FORM 20-F
US SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12 (B) OR (G)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 ( D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 000-29277
EARTHRAMP.COM COMMUNICATIONS INC.
(Exact name of Registrant as specified in its charter)
BRITISH COLUMBIA, CANADA
(Jurisdiction of incorporation or organization)
601 - 889 WEST PENDER STREET
VANCOUVER, BRITISH COLUMBIA, CANADA V6C 3B2
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares Without Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None
Indicate the number of outstanding shares of each of the Company's classes of
capital or common stock as of the close of the period covered by the annual
report.
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THERE WERE 9,252,342 COMMON SHARES, WITHOUT PAR VALUE, ISSUED AND OUTSTANDING AS
OF JULY 21, 2000.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. YES [ ] NO [X]
Indicate by check mark which financial statement item the Registrant has elected
to follow. ITEM 17 [X] ITEM 18 [ ]
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES [ ] NO [ ]
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TABLE OF CONTENTS
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PAGE
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PART 1 1
Item 1 Description of Business 1
Item 2 Description of Property 22
Item 3 Legal Proceedings 22
Item 4 Control of the Company 22
Item 5 Nature of Trading Market 23
Item 6 Exchange Controls and Other Limitations
Affecting Security Holders 24
Item 7 Taxation 25
Item 8 Selected Financial Data 35
Item 9 Management's Discussion and Analysis of
Financial Condition and Results of Operations 37
Item 9A Quantitative and Qualitative Disclosures About
Market Risk (Not Applicable) 41
Item 10 Directors and Officers 41
Item 11 Compensation of Directors and Officers 43
Item 12 Options to Purchase Securities 45
Item 13 Interest of Management in Certain Transactions 46
PART II
Item 14 Description of Securities to be Registered 47
PART III
Item 15 Defaults Upon Senior Securities (Not Applicable) 49
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Item 16 Changes in Securities, Changes in Security
for Registered Securities and
Use of Proceeds (Not Applicable) 49
PART IV
Item 17 Financial Statements 49
Item 18 Financial Statements 49
Item 19 Financial Statements & Exhibits 49
EXHIBITS 50
SIGNATURE 52
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PART I
ITEM 1 DESCRIPTION OF THE BUSINESS
Introduction
Earthramp.com Communications Inc.'s (the "Company") primary business is the
creation and distribution of proprietary consumer, financial and news
information through the development of advanced Internet websites. The
Company's corporate offices are located at 601 - 889 West Pender Street,
Vancouver, British Columbia, Canada V6C 3B2. The telephone number is (604)
331-1008 and the facsimile number is (604) 331-0932.
The Company's consolidated financial statements are stated in Canadian Dollars
(CDN$) and are prepared in accordance with Canadian Generally Accepted
Accounting Principles. In this Registration Statement, unless otherwise
specified, all dollar amounts are expressed in Canadian Dollars. All references
in this Registration Statement to "US$" refer to United States Dollars and all
references to common shares refer to common shares in the capital of the
Company.
Description of the Company and its Subsidiaries
The Company was incorporated under the laws of the Province of British Columbia
on March 14, 1986 under the name "Dante Resources Ltd.". On July 16, 1987, the
Company's name was changed to "Abac Resources Ltd." and then changed to "Quality
Learning Systems (International) Inc." on December 29, 1992. On May 27, 1996,
the Company's name was changed to "Carta Resources Ltd.". The Company's name
was then changed to "Earthramp.com Communications Inc." on December 24, 1999.
The Company is a reporting issuer under the securities laws of the province of
British Columbia.
On December 2, 1987, the Company was registered as an Extra-Territorial
Corporation to do business in the Yukon under the name "Abac Resources Ltd.".
On June 28, 1999, the Company was registered as an Extra-Territorial Corporation
in the Yukon under the name "Carta Resources Ltd.".
On December 29, 1992, the Company altered its authorized capital by
consolidating all of the 10,000,000 common shares without par value into
2,000,000 common shares without par value, with every five (5) such common
shares before consolidation being consolidated into one (1) common share. Also
on December 29, 1992, the authorized capital of the Company was increased from
2,000,000 common shares without par value to 20,000,000 common shares without
par value.
As of the date hereof, the Company has one wholly owned subsidiary, Quotes
Canada Financial Network, Ltd. ("Quotes Canada"). Quotes Canada was
incorporated under the laws of British Columbia on August 5, 1998 and was
acquired by the Company effective on November 5, 1999.
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Company History
From its incorporation in 1986 until November, 1999, the Company operated as a
junior natural resource issuer listed on the Vancouver Stock Exchange and
engaged in the exploration and development of mining claims located in Canada.
On October 30, 1995, the Company entered into an option agreement to acquire a
100% interest in a lithium property located in the Wekusko Lake area of the
Province of Manitoba, Canada. The property consisted of twelve claims, covering
an area of approximately eight square kilometres. The Company expended
approximately $75,386 on the exploration and development of the property. On
October 28, 1999, the Company decided it was no longer economically feasible to
proceed further with the exploration and development of this property and all
mining claims in connection with this property were written off, together with
related deferred exploration expenditures.
On April 29, 1999, the Company entered into an option agreement (the "Option
Agreement") to acquire a 100% interest in a property located in the Dawson
Mining District of Yukon Territory, Canada (the "Ami Property"), which property
consists of 42 mineral claims. The Company expended approximately $21,000 on
the exploration and development of the Ami Property. On January 15, 2000, the
Company decided it was no long economically feasible and did not proceed further
with the exploration and development of the Ami Property and all mining claims
in connection with this property were written off, together with related
deferred exploration expenditures. By way of an Assignment Agreement, dated
January 18, 2000, the Company assigned its rights under the Option Agreement to
H. Leo King and Associates Inc. in consideration of the payment of all future
expenses in connection with the Ami Propery and the assumption of all of the
Company's obligations under the Option Agreement. As a result of this
agreement, the Company has no further interest or further obligations in
connection with the Ami Property.
In connection with the Company's acquisition of Quotes Canada (as described
below), the Company was required to seek approval from the Vancouver Stock
Exchange (the "VSE") (the predecessor to the Canadian Venture Exchange (the
"CDNX")) because the acquisition constituted a change of business under the
policies of the VSE. The VSE approved the change of business and the
acquisition on November 5, 1999. The Company is presently engaged in the
business of providing consumer, financial and news information via the internet.
The Company changed its business because mining exploration would not enhance
shareholder value.
Present Operations of the Company
Pursuant to a letter agreement dated June 1, 1999 (the "Acquisition Agreement")
and the receipt of regulatory approval on November 5, 1999, the Company acquired
a 100% interest in Quotes Canada in consideration of a total of $240,000,
consisting of a cash payment of $50,000 and the issuance of 1,000,000 common
shares in the capital of the Company at a fair value of $0.19 per share to Paul
Dickson and Glen Dickson (each to receive 50% of the common shares) (the
"Acquisition Shares"). A copy of the Acquisition Agreement is attached to this
Registration Statement as an exhibit. On August 12, 1999, under the terms of
the Acquisition Agreement, Paul Dickson and Glen Dickson were appointed to the
Board of Directors of the Company. In
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addition, each has entered into employment agreements, effective December 1,
1999, which provide each a salary of $30,000 for 1999 and $42,000 for 2000 for
a minimum two year period. Each of Paul Dickson and Glen Dickson are to receive
incentive stock options, entitling each of them to purchase not less than 4% (or
such lower percentage as may be accepted by Paul Dickson and Glen Dickson) of
the issued and outstanding common shares of the Company at the minimum price
permitted by the CDNX for a period of five years from November 5, 1999. As part
of the Acquisition Agreement, Paul Dickson and Glen Dickson purchased, by way of
private placement, 160,000 units (each unit consisting of one share and one
share purchase warrant with a two year term) at $0.15 per unit for a total
purchase price of $12,000 for each of Paul and Glen Dickson. For more details
regarding the private placement, see Item 12 ("Options to Purchase Securities")
of this Registration Statement. The Company has determined that the effective
date of the acquisition was November 5, 1999.
Quotes Canada commenced services as an online Internet provider of real-time
stock market quotes and other financial information from its website,
www.quotescanada.com (the "Quotes Canada Website") in September, 1998. The
Quotes Canada Website is accessible through the Company's website,
www.earthramp.com (the "Company's Website") (collectively, the Quotes Canada
Website and the Company's Website are referred to as the "Websites"). By
December, 1998, users were able to access real-time stock quotes on the Quotes
Canada Website at no charge. As a result, the single web server used by Quotes
Canada became overloaded. At that time, Quotes Canada had only two employees,
Glen Dickson and Paul Dickson, and due to lack of funding and insufficient
advertising revenue, in January, 1999, Quotes Canada switched its originally
free services to a pay-per-quote system, which reduced the number of
subscribers, thereby allowing Quotes Canada to further develop their operations.
Under the pay-per-quote system in place at that time, subscribers paid USD$0.03
per quote.
At present, the Company provides a variety of online integrated data streaming
services through its Internet portal, the Quotes Canada Website, which has run
successfully for over one and one-half years. Integrated data streaming
services means that internet users can access data directly on the Company's
Website without having to link to another website. Presently, those online
integrated data streaming services include:
- RealTime Stock Quotes for companies listed on the Montreal, Toronto,
Canadian Venture and Canadian Dealing Network Stock Exchanges.
- Delayed Stock Quotes for both Canadian and US companies.
- RealTime / Delayed corporate press releases for Canadian stock and mutual
fund companies.
- Historical financial data, including an extensive database of historical
US and Canadian stock quotation information used to generate dynamic charts, and
access to over 10 years of stock closing prices.
- Other financial information in connection with silver, gold, copper,
aluminum and nickel prices, international currencies, natural gas, gas, oil and
Brent Crude Oil
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prices, and major world indices (New York, Nikkei, Hong Kong, etc.) and emerging
world market indices (Korean, Taiwan, Brazil, etc.).
- Dynamic Charts for presentation of historical stock price information.
These charts can be customized and can create plots of all market data. Data
can be plotted back as far as 15 years.
- Portfolio Tracking which enables users to maintain multiple portfolios for
US and Canadian stocks and mutual funds, through the Company's proprietary
software program call Portfolio Tracker. A new version of Portfolio Tracker is
scheduled to be released during the Company's second quarter this year.
- A monthly newsletter containing Canadian and International market
information.
- Links to weather reporting, telephone directories, horoscopes and other
entertainment related websites.
- Links to Citizens Bank, with access to Citizens Bank's prime interest,
exchange, mortgage, term deposit and RRSP rate information. In addition,
several financial calculators are available, such as the currency exchange
calculator, the loan payment calculator, the mortgage calculator, the net worth
calculator, the term deposit calculator and the RRSP calculator. Users can also
directly apply online for a Citizens Bank bank account, mortgage account, loan
or Visa card on the Company's Website.
- Links to various auction, book, gift, sporting goods and other product
related websites with a customized search engine allowing users to locate
websites that sell particular products.
- Online travel reservation and quotation service. Presently, the Company's
travel site is not linked to another site.
At this time, the Company is able to offer all of these services, with the
exception of its real-time stock quotes, at no costs to users. On January 1,
1999, the Company started to charge a fee for access to its real-time stock
quotes ($0.03 per quote). Quotes can be purchased in blocks of 100 ($3.00), 200
($6.00), 300 ($9.00), 400 ($12.00) or 500 ($15.00).
The Company pays a minimum of $5,000 per month for electronic data feeds from
financial data resellers linked to various stock exchanges, which fee may be
increased depending on the volume of subscriber usage. Once this data is
received by the Company, it can be interpreted, formatted and bundled for
redistribution to its customers. The Company is able to provide and sell data
to its four business subscribers in almost any format they require. At present,
the Company charges its subscribers between $300 and $3,000 per month for this
custom service, depending on the services and information required. In
connection with this redistribution of data to its customers, the Company is
able to provide advanced programming, for an additional fee, so that the
particular customer can effectively utilize that data in any manner that the
customer requires. The Company offers additional programming services involving
in depth
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customization not available under the normal package of services such as design
and website layout, and data module customization that focuses on the needs of
the subscriber in its particular industry. This advanced programming service
has always been available.
In addition, the Quotes Canada Website provides computer and software
development services including custom server configuration, mission-critical
application development, database design and implementation, advanced Cold
Fusion, C++ and Java application development, high-traffic website hosting and
administration and business to business consulting.
On November 4, 1999, the Company announced the initial launch of
MoneyChallenge.Com (the "MoneyChallenge Website"), an online, interactive
fantasy investment game (www.moneychallenge.com). Following the initial launch,
the Company decided to upgrade the performance of the MoneyChallenge Website.
The new code to implement the upgraded website has been completed, and following
installation of the high speed data feed, the Money Challenge Website will be
operational. The Company anticipates that the full launch of MoneyChallenge.Com
will take place during August, 2000. The MoneyChallenge Website will offer
users the chance to exercise their investing abilities by trading US stocks
using $100,000 virtual dollars. The user with the highest net worth at the end
of each month is eligible to win cash and prizes for various sponsors and
advertisers. The Company intends to generate revenues from the MoneyChallenge
Website through sponsorship, advertising and software licensing. In addition,
MoneyChallenge.Com offers an online discussion forum, online investing tips and
Frequently Asked Questions (FAQs). The MoneyChallenge Website is not available
to the general public.
On January 24, 2000, the Company announced the launch of a new website,
www.silentbrowser.com ("SilentBrowser.Com"), which will enable web users to
protect their privacy online with anonymous web surfing. When users visit
websites without the benefit of a product like SilentBrowser.Com, they risk
dissemination of personal information (for example address, phone number, credit
card number) and information about their web surfing habits. SilentBrowser.Com
acts as a shield between the user and the sites he or she visits, concealing
confidential and personal information. In addition, SilentBrowser.Com is able
to block hostile Internet programs that may be embedded in web pages and which
may damage the user's computer. At present, SilentBrowser.Com is available as a
free service. The Company does anticipate that a user fee of $5 - $10 per month
will be instituted by August, 2000 for its business clients who use the
SilentBrowser website.
Presently, Quotes Canada does not host any retail merchandise directly through
the Websites, but rather generate revenue through commissions from sales
generated by links from the Websites to other retailers' websites. Quotes
Canada does not intend to make these commissions a primary source of revenue.
The Company anticipates that subscriptions for its services and advertisements
on the Websites will generate the majority of its revenue.
The Quotes Canada Website offers a targeted advertising medium for small and
medium-sized companies whose customers are interested in finance. Advertising
banners and sponsorship buttons will be rotated regularly to appear on web pages
hosted by Quotes Canada. Banners consist of a set size graphical image designed
by the advertiser or Quotes Canada, which allows users to access the
advertiser's website, products and services by clicking on the banner. All
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advertising on the Websites is currently arranged by ClickThrough.Ca.
Advertising space can be purchased in the form of impressions or page views.
Advertisers can check statistics on their advertisements 24 hours per day. The
cost of an advertisement impression for advertisers ranges from $0.01 to $0.06
per impression or page view that the user visits on the Company's website.
Agreements
Quotes Canada has recently entered into agreements with other Internet content
providers and data feed providers that either provide direct revenues from
advertising, sponsorship, user fees, or commissions or indirect revenues
deriving from a mutually beneficial marketing agreements in the form of
co-branding that will attract internet users to the website of the Company. All
the services described in the agreements below are presently provided on the
Company's Website or being received from other parties except for the Vector
Agreement. Under the agreements described below, the Company is required to
make payments of $10,800 over the next 12 months. The Company presently does
not have any barter elements in any of its agreements where revenue is or will
be recognized. The ExactTrade.Com and ON24 Inc. agreements are examples of
barter arrangements.
(a) ClickThrough.Ca Marketing Agreement
On September 17, 1999, Quotes Canada entered into a one year agreement (with a
one year renewal provision) with ClickThrough.Ca, a company specializing in
online advertising. Pursuant to the agreement, ClickThrough.Ca will manage
available advertising space on the Quotes Canada Website, by using their
employees, software and computer servers to solicit, sell and deploy banner
advertising on the ClickThrough website on behalf of the Company, thereby
increasing Quotes Canada's advertising revenues while concurrently bringing new
advertisers to the Quotes Canada Website. In consideration of its services,
ClickThrough.Ca will retain between 40% and 50% of the advertising revenues that
are generated from advertisements on the Quotes Canada Website. After 9 months
from the date of this agreement, either party may terminate the agreement
without reason upon 90 days notice. Furthermore, either party may terminate the
agreement upon 60 days notice of a breach of the agreement.
(b) ON24 Inc. Marketing Agreement
On July 1, 1999, Quotes Canada and ON24 Inc. ("ON24") entered into an agreement
for a one year term. ON24 is streaming media services company that develops and
distributes corporate news and information on the Internet. Under the
agreement, Quotes Canada will provide ON24's syndicated newsfeed exclusively on
the Quotes Canada Website. ON24's news content includes CEO interviews,
quarterly earnings reports, company news, product launches and other related
information targeted to online investors. In consideration for ON24's services,
Quotes Canada must distribute ON24's news feed in a prime location on the Quotes
Canada Website. The agreement with ON24 does not generate any direct revenues
but it helps to promote the brand name of Quotes Canada. The agreement is
subject to termination by either party upon 30 days notice of a breach of term
of the agreement. In addition, ON24 has the right to terminate the agreement
upon receiving notice of any arrangement that Quotes Canada has entered into
with respect to providing media content for investors.
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(c) Citizens Bank of Canada
On August 17, 1999, Quotes Canada entered into a Web Linking Agreement with
Citizens Bank of Canada ("Citizens Bank'), an on-line banking company in Canada.
Under the Web Linking Agreement, Quotes Canada will provide Citizens Bank with
20 minutes delayed financial data in the form of co-branded stock charts, stock
and mutual fund quotes and historical stock quotation data. In this situation,
co-branding means that the Company gets the name of Quotes Canada exposed on the
site of Citizens Bank and Citizens Bank gets its name exposed on the Quotes
Canada site. Citizens Bank will in turn provide Quotes Canada with on-line
banking applications, mortgage rates, interest rates and other banking related
information, as well as a number of financial calculators. Quotes Canada will
derive revenues for each approved bank account application, Visa card
application, loan application and mortgage application, in the form of fees
payable by Citizens Bank as follows:
(i) Approved Account Application: $15
(ii) Approved and Funded Mortgage Application: 10 basis points of funds
advanced pursuant to the Mortgage Application (a one-time payment, not a
recurring fee)
(iii) Approved Visa Application: $15
(iv) Approved and Funded Loan Application: $15
Either party has the right to terminate the Web Linking Agreement upon five (5)
days notice to the other party or upon a material breach of the Web Linking
Agreement by either party.
(d) InfoSpaceCanada.Com Agreement
On August 31, 1999, Quotes Canada entered into an agreement with
InfoSpaceCanada.Com ("InfoSpace") (the "Distribution Agreement"), a specialist
in syndicating new, current event and other informative content through partners
including Netscape, Lycos, the Wall Street Journal, Microsoft, CBS and ABC,
among others. InfoSpace is an aggregator and integrator of such content
services for syndication to a broad network of affiliates, including existing
and emerging Internet portals, destination sites and suppliers of PCs and other
Internet access devices, such as cellular phones and pagers. InfoSpace gathers
content from multiple sources and integrates it to increase its value, thereby
serving as a single source of value-added content. Pursuant to the Distribution
Agreement, InfoSpace has granted Quotes Canada the right to include on the
Quotes Canada Website links which enable "point and click" access to locations
on the InfoSpace websites. In return, Quotes Canada has granted InfoSpace the
right to include on the InfoSpace websites links which enable "point and click"
access to locations of the Quotes Canada Website, the right to sell and serve
banner advertising on its co-branded pages and the right to track the number of
impressions. As a result, Quotes Canada will be in a position to offer a range
of online information, including search directories, telephone directories,
classified listings and real estate listings. Pursuant to the Distribution
Agreement, and commencing October 1, 1999, Quotes Canada pays a monthly fee to
InfoSpace in the amount of $500. The Distribution Agreement is for a term of
three years with automatic one year renewal provisions. Under the Distribution
Agreement, InfoSpace will remit to Quotes Canada 30% of advertising revenue
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received by Quotes Canada for banner advertising on the co-branded pages.
Either party may terminate the agreement upon 90 days notice of a material
breach of the agreement.
(e) ExactTrade.Com Marketing Agreement
On October 27, 1999, Quotes Canada entered into an agreement with
ExactTrade.Com, an online Canadian brokerage service. ExactTrade.com is a
Rampart Securities, Inc. company. Rampart is a full-service investment dealer
based in Toronto, Ontario, Canada, with branch offices in Calgary, Alberta,
Canada and Fredericton, New Brunswick, Canada, and structures and syndicates
underwritings, private placements, joint ventures, mergers and acquisitions in
various industries. Pursuant to the agreement, Quotes Canada will provide
ExactTrade.Com with financial data in the form of stock quotes, stock charts,
most active stocks, historical data and other related data services (the
"Data"). In return, the only consideration received by the Company will be that
on every page of ExactTrade.Com's website utilizing the Data, ExactTrade.Com
will display a logo (supplied to it by Quotes Canada) hyperlinked to the Quotes
Canada Website. The agreement is for a term of one year with automatic one year
renewal terms unless one party provides 60 days written notice electing to end
the agreement at the end of the most current term. The agreement with
ExactTrade does not generate any direct revenues but may generate indirect
revenue resulting from users going to the Quotes Canada website.
(f) MostActives.Com Marketing Agreement
On November 23, 1999, the Company entered into a Co-Branding Agreement for a one
year term with MostActives.Com, an online discount brokerage firm operated by
the Benson York Group in New York. The Co-Branding Agreement will provide users
of MostActives.Com with the MoneyChallenge.Com service, and the Company
anticipates that the Co-Branding Agreement will increase the MoneyChallenge
Website subscriber base, advertising revenues and sponsors. The MoneyChallenge
Website will be accessible through the Company's Website and also accessible
through the MostActive website. Either party may terminate the agreement upon 5
days notice of a material breach of a provision of the agreement.
(g) Agreement with Internet Gateway
Since June, 1999, the QuotesCanada.Com web server has been located at Internet
Gateway, whose address is 8th Floor - 889 West Pender Street, Vancouver, BC.
The agreement with Internet Gateway enables the Quotes Canada Website to access
high speed Internet at affordable prices. Internet Gateway has a secure
computer environment with air conditioning and alarmed premises. The Company
uses the latest computer software and hardware technology to allow thousands of
users to access the QuotesCanada.Com Website quickly, responsively and reliably.
The Company pays a monthly fee of $400 to Internet Gateway for these services.
(h) Vector Agreement
On March 28, 2000, Quotes Canada entered into an agreement with Vector Insurance
Network (Ontario) Limited to offer online insurance quotations on the
QuotesCanada.Com Website. The Company will receive revenues in the form of a
marketing fee of 1.25% of premiums written and settled for both new and renewal
policies purchased by users of the Quotes Canada Website. The agreement may be
terminated by Vector upon 90 days notice of its dissatisfaction with the
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profitability of the program, or by Quotes Canada upon 90 days notice of its
dissatisfaction of Vector's services and prices. The term is for three years
with automatic renewal of one year terms. The Vector site will be in operation
in August 2000.
(i) Global Securities Agreement
On May 23, 2000, the Company entered into an agreement with Global Securities
Corp. whereby the Company will provide a package of financial data services to
Global and Global will pay a fee of $750 per month to the Company. Global is a
full-service brokerage firm providing online trading and real-time quotation
services to its internet users. The term is for one year with automatic renewal
of one year terms. Either party may terminate the agreement upon 5 days notice
of a material breach of a provision of the agreement.
Intellectual Property
The Company has applied for trademark protection in Canada and the United States
for "EarthRamp.Com" and "Quotes Canada Financial Network Inc.". The Company has
also made a trademark application for QuotesCanada.Com" in Canada only. In
addition, the Company has secured the registration of the domain names
"Earthramp.Com", "QuotesCanada.Com", "MoneyChallenge.com" and
"SilentBrowser.Com" with Network Solutions, Inc. (Internet).
Employees
As of the date hereof, the Company currently employs 14 full-time employees
consisting of 4 management staff members, 7 programmers and 3 administrators.
In total, the Company currently pays approximately $736,000 in salaries to its
employees on an annual basis.
Plan of Operation for the Next 12 Months
Quotes Canada's current focus is the creation and distribution of proprietary
finance-related software called Day Trader Pro Streamer ("Day Trader"), which
will enable stock investors to easily access live, real-time, tick by tick
quotations for North American equities. The Company anticipates that Day Trader
will be available through the Quotes Canada Website during the second quarter of
this year, at a subscription cost of approximately $20 per month. By August 1,
2000, Day Trader will be expanded to provide live news streamers to its
subscribers at an additional cost of between $30 - $50 per month.
In addition, the Company anticipates that its US and Canadian stock and mutual
fund discussion forum will be available on the Quotes Canada Website by the end
of August, 2000. Subscribers will be able to download the application from the
Quotes Canada Website at no cost. In order to raise revenue to support this
discussion forum, the Company intends to sell advertising at the forum site.
The Company will be seeking and negotiating additional agreements such as
advertising, sponsorship, co-branding, licensing, web linking and other
marketing agreements with Internet content providers and data feed providers.
Over the next two months, the Company intends to provide its clients with access
to valuable content and to provide quotations for a broad range of
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consumer products and services, at an estimated cost of $500,000 for the next
year. These products and services would include the following:
- Corporate Capsules database of over 8,500 publicly traded companies
containing names, addresses, contacts, phone numbers and other information;
- RealTime US stock quotes;
- Headline news;
- Financial news for Canadian and US companies;
- Home, life, business and automobile insurance quotations (US only); and
- Automobile purchase quotations (US only).
The Company is constantly trying to improve the speed of access, site security,
and the aesthetics of their Websites in terms of minor modifications.
Research and Development
Syndicated data is still in its infancy, and approximately 24 companies have
been able to create data sources that are easily integrated into websites. The
Company's research indicates that its competitors are still using primitive
re-distribution methods. Many of the Company's competitors provide either no
integration tools or tools that require an expert to use. The Company's methods
of re-distribution use the latest in Internet software technologies to integrate
data and receive little or no expert intervention. Complete automation of the
Quotes Canada Website has been achieved through the development and
implementation of software applications that read information from the data
source and then re-format the data in a manner that makes it useful to end
users. In January, 2000, the Company was licenced by the Canadian Exchange
Group to obtain and re-distribute real-time stock quotes.
The Company recognized a need for quality financial tools, a market that sees
continuous growth, and the Internet allows content providers such as
QuotesCanada.Com the ability to distribute products and services to the public
at a low cost.
The Company, through its subsidiary Quotes Canada, has researched and developed
marketable products and services over the past year, and has expended
approximately $80,000 in this regard. Although future research and development
is dependent upon market direction, the Company anticipates that it will spend
approximately $200,000 per year on research and development.
Acquisition of Equipment
The Company is currently assessing its equipment needs, and anticipates that it
will purchase new computer equipment in the form of servers and workstations
over the next 12 months. The Company expects to spend approximately $150,000 in
upgrading its current equipment and purchasing new equipment.
<PAGE>
Anticipated Changes in Number of Employees
The Company is currently in the process of hiring graphic artists, computer
programmers, marketing staff and sales staff. Over the next 12 months, the
Company intends to increase staff to 25 employees from 14 with most of the new
employees being hired as sales and marketing staff. The Company expects the
total monthly cost of salaries to be $98,050.
Securities and Exchange Commission's Public Reference
Any member of the public may read and copy any materials filed by the Company
with the Securities and Exchange Commission (the "SEC") at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information
on the operation of the Public Reference Room may be obtained by calling the SEC
at 1-800-SEC-0330. The SEC maintains an Internet website (http://www.sec.gov)
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
Forward Looking Statements
Much of the information included in this Registration Statement includes or is
based upon estimates, projections or other "forward-looking statements". Such
forward looking statements include any projections or estimates made by the
Company and its management in connection with its business operations. While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect the Company's current judgment regarding the
direction of its business, actual results will almost always vary, sometimes
materially, from any estimates, predictions, projections, assumptions, or other
future performance suggested herein.
Such estimates, projections or other "forward-looking statements" involve
various risks and uncertainties as outlined below. The Company cautions the
readers that important factors in some cases have affected and, in the future,
could materially affect actual results and cause actual results to differ
materially from the results expressed in any such estimates, projections or
other "forward-looking statements".
RISK FACTORS
The common shares of the Company are considered speculative due to the nature of
the Company's business and its present stage of development. Prospective
investors should consider carefully the risk factors set out below.
Limited Operating History
Because the Company changed its operations to that of an Internet-based
technology company in November, 1999, it has a limited operating history on
which to base an evaluation of its business and prospects. The Company's
prospects must be considered in light of the risks, uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets similar
to those faced by the Company. Some of these risks and uncertainties relate to
the Company's ability to:
<PAGE>
- attract and maintain a large base of subscribers for the Websites,
- develop and introduce desirable services and original content for its
subscribers,
- establish and maintain agreements with content providers, affiliates and
sponsors,
- establish and maintain agreements with advertisers and advertising
agencies,
- respond effectively to competitive and technological developments,
- build an infrastructure to support the Company's business,
- provide compelling and unique content to Internet users,
- successfully market and sell advertising,
- effectively develop new and maintain existing agreements with advertisers,
content providers, business customers and advertising agencies,
- continue to develop and upgrade the Company's technology and network
infrastructure,
- respond to competitive developments,
- successfully introduce enhancements to the Company's existing products and
services with a view to addressing new technologies and standards, and
- attract, retain and motivate qualified personnel.
The Company cannot be sure that it will be successful in addressing these risks
and uncertainties and its failure to do so could have a materially adverse
effect on its financial condition. In addition, the Company's operating results
are dependent to a large degree upon factors outside the Company's control,
including the availability of compelling information and content for the
Websites and the continued use of the Internet as a source of financial, news
and other information. There are no assurances that the Company will be
successful in addressing these risks, and failure to do so may adversely affect
the Company's business.
<PAGE>
History of Losses
In the past the Company has incurred substantial net losses. For the year ended
October 31, 1999, the Company incurred net losses of $185,112 and for the 6
months ended April 30, 2000 losses of $467,775. The Company also has an
accumulated deficit of $2,061,713 as at April 30, 2000. The Company's ability
to generate any revenues is uncertain. With respect to current and future
product and service offerings, the Company expects to significantly increase its
marketing and operating expenses in an effort to increase its customer base,
enhance its brand image and support its infrastructure. In order for the
Company to make a profit, it must generate revenue to cover these and other
future costs. The Company may not generate such or any revenue on a quarterly
or annual basis in the future.
The Company's short and long-term prospects depend upon its ability to attract
both paying subscribers and advertisers to the Websites, to develop its existing
agreements and to generate new ones with content providers. The Company has
projected that a significant portion of its revenues will be generated from
business-to-business subscriptions for the Websites (50%), business-to-consumer
subscriptions (20%), online-based services (10%) and advertising/sponsorship
(20%). The Company's success is highly dependent on future revenues from
subscriptions, services and advertisements, and the Company may never generate
significant revenues if it does not establish a sufficient subscriber base,
brand image and advertising pool.
Need for Additional Financing
Based on its current operating plan, the Company anticipates that it will
require additional financing in order to finance its continued operations and to
increase the promotion and marketing of its products and services.
The Company's ability to continue in business depends upon its continued ability
to obtain such additional capital and financing. There can be no assurance that
any such financing would be available upon terms and conditions acceptable to
the Company, if at all. The inability to obtain additional financing in a
sufficient amount when needed and upon acceptable terms and conditions could
have a material adverse effect upon the Company. Although the Company believes
that it can raise financing sufficient to meet its immediate needs, it will
require funds to finance its development and marketing activities in the future.
There can be no assurance that such funds will be available or available on
terms satisfactory to the Company. If additional funds are raised by issuing
equity securities, further dilution to existing or future shareholders is likely
to result. If adequate funds are not available on acceptable terms when needed,
the Company may be required to delay, scale back or eliminate its promotional
and marketing campaign or its development programs. Inadequate funding also
could impair the Company's ability to compete in the marketplace and could
result in its dissolution.
Limited Marketing Experience
The Company has not incurred any significant advertising, sales or marketing
expenses to date. To increase awareness of the Company's online products and
services and its Website, the Company expects to spend significantly on
advertising, sales and marketing in the future. If the
<PAGE>
Company's marketing strategy is unsuccessful, it may not be able to recover
these expenses or generate or increase its revenues from operations. The
Company will be required to develop a marketing and sales campaign that will
effectively demonstrate the advantages of its services and products. The
Company's marketing and selling experience of its services and products to date
is very limited. The Company may also elect to enter into agreements with
third parties regarding the promotion or marketing of its products and services.
There can be no assurance that the Company will be able to establish adequate
sales and marketing capabilities, that it will be able to enter into marketing
agreements with third parties on financially acceptable terms or that any third
parties with whom it enters into such arrangements will be successful in
marketing and promoting the Company's services and products.
Acceptance of the Company, its Products and Services
The Company's success is dependent upon achieving significant market acceptance
of the Websites and the online products and services offered by the Company, by
Internet consumers, advertisers, affiliates, sponsors and content providers. It
cannot guarantee that Internet consumers, advertisers, affiliates, sponsors and
content providers will accept the Websites or the Company's products and
services, or even the Internet, as a replacement for traditional sources of
financial data, travel information, entertainment information, educational
material, sports data and audio/video content. Market acceptance of real-time
financial data, travel information, entertainment information, educational
material, sports data and audio/video content depends upon continued growth in
the use of the Internet generally and, in particular, as a source of financial
data, travel information, entertainment information, educational material,
sports data, URL databases and audio/video content for consumers. The Internet
may not prove to be a viable channel for these services because of inadequate
development of necessary infrastructure, such as reliable network backbones, or
complimentary services, such as high-speed modems and security procedures, the
implementation of competitive technologies, government regulation or other
reasons. Failure to achieve and maintain market acceptance of the Websites and
the Company's products and services would seriously harm the Company's business
and its continued operations.
Acceptance of the Company and its products and services depends on the success
of its advertising, promotional and marketing efforts and the ability to
continue to provide high-quality information to its users of its products and
services. To increase awareness of its products and services, the Company
expects to spend $300,000 on promotion, marketing and advertising in the next 12
months. If these expenses fail to develop an awareness of the Company's
products and services, these expenses may never be recovered and the Company may
never be able to generate future revenues. In addition, even if awareness of
its products and services increases, the Company may not be able to increase or
maintain the number of users of the Websites, its products and services. The
Company currently has an average of 40,000 registered users for its
business-to-consumer subscription services and 8 business-to-business
subscribers of whom 4 are paying a fee.
Reliance upon Technology and Computer Systems
The markets in which the Company competes are characterized by rapidly changing
technology, evolving technological standards in the industry, the creation of
competing websites, frequent
<PAGE>
new products and service offerings and changing consumer demands. The Company's
future success will depend on its ability to adapt to these changes and to
continuously improve the performance, features and reliability of the Websites
and its products and services in response to competitive services and products
and the evolving demands of the marketplace, which it may not be able to do.
Specifically, the Company's ability to continue its operations in the future
will depend on its ability to:
- provide current financial data and news in a timely fashion,
- build and maintain a base of subscribers willing to pay for the Company's
products and services,
- build a sufficient pool of advertisers, and
- develop new products and services to meet consumer demand.
In addition, the widespread adoption of new internet telecommunications
technologies or other technological changes could require the Company to incur
substantial expenditures to modify or adapt its services or infrastructure,
which might impact its ability to become or remain profitable. Any failure by
the Company to anticipate or respond rapidly to technological advances, new
products and enhancements, or changes in customer requirements could have a
material adverse effect on the Company.
The Quotes Canada Website, and eventually the Company's Website, once expanded,
utilizes sophisticated and specialized network and computer technology. The
Company anticipates that it will be necessary to continue to invest in and
develop new and enhanced technology on a timely basis to maintain its
competitiveness. Significant capital expenditures may be required to keep its
technology up to date. Investments in technology and future investments in
upgrades and enhancements to software for such technology may not necessarily
maintain the Company's competitiveness. The Company's business is highly
dependent upon its computer and software systems, and the temporary or permanent
loss of such equipment or systems, through casualty, operating malfunction or
otherwise, could have a material adverse effect upon the Company. If the
Company cannot operate its website 24 hours a day seven days per week with
limited interruptions, its business may be seriously harmed. The Company's
Websites have been down 6 times, each no longer than 4 hours in duration and due
to problems in receiving the data fees from outside sources. The Websites may
be required to accommodate a high volume of traffic and deliver frequently
updated information. It may experience slower response times or system failures
due to increased traffic on the Websites or on the Internet. The Websites users
and members depend on Internet service providers and other website operators for
access to the Websites. These providers and operators have experienced
significant outages in the past and there can be no assurance that such outages
or other problems will not occur in the future. Any interruptions in the
operation of the Websites however caused could have a material adverse effect
upon the Company.
Services based on sophisticated software and computer systems often encounter
developmental delays, and the underlying software may contain undetected errors
that could cause system failures when introduced. Any system error or failure
causing interruption in the availability of
<PAGE>
content or an increase in response time could result in a loss of potential or
existing business services, users, advertisers or content providers, and if
sustained or repeated, could reduce the attractiveness of the Websites to these
individuals and entities. In addition, because the Company's advertising
revenues will be directly linked to the number of advertisements delivered by
the Company to users, system interruptions that result in the unavailability of
or slow response times to the websites would reduce the number of advertisements
delivered, thereby reducing revenues.
Conversely, a sudden, significant increase in traffic to the Websites could
strain the capacity of the software, hardware and telecommunications systems
utilized by the Company, possibly leading to slower response times or system
failures. The Company's operations are dependent upon the receipt of timely
feeds from the content providers, and any failure or delay in the transmission
or receipt of the feeds could disrupt the Company's operations.
Response to Technological Change May be Inadequate
The Company's market is characterized by rapid technological developments,
frequent new product introductions and evolving industry standards. If the
Company fails to respond rapidly to technological developments, its business may
be adversely affected. The emerging character of these products and services and
their rapid evolution will require the Company to:
1. effectively use leading technologies;
2. continue to develop its technological expertise; and
3. enhance its current services and continue to improve the performance,
features and reliability of its network infrastructure.
Substantial Competition
The Company competes with companies such as Inktomi Corp. (www.inktomi.com) and
iSyndicate, Inc. (www.isyndicate.com), who, like the Company, provide syndicated
data and compete in the same market. The primary competitors of the Company
include Bridge Systems, Star Data, ILX, MAW, SeP and Bloomberg. The Company
competes with these and other numerous financial information providers.
Many of the Company's competitors are substantially larger than the Company and
have significantly greater financial resources and marketing capabilities than
the Company, together with better name recognition. It is also possible that
new competitors may emerge and acquire significant market share. Competitors
with superior resources and capabilities may be able to utilize such advantages
to market their products and services better, faster and/or cheaper than the
Company. Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any of which could have a material
adverse effect upon the Company's business, results of operations and financial
condition. In addition, there can be no assurance that the Company will be able
to compete successfully against its present or future competitors.
<PAGE>
The Company's ability to compete successfully will require it to develop and
maintain technologically advanced products and services, attract and retain
highly qualified personnel, obtain a significant customer base, whether alone or
with third parties. There can be no assurance that the Company will achieve
these objectives. Failure to do so would have a materially adverse effect on
its business, operating results and financial condition. Furthermore, the
Company's potential products and services, if successfully developed, will
compete directly with other existing and subsequently developed products using
competing technologies. There can be no assurance that the Company's
competitors will not succeed in developing or marketing technologies and
products that are more effective and commercially desirable than those developed
or marketed by the Company or that would render the Company's technology and
products non-competitive. Failure of the Company's potential products to
compete successfully with products using competing technologies will have a
material adverse effect on the Company's business, operating results and
financial condition.
Uncertain Ability to Manage Growth
The Company's ability to achieve its planned growth is dependent upon a number
of factors including, but not limited to, its ability to hire, train and
assimilate management and other employees, the adequacy of the Company's
financial resources, the Company's ability to identify and efficiently provide
and perform such new products and services as the Company's customers may
require in the future and its ability to adapt its own systems to accommodate
its expanded operations. In addition, there can be no assurance that the
Company will be able to achieve its planned expansion or that it will be able to
manage successfully such expanded operations. Failure to manage anticipated
growth effectively and efficiently could have a material adverse effect on the
Company.
Dependence Upon Key Personnel
The Company considers that any of the Company's management team and other key
personnel, including J.E. Charlesworth, Thomas Boychuk. Glen Dickson and Paul
Dickson (the "Key Personnel"), are vital to the Company's continued operations.
The loss of the services of any of the Key Personnel or other employees, for any
reason, may have a materially adverse effect on the prospects of the Company.
There can be no assurance in this regard, nor any assurance that the Company
will be able to find a suitable replacement for such persons. Furthermore, the
Company does not maintain "key man" life insurance on the lives of the Key
Personnel or any other officers of the Company. To the extent that the services
of any of the Key Personnel become unavailable, the Company will be required to
retain other qualified persons; however, there can be no assurance that it will
be able to employ qualified persons upon acceptable terms.
J.E. Charlesworth provides management services to the Company at a rate of
$1,000 per month, pursuant to an oral agreement with the Company. Thomas
Boychuk also provides the Company, and provides management services and investor
relations services to the Company at a rate of $2,000 per month, pursuant to an
oral agreement with the Company. The contracts with both Mr. Charlesworth and
Mr. Boychuk are "month to month" and can be terminated by either party on one
months' notice.
<PAGE>
The Company's business is labour intensive and places significant importance on
its ability to recruit and retain technical and professional personnel. The
success of the Company is therefore dependent upon its ability to identify, hire
and retain additional qualified personnel, for whose services the Company will
be in competition with other prospective employers, many of which may have
significantly greater resources than the Company. Additionally, demand for
qualified personnel conversant with certain technologies is intense and may
outstrip supply as new and additional skills are required to keep pace with
evolving telecommunications technology. There can be no assurance that the
Company will be able to hire and, if so, retain such additional qualified
personnel. Failure to attract and retain such personnel could have a material
adverse effect upon the Company.
"Penny Stock" Rules May Restrict the Market for the Company's Shares
The Company's common shares are subject to rules promulgated by the SEC relating
to "penny stocks," which apply to companies whose shares are not traded on a
national stock exchange or on the NASDAQ system, trade at less than $5.00 per
share, or who do not meet certain other financial requirements specified by the
SEC. These rules require brokers who sell "penny stocks" to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors, and provide investors
with certain information concerning the risks of trading in the such penny
stocks. These rules may discourage or restrict the ability of brokers to sell
the Company's common shares and may affect the secondary market for the
Company's common shares. These rules could also hamper the Company's ability to
raise funds in the primary market for the Company's common shares.
Government Regulation
Although there are few laws and regulations directly applicable to the Internet,
it is likely that new laws and regulations will be adopted in the United States
and elsewhere governing issues such as music licensing, broadcast license fees,
copyrights, privacy, pricing, sales taxes and characteristics and quality of
Internet services. It is possible that governments will enact legislation that
may be applicable to the Company in areas such as content, network security,
encryption and the use of key escrow, data and privacy protection, electronic
authentication or "digital" signatures, illegal and harmful content, access
charges and retransmission activities.
The adoption of restrictive laws or regulations could slow Internet growth or
expose the Company to liability associated with content available on the
Websites. The application of existing laws and regulations governing Internet
issues such as property ownership, libel, defamation, content, taxation and
personal privacy is also uncertain. The majority of such laws were adopted
before the widespread use and commercialization of the Internet and, as a
result, do not contemplate or address the unique issues of the Internet and
related technologies.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease demand for the Websites and
services, increase its cost of doing business or otherwise have a materially
adverse effect on its success and continued operations. Laws and regulations
may be adopted in the future that address Internet-related issues, including
online content, user privacy, pricing and quality of products and services. The
growing popularity and use of the Internet has burdened the existing
telecommunications infrastructure in
<PAGE>
many areas, as a result of which local exchange carriers have petitioned the FCC
to regulate Internet service providers in a manner similar to long distance
telephone carriers and to impose access fees on the Internet service providers.
The Company cannot guarantee that the United States, Canada or foreign nations
will not adopt legislation aimed at protecting Internet users' privacy. Any
such legislation could negatively affect the Company's business. Moreover, it
may take years to determine the extent to which existing laws governing issues
like property ownership, libel, negligence and personal privacy are applicable
to the Internet.
Liability for Website Information and Inadequate Insurance Coverage
The Company may be subjected to claims for negligence, copyright, patent,
trademark, defamation, indecency and other legal theories based on the nature
and content of the materials that it broadcasts. Such claims have been brought,
and sometimes successfully litigated, against Internet content distributors. In
addition, the Company could be exposed to liability with respect to the content
or unauthorized duplication or broadcast of content. The Company's insurance
may not cover potential claims of this type or may not be adequate to indemnify
it for all liability that may be imposed. In addition, although the Company
generally requires its content providers to indemnify it for such liability,
such indemnification may be inadequate. Any imposition of liability that is not
covered by insurance, is in excess of insurance coverage or is not covered by an
indemnification by a content provider could adversely affect our business.
Limited Protection for Intellectual Property
While the Company is investigating the possibilities of patent, copyright and
trademark registration and protection for its intellectual property, no such
protection has yet been applied for (excepting the domain registration of the
names "www.earthramp.com" and "www.quotescanada.com" and the application for
trademark registration of the names Earthramp.com Communications Inc. and Quotes
Canada Financial Network Ltd.) or granted. There is no assurance that such
registration or protection will be available, and therefore the Company may have
little or no protection for its intellectual property assets, comprising the
main business assets of the Company.
The Company's financial data, business tools and consumer products and its other
intellectual property are important to the Company's continued operations and
success. The Company's efforts to protect this intellectual property may not be
adequate. Unauthorized parties may infringe upon or misappropriate its
financial data, business tools and consumer products or other proprietary
information. In the future, litigation may be necessary to protect and enforce
the Company's intellectual property rights or to determine the validity and
scope of its intellectual property, which could be time consuming and costly.
The Company could also be subject to intellectual property infringement claims
as the numbers of competitors grows. These claims, even if not meritorious,
could be expensive and divert the Company's attention from its continued
operations. If the Company becomes liable to any third parties for such claims,
it could be required to pay a substantial damage award or to develop comparable
non-infringing intellectual property and systems.
<PAGE>
Misappropriation of Intellectual Property
The Company's actions to protect its trademarks and other proprietary rights may
be inadequate. In addition, it is possible that the Company could become subject
to infringement actions based upon content it may license from third parties.
Any of these claims, with or without merit, could subject the Company to costly
litigation and the diversion of its financial resources and technical and
management personnel. Further, if such claims are successful, the Company may
be required to change its trademarks, alter the content of its websites and pay
financial damages. Despite the Company's efforts to protect its proprietary
rights from unauthorized use or disclosure, parties may attempt to disclose,
obtain or use the Company's solutions or technologies.
If third parties prepare and file applications in the United States that claim
trademarks used or registered by the Company, it may oppose those applications
and be required to participate in proceedings before the United States Patent
and Trademark Office to determine priority of rights to the trademark, which
could result in substantial costs. An adverse outcome in litigation or privity
proceedings could require the Company to license disputed rights from third
parties or to cease using such rights. Any litigation regarding the Company's
proprietary rights could be costly and divert its attention, result in the loss
of certain of its proprietary rights, require the Company to seek licenses from
third parties and prevent it from selling its services, any one of which could
adversely affect the Company's business.
Misappropriation of Proprietary Rights
The Company may not be able to prevent misappropriation of its proprietary
information and that agreements entered into for that purpose may not be
enforceable. It might be possible for a third party to copy or otherwise obtain
and use the Company's proprietary information without authorization. The laws
of some countries may afford the Company little or no effective protection of
its intellectual property.
Insider Control of Common Stock
As of June 9, 2000, directors and executive officers beneficially owned
approximately 46% of the outstanding Common Shares. As a result, these
shareholders, if they act as a group, will have a significant influence on all
matters requiring shareholder approval, including the election of directors and
approval of significant corporate transactions. Such control may have the
effect of delaying or preventing a change in control.
Dependence Upon New and Continued Agreements with Content Providers
At present, the Company has a limited number of agreements with content
providers, sponsors and affiliates. The Company's success depends significantly
on its ability to maintain these existing agreements and to build new ones with
other content providers, sponsors and affiliates. The Company cannot ensure
that it will be able to maintain such agreements and continue to obtain the
necessary content.
The Company's future success depends upon its ability to deliver compelling
content over via the Websites. The Company relies on third party content
providers for compelling and
<PAGE>
entertaining content. The Company's ability to maintain and build agreements
with content providers, affiliates and sponsors is critical to its success. The
Company's agreements with third party content providers, sponsors and affiliates
may not be renewed or may be terminated prior to the expiration of their terms
if the Company does not fulfil its contractual obligations. The Company's
inability to secure licenses from content providers or performance rights or the
termination of any number of content provider agreements would decrease the
availability of content that it can offer users. Such inability or termination
may result in decreased traffic on the Websites and, as a result, decreased
advertising revenue, which could adversely affect the Company's business.
The Company's agreements with all content providers are nonexclusive, and many
of its competitors offer, or could offer, content that is similar to or the same
as that obtained by the Company from such nonexclusive content providers. Such
direct competition could adversely affect the Company's business.
Possible Volatility of Share Prices
The trading price of the Company's Common Shares has been and may continue to be
subject to wide fluctuations. The stock market in general, and the market for
Internet-related and technology companies in particular, has experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of such companies. The trading prices of many
technology companies' stocks are at or near historical highs and reflect price
earnings ratios substantially above historical levels. There can be no
assurance that these trading prices and price earnings ratios will be sustained.
These broad market and industry factors may adversely affect the market price of
the common shares, regardless of the Company's operating performance.
In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for the Company and
a diversion of management's attention and resources.
Limited Liability of Directors, Officers and Others
The Company's articles contain provisions limiting the liability of officers and
directors of the Company for all acts, receipts, neglects or defaults of
themselves and all other officers or directors of the Company or for any other
loss, damage or expense happening to the Company which shall happen in the
execution of the duties of such officers or directors. Such limitations on
liability may reduce the likelihood of derivative litigation against officers
and directors of the Company and may discourage or deter the Company's
shareholders from suing officers and directors of the Company based upon
breaches of their duties to the Company, though such an action, if successful,
might otherwise benefit the Company and its shareholders.
Future Dilution
The Company's constating documents authorize the issuance of 20,000,000 common
shares. In the event the Company is required to issue additional common shares
or determines to enter into private placements to raise financing through the
sale of equity securities, investors' interests in
<PAGE>
the Company will be diluted and investors may suffer dilution in their net book
value per share depending on the price at which such securities are sold. If
the Company does issue any such additional shares, such issuances also will
cause a reduction in the proportionate ownership and voting power of all other
shareholders. Further, any such issuance may result in a change of control of
the Company. Moreover, the Company may seek authorization to increase the
number of its authorized shares.
Anti-Takeover Provisions
At the present time, the Company's Board of Directors has not adopted any
shareholder rights plan or any anti-takeover provisions in its Articles.
Without any anti-takeover provisions, there is no deterrent for a take-over of
the Company, which may result in a change of management and directors of the
Company.
ITEM 2 DESCRIPTION OF PROPERTY
The Company's executive office is located at Suite 601 - 889 West Pender Street,
Vancouver, British Columbia, V6C 3B2 (the "Premises"). Through its wholly owned
subsidiary, Quotes Canada, the Company has entered into a lease agreement to
lease the Premises, which is approximately 2414 square feet in size, at a base
rent of $26,544 per year (monthly instalments of $2,212), plus the Company's
proportionate share of building and office operating costs and municipal tax
costs. The lease is scheduled to commence on April 1, 2000 for a three year
term ending March 31, 2003; however, the Company took possession of the Premises
on January 17, 2000 on a rent-free basis until April 1, 2000. The Premises will
house all of the Company's executive and administrative offices.
ITEM 3 LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company or its subsidiary is
a party or of which any of their respective property is the subject. There are
no legal proceedings to which any director, officer or affiliate of the Company
or its subsidiary, or any associate of any such director, officer or affiliate
of the Company or its subsidiary is a party or has a material interest adverse
to the Company or its subsidiaries.
ITEM 4 CONTROL OF THE COMPANY
To the best of the Company's knowledge, the Company is not directly or
indirectly owned or controlled by another corporation or by any foreign
government.
To the best of the Company's knowledge, other than those persons listed below,
no person beneficially owns more than 10% of any class of the Company's voting
securities. There were 9,252,342 common shares issued and outstanding as of
July 21, 2000. The following table sets forth, as of the date hereof: (1)
persons known to the Company to be the owner of more than ten (10%) of the
Company's common shares; and (2) the total amount of Company's common shares
beneficially owned by the officers and directors of the Company as a group.
<PAGE>
<TABLE>
<CAPTION>
NAME IDENTITY OF PERSON
OR GROUP AMOUNT OWNED (2) PERCENT OF CLASS (1)
------------------ ---------------- --------------------
<S> <C> <C> <C>
Paul Edward Dickson. . 10% shareholder 1,022,500 11.1%
------------------ ---------------- --------------------
Glen Alexander Dickson 10% shareholder 1,022,500 11.1%
------------------ ---------------- --------------------
Thomas J. Boychuk. . . 10% shareholder 955,323 10.3%
------------------ ---------------- --------------------
Kurt Marty . . . . . . 10% shareholder 1,270,000 13.8%
------------------ ---------------- --------------------
Rhein Investors AG . . 10% shareholder 1,000,000 10.8%
------------------ ---------------- --------------------
Officers and Directors N/A 4,270,823 46.2%
---------------------- ------------------ ---------------- --------------------
<FN>
(1) There were 9,252,342 common shares issued and outstanding as of July
21, 2000.
(2) The Company believes that all persons hold legal title and has
no knowledge of actual ownership.
</TABLE>
There are no arrangements, known to the Company, the operation of which may at a
subsequent date result in a change in the control of the Company.
ITEM 5 NATURE OF TRADING MARKET
The Company's common shares trade on the Canadian Venture Exchange (formerly the
Vancouver Stock Exchange ("CDNX"). The Company's symbol is ERA and its CUSIP
number is 27032X102. The Company's registrar and transfer agent is Pacific
Corporate Trust, Suite 830 - 625 Howe Street, Vancouver, British Columbia,
Canada (telephone (604) 689-9853, facsimile (604) 689-8144).
The Company has no established trading market in the United States.
The high and low trades on the CDNX (formerly the VSE) for the periods
referenced below were as follows:
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW VOLUME
----------------- ----- ----- ---------
<S> <C> <C> <C>
April 30, 1997. . $0.55 $0.24 397,167
----- ----- ---------
July 31, 1997 . . $0.45 $0.13 360,701
----- ----- ---------
October 31, 1997. $0.20 $0.14 77,100
----- ----- ---------
January 31, 1998. $0.16 $0.11 122,000
----- ----- ---------
April 30, 1998. . $0.20 $0.11 62,400
----- ----- ---------
<PAGE>
July 31, 1998 . . $0.15 $0.11 38,100
----- ----- ---------
October 31, 1998. $0.06 $0.04 11,295
----- ----- ---------
January 31, 1999. $0.08 $0.05 26,700
----- ----- ---------
April 30, 1999. . $0.12 $0.04 30,800
----- ----- ---------
July 31, 1999 . . $0.50 $0.15 434,750
----- ----- ---------
October 31, 1999. $0.80 $0.21 3,117,450
----- ----- ---------
December 31, 1999 $0.80 $0.35 1,054,500
----- ----- ---------
March 31, 2000. . $4.99 $0.55 3,918,397
----- ----- ---------
June 30, 2000 . . $2.95 $1.80 906,520
----------------- ----- ----- ---------
</TABLE>
As of July 21, 2000, the closing price of the Company's common shares on the
CDNX was $2.10.
As of June 9, 2000, the registrar and transfer agent for the Company reported
that there were 9,232,342 common shares issued and outstanding. Of those common
shares issued and outstanding, 7,531,087 common shares were registered to
Canadian residents (34 shareholders), 62,255 common shares were registered to
residents of the United States (4 shareholders) and 1,639,000 common shares were
registered to residents of other foreign countries (3 shareholders).
ITEM 6 EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are no government laws, decrees or regulations in Canada which restrict
the export or import of capital or which affect the remittance of dividends,
interest or other payments to non-resident holders of the Company's common
shares. Any remittances of dividends to United States residents and to other
non-residents are, however, subject to withholding tax. See "ITEM 7 -
TAXATION".
Except as provided in the Investment Canada Act, there are no limitations under
the applicable laws of Canada or by the charter of the Company or other
constituent documents of the Company on the right of foreigners to hold or vote
common shares or other securities of the Company.
The Investment Canada Act will prohibit implementation, or if necessary, require
divestiture of an investment deemed "reviewable" under the Investment Canada Act
by an investor that is not a "Canadian" as defined in the Investment Canada Act
(a "non-Canadian"), unless after review the Minister responsible for the
Investment Canada Act ("the Minister") is satisfied that the "reviewable"
investment is likely to be of net benefit to Canada. An investment in common
shares of the Company by a non-Canadian (other than an "American" as defined in
the Investment Canada Act) would be reviewable under the Investment Canada Act
if it was an investment to acquire control of the Company and the value of the
assets of the Company was $5 million or more. A non-Canadian (other than an
American) would be deemed to acquire control of the Company for the purposes of
the Investment Canada Act if the non-Canadian acquired a
<PAGE>
majority of the outstanding common shares of the Company (or less than a
majority but controlled the Company in fact through the ownership of one-third
or more of the outstanding common shares of the Company) unless it could be
established that, on the acquisition, the Company was not controlled in fact by
the acquirer through the ownership of such common shares. Certain transactions
in relation to the Company's common shares would be exempt from review under the
Investment Canada Act, including, among others, the following:
1. acquisition of common shares by a person in the ordinary course of
that person's business as a trader or dealer in securities;
2. acquisition of control of the Company in connection with the
realization of security granted for a loan or other financial assistance and not
for any purpose related to the provisions of the Investment Canada Act; and
3. acquisition of control of the Company by reason of an amalgamation,
merger, consolidation or corporate reorganization following which the ultimate
direct or indirect control of the Company, through the ownership of voting
interests, remains unchanged.
The Investment Canada Act was amended with the World Trade Organization
Agreement to provide for special review thresholds for "WTO Investors" of
countries belonging to the World Trade Organization, among others, nationals and
permanent residents (including "WTO Investor controlled entities" as defined in
the Investment Canada Act). Under the Investment Canada Act, as amended, an
investment in the Company's common shares by WTO Investors would be reviewable
only if it was an investment to acquire control of the Company and the value of
the assets of the Company was equal to or greater than a specified amount (the
"Review Threshold"), which is published by the Minister after its determination
for any particular year. The Review Threshold is currently $192 million for the
year 2000.
ITEM 7 TAXATION
CANADIAN FEDERAL INCOME TAXATION
The Company considers that the following summary fairly describes the principal
Canadian federal income tax consequences applicable to a holder of common shares
of the Company who at all material times deals at arm's length with the Company,
who holds all common shares as capital property, who is resident in the United
States, who is not a resident of Canada and who does not use or hold, and is not
deemed to use or hold, his common shares of the Company in connection with
carrying on a business in Canada (a "non-resident holder"). It is assumed that
the common shares will at all material times be listed on a stock exchange that
is prescribed for purposes of the Income Tax Act (Canada) (the "ITA") and
regulations thereunder.
This summary is based upon the current provisions of the ITA, the regulations
thereunder, the Canada-United States Tax Convention as amended by the Protocols
thereto (the "Treaty") as at the date of the registration statement and the
currently publicly announced administrative and assessing policies of Revenue
Canada. This summary does not take into account Canadian provincial income tax
consequences. This description is not exhaustive of all possible Canadian
federal income tax consequences and does not take into account or anticipate any
changes in law, whether by legislative, governmental or judicial action. This
summary does, however, take into
<PAGE>
account all specific proposals to amend the ITA and regulations thereunder,
publicly announced by the Government of Canada to the date hereof.
THIS SUMMARY DOES NOT ADDRESS POTENTIAL TAX EFFECTS RELEVANT TO THE COMPANY OR
THOSE TAX CONSIDERATIONS THAT DEPEND UPON CIRCUMSTANCES SPECIFIC TO EACH
INVESTOR. ACCORDINGLY, HOLDERS AND PROSPECTIVE HOLDERS OF COMMON SHARES OF THE
COMPANY SHOULD CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE INCOME
TAX CONSEQUENCES TO THEM OF PURCHASING, OWNING AND DISPOSING OF COMMON SHARES OF
THE COMPANY.
DIVIDENDS
The ITA provides that dividends and other distributions deemed to be dividends
paid or deemed to be paid by a Canadian resident corporation (such as the
Company) to a non-resident of Canada shall be subject to a non-resident
withholding tax equal to 25% of the gross amount of the dividend of deemed
dividend. Provisions in the ITA relating to dividend and deemed dividend
payments to and gains realized by non-residents of Canada, who are residents of
the United States, are subject to the Treaty. The Treaty may reduce the
withholding tax rate on dividends as discussed below.
Article X of the Treaty as amended by the US-Canada Protocol ratified on
November 9, 1995 provides a 5% withholding tax on gross dividends or deemed
dividends paid to a United States corporation which beneficially owns at least
10% of the voting stock of the Company paying the dividend. In cases where
dividends or deemed dividends are paid to a United States resident (other than a
corporation) or a United States corporation which beneficially owns less than
10% of the voting stock of the Company, a withholding tax of 15% is imposed on
the gross amount of the dividend or deemed dividend paid. The Company will be
required to withhold any such tax from the dividend and remit the tax directly
to Revenue Canada for the account of the investor.
The reduction in withholding tax from 25%, pursuant to the Treaty, will not be
available:
(a) if the shares in respect of which the dividends are paid formed part of
the business property or were otherwise effectively connected with a permanent
establishment or fixed base that the holder has or had in Canada within the 12
months preceding the disposition, or
(b) the holder is a U.S. LLC which is not subject to tax in the U.S.
The Treaty generally exempts from Canadian income tax dividends paid to a
religious, scientific, literary, educational or charitable organization or to an
organization exclusively administering a pension, retirement or employee benefit
fund or plan, if the organization is resident in the U.S. and is exempt from
income tax under the laws of the U.S.
CAPITAL GAINS
A non-resident holder is not subject to tax under the ITA in respect of a
capital gain realized upon the disposition of a share of the Company unless the
share represents "taxable Canadian property" to the holder thereof. The Common
shares of the Company will be considered taxable Canadian property to a
non-resident holder only if-.
<PAGE>
(a) the non-resident holder;
(b) persons with whom the non-resident holder did not deal at arm's length-
or
(c) the non-resident holder and persons with whom he did not deal at arm's
length,
owned not less than 25% of the issued shares of any class or series of the
Company at any time during the five year period preceding the disposition. In
the case of a non-resident holder to whom shares of the Company represent
taxable Canadian property and who is resident in the United States, no Canadian
taxes will generally be payable on a capital gain realized on such shares by
reason of the Treaty unless:
(a) the value of such shares is derived principally from real property
(including resource property) situated in Canada,
(b) they formed part of the business property or were otherwise effectively
connected with a permanent establishment or fixed base that the holder has or
bad in Canada within the 12 months preceding the disposition, or
(c) the holder is a U.S. LLC which is not subject to tax in the U.S.
If subject to Canadian tax on such a disposition, the taxpayer's capital gain
(or capital loss) from a disposition is the amount by which the taxpayer's
proceeds of disposition exceed (or are exceeded by) the aggregate of the
taxpayer's adjusted cost base of the shares and reasonable expenses of
disposition. For Canadian income tax purposes, the "taxable capital gain" is
equal to three quarters of the capital gain.
UNITED STATES FEDERAL INCOME TAXATION
The following is a discussion of the material United States Federal income tax
consequences, under current law, applicable to a U.S. Holder (as defined below)
of common shares of the Company who holds such shares as capital assets. This
discussion does not address all potentially relevant Federal income tax matters
and it does not address consequences peculiar to persons subject to special
provisions of Federal income tax law, such as those described below as excluded
from the definition of a U.S. Holder. In addition, this discussion does not
cover any state, local, or foreign tax consequences. (See "Canadian Federal
Income Tax Consequences" above.)
The following discussion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, published Internal Revenue Service
("IRS") rulings, published administrative positions of the IRS and court
decisions that are currently applicable, any or all of which could be materially
and adversely changed, possibly on a retroactive basis, at any time. In
addition, this discussion does not consider the potential effects, both adverse
and beneficial, of any recently proposed legislation which, if enacted, could be
applied, possibly on a retroactive basis, at any time.
THE DISCUSSION BELOW DOES NOT ADDRESS POTENTIAL TAX EFFECTS RELEVANT TO THE
COMPANY OR THOSE TAX CONSIDERATIONS THAT DEPEND UPON CIRCUMSTANCES SPECIFIC TO
EACH INVESTOR. IN
<PAGE>
ADDITION, THIS DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE
RELEVANT TO PARTICULAR INVESTORS SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN U.S.
FEDERAL INCOME TAX LAWS, SUCH AS, DEALERS IN SECURITIES, TAX-EXEMPT ENTITIES,
BANKS, INSURANCE COMPANIES AND NON-U.S. HOLDERS. PURCHASERS OF THE COMMON STOCK
SHOULD THEREFORE SATISFY THEMSELVES AS TO THE OVERALL TAX CONSEQUENCES OF THEIR
OWNERSHIP OF THE COMMON STOCK, INCLUDING THE STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES THEREOF (WHICH ARE NOT REVIEWED HEREIN), AND SHOULD CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR CIRCUMSTANCES.
U.S. HOLDERS
As used herein, a "U.S. Holder" includes a beneficial holder of common shares of
the Company who is a citizen or resident of the United States, a corporation or
partnership created or organized in or under the laws of the United States or of
any political subdivision thereof, any trust if either a US court is able to
exercise primary supervision over the administration of the trust or one or more
US persons have the authority to control all substantial decisions of the trust,
any entity which is taxable as a corporation for U.S. tax purposes and any other
person or entity whose ownership of common shares of the Company is effectively
connected with the conduct of a trade or business in the United States. A U.S.
Holder does not include persons subject to special provisions of Federal income
tax law, such as tax-exempt organizations, qualified retirement plans, financial
institutions, insurance companies, real estate investment trusts, regulated
investment companies, broker-dealers, non-resident alien individuals or foreign
corporations whose ownership of the common shares of the Company is not
effectively connected with the conduct of a trade or business in the United
States and shareholders who acquired their shares through the exercise of
employee stock options or otherwise as compensation.
DIVIDEND DISTRIBUTION ON SHARES OF THE COMPANY
U.S. Holders receiving dividend distributions (including constructive dividends)
with respect to the common shares of the Company are required to include in
gross income for United States Federal income tax purposes the gross amount of
such distributions to the extent that the Company has current or accumulated
earnings and profits, without reduction for any Canadian income tax withheld
from such distributions. Such Canadian tax withheld may be deducted or may be
credited against actual tax payable, subject to certain limitations and other
complex rules, against the U.S. Holder's United States Federal taxable income.
See "Foreign Tax Credit" below. To the extent that distributions exceed current
or accumulated earnings and profits of the Company, they will be treated first
as a return of capital to the extent of the shareholder's basis in the common
shares of the Company and thereafter as gain from the sale or exchange of the
common shares of the Company. Preferential tax rates for net long term capital
gains may be applicable to a U.S. Holder which is an individual, estate or
trust.
In general, dividends paid on the common shares of the Company will not be
eligible for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations.
FOREIGN TAX CREDIT
<PAGE>
A U.S. Holder who pays (or who has had withheld from distributions) Canadian
income tax with respect to the ownership of the common shares of the Company may
be entitled, at the election of the U.S. Holder, to either a deduction or a tax
credit for such foreign tax paid or withheld. This election is made on a
year-by-year basis and generally applies to all foreign income taxes paid by (or
withheld from) the U.S. Holder during that year. There are significant and
complex limitations which apply to the credit, among which is the general
limitation that the credit cannot exceed the proportionate share of the U.S.
Holder's United States income tax liability that the U.S. Holder's foreign
source income bears to his or its world-wide taxable income. In determining the
application of this limitation, the various items of income and deduction must
be classified into foreign and domestic sources. Complex rules govern income
such as "passive income", "high withholding tax interest", "financial services
income", "shipping income" and certain other classifications of income. A U.S.
Holder who is treated as a domestic U.S. corporation owning 10% or more of the
voting stock of the Company is also entitled to a deemed paid foreign tax credit
in certain circumstances for the underlying foreign tax of the Company related
to dividends received or Subpart F income received from the Company. (See the
discussion below of Controlled Foreign Corporations). The availability of the
foreign tax credit and the application of the limitations on the foreign tax
credit are fact specific and holders and prospective holders of the common
shares of the Company should consult their own tax advisors regarding their
individual circumstances.
DISPOSITION OF COMMON SHARES
If a "U.S. Holder" is holding shares as a capital asset, a gain or loss realized
on a sale of the common shares of the Company will generally be a capital gain
or loss, and will be long-term if the shareholder has a holding period of more
than one year. However, gains realized upon sale of the common shares of the
Company may, under certain circumstances, be treated as ordinary income, if the
Company were determined to be a "collapsible corporation" within the meaning of
Code Section 341 based on the facts in existence on the date of the sale (See
below for definition of "collapsible corporation"). The amount of gain or loss
recognized by a selling U.S. Holder will be measured by the difference between
(i) the amount realized on the sale and (ii) his tax basis in the common shares
of the Company. U.S. Holders who are individuals may offset up to $3,000 of
ordinary income per year ($1,500 for married individuals filing separately) and
may carryover unused capital losses to offset capital gains realized in
subsequent years. For U.S. Holders which are corporations (other than
corporations subject to Subchapter S of the Code), any unused capital losses may
only be carried back three and forward five years from the year in which such
losses are realized.
A "collapsible corporation" is a corporation that is formed or availed
principally to manufacture, construct, produce, or purchase prescribed types or
property that the corporation holds for less than three years and that generally
would produce ordinary income on its disposition, with a view to the
stockholders selling or exchanging their stock and thus realizing gain before
the corporation realizes two thirds of the taxable income to be derived from
prescribed property. Prescribed property includes: stock in trade and
inventory; property held primarily for sale to customers in the ordinary course
of business; unrealized receivables or fees, consisting of rights to payment for
noncapital assets delivered or to be delivered, or services rendered or to be
rendered to the extent not previously included in income, but excluding
receivables from selling property that is not prescribed; and property gain on
the sale of which is subject to the capital
<PAGE>
gain/ordinary loss rule. Generally, a shareholder who owns directly or
indirectly 5 percent or less of the outstanding stock of the corporation may
treat gain on the sale of his shares as capital gain.
OTHER CONSIDERATIONS FOR U.S. HOLDERS
In the following circumstances, the above sections of this discussion may not
describe the United States Federal income tax consequences resulting from the
holding and disposition of common shares of the Registrant. Management of the
Company is of the opinion that there is little, if not, any likelihood of the
Company being deemed a "Foreign Personal Holding Company", a "Foreign Investment
Company" or a "Controlled Foreign Corporation" (each as defined below) under
current and anticipated conditions.
FOREIGN PERSONAL HOLDING COMPANY
If at any time during a taxable year more than 50% of the total combined voting
power or the total value of the Registrant's outstanding shares is owned,
actually or constructively, by five or fewer individuals who are citizens or
residents of the United States and 60% or more of the Registrant's gross income
for such year was derived from certain passive sources (e.g., from dividends
received from its subsidiaries), the Registrant would be treated as a "foreign
personal holding company." In that event, U.S. Holders that hold common shares
of the Registrant would be required to include in income for such year their
allocable portion of the Registrant's passive income which would have been
treated as a dividend had that passive income actually been distributed.
FOREIGN INVESTMENT COMPANY
If 50% or more of the combined voting power or total value of the Registrant's
outstanding shares are held, actually or constructively, by citizens or
residents of the United States, United States domestic partnerships or
corporations, or estates or trusts other than foreign estates or trusts (as
defined by the Code Section 7701(a)(31)), and the Registrant is found to be
engaged primarily in the business of investing, reinvesting, or trading in
securities, commodities, or any interest therein, it is possible that the
Registrant might be treated as a "foreign investment company" as defined in
Section 1246 of the Code, causing all or part of any gain realized by a U.S.
Holder selling or exchanging common shares of the Registrant to be treated as
ordinary income rather than capital gains.
PASSIVE FOREIGN INVESTMENT COMPANY
A U.S. Holder who holds stock in a foreign corporation during any year in which
such corporation qualifies as a passive foreign investment company ("PFIC") is
subject to U.S. federal income taxation of that foreign corporation under one of
two alternative tax methods at the election of each such U.S. Holder.
Section 1297 of the Code defines a PFIC as a corporation that is not formed in
the United States and, for any taxable year, either (i) 75% or more of its gross
income is "passive income," which includes interest, dividends and certain rents
and royalties or (ii) the average percentage, by value (or, if the company is a
controlled foreign corporation or makes an election, adjusted tax
<PAGE>
basis), of its assets that produce or are held for the production of "passive
income" is 50% or more. For taxable years of U.S. persons beginning after
December 31, 1997, and for tax years of foreign corporations ending with or
within such tax years, the Taxpayer Relief Act of 1997 provides that publicly
traded corporations must apply this test on a fair market value basis only. The
Registrant believes that it is a PFIC.
As a PFIC, each U. S. Holder must determine under which of the alternative tax
methods it wishes to be taxed. Under one method, a U.S. Holder who elects in a
timely manner to treat the Registrant as a Qualified Electing Fund ("QEF"), as
defined in the Code, (an "Electing U.S. Holder") will be subject, under Section
1293 of the Code, to current federal income tax for any taxable year in which
the Registrant's qualifies as a PFIC on his pro-rata share of the Registrant's
(i) "net capital gain" (the excess of net long-term capital gain over net
short-term capital loss), which will be taxed as long-term capital gain to the
Electing U.S. Holder and (ii) "ordinary earnings" (the excess of earnings and
profits over net capital gain), which will be taxed as ordinary income to the
Electing U.S. Holder, in each case, for the U.S. Holder's taxable year in which
(or with which) the Registrant taxable year ends, regardless of whether such
amounts are actually distributed. Such an election, once made shall apply to
all subsequent years unless revoked with the consent of the IRS.
A QEF election also allows the Electing U.S. Holder to (i) generally treat any
gain realized on the disposition of his common shares (or deemed to be realized
on the pledge of his common shares) as capital gain; (ii) treat his share of the
Registrant's net capital gain, if any, as long-term capital gain instead of
ordinary income, and (iii) either avoid interest charges resulting from PFIC
status altogether (see discussion of interest charge below), or make an annual
election, subject to certain limitations, to defer payment of current taxes on
his share of the Registrant's annual realized net capital gain and ordinary
earnings subject, however, to an interest charge. If the Electing U.S. Holder
is an individual, such an interest charge would be not deductible.
The procedure a U.S. Holder must comply with in making an timely QEF election
will depend on whether the year of the election is the first year in the U.S.
Holder's holding period in which the Registrant is a PFIC. If the U.S. Holder
makes a QEF election in such first year, (sometimes referred to as a "Pedigreed
QEF Election"), then the U.S. Holder may make the QEF election by simply filing
the appropriate documents at the time the U.S. Holder files its tax return for
such first year. If, however, the Registrant qualified as a PFIC in a prior
year, then the U.S. Holder may make an "Unpedigreed QEF Election" by recognizing
as an "excess distribution" (i) under the rules of Section 1291 (discussed
below), any gain that he would otherwise recognize if the U.S. Holder sold his
stock on the qualification date (Deemed Sale Election) or (ii) if the Registrant
is a controlled foreign corporation ("CFC"), the Holder's pro rata share of the
corporation's earnings and profits (Deemed Dividend Election) (But see
"Elimination of Overlap Between Subpart F Rules and PFIC Provisions"). The
effect of either the deemed sale election or the deemed dividend election is to
pay all prior deferred tax, to pay interest on the tax deferral and to be
treated thereafter as a Pedigreed QEF as discussed in the prior paragraph. With
respect to a situation in which a Pedigreed QEF election is made, if the
Registrant no longer qualifies as a PFIC in a subsequent year, normal Code rules
and not the PFIC rules will apply.
If a U.S. Holder has not made a QEF Election at any time (a "Non-electing U.S.
Holder"), then special taxation rules under Section 1291 of the Code will apply
to (i) gains realized on the
<PAGE>
disposition (or deemed to be realized by reason of a pledge) of his common
shares and (ii) certain "excess distributions", as specially defined, by the
Registrant. An "excess distribution" is any current-year distribution in
respect of PFIC stock that represents a rateable portion of the total
distributions in respect of the stock during the year that exceed 125 percent of
the average amount of distributions in respect of the stock during the three
preceding years.
A Non-electing U.S. Holder generally would be required to pro-rate all gains
realized on the disposition of his common shares and all excess distributions
over the entire holding period for the common shares. All gains or excess
distributions allocated to prior years of the U.S. Holder (other than years
prior to the first taxable year of the Registrant during such U.S. Holder's
holding period and beginning after January , 1987 for which it was a PFIC) would
be taxed at the highest tax rate for each such prior year applicable to ordinary
income. The Non-electing U.S. Holder also would be liable for interest on the
deferred tax liability for each such prior year calculated as if such liability
had been due with respect to each such prior year. A Non-electing U.S. Holder
that is an individual is not allowed a deduction for interest on the deferred
tax liability. The portions of gains and distributions that are not
characterized as "excess distributions" are subject to tax in the current year
under the normal tax rules of the Internal Revenue Code.
If the Registrant is a PFIC for any taxable year during which a Non-electing
U.S. Holder holds common shares, then the Registrant will continue to be treated
as a PFIC with respect to such Common Shares, even if it is no longer by
definition a PFIC. A Non-electing U.S. Holder may terminate this deemed PFIC
status by electing to recognize gain (which will be taxed under the rules
discussed above for Non-Electing U.S. Holders) as if such common shares had been
sold on the last day of the last taxable year for which it was a PFIC.
Under Section 1291(f) of the Code, the Department of the Treasury has issued
proposed regulations that would treat as taxable certain transfers of PFIC stock
by Non-electing U.S. Holders that are generally not otherwise taxed, such as
gifts, exchanges pursuant to corporate reorganizations, and transfers at death.
If a U.S. Holder makes a QEF Election that is not a Pedigreed Election (i.e., it
is made after the first year during which the Registrant is a PFIC and the U.S.
Holder holds shares of the Registrant) (a "Unpedigreed Election"), the QEF rules
apply prospectively but do not apply to years prior to the year in which the QEF
first becomes effective. U.S. Holders should consult their tax advisors
regarding the specific consequences of making a Non-Pedigreed QEF Election.
Certain special, generally adverse, rules will apply with respect to the common
shares while the Registrant is a PFIC whether or not it is treated as a QEF.
For example under Section 1297(b)(6) of the Code (as in effect prior to the
Taxpayer Relief Act of 1997), a U.S. Holder who uses PFIC stock as security for
a loan (including a margin loan) will, except as may be provided in regulations,
be treated as having made a taxable disposition of such stock.
The foregoing discussion is based on currently effective provisions of the Code,
existing and proposed regulations thereunder, and current administrative rulings
and court decisions, all of which are subject to change. Any such change could
affect the validity of this discussion. In addition, the implementation of
certain aspects of the PFIC rules requires the issuance of regulations which in
many instances have not been promulgated and which may have retroactive
<PAGE>
effect. There can be no assurance that any of these proposals will be enacted
or promulgated, and if so, the form they will take or the effect that they may
have on this discussion. Accordingly, and due to the complexity of the PFIC
rules, U.S. Holders of the Registrant are strongly urged to consult their own
tax advisors concerning the impact of these rules on their investment in the
Registrant. For a discussion of the impact of the Taxpayer Relief Act of 1997
on a U.S. Holder of a PFIC, see "Mark-to-Market Election For PFIC Stock Under
the Taxpayer Relief Act of 1997" and "Elimination of Overlap Between Subpart F
Rules and PFIC Provisions" below.
MARK-TO-MARKET ELECTION FOR PFIC STOCK UNDER THE TAXPAYER RELIEF ACT OF 1997
The Taxpayer Relief Act of 1997 provides that a U.S. Holder of a PFIC may make a
mark-to-market election with respect to the stock of the PFIC if such stock is
marketable as defined below. This provision is designed to provide a current
inclusion provision for persons that are Non-Electing Holders. Under the
election, any excess of the fair market value of the PFIC stock at the close of
the tax year over the Holder's adjusted basis in the stock is included in the
Holder's income. The Holder may deduct any excess of the adjusted basis of the
PFIC stock over its fair market value at the close of the tax year. However,
deductions are limited to the net mark-to-market gains on the stock that the
Holder included in income in prior tax years, or so called "unreversed
inclusions." For purposes of the election, PFIC stock is marketable if it is
regularly traded on (1) a national securities exchange that is registered with
the SEC, (2) the national market system established under Section II A of the
Securities Exchange Act of 1934, or (3) an exchange or market that the IRS
determines has rules sufficient to ensure that the market price represents
legitimate and sound fair market value.
A Holder's adjusted basis of PFIC stock is increased by the income recognized
under the mark-to-market election and decreased by the deductions allowed under
the election. If a U.S. Holder owns PFIC stock indirectly through a foreign
entity, the basis adjustments apply to the basis of the PFIC stock in the hands
of the foreign entity for the purpose of applying the PFIC rules to the tax
treatment of the U.S. owner. Similar basis adjustments are made to the basis of
the property through which the U.S. persons hold the PFIC stock.
Income recognized under the mark-to-market election and gain on the sale of PFIC
stock with respect to which an election is made is treated as ordinary income.
Deductions allowed under the election and loss on the sale of PFIC with respect
to which an election is made, to the extent that the amount of loss does not
exceed the net mark-to-market gains previously included, are treated as ordinary
losses. The U.S. or foreign source of any income or losses is determined as if
the amount were a gain or loss from the sale of stock in the PFIC.
If PFIC stock is owned by a CFC (discussed below), the CFC is treated as a U.S.
person that may make the mark-to-market election. Amounts includible in the
CFC's income under the election are treated as foreign personal holding company
income, and deductions are allocable to foreign personal holding company income.
The above provisions apply to tax years of U.S. persons beginning after December
31, 1997, and to tax years of foreign corporations ending with or within such
tax years of U.S. persons.
<PAGE>
The rules of Code Section 1291 applicable to nonqualified funds as discussed
above generally do not apply to a U.S. Holder for tax years for which a
mark-to-market election is in effect. If Code Section 1291 is applied and a
mark-to-market election was in effect for any prior tax year, the U.S. Holder's
holding period for the PFIC stock is treated as beginning immediately after the
last tax year of the election. However, if a taxpayer makes a mark-to-market
election for PFIC stock that is a nonqualified fund after the beginning of a
taxpayer's holding period for such stock, a coordination rule applies to ensure
that the taxpayer does not avoid the interest charge with respect to amounts
attributable to periods before the election.
CONTROLLED FOREIGN CORPORATION STATUS
If more than 50% of the voting power of all classes of stock or the total value
of the stock of the Registrant is owned, directly or indirectly, by U.S.
Holders, each of whom own after applying rules of attribution 10% or more of the
total combined voting power of all classes of stock of the Registrant, the
Registrant would be treated as a "controlled foreign corporation" or "CFC" under
Subpart F of the Code. This classification would bring into effect many complex
results including the required inclusion by such 10% U.S. Holders in income of
their pro rata shares of "Subpart F income" (as defined by the Code) of the
Registrant and the Registrant's earnings invested in "U.S. property" (as defined
by Section 956 of the Code). In addition, under Section 1248 of the Code if the
Registrant is considered a CFC at any time during the five year period ending
with the sale or exchange of its stock, gain from the sale or exchange of common
shares of the Registrant by such a 10% U.S. Holder of Registrant at any time
during the five year period ending with the sale or exchange is treated as
ordinary dividend income to the extent of earnings and profits of the Registrant
attributable to the stock sold or exchanged. Because of the complexity of
Subpart F, and because the Registrant may never be a CFC, a more detailed review
of these rules is beyond of the scope of this discussion.
ELIMINATION OF OVERLAP BETWEEN SUBPART F RULES AND PFIC PROVISIONS
Under the Taxpayer Relief Act of 1997, a PFIC that is also a CFC will not be
treated as a PFIC with respect to certain 10% U.S. Holders. For the exception
to apply, (i) the corporation must be a CFC within the meaning of section 957(a)
of the Code and (ii) the U.S. Holder must be subject to the current inclusion
rules of Subpart F with respect to such corporation (i.e., the U.S. Holder is a
"United States Shareholder," see "Controlled Foreign Corporation," above). The
exception only applies to that portion of a U.S. Holder's holding period
beginning after December 31, 1997. For that portion of a United States Holder
before January 1, 1998, the ordinary PFIC and QEF rules continue to apply.
As a result of this new provision, if the Registrant were ever to become a CFC,
U.S. Holders who are currently taxed on their pro rata shares of Subpart F
income of a PFIC which is also a CFC will not be subject to the PFIC provisions
with respect to the same stock if they have previously made a Pedigreed QEF
Election. The PFIC provisions will however continue to apply to U.S Holders for
any periods in which Subpart F does not apply (for example he is no longer a 10%
Holder or the Registrant is no longer a CFC) and to U.S. Holders that did not
make a Pedigreed QEF Election unless the U.S. Holder elects to recognize gain on
the PFIC shares held in the Registrant as if those shares had been sold.
<PAGE>
ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES OF THE
COMPANY.
ITEM 8 SELECTED FINANCIAL DATA
The selected consolidated financial data presented below for the five year
period ended October 31 is derived from the Company's consolidated financial
statements which were examined by the Company's independent auditor. The
information set forth below should be read in conjunction with the Consolidated
Financial Statements of the Company (including related notes thereto) and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". The data is presented in Canadian dollars.
Comparability of Selected Financial Data:
In 1996, the Company acquired certain mineral properties which were explored in
1997 and 1998. In 1999, the Company re-evaluated its properties and decided to
abandon most of the said properties. Also in 1999, management pursued a change
in business for the Company and subsequent to October 31, 1999, the Company
purchased an e-commerce business.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA(1)(2)
------------------------------------
(STATED IN CANADIAN DOLLARS)
FISCAL YEAR ENDED OCTOBER 31
----------------------------
6 MONTHS
ENDED
CANADIAN GAAP APR. 30/2000 1999 1998 1997 1996 1995(3)
-------------------------------------- ------------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . 33,052 -- -- -- -- --
------------- --------- -------- --------- -------- --------
Direct Costs . . . . . . . . . . . . . -- -- -- -- -- --
------------- --------- -------- --------- -------- --------
Operating Expenses . . . . . . . . . . 19,022 -- -- -- -- --
------------- --------- -------- --------- -------- --------
Administrative Expenses. . . . . . . . 414,161 76,184 26,660 56,797 90,558 29,534
------------- --------- -------- --------- -------- --------
Amortization and Asset Write-down. . . 42,114 -- -- -- -- --
------------- --------- -------- --------- -------- --------
Income (Loss) From Operations. . . . . (442,245) (76,184) (26,660) (56,797) (90,558) (29,500)
------------- --------- -------- --------- -------- --------
Other Income . . . . . . . . . . . . . 4,715 3,064 4,049 1,270 9,885 --
------------- --------- -------- --------- -------- --------
Net Loss from Continuing Operations. . (437,529) (73,120) (22,611) (55,527) -- --
------------- --------- -------- --------- -------- --------
Net Loss from Discontinued Operations. (30,246) (111,982) (28,358) (2,315) -- --
------------- --------- -------- --------- -------- --------
Net Income (Loss). . . . . . . . . . . (467,775) (185,112) (50,969) (57,842) (80,673) (29,534)
------------- --------- -------- --------- -------- --------
Income (Loss) per Common Share . . . . (0.06) (0.05) (0.01) (0.02) (0.06) (0.02)
------------- --------- -------- --------- -------- --------
Total Assets . . . . . . . . . . . . . 914,029 614,059 206,241 258,182 21,483 11,082
------------- --------- -------- --------- -------- --------
Long-Term Debt . . . . . . . . . . . . -- -- -- -- -- --
------------- --------- -------- --------- -------- --------
Cash Dividends per Common Share. . . . -- -- -- -- -- --
-------------------------------------- ------------- --------- -------- --------- -------- --------
<PAGE>
6 MONTHS
ENDED
U.S. GAAP. . . . . . . . . . . . . . . APR. 30/2000 1999 1998 1997 1996 1995
-------------------------------------- ------------- --------- -------- --------- -------- --------
Revenue. . . . . . . . . . . . . . . . 33,052 -- -- -- -- --
-------------------------------------- ------------- --------- -------- --------- -------- --------
Direct Costs . . . . . . . . . . . . . -- -- -- -- -- --
------------- --------- -------- --------- -------- --------
Operating Expenses . . . . . . . . . . 19,022 -- -- -- -- --
------------- --------- -------- --------- -------- --------
Administrative Expenses. . . . . . . . 890,660 88,280 26,660 56,797 90,558 29,534
------------- --------- -------- --------- -------- --------
Amortization . . . . . . . . . . . . . 42,114 -- -- -- -- --
------------- --------- -------- --------- -------- --------
Income (Loss) From Operations. . . . . (918,744) (88,280) (26,660) (56,797) (90,558) (29,534)
------------- --------- -------- --------- -------- --------
Other Income . . . . . . . . . . . . . 4,715 3,064 4,049 1,270 9,885 --
------------- --------- -------- --------- -------- --------
Net Loss from Continuing Operations. . (914,029) (85,216) (22,511) (55,527) (80,673) (29,534)
------------- --------- -------- --------- -------- --------
Net Loss from Discontinued Operations. (10,065) (57,587) (36,992) (66,267) (4,061) --
------------- --------- -------- --------- -------- --------
Net Income (Loss) for the year . . . . (924,094) (142,803) (59,503) (119,833) (84,734) (29,534)
------------- --------- -------- --------- -------- --------
Income (Loss) per Common Share . . . . (0.15) (0.04) (0.02) (0.06) (0.13) (0.02)
------------- --------- -------- --------- -------- --------
Total Assets . . . . . . . . . . . . . 914,029 593,878 131,655 192,130 17,422 11,082
------------- --------- -------- --------- -------- --------
Long-Term Debt . . . . . . . . . . . . -- -- -- -- -- --
------------- --------- -------- --------- -------- --------
Cash Dividends per Common Share. . . . -- -- -- -- -- --
-------------------------------------- ------------- --------- -------- --------- -------- --------
<FN>
1. See ITEM 9 - Management's Discussion and Analysis of Financial Condition and Results of Operations
and ITEM 9 - United States Generally Accepted Accounting Principles Reconciliation.
2. A reconciliation to U.S. GAAP for 1999, 1998 and 1997 is included in Note 12 to the Audited
Consolidated Financial Statements. Significant differences include accounting for mineral properties and
compensation expense related to escrow shares.
3. As at October 31, 1995, and for the nine months ended October 31, 1995. In fiscal 1995, the
Company changed its year end from January 31 to October 31.
</TABLE>
Since June 1, 1970, the government of Canada has permitted a floating exchange
rate to determine the value of the Canadian dollar as compared to the United
States dollar. For the past fiscal years ended October 31 and the interim
period ended December 31, 1999, the following exchange rates were in effect for
Canadian dollars exchanged for United States dollars, expressed in terms of
Canadian dollars (based on the noon buying rates in New York City, for cable
transfers in Canadian dollars, as certified for customs purposes by the Federal
Reserve Bank of New York):
<TABLE>
<CAPTION>
YEAR AVERAGE LOW-HIGH YEAR END/PERIOD END
---- -------- ------------------------- --------------------
<C> <C> <S> <C>
1995 $ 1.373 Low $1.346, High $1.413 $ 1.369
-------- ------------------------- --------------------
1996 $ 1.364 Low $1.338, High $1.375 $ 1.362
-------- ------------------------- --------------------
<PAGE>
1997 $ 1.385 Low $1.349, High $1.427 $ 1.427
-------- ------------------------- --------------------
1998 $ 1.484 Low $1.417, High $1.543 $ 1.543
-------- ------------------------- --------------------
1999 $ 1.486 Low $1.461, High $1.519 $ 1.472
---- -------- ------------------------- --------------------
</TABLE>
The Company has not issued any dividends in the past five fiscal years.
ITEM 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(ALL NUMBERS IN CANADIAN DOLLARS UNLESS OTHERWISE STATED)
Results from Operations
Six months ended April 30, 2000
------------------------------------
The Company acquired 100% of the outstanding shares of Quotes Canada Financial
Network Ltd. with an effective date of November 5, 1999. The assets and
business of Quotes Canada will remain in the subsidiary operating company and
not be transferred to the Company.
The Company incurred a loss for the six months ended April 30, 2000 of $467,775
or $0.07 per share compared to a loss of $8,681 or $0.01 per share for the six
months ended April 30, 1999. The increase in the loss is due to the following
factors:
- an increase in the write-down of mineral properties which is included in
discontinued operations from nil to $30,246 as the Company abandoned its
remaining mineral properties in the first quarter of 2000 in order to
concentrate on the Quotes Canada acquired operations;
- an increase in depreciation and amortization by $42,114 which is included
in discontinued operations as the Company depreciates the equipment acquired on
acquisition of Quotes Canada and additional purchases during the quarter for
total depreciation of $17,064 and $25,050 in amortization of the goodwill
recorded on the acquisition of Quotes Canada;
- an increase in consulting expenses, and salaries and benefits of $199,353
as the Company paid its programmers, graphic artists, marketing and sales staff
relating to the Quotes Canada acquired business;
- an increase in professional fees by $51,231, regulatory fees by $3,617 and
transfer agent fees by $3,399 as the Company increased its regulatory activities
by issuing shares for private placements, obtained legal and accounting advice
relating to filing a
<PAGE>
registration statement with the Securities and Exchange Commission and advice
on other corporate matters;
- an increase in advertising and promotion and travel and accommodation by
$99,002 due to activities relating to the acquired business of Quotes Canada;
- an increase in general office costs such as rent, telephone and other
sundry office expenses by $47,605 due to activities relating to the acquired
business of Quotes Canada; and
- somewhat offsetting these costs increases was revenue of $33,052 received
for the Company's integrated data streamlining services.
During the six months ended April 30, 2000, the Company continued to develop and
refine its integrated data streamlining services. Significant expenses were
incurred to develop and market the Company's services. In addition, the Company
also focused on obtaining financing which will be required to fund future
expenses as the Company is still in process of developing and marketing its
services.
Cash flow from operations for the six months ended April 30, 2000 was a cash
outflow of $420,703 compared to a cash inflow of $2,621 for the six months ended
April 30, 1999. The increase in the cash outflow is due to the increase in cash
expenses as discussed above.
Year ended October 31, 1999 compared to the Year ended October 31, 1998
--------------------------------------------------------------------------------
The Company continued its program of exploring its current mineral properties
and searching for potential acquisitions of mineral properties or other viable
businesses. The Company incurred a loss for the year of $185,112 or $0.05 per
share compared to a loss of $50,969 or $0.01 per share in 1998. The increase in
the loss is due to the following:
- an increase in the write-down of mineral properties from $3,496 to
$111,886 as the Company abandoned exploration and development of its Yukon
mineral property; and
- an increase in professional fees from $7,368 in 1998 to $48,488 in 1999
and regulatory fees from $2,600 in 1998 to $8,876 in 1999 related to certain
acquisition negotiations including the acquisition of Quotes Canada Financial
Network Ltd. ("Quotes Canada") which closed subsequent to year end.
Cash flow from operations in 1999 was an outflow of $62,360 which is consistent
with 1998's cash outflow of $60,250. The cash outflow for 1999 consists
primarily of administration expenses paid during the year.
Year ended October 31, 1998 compared to the Year ended October 31, 1997
--------------------------------------------------------------------------------
The Company incurred a loss for the year of $50,969 or $0.01 per share compared
to a loss of $57,842 or $0.02 per share in 1997. The decrease in the loss is
due to the following:
<PAGE>
- an increase in the exploration costs from $2,315 to $24,862 increased the
loss as the Company increased activity relating to its Manitoba property; and
- an decrease in professional fees from $36,566 to $7,368 decreased the loss
as the Company did not require the use of professional services in 1998 to the
same extent as 1997. In 1997, the Company incurred legal fees relating to the
settlement of accounts payable through the issuance of shares and relating to
the acquisition of mineral properties.
Cash flow from operations in 1998 was an outflow of $60,250 which is
substantially lower than 1997's cash outflow of $231,150, due primarily to the
payment of significant current liabilities in 1997. The cash outflow for 1998
consists primarily of administration expenses and exploration expenses paid
during the year.
Year ended October 31, 1997 compared to the Year ended October 31, 1996
--------------------------------------------------------------------------------
The Company incurred a loss for the year of $57,842 or $0.02 per share compared
to a loss of $80,673 or $0.06 per share in 1996. The decrease in the loss is
due to the following:
- an increase in the travel and accommodation from nil in 1996 to $6,081 in
1997 due to travel to the Yukon and Manitoba to consider investments in mineral
properties and, office costs from $4,180 in 1996 to $7,066 due to increased
activity levels requiring more supplies and other expenses in 1997, increased
the loss; and
- an decrease in professional fees from $66,690 to $36,566 decreased the
loss as the Company did not require the use of professional services in 1997 to
the same extent as 1996.
Cash flow from operations in 1997 was an outflow of $231,150 which is
substantially higher than 1996's cash outflow of $27,608, due primarily to the
payment of significant current liabilities in 1997. The cash outflow consists
of administrative expenses paid during the year relating to 1997 activities plus
prior year administrative expenses and other accrued liabilities which were paid
in 1997.
Liquidity and Capital Resources
As at April 30, 2000
------------------------
During the six months ended April 30, 2000, the Company spent $31,917 on
operations, investing and financing activities, reducing the Company's cash
position from $453,290 at October 31, 1999 to $421,373 at April 30, 2000.
$420,703 was spent on operations as discussed in the results from operations
section of this report. $171,844 was spent on investing in equipment
($163,558), trade names ($5,796) and mineral properties ($5,065), offset by
$2,575 in cash of Quotes Canada on acquisition. $560,630 was generated from
financing activities.
The Company estimates cash requirements for capital and funding operating losses
of approximately $1,080,000 for the remainder of fiscal 2000. The Company
expects to fund these requirements through the cash on hand of $421,373 and
issuances of share capital. On May 16,
<PAGE>
2000, the Company issued 1,000,000 Special Warrants at $1.46 Cdn. for gross
proceeds of $1,460,000 and a finders fee of $109,500 was paid. The Company is
dependent on this private placement for funding of planned operations.
The Company is forecasting cash in flows from operations commencing in the first
quarter of fiscal 2001. The Company is also forecasting to incur approximately
$1,700,000 in capital expenditures in fiscal 2001, the majority of which will
occur in the first six months of the year. As a result, the Company will
require additional financing prior to these capital additions. The Company
intends to obtain this financing through future private placements between now
and the first quarter of fiscal 2001. The actual timing will be dependent on
the availability of financing on terms acceptable and beneficial to the Company.
There are no assurances that the required financing will be received.
As at October 31, 1999
--------------------------
The Company improved its financial position in 1999 compared to 1998. Cash and
cash equivalents increased from $84,468 at October 31, 1998 to $453,290 at
October 31, 1999. The increase in cash is due to $590,600 received from the
issuance of shares and warrants for cash, somewhat offset by the $131,937 cash
outflow to Quotes Canada as part of the acquisition which closed subsequent to
year end, $27,481 cash outflow on the acquisition and exploration of mineral
properties and $62,360 cash outflow from operations.
As at October 31, 1998
--------------------------
Cash and cash equivalents decreased from $161,747 in 1997 to $84,468 in 1998 due
to expenditures on the acquisition and development of mineral properties of
$17,029 and a cash outflow from operations of $60,250.
As at October 31, 1998, the Company had $109,586 ($35,000 in mineral properties
plus $74,586 in deferred exploration costs) capitalized costs relating to
mineral properties compared to $96,053 ($30,001 in mineral properties and
$66,052 in deferred exploration costs) in 1997.
Change in Business
--------------------
With the acquisition of Quotes Canada subsequent to year end, the Company has
changed its business from the exploration and development of mineral properties
to the creation and distribution of proprietary consumer, financial and news
information through the development of advanced Internet websites. Given the
change in the Company's business, the results of operations for the years ended
October 31, 1999, 1998 and 1997 referred to above may not be indicative of
future results.
U.S. GAAP
----------
The results of operations discussed above are based on the Company's audited
financial statements prepared in accordance with Canadian generally accepted
accounting principles. Differences between Canadian generally accepted
accounting principles and principles generally accepted in the United States are
listed and quantified in note 13 to the financial statements
<PAGE>
included elsewhere in this document. Significant differences between Canadian
GAAP and US GAAP include:
- the requirement under US GAAP to expense mineral property exploration
expenditures and land-use costs relating to mineral properties for which
commercial feasibility has not yet been established, whereas under Canadian
GAAP, these expenses are capitalized and amortized based on future production or
expensed when the properties are abandoned.
- the requirement under US GAAP to treat escrow shares as compensation
arrangements and record compensation expense based on the fair value of the
shares released to a shareholder that provides services as an officer, director,
employee, consultant or contractor, whereas under Canadian GAAP, escrow shares
are recorded based on the consideration paid on issuance and the release of
escrow shares does not result in an accounting entry by the Company.
- the requirement under US GAAP to record compensation expense when shares
or share options are issued or granted to officers at prices below market value
at the time of issuance or grant, whereas under Canadian GAAP, compensation
expense is generally not recorded under these circumstances.
Loss for the six months ended April 30, 2000 under US GAAP was $924,094 or $0.15
per share. Loss for the year ended October 31, 1999 under U.S. GAAP was
$142,803 (1998 - $59,503; 1997 - $123,894) and loss per share was $0.04 (1998 -
$0.02; 1997 - $0.06). The reasons for the losses are as discussed above under
Results from Operations.
ITEM 9A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 10 DIRECTORS AND OFFICERS
The following table sets forth the names, municipalities of residence and
ownership of common shares of each of the directors and officers of the Company.
<TABLE>
<CAPTION>
NAME
OFFICE HELD SHARE OWNERSHIP
PLACE OF RESIDENCE DATE OF OFFICE AND TERM OF OFFICE(3) AS OF JULY 21, 2000(1) (2)
--------------------------- ---------------------------------------------- --------------------------
<S> <C> <C>
<PAGE>
Paul Edward Dickson . . . . Director since August 12, 1999 and
Director and President. . . President since January 17, 2000.
Vancouver, BC, Canada . . . Term until Annual General Meeting in 2001. 1,022,500
---------------------------------------------- --------------------------
Glen Alexander Dickson. . . Director since August 12, 1999 and
Director and Vice-President Vice President since January 17, 2000.
North Vancouver, BC, Canada Term until Annual General Meeting in 2001. 1,022,500
---------------------------------------------- --------------------------
Dianne Szigety
Corporate Secretary . . . . Corporate Secretary since January 17, 2000.
New Westminster, BC, Canada Term until Annual General Meeting in 2001. Nil
---------------------------------------------- --------------------------
Thomas Julian Boychuk
Director. . . . . . . . . . Director since December 15, 1995.
Vancouver, BC, Canada . . . Term until Annual General Meeting in 2001. 955,323
---------------------------------------------- --------------------------
Kurt Marty
Director. . . . . . . . . . Director since January 26, 2000.
Bremgarten,Switzerland. . . Term until Annual General Meeting in 2001. 1,270,000
---------------------------------------------- --------------------------
Roxanne Ayotte. . . . . . . Chief Financial Officer since April 17, 2000.
Vancouver, BC, Canada . . . Term until Annual General Meeting in 2001. 500
--------------------------- ---------------------------------------------- --------------------------
<FN>
(1) There were 9,252,342 common shares issued and outstanding as of July 21, 2000. The share
ownership includes escrow shares issued to directors and officers.
(2) Unless otherwise indicated, the Company believes that all persons named in the table have sole
voting and investment power with respect to the common shares beneficially owned by them.
(3) The directors are re-elected and the officers are re-appointed at the annual general meeting of
shareholders. The last annual meeting was held on January 17, 2000. Effective April 30, 2000, John
Charlesworth resigned as a director of the Company.
</TABLE>
Paul Dickson (President and Director) and Glen Dickson (Vice President and
Director) are brothers. There are no other family relationships between any of
the other Director or Executive Officers.
Aside from the appointment of Paul Dickson and Glen Dickson as Directors under
the terms of the Acquisition Agreement, there are no arrangements or
understandings between any of the Directors and/or Executive Officers and any
other person pursuant to which that Director and/or Executive Officer was
selected.
As part of the acquisition of Quotes Canada, J.E. Charlesworth and Thomas
Boychuk agreed, for a period of three years, to cast the votes represented by
their common shares in support of the following actions:
(a) the election of Paul Dickson and Glen Dickson to the Company's
Board of Directors;
<PAGE>
(b) the employment of Paul Dickson and Glen Dickson by the Company for
a minimum period of two years at a salary of not less than $2,500 per month
(increased to $5,000 per month on January 1, 2000); and
(c) the granting of stock options to Paul Dickson and Glen Dickson
entitling them to purchase not less than four (4%) percent (or such lower
percentage as may be accepted by Paul Dickson and Glen Dickson) of the issued
and outstanding common shares of the Company at a minimum price permitted by the
CDNX for a period of five (5) years.
ITEM 11 COMPENSATION OF DIRECTORS AND OFFICERS
Other than as set forth in the table below, no executive officer of the Company
was paid or earned compensation from the Company for performing his or her
duties during the years ended October 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
==========================
ALL OTHER
NAME AND PRINCIPAL COMPEN-
POSITION YEAR ANNUAL COMPENSATION LONG TERM COMPENSATION SATION
======== ==== =================== ====================== ======
OTHER
ANNUAL
COMPEN-
SALARY BONUS SATION AWARDS PAYOUTS
====== ===== ====== ====== =======
SECURITIES
UNDER RESTRICTED
OPTIONS/ SHARES OR
SARS RESTRICTED LTIP
GRANTED SHARE UNITS PAYOUTS
======= =========== =======
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J.E. CHARLESWORTH 1999 Nil Nil Nil Nil Nil Nil Nil
PRESIDENT (1) 1998 Nil Nil Nil Nil Nil Nil Nil
1997 Nil Nil Nil 75,000 Nil Nil Nil
================== ======= =========== ======= === ===== === === ===
<FN>
(1) J.E. Charlesworth resigned as President of the Company on January 17, 2000.
</TABLE>
The aggregate amount of compensation paid by the Company and its subsidiaries to
its officers and directors as a group for all services in all capabilities
during the Company's last fiscal year was $7,500 (for geological services with
respect to the Ami Property).
<PAGE>
The Company did not grant any stock options to any of its executive officers
during the year ended October 31, 1999. There were no long-term incentive
awards made to the executive officers of the Company during the fiscal year
ended October 31, 1999. There are no pension plan benefits in place for the
executive officers of the Company.
The following stock options were exercised by the Company's executive officers
during the year ended October 31, 1999:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
UNEXERCISED IN THE MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END FY-END
AGGREGATE VALUE (#) ($)
SECURITIES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
================= ==================== ================ =============== ================
<S> <C> <C> <C> <C> <C>
J.E. CHARLESWORTH 75,000 $ 37,500 NIL / NIL NIL / NIL
================= ==================== =============== ================ =========
<FN>
1. Based on the difference between the option exercise price and the closing market price of the
Company's common shares on the date of exercise.
2. In the money options are those where the market value of the underlying securities at the fiscal
year-end exceed the exercise price of the options.
</TABLE>
During the year ended October 31, 1999, other Directors and Officers (excluding
J.E. Charlesworth, as indicated in the above table) as a group exercised a total
of 285,000 stock options at an exercise price of $0.15 per share. On the day of
exercise, the closing price for each share was $0.65.
The Company has no compensatory plan or arrangement with respect to any officer
that results or will result from the resignation, retirement or any other
termination of employment of such officer's employment with the Company, from a
change in control of the Company or a change in such officer's responsibilities
following a change in control.
No cash compensation was paid to any director of the Company for the director's
services as a director during the fiscal year ended October 31, 1999. The
Company has no standard arrangement pursuant to which directors are compensated
by the Company for their services in their capacity as directors except for the
granting from time to time of incentive stock options in accordance with the
policies of the CDNX.
Since the year ended October 31, 1999, the Company has entered into the
following employment agreements:
<PAGE>
(a) The Company entered into employment agreements with Paul Dickson and
Glen Dickson effective December 1, 1999, which provide for a salary of $2,500
per month plus bonuses from time to time upon the successful performance of
Quotes Canada, for a two year period. Beginning January 1, 2000, both Paul
Dickson and Glen Dickson received salary increases to $5,000 per month.
(b) On November 30, 1999, the Company entered into an oral agreement with
J.E. Charlesworth to provide management services at a rate of $1,000 per month.
The Company's contracts with Mr. Charlesworth is "month to month" and can be
terminated with one months' notice.
(c) On November 30, 1999, the Company entered into an oral agreement with
Thomas Boychuk to provide management services and investor relations at a rate
of $2,000 per month. The Company's contracts with Mr. Boychuk is "month to
month" and can be terminated with one months' notice.
(d) In addition, the Company entered into employment agreements with 2
programmers (at rates of $3,200 and $2,500 per month respectively), and with 1
secretary (at a rate of $2,800 per month).
ITEM 12 OPTIONS TO PURCHASE SECURITIES
As part of a private placement of 350,000 special warrants, the Company issued
350,000 share purchase warrants in July, 1999 (the "July Warrants"). Each July
Warrant entitles the holder thereof to acquire one common share at a price of
$0.30 per common share for a period of two years from July 9, 1999. The holders
of the July Warrants are as follows:
(a) Paul Dickson 80,000 warrants
(b) Glen Dickson 80,000 warrants
(c) J.E. Charlesworth 95,000 warrants
(d) Thomas Boychuk 95,000 warrants
As part of a private placement of 1,270,000 units, the Company issued 635,000
common share purchase warrants in September, 1999 (the "September Warrants").
Each September Warrant entitles the holder thereof to acquire one common share
for a period of two years from September 23, 1999, at a price of $0.48 during
the first year and $0.58 during the second year. The holder of the 635,000
September Warrants is Refima AG, a company controlled by Kurt Marty.
As a group the directors and officers hold warrants exercisable into 890,000
common shares of the Company.
On April 18, 2000, the Company received regulatory approval for the issuance of
1,000,000 special warrants (the "Special Warrants"). Each Special Warrant is
exercisable into one unit consisting of one common share and one common share
purchase warrant (the "April Warrants"). Rhein Investors AG, a company
controlled by Jorg Rudolf and Frank Junker, purchased the 1,000,000 Special
Warrants. Each April Warrant entitles the holder thereof to
<PAGE>
acquire one common share for a two year period, at a price of $1.83. The
transaction has now closed and the securities have been issued.
As of the date hereof the following securities to acquire common shares of the
Company were outstanding:
<TABLE>
<CAPTION>
AMOUNT OF SECURITIES
CALLED FOR BY THE EXERCISE PRICE OF
TYPE OF SECURITY WARRANTS WARRANTS EXPIRATION DATE
---------------------- -------------------- ------------------- ------------------
<S> <C> <C> <C>
Common Shares. . . . . 350,000 $ 0.30 July 9, 2001
-------------------- ------------------- ------------------
$.048 (first year)
Common Shares. . . . . 635,000 $0.58 (second year) September 23, 2001
-------------------- ------------------- ------------------
$1.83 (first year)
Common Shares. . . . . 1,000,000 $1.83 (second year) February 23, 2002
---------------------- -------------------- ------------------- ------------------
</TABLE>
As of the date hereof the following are stock options held by directors and
officers and employees of the Company, as separate groups:
<TABLE>
<CAPTION>
NUMBER OF COMMON EXERCISE PRICE PER
GROUP SHARES UNDER OPTION COMMON SHARE EXPIRY DATE
---------------------- ------------------- ------------------- ----------------
<S> <C> <C> <C>
Directors and Officers 405,000 $ 1.24 January 27, 2005
------------------- ------------------- ----------------
100,000 $ 3.06 March 8, 2005
------------------- ------------------- ----------------
Employees. . . . . . . 20,000 $ 1.87 May 17, 2002
------------------- ------------------- ----------------
25,000 $ 1.24 January 27, 2005
------------------- ------------------- ----------------
25,000 $ 3.06 March 8, 2005
------------------- ------------------- ----------------
</TABLE>
<PAGE>
ITEM 13 INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Except as set forth below, none of the following persons had or is to have any
material interest, direct or indirect, in any transaction during the last three
fiscal years or any presently proposed transaction to which the Company or any
of its subsidiaries was or is to be a party:
1. any director or officer of the Company;
2. any shareholder holding more than 10% of the Company's common
shares; and
3. any relative or spouse of any of the foregoing persons, or any
relative of such spouse, who has the same home as such person or who is a
director or officer of any subsidiary of the Company.
Pursuant to the Acquisition Agreement, the Company acquired a 100% interest in
Quotes Canada in consideration of a total of $240,000, consisting of a cash
payment of $50,000 and the issuance of the Acquisition Shares. Under the terms
of the Acquisition Agreement, both Paul Dickson and Glen Dickson were appointed
to the board of directors on August 12, 1999 and each have entered into
employment agreements effective December 1, 1999 which provide for a salary of
$2,500 per month (increased to $3,500 per month as of January 1, 2000) plus
bonuses from time to time upon the successful performance of Quotes Canada, for
a two year period. In addition, incentive stock options will be granted to each
of Paul Dickson and Glen Dickson, entitling them to purchase not less than 4%
(or such lower percentage as may be accepted by the optionee) of the issued
common shares of the Company at the minimum price permitted by the CDNX for a
period of five years.
On February 21, 2000 the Company received regulatory approval for the issuance
of an aggregate of 1,526,200 additional escrow shares (the "Additional Escrow
Shares") to the existing Officers and Directors as a group. Prior to the
issuance of the Additional Escrow Shares, John Charlesworth and Thomas Boychuk
each held 199,600 escrow shares (the "Existing Escrow Shares").
The Existing Escrow Shares will effectively be cancelled and converted to the
new escrow agreement which now covers a total of 2,125,000 shares. The
Additional Escrow Shares will not be released from escrow, transferred or in any
manner dealt with without the express consent of the CDNX. Any shares not
released on or before ten years from the date of acceptance by CDNX will be
cancelled. The shares may also be cancelled at the time of a major
reorganization of the Company, if required as a condition of the consent to the
reorganization by the Executive Director for the British Columbia Securities
Commission or where the Company's shares have been subject to a cease trade
order under the Securities Act (British Columbia) for a period of two
consecutive years.
Except as set forth below, none of the following persons was indebted to the
Company or its subsidiary at any time during the last three fiscal years:
1. any director or officer of the Company; and
<PAGE>
2. any associate of any such director or officer.
PART II
ITEM 14 DESCRIPTION OF SECURITIES TO BE REGISTERED
Capital Stock to be Registered
The Company's authorized share capital consists of 20,000,000 common shares
without par value, of which 9,252,342 were issued and outstanding as of July 21,
2000.
All of the authorized common shares of the Company, once issued, rank equally as
to dividends, voting powers, and participation in assets. Holders of common
shares are entitled to one vote for each common share held of record on all
matters to be acted upon by the shareholders. Holders of common shares are
entitled to receive such dividends as may be declared from time to time by the
Board of Directors, in its discretion, out of funds legally available therefore.
The articles of the Company do not provide for cumulative voting.
Upon liquidation, dissolution or winding up of the Company, holders of common
shares are entitled to receive pro rata the assets of Company, if any, remaining
after payments of all debts and liabilities. No common shares have been issued
subject to call or assessment. There are no pre-emptive or conversion rights
and no provisions for redemption or purchase for cancellation, surrender, or
sinking or purchase funds. There are no restrictions on the repurchase or
redemption of common shares by the Company while there is any arrearage in the
payment of dividends or sinking fund instalments.
Provisions as to the modification, amendment or variation of the rights
attaching to the common shares or provisions are contained in the British
Columbia Company Act (the "BCCA"). The BCCA requires approval by a special
resolution (ie. approved by at least three-quarters of the votes cast at a
meeting of the shareholders of the Company or consented to in writing by each
shareholder of the Company) of the Company's shareholders in order to effect any
of the following changes:
(a) subdivide all or any of its unissued, or fully paid issued, shares with
par value into shares of smaller par value,
(b) subdivide all or any of its unissued, or fully paid issued, shares
without par value so that the number of those shares is increased,
(c) consolidate all or any of its shares with par value into shares of
larger par value,
(d) consolidate all or any of its shares without par value so that the
number of those shares authorized is reduced,
(e) change all or any of its unissued, or fully paid issued, shares with par
value into shares without par value,
<PAGE>
(f) change all or any of its unissued shares without par value into shares
with par value,
(g) alter the name or designation of all or any of its shares, whether
issued or unissued, or
(h) alter the provisions as to the maximum price or consideration at or for
which shares without par value may be issued.
PART III
ITEM 15 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 16 CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES
AND USE OF PROCEEDS
Not applicable.
PART IV
ITEM 17 FINANCIAL STATEMENTS
(All numbers are Canadian Dollars unless otherwise noted)
Consolidated Financial Statements of the Company for the Six Months Ended April
30, 2000 (unaudited) and Years Ended October 31, 1999, 1998 and 1997 (audited),
reported on by Topping, Eyton and Partners, Chartered Accountants.
These financial statements are expressed in Canadian dollars and were prepared
in accordance with Canadian Generally Accepted Accounting Principles, which are
substantially the same as United States Generally Accepted Accounting
Principles. For a reconciliation of Canadian with United States Generally
Accepted Accounting Principles, see Note 12 to the Company's Consolidated
Financial Statements. For a history of the exchange rates in effect between the
Canadian dollar and the United States dollar, see ITEM 8 - Selected Financial
Data.
ITEM 18 FINANCIAL STATEMENTS
Not applicable. See ITEM 17 - Financial Statements.
ITEM 19 FINANCIAL STATEMENTS AND EXHIBITS
All Audited Statements are in Canadian Dollars and presented on a consolidated
basis.
Financial Statements Filed as Part of the Registration Statement:
<PAGE>
Consolidated Financial Statements of the Company for the Six Months Ended April
30, 2000 (unaudited) and Years Ended October 31, 1999, 1998 and 1997 (audited),
reported on by Topping, Eyton and Partners, Chartered Accountants:
Auditor's Report dated December 8, 1999 and January 27, 2000 as to
disclosure changes for generally accepted accounting principles in the
United States
Consolidated Balance Sheets
Consolidated Statement of Loss and Deficit
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Consolidated Schedule of Deferred Explorations Costs
Audited Financial Statements of Quotes Canada Financial Network, Ltd. for the
Two Months Ended October 31, 1999 and Twelve Months Ended August 31, 1999.
Exhibits Required by Form 20-F
Exhibit Description
Number
(1) Articles of Incorporation and By-laws:
1.1 Articles of Incorporation of the Company, effective September 9,
1993
1.2 Altered Memorandum of the Company dated December 6, 1999
1.3 Certificate of Change of Name of the Company, dated December 24,
1999
(2) Instruments Defining Rights of Holders of Equity Securities Being
Registered:
2.1 See 1.1 above
(3) Material Contracts:
3.1 Escrow Agreement between Montreal Trust Company of Canada,
the Company and Each Shareholder, dated July 11, 1996
3.2 Agreement between Peter Ledwidge and the Company, dated April
29, 1999
3.3 Acquisition Agreement between Quotes Canada Financial Network
Ltd. and the Company, dated May 28, 1999 (executed June
1, 1999)
3.4 Affiliate Contract between Quotes Canada Financial Network Ltd.
and ON24 Inc., dated July 1, 1999
<PAGE>
3.5 Sponsorship Agreement between Global Securities Corporation,
the Company and Quotes Canada Financial Network Ltd., dated
July 6, 1999
3.6 Amendment Agreement between Glen Dickson and Paul Dickson and
the Company, dated July 29, 1999
3.7 Web Linking Agreement between Citizens Bank of Canada and
Quotes Canada Financial Network Ltd., dated August 17, 1999
3.8 Voting Trust Agreement between Quotes Canada Financial Network
Ltd. and the Company, dated August 25, 1999
3.9 Internet InfoSpace Canada Content Distribution Agreement between
InfoSpace Canada.com, Inc. and Quotes Canada, dated August
31, 1999
3.10 Sales Agency Website Agreement between ClickThrough Interactive
Services Inc. and Quotes Canada, dated September 17, 1999
3.11 Private Placement Subscription Agreement between the Company and
Refima AG, dated September 23, 1999
3.12 Republishing Agreement between Quotes Canada Financial Network
Ltd. and ExactTrade.Com, dated October 27, 1999
3.13 Lease Agreement between the Company's wholly-owned subsidiary,
Quotes Canada Financial Network Inc. and S & B Octagon
Properties Canada Ltd., dated November 9, 1999
3.14 Republishing Agreement between the Company and MostActives.Com,
dated November 23, 1999
3.15 Amendment Agreement between Glen Dickson and Paul Dickson and
the Company, dated November 30, 1999
3.16 Employment and Confidentiality Agreement between the Company and
Glen Dickson, dated December 1, 1999
3.17 Employment and Confidentiality Agreement between the Company and
Paul Dickson, dated December 1, 1999
3.18 Escrow Agreement between Pacific Corporate Trust Company, the
Company and Each Principal, dated December 6, 1999
3.19 Assignment Agreement between the Company and H. Leo King &
Associates Ltd., dated January 18, 2000
3.20 Affinity Group Marketing Agreement between Quotes Canada and
Vector Insurance Network (Ontario) Limited, dated March 28,
2000
<PAGE>
3.21 Republishing Agreement between the Company and Global Securities
Corporation dated May 16, 2000
3.22 Investors Relations Agreement between the Company and GPC
Communications dated May 20, 2000.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, hereunto duly authorized.
Dated: July 24, 2000 EARTHRAMP.COM COMMUNICATIONS INC.
Per:
/s/ Paul Dickson
Paul E. Dickson
President
<PAGE>
Consolidated Financial Statements of
EARTHRAMP.COM
COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Six months ended April 30, 2000 (unaudited) and
Years ended October 31, 1999, 1998 and 1997 (audited)
Auditors' Report
Consolidated Balance Sheets Statement 1
Consolidated Statement of Loss and Deficit Statement 2
Consolidated Statements of Cash Flows Statement 3
Notes to Consolidated Financial Statements
Consolidated Schedule of Deferred Explorations Costs Schedule 1
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the balance sheets of Earthramp.com Communications Inc.
(formerly Carta Resources Ltd.) as at October 31, 1999 and 1998 and the
statements of loss and deficit and cash flows for the three years ended October
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at October 31, 1999 and 1998
and the results of its operations and its cash flows for the three years ended
October 31, 1999 in accordance with Canadian generally accepted accounting
principles. As required by the Company Act (British Columbia), we report that,
in our opinion, these principles have been applied on a basis consistent with
that of the preceding year.
/s/ TOPPING, EYTON and PARTNERS
Chartered Accountants
Vancouver, Canada
December 8, 1999
January 27, 2000 as to disclosure changes for generally
accepted accounting principles in the United States
<PAGE>
<TABLE>
<CAPTION>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.) Statement 1
Consolidated Balance Sheets
----------------------------
April 30, October 31, October 31,
2000 1999 1998
(unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 406,373 $ 53,290 $ 1,053
Term deposits . . . . . . . . . . . . . . . . . . . . . . . 15,000 400,000 83,415
Accounts receivable . . . . . . . . . . . . . . . . . . . . 43,463 3,651 12,187
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . 7,141 - -
471,977 456,941 96,655
Deposit and advances (note 3) . . . . . . . . . . . . . . . . - 131,937 -
Capital assets (note 4) . . . . . . . . . . . . . . . . . . . 442,052 - -
Mineral properties, at cost (note 5). . . . . . . . . . . . . - 5,000 35,000
Deferred exploration costs (schedule 1) . . . . . . . . . . . - 20,181 74,586
$ 914,029 $ 614,059 $ 206,241
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . $ 22,253 $ 5,138 $ 2,808
Shareholders' equity:
Share capital (note 6):
Authorized:
20,000,000 common shares
without par value
Issued and outstanding:
8,232,342 shares
(October 31,
1999 - 4,086,142;
1998 - 3,691,142) 2,267,763 1,566,009 1,510,509
Warrants and share subscriptions (note 7) . . . . . . . . . . 583,976 535,100 -
Contributed surplus (note 8). . . . . . . . . . . . . . . . . 101,750 101,750 101,750
Deficit (statement 2) . . . . . . . . . . . . . . . . . . . . (2,061,713) (1,593,938) (1,408,826)
891,776 608,921 203,433
Subsequent events (notes 7 and 14). . . . . . . . . . . . . . $ 914,029 $ 614,059 $ 206,241
-------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
On behalf of the Board:
/s/ Paul Dickson (Director) /s/ Glen Dickson (Director)
<PAGE>
<TABLE>
<CAPTION>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.) Statement 2
Consolidated Statements of Loss and Deficit
Six months ended April 30, Years ended October 31,
2000 1999 1999 1998 1997
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,052 $ - $ - $ - $ -
Expenses:
Advertising and promotion . . . . . . . . . . . . . . . . . 87,694 - 7,500 1,584 -
Amortization. . . . . . . . . . . . . . . . . . . . . . . . 42,114 - - - -
Bank charges and interest . . . . . . . . . . . . . . . . . - - 37 35 (2,049)
Consulting fees . . . . . . . . . . . . . . . . . . . . . . 157,412 - - - -
Data feed . . . . . . . . . . . . . . . . . . . . . . . . . 19,022 - - - -
Office and sundry . . . . . . . . . . . . . . . . . . . . . 27,808 (405) 4,306 3,992 7,056
Professional fees . . . . . . . . . . . . . . . . . . . . . 53,933 2,702 48,488 7,368 36,566
Regulatory fees . . . . . . . . . . . . . . . . . . . . . . 6,917 3,300 8,876 2,600 4,709
Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,706 - - - -
Research and development. . . . . . . . . . . . . . . . . . 1,273 - - - -
Salaries and benefits . . . . . . . . . . . . . . . . . . . 41,941 - - - -
Telephone, interest and
cable . . . . . . . . . . . . . . . . . . . . . . . . . . 8,686 - - - -
Transfer agent. . . . . . . . . . . . . . . . . . . . . . . 6,483 3,084 5,113 3,035 4,434
Travel and accommodation. . . . . . . . . . . . . . . . . . 11,308 - 1,864 8,046 6,081
475,297 8,681 76,184 26,660 56,797
Loss from operations. . . . . . . . . . . . . . . . . . . . . (442,245) (8,681) (76,184) (26,660) (56,797)
Miscellaneous income. . . . . . . . . . . . . . . . . . . . . - - - - 1,270
Interest income . . . . . . . . . . . . . . . . . . . . . . . 4,716 - 3,064 4,049 -
-------------------------------------------------------------
Net loss from continuing operations . . . . . . . . . . . . . (437,529) (8,681) (73,120) (22,611) (55,527)
Net loss from discontinued
operations (note 5) . . . . . . . . . . . . . . . . . . . . (30,246) - (111,992) (28,358) (2,315)
-------------------------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . (467,775) (8,681) (185,112) (50,969) (57,842)
Deficit, beginning of period. . . . . . . . . . . . . . . . . 1,593,938 1,408,826 1,408,826 1,357,857 1,300,015
-------------------------------------------------------------
Deficit, end of period. . . . . . . . . . . . . . . . . . . . $2,061,713 $1,417,507 $1,593,938 $1,408,826 $1,357,857
-------------------------------------------------------------
Loss per share from
continuing operations . . . . . . . . . . . . . . . . . . . $ (0.06) $ (0.01) $ (0.02) $ (0.01) $ (0.02)
-------------------------------------------------------------
Loss per share from
discontinued operations . . . . . . . . . . . . . . . . . . $ (0.01) $ - $ (0.03) $ (0.01) $ (0.00)
Loss per share. . . . . . . . . . . . . . . . . . . . . . . . $ (0.07) $ (0.01) $ (0.05) $ (0.01) $ (0.02)
-------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.) Statement 3
Consolidated Statements of Cash Flows
Six months ended April 30, Years ended October 31,
2000 1999 1999 1998 1997
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities:
Loss from continuing
operations. . . . . . . . . . . . . . . . . . . . . . . . $(437,529) $(8,681) $ (73,120) $(22,611) $ (55,527)
Add items not
affecting cash:
Amortization. . . . . . . . . . . . . . . . . . . . . . 42,114 - - - -
(395,415) (8,681) (73,120) (22,611) (55,527)
Net change in non-cash
working capital:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . (33,224) 8,868 8,536 (11,805) 967
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . (2,308) - - - -
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . 10,244 (2,808) 2,330 (972) 34,232
Due to related parties. . . . . . . . . . . . . . . . . . . . - - - - (208,507)
-------------------------------------------------------------
Cash from operations - continuing . . . . . . . . . . . . . . (420,703) (2,621) (62,254) (35,388) (228,835)
Cash from operations - discontinued . . . . . . . . . . . . . - - (106) (24,862) (2,315)
(420,703) (2,621) (62,360) (60,250) (231,150)
Investing activities:
Deferred exploration
costs . . . . . . . . . . . . . . . . . . . . . . . . . . - (800) (20,981) (12,029) (61,991)
Deposit and advances. . . . . . . . . . . . . . . . . . . . - - (131,937) - -
Mineral properties costs. . . . . . . . . . . . . . . . . . (5,065) - (5,000) (5,000) (15,001)
Net additions to equipment. . . . . . . . . . . . . . . . . (163,558) - - - -
Trade names . . . . . . . . . . . . . . . . . . . . . . . . (5,796) - - - -
Subsidiary cash on
acquisition . . . . . . . . . . . . . . . . . . . . . . . 2,575 - - - -
(171,844) (800) (157,918) (17,029) (76,992)
Financing activities:
Finders fee . . . . . . . . . . . . . . . . . . . . . . . . (38,608) - - - -
Proceeds from share
issuance. . . . . . . . . . . . . . . . . . . . . . . . . 15,262 - 54,000 - 468,816
Proceeds from warrant
and share subscriptions . . . . . . . . . . . . . . . . . 583,976 - 535,100 - -
560,630 - 589,100 - 468,816
Increase (decrease) in cash . . . . . . . . . . . . . . . . . (31,917) (3,421) 368,822 (77,279) 160,674
Cash, beginning of period . . . . . . . . . . . . . . . . . . 453,290 84,468 84,468 161,747 1,073
-------------------------------------------------------------
Cash, end period. . . . . . . . . . . . . . . . . . . . . . . $ 421,373 $81,047 $ 453,290 $ 84,468 $ 161,747
-------------------------------------------------------------
Represented by:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 406,373 $ 2,554 $ 53,290 $ 1,053 $ 898
Term deposit. . . . . . . . . . . . . . . . . . . . . . . . 15,000 78,493 400,000 83,415 160,849
$ 421,373 $81,047 $ 453,290 $ 84,468 $ 161,747
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
1. Nature of operations:
At an extraordinary general meeting of shareholders on December 6, 1999, the
shareholders approved by special resolution the change of name of the Company
from Carta Resources Ltd. to Earthramp.com Communications Inc.
With the acquisition of Quotes Canada Financial Network Ltd. on November 5, 1999
(note 3), the Company has changed its business from the exploration of mineral
properties to the creation and distribution of proprietary consumer, finance and
news information through the development of advanced Internet websites.
The Company has abandoned its mineral properties and has written-off all
capitalized mineral property and deferred exploration costs (note 5).
2. Significant accounting policies:
(a) Basis of presentation:
The consolidated financial statements include the accounts of Earthramp.com
Communications Inc. and its wholly-owned subsidiary, Quotes Canada Financial
Network Ltd, ("Quotes Canada") from the date of acquisition on November 5, 1999.
The Company acquired all the outstanding shares of Quotes Canada on November 5,
1999. The comparative figures are for the Company itself.
(b) Cash and cash equivalents:
Cash equivalents of $421,373, $453,290 and $84,468 at April 30, 2000, October
31, 1999 and 1998, respectively, consist of overnight repurchase agreements and
certificates of deposits with an initial term of less than three months. For
purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
(c) Equipment:
The Company amortizes its equipment, which is recorded at cost, using the
diminishing balance method at the following rates:
Computer equipment 30%
Furniture and equipment 20%
(d) Mineral properties and deferred exploration costs:
The Company capitalizes acquisition, exploration and development costs related
to mineral properties. The costs of abandoned properties are charged to expense
in the year of abandonment. The cost of producing properties will be depleted
by the unit-of-production method based on estimated proven reserves.
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 2
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
2. Significant accounting policies (continued):
(e) Goodwill:
The excess of the purchase price for the acquisition, for accounting purposes,
of Quotes Canada over the fair value of the net liabilities of Quotes Canada has
been capitalized as goodwill. It is being amortized over five years using the
straight-line method. The Company reviews the carrying values of goodwill and
other long-term assets on a periodic basis when factors indicate that there may
have been a permanent impairment in value. The recoverability of goodwill and
other long-term assets is based upon an assessment of projected future operating
cash flows calculated on an undiscounted basis when the carrying value is less
than the projected cash flows, a provision is recorded for the difference.
(f) Income taxes:
The Company accounts for income taxes on the tax allocation method. Under this
method, timing differences between reported and taxable income result in
provisions for income taxes not currently payable. Such timing differences
result primarily as a result of claiming depreciation and depletion for tax
purposes at amounts differing from those charged to income. The tax benefit of
losses is only recognized to the extent that the benefit is of virtual
certainty.
(g) Use of estimates:
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with Canadian generally accepted accounting principles. Actual
results could differ from those estimates.
(h) Share option plan:
The Company applies the intrinsic value-based method of accounting by Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations, in accounting for its fixed plan stock
options. As such, compensation expense would be recorded on the date of grant
only if the current market price of the underlying stock exceeded the exercise
price.
(i) Loss per share:
Loss per share is calculated using the weighted average number of shares
outstanding for the year as follows:
<TABLE>
<CAPTION>
Six months ended April 30,
<S> <C>
2000 . . . . . . . . . . . 7,224.869
1999 . . . . . . . . . . . 3,716,142
Year ended October 31,
1999 . . . . . . . . . . . 3,739,553
1998 . . . . . . . . . . . 3,691,142
1997 . . . . . . . . . . . 3,322,180
</TABLE>
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 3
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
2. Significant accounting policies (continued):
(j) Comparative figures:
Comparative figures are reclassified to conform with the presentation of the
current period.
(k) Financial instruments:
The fair values of cash, term deposits, accounts receivable and accounts payable
approximates carrying values due to the short-term nature of these items. The
Company does not have any derivative financial instruments for any of the
periods presented.
(l) Escrow shares
The Company records escrow shares issued to officers and directors at the cash
amounts received. Upon release of the escrow shares when the performance
criteria are achieved or on cancellation if not achieved, no further accounting
entries are recorded.
(m) Revenue recognition policies
The company principally derives its revenue from service contracts for the
provision of financial data only, service contracts for the provision of
financial data together with analytical software, subscriptions to
Quotescanada.com, and the sale of advertising on its website. License fees for
data feed are billed at the beginning of the month with a 30-day payment terms.
License fees for software are billed at the end of the month with a 30-day
payment terms. Revenue is recognized for license fees whether for data feed or
analytical software at the end of each month for the services provided in that
month. Revenue is allocated between data feed and analytical software in
multiple service contracts based on the stated contractual amounts, which are
consistent with the amounts charged for single service contracts. The Company's
revenue recognition policies for license fees are in accordance with the AICPA's
SOP 97-2 and EITF 00-3. Revenue from the sale of advertising is recognized as
the advertising is displayed on the website. Subscriptions for Quotescanada.com
are generally paid by credit card prior to the month of service. These and
other payments received prior to services being rendered are included in
deferred revenue and as services are rendered, the proportionate share is
recognized as revenue. Advertising barter transactions are recorded at zero
unless historical evidence of previous similar cash transactions exists.
(n) Website development costs
Website development costs are expensed as incurred.
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 4
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
3. Deposit and advances and acquisition of Quotes Canada:
Deposit and advances at October 31, 1999 represent the following:
Non-refundable advance on acquisition of Quotes Canada $ 50,000
Advances to Quotes Canada, without interest or
stated terms of repayment $ 81,937
-----------------------------------------------------------------------------
$ 131,937
The Company entered into an agreement on June 1, 1999 whereby it agreed to
acquire a 100% interest in Quotes Canada at a total cost of $240,000, consisting
of a non-refundable payment of $50,000 (which amount was paid by October 31,
1999) and the issuance of 1,000,000 common shares at a fair value of $0.19
(based on the average trading price of the Company's shares for the ten days
ended May 31, 1999) to the shareholders. The agreement was modified on November
30, 1999 by recharacterizing the $50,000 non-refundable payment as a repayment
of shareholder loans, which had been advanced by the vendors (existing
shareholders) of Quotes Canada prior to the acquisition. Quotes Canada provides
real-time stock market quotes and other financial information from its website.
The shares may not be traded until June 1, 2000.
The acquisition was subject to approval by the Company's shareholders and the
Vancouver Stock Exchange. Approval of the acquisition of Quotes Canada as
outlined above was received from the Company's shareholders on August 12, 1999
and the Vancouver Stock Exchange on November 5, 1999. On December 6, 1999, the
shareholders also approved the issuance of an additional 1,526,200 escrow shares
to the initial and additional principals of the Company as a result of the
acquisition of Quotes Canada. The escrow shares were issued on February 8, 2000
at $0.01 per share for total consideration of $15,262. The escrow shares can be
released based on an earn-out formula equal to approximately 10.5 shares for
every $1 of cumulative cash flow. No additional value above the $0.01 per share
has been ascribed to these escrow shares on the acquisition of Quotes Canada
given their contingent nature.
No finders' fees were paid in connection with this acquisition.
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 5
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
3. Deposit and advances and acquisition of Quotes Canada (continued):
This acquisition will be accounted for using the purchase method with an
effective date of November 5, 1999 and is summarized as follows:
<TABLE>
<CAPTION>
Net Acquired Assets
<S> <C>
Current assets. . . . $ 13,999
Equipment . . . . . . 4,308
Goodwill. . . . . . . 250,500
$328,807
Liabilities Assumed
Current liabilities . $ 6,871
Long-term liabilities 81,936
---------------------
$ 88,807
Consideration paid:
Cash. . . . . . . . $ 50,000
Shares issued . . . 190,000
$240,000
</TABLE>
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 6
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
3. Deposit and advances and acquisition of Quotes Canada (continued):
A summarized pro-forma statement of loss of the Company assuming the acquisition
of Quotes Canada had occurred on November 5, 1998 financed by a common share
issuance of $190,000 and cash of $50,000, is as follows:
<TABLE>
<CAPTION>
<S> <C>
Revenues. . . . . . . . . . . . . $ 12,383
Expenses:
General and administrative. . . . 19,431
Stock quotation services. . . . . 24,124
Depreciation and amortization . . 55,090
Professional fees . . . . . . . . 57,031
Travel, advertising and promotion 12,915
Regulatory and transfer agent . . 13,989
Mineral properties written-off. . 111,992
294,572
Loss from operations. . . . . . . 282,189
Interest income . . . . . . . . . 3,064
---------------------------------
Net loss. . . . . . . . . . . . . $279,125
--------------------------------- --------
</TABLE>
<TABLE>
<CAPTION>
4. Capital assets:
Capital assets represent the following:
April 30,
2000
----
Accumulated Net book
Cost amortization value
(unaudited)
<S> <C> <C> <C>
Computer equipment . . . $ 203,815 $ 19,982 $183,833
Furniture and equipment. 29,045 2,072 26,973
Trade names. . . . . . . 5,796 - 5,796
Goodwill (note 3). . . . 250,500 25,050 225,450
$ 489,156 $ 47,104 $442,052
</TABLE>
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 7
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
5. Mineral properties and discontinued operations:
<TABLE>
<CAPTION>
April 30, October 31, October 31,
2000 1999 1998
(unaudited)
<S> <C> <C> <C>
Yukon property $ - $5,000 $ -
Manitoba property. - - 35,000
$ - $5,000 $35,000
</TABLE>
(a) Yukon property:
The Company entered into an agreement dated April 29, 1999 to acquire a 100%
interest in certain mineral claims in the Dawson Mining District in the Yukon.
The terms of the agreement were as follows:
- paying a total of $55,000; such sum shall be paid as follows:
(i) $5,000 is due and payable on the signing of the agreement, which sum has
been paid;
(ii) $10,000 is due and payable on or before May 1, 2000;
(iii) $10,000 is due and payable on or before May 1, 2001;
(iv) $10,000 is due and payable on or before May 1, 2002; and
(v) $20,000 is due and payable on or before May 1, 2003.
During the six months ended April 30, 2000, these claims were abandoned and
$5,000 in mineral claims was written-off.
(b) Manitoba property:
The Company entered into an agreement to purchase a 100% interest in certain
lithium claims in the Wekusko Lake area of Manitoba. Under the terms of the
original agreement dated October 30, 1995, the Company had to pay a total of
$250,000 over a period from signing the agreement to October 30, 2000. It had
complied with the terms of the agreement and paid a total of $30,000 to October
30, 1997. On October 29, 1998, the agreement was amended and the terms were as
follows:
- paying a total of $260,000, such sum to be paid as follows:
(i) on October 30, 1998: $5,000 was due and payable, which sum was paid,
plus the issue of 25,000 free trading shares of the Company (which shares were
not issued until after the 1998 year end pending regulatory approval);
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 8
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
5. Mineral properties (continued):
(b) Manitoba property (continued):
(i) on October 30, 1999: an additional $5,000 was due and payable, plus the
issue of an additional 25,000 free trading shares of the Company (terms not
complied with in 1999);
(ii) on October 30, 2000, an additional $10,000 was due and payable;
(iii) on October 30, 2001, an additional $10,000 was due and payable;
(iv) on October 30, 2002, an additional $10,000 was due and payable;
(v) on October 30, 2003, an additional $20,000 was due and payable;
(vi) on October 30, 2004, an additional $25,000 was due and payable; and
(vii) on or before October 30, 2005: $175,000 was due and payable. This
$175,000 could be payable in cash and shares with a 50/50 cash and share split.
The shares will be issued in accordance with the British Columbia Securities
laws and will be issued at a deemed value of the average closing trading price
for the previous 90 trading days;
- incurring exploration expenditures of not less than an aggregate $250,000
to October 30, 2003; and
- on commencement of commercial production, the property will be subject to
a Net Smelter Return ("NSR") of 2.5%. 1.5% of this NSR may be purchased at any
time for $1,000,000.
During the year, these claims were abandoned and the deferred exploration costs
written-off.
(c) Discontinued operations:
The Company abandoned its Manitoba mineral property in 1999 and its Yukon
mineral property in 2000. As at April 30, 2000, the Company no longer operates
an exploration and development of mineral properties segment. As a result, the
exploration and development of mineral properties represents discontinued
operations effective for the first quarter of fiscal 2000. In accordance with
Canadian generally accepted accounting principles, prior year and period
comparative figures have been reclassified in the statements of loss and deficit
and cash flows to reflect discontinued operations accounting. The loss from
discontinued operations includes the following:
<TABLE>
<CAPTION>
Six months ended April 30, Years ended October 31,
2000 1999 1999 1998 1997
(unaudited)
<S> <C> <C> <C> <C> <C>
Exploration expenses . . $ - $ - $ 106 $ 24,862 $ 2,315
Write down of mineral
properties and deferred
exploration costs. . . . 30,246 - 111,886 3,496 -
$(30,246) - $(111,982) $(28,458) $(2,315)
</TABLE>
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 9
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
6. Share capital:
Number Amount
<S> <C> <C>
Balance, October 31, 1996 . . . . . . . . . . . . . . . . 1,371,092 $ 787,668
Shares issued for cash. . . . . . . . . . . . . . . . . . 1,558,500 461,316
Shares issued for debt settlement . . . . . . . . . . . . 711,550 355,775
Escrow shares cancelled . . . . . . . . . . . . . . . . . (700,000) (101,750)
New escrow shares issued for cash . . . . . . . . . . . . 750,000 7,500
---------------------------------------------------------
Balance, October 31, 1997 and 1998. . . . . . . . . . . . 3,691,142 1,510,509
Shares issued pursuant to the purchase of the
Manitoba property . . . . . . . . . . . . . . . . . . . . 25,000 1,500
Shares issued pursuant to the purchase of the
Yukon property. . . . . . . . . . . . . . . . . . . . . . 10,000 -
Shares issued pursuant to the exercise of stock options . 360,000 54,000
---------------------------------------------------------
Balance, October 31, 1999 . . . . . . . . . . . . . . . . 4,086,142 1,566,009
Shares issued pursuant to acquisition of 100% interest
in Quotes Canada (note 3) . . . . . . . . . . . . . . . . 1,000,000 190,000
Shares issued pursuant to share subscriptions from
private placement (note 7(b)) . . . . . . . . . . . . . . 1,270,000 443,992
Shares issued pursuant to share subscriptions (note 7(a)) 350,000 52,500
---------------------------------------------------------
Escrow shares issued for cash (note 3). . . . . . . . . . 1,526,200 15,262
---------------------------------------------------------
Balance, April 30, 2000 . . . . . . . . . . . . . . . . . 8,232,342 $2,267,763
---------------------------------------------------------
Included in issued and outstanding shares are 2,125,000 (1999 598,800; 1998
750,000) escrow shares, which may not be traded, transferred or released without
consent of regulatory authorities (note 3).
</TABLE>
7. Special warrants and share subscriptions:
During 1999, the Company entered into two private placement agreements as
follows:
(a) Subscribers received 350,000 special warrants at a price of $0.15 each.
Each warrant was exchangeable, at no additional consideration, into one common
share and one share purchase warrant to purchase one additional share for a
period of two years at a price of $0.30 per share. Approval by regulatory
authorities was received on November 5, 1999 and 350,000 common shares were
issued on November 30, 1999.
(b) Subscribers received 1,270,000 units at a price of $0.38. Each unit
consisted of one common share and warrant to acquire one-half of a share. Each
share purchase warrant was exchangeable, at no additional consideration, into
one-half of one common share for a two year period at a price of $0.48 in the
first year and $0.58 in the second year. The underlying shares and share
purchase warrants are subject to a 12-month hold period. A finder's fee
agreement was entered into whereby 8% of the gross proceeds from this private
placement totaling $36,608 was due and payable ten days following the date of
all necessary approvals by regulatory authorities, which approvals were received
on November 5, 1999 and 1,270,000 shares were issued on November 12, 1999.
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 10
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
7. Special warrants and share subscriptions (continued):
During 2000, the Company entered into a private placement agreement to issue
1,000,000 special warrants at a price of $1.46 per special warrant, for gross
proceeds of $1,460,000. $583,976 was received by the Company prior to April 30,
2000. The remaining subscription price was received subsequent to April 30,
2000 and the special warrants were issued on May 16, 2000. A finder's fee of
$109,500 was paid pursuant to this private placement.
8. Contributed surplus:
Contributed surplus arose from the cancellation of 700,000 old escrow shares.
9. Government grants:
The Company received a $10,000 grant from the Manitoba government during the
1998 fiscal year. The deferred exploration costs are net of $34,047, being the
total grants received to date.
10. Income taxes:
The Company has non-capital tax losses totaling $805,630, which expire as
follows:
2002 $ 29,534
2003 80,673
2004 57,842
2005 50,969
2006 148,612
2007 438,000
----
$ 805,630
11. Segmented information:
For the three years ended October 31, 1999, the Company had one operating
segment - the exploration and development of mineral properties in Canada. In
late 1999, in conjunction with the potential acquisition of Quotes Canada, the
Company paid a $50,000 non-refundable deposit and $81,937 in advances to Quotes
Canada (note 3). These transactions have led to a change in the Company's
business (note 1). For the six months ended April 30, 2000, all operations were
related to the Company's new business except for the write-down of mineral
properties of $30,246, which related to the exploration and development of
mineral properties. At April 30, 2000, the Company has abandoned all mineral
properties and no longer conducts operations in this segment.
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 11
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
12. 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 information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems, which use certain dates in 1999 to represent something other than a
date. The effect 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 may 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
Company, including those related to the efforts of customers, suppliers or other
third parties, have been fully resolved.
13. Differences between United States and Canadian generally accepted
accounting principles:
The financial statements are prepared in accordance with generally accepted
accounting principles in Canada. Significant differences to accounting
principles generally accepted in the United States ('U.S. GAAP") are as follows:
(a) Income taxes:
The Company would, under U.S. GAAP, be subject to Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Adopting this
Standard would have no material effect on net income of the Company for any of
the years presented. The following additional disclosure would be provided:
<TABLE>
<CAPTION>
April 30, October 31, October 31,
2000 1999 1998
(unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Net operating losses. . . $ 362,500 $ 165,000 $ 98,600
Less valuation allowance. (362,500) (165,000) (98,600)
-------------------------
Net deferred tax assets . - - -
Deferred tax liabilities. - - -
-------------------------
Deferred tax assets, net. $ - $ - $ -
-------------------------
</TABLE>
A valuation allowance equal to the net deferred tax asset balance has been
recorded as the realization of such losses during the carry-forward period,
cannot be considered to be more likely than not.
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 12
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
13. Differences between United States and Canadian generally accepted
accounting principles (continued):
(b) Mineral properties and deferred exploration costs:
Under U.S. GAAP, mineral property exploration expenditures and land-use costs
relating to mineral properties for which commercial feasibility has not yet been
established are expensed in the period incurred. For U.S. GAAP purposes, the
Company has expensed these costs in the year incurred. Under Canadian GAAP,
these costs are deferred and amortized over the estimated life of the property
following the commencement of commercial production or written-off if the
property is sold, allowed to lapse or abandoned.
The Company abandoned the Manitoba Mineral property in fiscal 1999 and $35,000
in capitalized acquisition costs and $75,386 in deferred exploration costs were
expensed as "net loss from discontinued operations" in statement of loss and
deficit. For U.S. GAAP, the write-down was $35,000 as exploration costs are
expensed as incurred under U.S. GAAP. The Company abandoned the Yukon Mineral
property in fiscal 2000 and $5,000 in capitalized acquisition costs and $20,181
in deferred exploration costs were expensed as "net loss from discontinued
operations" in the statement of loss and deficit. For U.S. GAAP, the write down
was $5,000 as exploration costs are expensed as incurred under U.S. GAAP.
(c) Stock based compensation:
Under U.S. GAAP and applying the intrinsic value method of valuing stock
options, compensation expense is recorded if stock options are issued to
officers at an option price, which is less than the market value of the
underlying shares at the option grant date. Under Canadian GAAP, compensation
expense is generally not recorded in these circumstances. For U.S. GAAP,
compensation expense of $476,500 has been recorded in the six months ended April
30, 2000 for 350,000 common shares issued to employees at $0.15 per share when
the trading price of the Company's shares was $0.19 per share (Note 7(a)),
450,000 common stock options issued to employees and directors at $1.24 when the
trading price of the Company's shares was $2.09 and 125,000 common stock options
issued to employees and directors when the trading price of the Company's shares
was $3.70. The Company has not allocated any of the consideration received nor
any compensation expense to the 350,000 share purchase warrants as the exercise
price of $0.30 is higher than the $0.19 trading price of the underlying common
shares at the date of issuance.
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", which became effective for fiscal
years beginning after December 15, 1995, the Company has opted to continue to
apply the intrinsic value method of valuing stock options granted to employees.
If the fair value method had been used compensation for stock options granted to
directors, officers and employees for the six months ended April 30, 2000 of
$663,275 (1997 - $44,800) would have been recorded increasing the reported loss
by such amount. Accordingly, the pro-forma loss and loss per share for the six
months ended April 30, 2000 and for the year ended October 31, 1997 under U.S.
GAAP are $1,587,369 and $0.27 (1997 - $168,694 and $0.08). There were no stock
options issued in 1999 and 1998.
The fair value of options granted was estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions: risk-free
interest rate of 6% (1997 - 6%); no annual dividends; expected lives equal to
one-half the option lives; and volatility of 126% (1997 - 109%).
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 13
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
13. Differences between United States and Canadian generally accepted
accounting principles (continued):
(d) Stock options:
The Company does not have a formal stock option plan available to all of its
existing officers and employees. The Company has and will continue to issue
stock options to officers or employees if and when the Board of Directors deems
that stock options should be issued.
A continuity of the Company's stock options for the past three fiscal years is
as follows:
<TABLE>
<CAPTION>
April 30, October 31, October 31, October 31,
2000 1999 1998 1997
<S> <C> <C> <C> <C>
Balance outstanding, beginning of year - 360,000 360,000 -
Granted during the period. . . . . . . 575,000 - - 360,000
Exercised at an average price of $0.15 - (360,000) - -
Cancelled or expired during the year . - - - -
--------------------------------------
575,000 - 360,000 360,000
</TABLE>
The 360,000 options granted in 1997 were at an exercise price of $0.15 per
share, which was equal to the market value of the shares at the grant date.
These options were exercised in 1999. There are no options outstanding at
October 31, 1999. During the six months ended April 30, 2000, the Company
granted 450,000 incentive stock options exercisable up to January 27, 2005 at an
exercise price of $1.24 per share and 125,000 incentive stock options
exercisable up to March 8, 2005 at an exercise price of $3.06 per share for a
total of 575,000 options which were outstanding as April 30, 2000.
(e) Escrow shares:
Under U.S. GAAP, escrow shares are treated as a compensatory arrangement.
Compensation expense is recognized in the statement of operations for the fair
value of the shares released to a shareholder that provides services as an
officer, director, employee, consultant or contractor. $12,096 in compensation
expense has been recorded in 1999 for escrow shares that were released in 1999.
(f) Loss per share:
Under U.S. GAAP, escrow shares are excluded from the calculation of weighted
average common shares outstanding during the years. 750,000 common shares were
held in escrow since July 11, 1996. 151,200 of these escrow shares were
released in 1999 based on performance criteria set by regulators. 1,526,200
escrow shares were issued on February 8, 2000 as a result of the acquisition of
Quotes Canada.
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 14
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
13. Differences between United States and Canadian generally accepted
accounting principles (continued):
(g) Reporting comprehensive income:
Effective for fiscal years beginning after December 15, 1997, Statement of
Financial Accounting Standards No. 130 ("FAS 130") "Reporting Comprehensive
Income", is applicable for U.S. GAAP purposes. FAS 130 establishes standards
for the reporting and display of comprehensive income and its components in a
full set of general purpose financial statements. FAS 130 requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement. The
Company does not have any items to be recognized under comprehensive income
except for the items in the statement of operations;
(h) New accounting pronouncements;
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 establishes
standards for derivative instruments, including certain derivative instruments
imbedded in other contracts, and for hedging activities. It requires that an
entity recognized all derivatives as either assets or liabilities in its balance
sheet and measures those instruments at fair value. This statement is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999. As at
October 31, 1999, the Company does not have any derivative or hedging
instruments and, therefore, does not believe the adoptions of FAS 133 would
result in a material GAAP difference.
(i) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of;
The Company accounts for long-lived assets in accordance with the provisions of
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. This Statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell.
The effect of the differences between Canadian GAAP and U.S. GAAP (including
practices described by the SEC) on the balance sheets, statements of operations
and cash flows is summarized as follows:
<TABLE>
<CAPTION>
April 30, October 31, October 31,
2000 1999 1998
(unaudited)
<S> <C> <C> <C>
Deferred exploration costs under Canadian GAAP. $ - $ 20,181 $ 74,586
Adjustments for deferred exploration costs. . . - (20,181) (74,586)
-----------------------------------------------
Deferred exploration costs under U.S. GAAP. . . $ - $ - $ -
-----------------------------------------------
</TABLE>
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 15
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
13. Differences between United States and Canadian generally accepted
accounting principles (continued):
<TABLE>
<CAPTION>
April 30, October 31, October 31,
2000 1999 1998
(unaudited)
<S> <C> <C> <C>
Share capital under Canadian GAAP . . . . $ 2,267,763 $ 1,566,009 $ 1,510,509
-----------------------------------------
Adjustment for escrow shares. . . . . . . 12,096 12,096 --
-----------------------------------------
Adjustment for stock compensation . . . . 476,500 - -
Share capital under U.S. GAAP . . . . . . $ 2,756,359 $ 1,578,105 $ 1,510,509
-----------------------------------------
April 30, October 31, October 31,
2000 1999 1998
(unaudited)
Deficit under Canadian GAAP . . . . . . . $ (2,061,713) $ (1,593,938) $(1,408,826)
-----------------------------------------
Adjustment for escrow shares. . . . . . . (12,096) (12,096) -
Adjustment for mineral properties . . . . - (20,181) (74,856)
Adjustment for stock compensation . . . . (476,500) - -
Deficit under U.S. GAAP . . . . . . . . . $ (2,550,309) $ (1,626,215) $(1,483,682)
-----------------------------------------
April 30, October 31, October 31,
2000 1999 1998
(unaudited)
Shareholders' equity under Canadian GAAP. $ 914,029 $ 608,921 $ 203,433
-----------------------------------------
Adjustment for mineral properties . . . . - (20,181) (74,856)
Shareholders' equity under U.S. GAAP. . . $ 914,029 $ 588,740 $ 128,577
-----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months
ended
April 30, Years ended October 31,
2000 1999 1998 1997
(unaudited)
<S> <C> <C> <C> <C>
Loss for the period under Canadian GAAP $(467,775) $(185,112) $(50,969) $(57,842)
Adjustment for mineral properties 20,181 54,405 (8,534) (66,052)
Adjustment for escrow shares - (12,096) - -
------------------------------------------------
Adjustment for compensation expense (476,500) - - -
Loss for the period under U.S. GAAP $(924,094) $(142,803) $(59,503) $(123,894)
------------------------------------------------
Loss from continuing operations under
Canadian GAAP $(437,529) $(73,120) $(22,511) $(55,527)
Adjustment for escrow shares - (12,096) - -
Adjustment for compensation expense (476,500) - - -
------------------------------------------------
Loss from continuing operations under U.S. GAAP $(914,029) $(85,216) $(22,511) $(55,527)
------------------------------------------------
</TABLE>
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 16
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
13. Differences between United States and Canadian generally accepted
accounting principles (continued):
<TABLE>
<CAPTION>
Six months
ended
April 30, Years ended October 31,
2000 1999 1998 1997
(unaudited)
<S> <C> <C> <C> <C>
Loss from discontinued operations under
Canadian GAAP $(30,246) $(111,992) $(28,458) $(2,315)
--------------------------------------------------
Adjustment for mineral properties 20,181 54,405 (8,534) (66,052)
Loss from discontinued operations under U.S. GAAP $(10,065) $(57,587) $(36,992) $(66,267)
--------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months
ended
April 30, Years ended October 31,
2000 1999 1998 1997
(unaudited)
<S> <C> <C> <C> <C>
Loss per share from continuing operations. . $(0.15) $(0.02) $(0.01) $(0.03)
--------------------------------------------
Loss per share from discontinued operations. $(0.00) $(0.02) $(0.01) $(0.03)
Loss per share under U.S. GAAP . . . . . . . $(0.15) $(0.04) $(0.02) $(0.06)
</TABLE>
<TABLE>
<CAPTION>
Six months
ended
April 30, Years ended October 31,
2000 1999 1998 1997
(unaudited)
<S> <C> <C> <C> <C>
Weighted average number of
---------------------------
shares under U.S. GAAP. . . 5,938,441 3,269,414 2,941,142 2,167,100
</TABLE>
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.)
Notes to Consolidated Financial Statements, page 17
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
13. Differences between United States and Canadian generally accepted
accounting principles (continued):
<TABLE>
<CAPTION>
There are no adjustments to the weighted average number of shares (denominator)
nor to the net loss, loss from continuing operations or loss from discontinued
operations (numerator) in calculating basic loss per share. Dilution loss per
share for continuing, discontinued and in total for the year is the same as
basic loss per share due to the loss for all periods presented. The following
securities could potentially dilute basic EPS in the future but were not
included in the computation of diluted EPS because to do so would have been
anti-dilutive for the periods presented:
Six months
ended
April 30, Years ended October 31,
2000 1999 1998 1997
(unaudited)
<S> <C> <C> <C> <C>
Warrants (note 7). . . 1,620,000 - - -
Escrow Shares (note 6) 2,125,000 - - -
Options. . . . . . . . 575,000 360,000 360,000 360,000
</TABLE>
14. Subsequent event:
Subsequent to April 30, 2000, the Company has granted 20,000 incentive stock
options to directors and employees to purchase common shares of the Company.
These options are exercisable up to May 17, 2002 at a price of $1.87 per share.
<PAGE>
EARTHRAMP.COM COMMUNICATIONS INC.
(formerly Carta Resources Ltd.) Schedule 1
<TABLE>
<CAPTION>
Schedule of Deferred Exploration Costs
Six months ended April 30, 2000 and 1999 (unaudited) and
Years ended October 31, 1999, 1998 and 1997
Manitoba Yukon Total
<S> <C> <C> <C>
Balance, October 31, 1998 (note 9) $ 74,586 $ - $ 74,586
Expenditures for the year:
Accommodation. . . . . . . . . . . - 2,125 2,125
Assays and geochemical . . . . . . - 1,998 1,998
Claim fees . . . . . . . . . . . . - 685 685
Geological services. . . . . . . . - 7,500 7,500
Professional fees. . . . . . . . . 800 - 800
Supplies . . . . . . . . . . . . . - 1,530 1,530
Transportation . . . . . . . . . . - 6,343 6,343
800 20,181 20,981
75,386 20,181 95,567
Mineral properties written-off . . (75,386) - (75,386)
----------------------------------
Balance, October 31, 1999. . . . . - 20,181 20,181
Expenditures for the period. . . . - - -
Mineral properties written-off . . - (20,181) (20,181)
----------------------------------
</TABLE>
Balance, April 30, 2000 $ - $ - $ -
--------------------------
<PAGE>
QUOTES CANADA FINANCIAL
NETWORK LTD.
FINANCIAL STATEMENTS
OCTOBER 31, 1999
<PAGE>
QUOTES CANADA FINANCIAL NETWORK LTD.
Financial Statements
Two Months Ended October 31, 1999
Twelve Months Ended August 31, 1999
CONTENTS
Auditor's Report
Financial Statements:
Balance Sheets
Statements of Earnings
Statements of Cash Flows
Notes to Financial Statements
<PAGE>
T. DELANE TERRILLON
CERTIFIED GENERAL ACCOUNTANT
AUDITOR'S REPORT
To the shareholders of Quotes Canada Financial Network Ltd.
I have audited the balance sheets of Quotes Canada Financial Network Ltd. at
October 31, 1999 and August 31, 1999 and the statements of loss and deficit, and
statements of cash flows for the 2 months ended October 31, 1999 and the 12
months ended August 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 the audits in accordance with Canadian 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 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 October 31, 1999 and
August 31, 1999 and the results of its operations and the changes in its
financial position for the 2 months ended October 31, 1999 and the year ended
August 31, 1999 in accordance with Canadian generally accepted accounting
principles.
/s/ T. Delane Terrillon"
CERTIFIED GENERAL ACCOUNTANT
North Vancouver
May 4th, 2000
<PAGE>
<TABLE>
<CAPTION>
QUOTES CANADA FINANCIAL NETWORK LTD.
BALANCE SHEET
As at October 31, 1999
ASSETS
<S> <C> <C>
CURRENT ASSETS. . . . . . . OCTOBER 1999 AUGUST 1999
Cash. . . . . . . . . . . . $ 2,575 $ 1,574
Accounts Receivable . . . . 252 -
GST Receivable. . . . . . . 6,336 2,543
Prepaid expenses. . . . . . 4,836 1,875
-------------- -------------
13,999 5,992
CAPITAL ASSETS (Note 3). . 64,308 15,859
OTHER ASSETS
Incorporation Costs . . . . 525 525
Research and Development. . 16,112 7,105
-------------- -------------
$ 94,944 $ 29,481
============== =============
LIABILITIES
CURRENT LIABILITIES
Account Payable . . . . . . $ 787 $ 484
Accrued Liabilities . . . . 1,284 642
-------------- -------------
2,071 1,126
OTHER LIABILITIES
Shareholder's loan (Note 4) 54,800 56,717
Note Payable (Note 5) . . . 81,936 6,000
-------------- -------------
$ 138,807 $ 63,843
============== =============
SHAREHOLDERS' EQUITY
Share Capital (Note 6). . . $ 50 $ 50
Deficit . . . . . . . . . . (43,913) (34,412)
-------------- -------------
(43,863) (34,362)
-------------- -------------
$ 94,944 $ 29,481
============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
QUOTES CANADA FINANCIAL NETWORK LTD.
STATEMENT OF CASH FLOWS
For two months ended October 31, 1999
2 Months 12 Months
OCTOBER 1999 AUGUST 1999
<S> <C> <C>
Cash from Operation:
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,501) $(34,412)
Add back Depreciation . . . . . . . . . . . . . . . . . . . . . 2,275 2,715
------------- ---------
Total Cash from Operation . . . . . . . . . . . . . . . . . . . . (7,226) (31,697)
Changes in non-cash working capital items:
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . (4,045) (2,543)
Prepaid Expenses. . . . . . . . . . . . . . . . . . . . . . . . (2,961) (1,875)
Accounts Payable. . . . . . . . . . . . . . . . . . . . . . . . 945 1,126
------------- ---------
Net changes in Operation - (outflow). . . . . . . . . . . . . . . (13,287) (34,989)
------------- ---------
Financing Activities:
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . 75,937 6,000
Shareholders' Loan. . . . . . . . . . . . . . . . . . . . . . . (1,917) 56,717
Share Capital Proceeds. . . . . . . . . . . . . . . . . . . . . - 50
------------- ---------
74,020 62,767
Investing Activities:
Research and Development. . . . . . . . . . . . . . . . . . . . (9,008) (7,105)
Purchase of capital assets. . . . . . . . . . . . . . . . . . . (50,724) (18,574)
Incorporation Costs . . . . . . . . . . . . . . . . . . . . . . - (525)
------------- ---------
14,288 36,563
Increase in cash during the year. . . . . . . . . . . . . . . . . $ 1,001 $ 1,574
------------- ---------
Cash, beginning of year . . . . . . . . . . . . . . . . . . . . . 1,574 -
------------- ---------
Cash, end of period . . . . . . . . . . . . . . . . . . . . . . . $ 2,575 $ 1,574
============= =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
QUOTES CANADA FINANCIAL NETWORK LTD.
STATEMENT OF LOSS AND DEFICIT
For two months ended October 31, 1999
2 Months 12 Months
OCTOBER 1999 AUGUST 1999
<S> <C> <C>
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,182 $ 8,201
============= =========
Expenses:
Accounting and Legal . . . . . . . . . . . . . . . . . . . . . $ 975 $ 4,791
Advertising. . . . . . . . . . . . . . . . . . . . . . . . . . - 2,811
Bank Charges & Interest. . . . . . . . . . . . . . . . . . . . 20 215
Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . 1,783 198
Communications . . . . . . . . . . . . . . . . . . . . . . . . - 4,202
Consulting Services. . . . . . . . . . . . . . . . . . . . . . 2,777 -
Contract News Letter . . . . . . . . . . . . . . . . . . . . . - 950
Depreciation & Amortization. . . . . . . . . . . . . . . . . . 2,275 2,715
Meals & Entertainment. . . . . . . . . . . . . . . . . . . . . - 279
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . - 15
Office & General Expense . . . . . . . . . . . . . . . . . . . 3,588 4,117
Stock Quotation Services . . . . . . . . . . . . . . . . . . . 2,265 21,859
Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 461
------------- ---------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,683 $ 42,613
Net Loss before taxes. . . . . . . . . . . . . . . . . . . . . . (9,501) (34,412)
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . - -
------------- ---------
Net Loss for the period. . . . . . . . . . . . . . . . . . . . . $ (9,501) $(34,412)
Deficit, Beginning of Period . . . . . . . . . . . . . . . . . . (34,412) -
------------- ---------
Deficit, End of Period . . . . . . . . . . . . . . . . . . . . . $ (43,913) $(34,412)
============= =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
QUOTES CANADA FINANCIAL NETWORK LTD.
Notes to Financial Statements
October 31, 1999
1. Summary of Significant Accounting Policies:
(a) Amortization:
Amortization of capital assets is provided using the following
annual rates:
Furniture and Fixtures 20% declining balance
Computer Hardware 30% declining balance
Computer Software 100% declining balance
2. These interim financial statements were prepared for the purpose of a
signed agreement to sell all the issued shares of Quotes Canada Financial
Network Ltd. to Carta Resources Ltd., for the sum of $240,000 due as follows:
1. $50,000 payable on signing the agreement
2. $190,000 to be paid by the issuance of 1,000,000 shares of Carta at a
deemed price of $0.19 per share, upon Vancouver Stock Exchange
approval.
3. Capital Assets
<TABLE>
<CAPTION>
October August
1999 1999
<S> <C> <C> <C> <C>
Cost Amortization Net Net
Furniture and Fixtures $ 5,243 $ (258) $ 4,407 $14,584
Computer Hardware. . . 62,023 (4,682) 46,800 1,274
Telephone System . . . 2,032 (51) 1,727
------------- -------- ------- -------
$ 69,298 $(4,990) $64,308 $15,858
</TABLE>
4. Shareholder's Loan:
Advances from Shareholders are non-interest bearing with no specific terms
of repayment.
5. Note Payable:
Advances from Carta Resources Ltd. are non-interest bearing with no
specific terms of repayment.
6. Share Capital:
Authorized:
1,000,000 common shares, no par value
1999
----
Issued and fully paid:
500,000 common shares, no par value $50
<PAGE>
QUOTES CANADA FINANCIAL NETWORK LTD.
Notes to Financial Statements
October 31, 1999
7. Lease Obligations:
The company is committed to a building lease. The minimum lease payments are
summarized below:
Year 2000 $9064
8. Incorporation:
Quotes Canada Financial Network Ltd. was incorporated October 14, 1998 under the
laws of the Province of British Columbia.
9. Year 2000 Compatible:
Quotes Canada Financial Network Ltd. has designed its software and network to be
Y2K compliant and has taken the appropriate steps to ensure that the website
will be operational as intended on and after January 1, 2000. Quotes Canada's
management has endeavoured to confirm the Y2K readiness of its data vendors and
partners. No major disruptions in service are anticipated, although it cannot
be certain that affiliates, partners and suppliers have determined that their
systems are 100% Y2K compliant.
10. Differences between United States and Canadian generally accepted
accounting principles:
The financial statements are prepared in accordance with generally accepted
accounting principles in Canada. Significant differences to accounting
principles generally accepted in the United States ("U.S. GAAP") are as follows:
(a) Income taxes:
The Company would, under U.S. GAAP, be subject to Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Adopting this
Standard would have no material effect on net income of the Company for any of
the years presented. The following additional disclosure would be provided:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Net operating losses . . $ 19,800
Less valuation allowance (19,800)
Net deferred tax assets. -
Deferred tax liabilities -
Deferred tax assets, net $ -
------------------------ ---------
</TABLE>
A valuation allowance equal to the net deferred tax asset balance has been
recorded as the realization of such losses during the carryforward period at
October 31, 1999, cannot be considered to be more likely than not.
(b) Research and development expenses:
Under Canadian GAAP, research and development expenses are deferred if they meet
certain defined criteria. Under U.S. GAAP, research and development expenses
are expensed as incurred. Consequently, under U.S. GAAP, deferred research and
development expenses of $9,007 for the two months ended October 31, 1999 and
$7,105 for the year ended August 31, 1999 would be expensed.
<PAGE>
QUOTES CANADA FINANCIAL NETWORK LTD.
Notes to Financial Statements
October 31, 1999
10. Reconciliation to United States generally accepted accounting principles
("U.S. GAAP") (continued):
The effect of the differences between Canadian GAAP and U.S. GAAP (including
practices described by the SEC) on the balance sheets, statements of operations
and cash flows is summarized as follows:
<TABLE>
<CAPTION>
October 31, 1999 August 31, 1999
------------------ -----------------
<S> <C> <C>
Capitalized research and development under Canadian GAAP $ 16,112 $ 7,105
Adjustments for research and development expenses. . . . (16,112) (7,105)
Capitalized research and development under U.S. GAAP . . $ - $ -
-------------------------------------------------------- ------------------ -----------------
October 31, 1999 August 31, 1999
-------------------------------------------------------- ------------------ -----------------
Deficit under Canadian GAAP. . . . . . . . . . . . . . . $ (43,914) $ (34,412)
Adjustment for research and development costs. . . . . . (16,112) (7,105)
Deficit under U.S. GAAP. . . . . . . . . . . . . . . . . $ (60,026) $ (41,517)
-------------------------------------------------------- ------------------ -----------------
October 31, 1999 August 31, 1999
-------------------------------------------------------- ------------------ -----------------
Shareholders' deficiency under Canadian GAAP . . . . . . $ (43,864) $ (34,362)
Adjustment for research and development costs. . . . . . (16,112) (7,105)
Shareholders' deficiency under U.S. GAAP . . . . . . . . $ (59,976) $ (41,467)
-------------------------------------------------------- ------------------ -----------------
Two months ended Year ended
October 31, 1999 August 31, 1998
-------------------------------------------------------- ------------------ -----------------
Loss for the period under Canadian GAAP. . . . . . . . . $ ( 9,501) $ (34,412)
Adjustment for research and development costs. . . . . . (9,007) (7,105)
Loss for the period under U.S. GAAP. . . . . . . . . . . $ (18,508) $ (41,517)
-------------------------------------------------------- ------------------ -----------------
</TABLE>
