<PAGE> 1
LAW OFFICES
HARKLEROAD & HERMANCE
A PROFESSIONAL CORPORATION
SUITE 100
6801 GOVERNOR'S LAKE PARKWAY
NORCROSS, GEORGIA 30071
(678) 533-9000
FAX (678) 291-0222
May 18, 2000
Ms. Kara Sandler
United States Securities and Exchange Commission
Washington D.C. 20549
Re: CityXpress.com Corp
Amendment #1 to Registration Statement on Form 10-SB
File No. 0-30742
Dear Ms. Sandler:
We are counsel to CityXpress.com Corp. On behalf of CityXpress.com Corp.
we herewith file Amendment #1 to Registration Statement on Form 10-SB.
Very truly yours,
/s/ James P. Heimance
James P. Heimance
<PAGE> 2
CityXpress.com Corp.
Suite 200-1727 West Broadway
Vancouver, BC Canada V6J 455
Tel: 604-638-3800 Fax: 604-638-3808
Email: [email protected]
CityXpress.com
May 18, 2000
Securities and Exchange Commission
Washington, DC 20549
RE: Registration Statement on Form 10-SB (File No. 0-30742) of CityXpress.com
Corp.
Gentlemen:
CityXpress.com Corp. hereby requests that the above-captioned Registration
Statement become effective at 10:00 a.m. (EDST) on Friday, May 19, 2000, or as
soon thereafter as possible.
Very truly yours,
CityXpress.com Corp.
By: /s/ Ken Bradley
------------------------------
Ken Bradley, Chief Operating Officer and CFO
<PAGE> 3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-SB
FILE NO. 0-30742
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES
EXCHANGE ACT OF 1934
CITYXPRESS.COM CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida None
- -------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1727 West Broadway, Suite 200
Vancouver, BC Canada V6J 4W6
- --------------------------------------- ---------------------------------
(Address of principal executive offices) (Postal Code)
Registrant's telephone number: (604) 638 - 3811
Securities to be registered under Section 12(b) of the Act:
None None
- --------------------------------------- -----------------------------------
Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Shares, Par Value of $0.001 per Share
- -------------------------------------------------------------------------------
(Title of Class)
Not Applicable
- -------------------------------------------------------------------------------
(Title of Class)
PAGE 1 OF 36 PAGES.
THE EXHIBIT INDEX APPREARS ON
SEQUENTIALLY NUMBERED PAGE 37.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I...................................................................................................5
ITEM 1. DESCRIPTION OF BUSINESS....................................................................5
ITEM 2. DESCRIPTION OF PROPERTIES.................................................................21
ITEM 3. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS..............................22
ITEM 4. DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES..................................23
ITEM 5. REMUNERATION OF DIRECTORS AND OFFICERS....................................................26
ITEM 6. INTEREST OF MANAGEMENT AND OTHERS IN TRANSACTIONS.........................................29
ITEM 7. DESCRIPTIONS OF REGISTRANT'S SECURITIES TO BE REGISTERED..................................30
PART II.................................................................................................31
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS...................................................................................31
ITEM 2. LEGAL PROCEEDINGS.........................................................................32
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE......32
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES...................................................32
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.................................................34
PART F/S................................................................................................38
FINANCIAL STATEMENTS.................................................................................38
PART III EXHIBITS.......................................................................................39
LIST OF SUBSIDIARIES OF THE REGISTRANT..................................................................40
</TABLE>
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NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for statements of historical fact, certain information contained
in this registration statement constitutes "forward-looking statements,"
including without limitation statements containing the words "believes,"
"anticipates," "intends," "expects" and words of similar import, as well as all
projections of future results. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results or achievements of the Company to be materially different from any
future results or achievements of the Company expressed or implied by such
forward-looking statements. Such factors include, but are not limited to the
following: the Company's limited operating history; undercapitalization; risks
involving new product development; unpredictability of future revenues;
competition; management of business growth; risks of technological change; the
Company's dependence on key personnel; ability to develop marketing
relationships with strategic partners; dependence on continued growth in use of
the Internet; the Company's ability to protect its intellectual property rights
and uncertainty regarding infringing intellectual property rights of others;
government regulations; and the other risks and uncertainties described in this
registration statement.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
CityXpress.com Corp. (the "Company") is a software developer and
Internet publisher. The Company intends to be the preferred means by which
Internet consumers can locate and purchase products and services from businesses
in their regional markets. This goal will be met by building alliances with
media companies that are establishing regional portals and providing them with a
suite of Internet services that can be profitably sold to businesses looking for
cost-effective means of establishing and promoting an eCommerce presence in
their regional markets. The Company has developed a regional directory of
business listings and a search engine that allows web users to locate businesses
within a designated region that fit given search criteria. The Company has also
developed a comprehensive suite of eCommerce products that allow businesses to
build online storefronts and to create web sites, and a suite of advertising and
promotion products, which include systems for connecting a discount coupon
displayed in a banner ad to a vendor's eCommerce shopping basket and for
developing private-label flyers that contain a collection of discount coupons.
(a full description of the Company's products is provided under the heading
"CityXpress.com Products" hereto) The Company's products are designed to work
together by drawing web consumers to the businesses promoting their products and
services through the regional sites of our media partners.
CityXpress.com's media partners will sell the Company's products to
small and mid-sized businesses throughout North America. These businesses
require affordable ways for their customers to find them in their local markets
and effective means to sell their products and services online. The Company's
line of products provide these businesses with the means of targeting
advertising and promotions to regional Internet consumers through our business
directory and of establishing cost-effective eCommerce storefronts through which
to conduct online commerce.
CORPORATE HISTORY
The Company was incorporated as a Florida corporation on January
15,1981 as Wicked Wings of Buffalo (Wicked Wings), a non-operating company
traded on the NASDAQ OTC Bulletin Board. Pursuant to a share purchase agreement
dated January 7, 1999, the shareholders of WelcomeTo Search Engine Inc. sold
their 100% interest in WelcomeTo Search Engine Inc. to the Company in
consideration for 8,510,000 shares of the Company, which represented a
controlling interest of 62.5%. This transaction was considered an acquisition of
the Company by WelcomeTo Search Engine and was treated as a recapitalization of
WelcomeTo Search Engine and the reverse acquisition of the Company by WelcomeTo
Search Engine for accounting purposes. For purposes of acquisition, the fair
value of the net assets of the Company amounted to $724,989 and was ascribed to
the 5,100,000 previously outstanding common shares of the Company deemed to be
issued in the acquisition. The reverse acquisition resulted in one-time costs of
$225,000 for finder's fees pertaining to the acquisition of WelcomeTo and Xceedx
Technologies Inc. which was paid for by the issuance of 450,000 common shares
issued in an offering exempt from registration under Regulation S promulgated
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under the Securities Act to two Canadian companies. (Also see page 29 Item # 4
Recent Sales of Unregistered Securities, first paragraph). The cost of
recapitalization has been charged against stockholders' equity.
For accounting purposes October 27, 1997 is used as the date of
inception of WelcomeTo Search Engine as this is the original incorporation date
of WelcomeTo Search Engine.
On January 27, 1999, the Company acquired 100% of the issued and
outstanding shares of Xceedx Technologies Inc., a private British Columbia,
Canada company incorporated on February 11, 1994 whose principal business was
providing Internet technology services and eCommerce software solutions. The
acquisition was accounted for by the purchase accounting method in which the
results of operations have been included in the Company's accounts from the date
of acquisition. The Company issued 6,250,000 common shares for net assets of
$562,500.
On August 27, 1999, the Company changed its name to CityXpress.com
Corp. The Company's web site is located at www.cityxpress.com. Information
contained in the web site does not constitute a part of this filing.
CORPORATE STRUCTURE
CityXpress.com Corp. has the following corporate structure:
- A Florida registered public company called CityXpress.com
Corp.
- CityXpress.com has two private Canadian based subsidiaries:
WelcomeTo Search Engine Inc. and Xceedx Technologies Inc.
All financial reporting for the Company is a consolidation of these three
companies.
INDUSTRY BACKGROUND.
The Company operates in the eCommerce industry, providing tools and
services that allow small businesses to build an online Internet presence
through which they may promote the goods and services they sell. The eCommerce
industry is undergoing rapid growth driven by the increasing numbers of
consumers who are using the Internet.
Electronic commerce encompasses a broad spectrum of transactions that
are completed on the Internet, including online banking, buying and selling
stocks and the purchase of goods or services by individual consumers from
businesses. The Company currently competes in the latter niche of the eCommerce
market, providing software products and services that can be used by companies
to facilitate the sale of their products and services online. The Company
currently offers its products and services to the North American market. As it
implements media partner sites it activates the search capabilities for the
specific states being served by these sites. Presently, there are five web sites
that serve five states Arizona, Nebraska, Iowa, Montana and Oregon. The Company
is in active negotiations with other media companies. Should these negotiations
be successful the company will be expanding its US geographic presence. This
will result in a larger number of US states being searchable on our web site.
The Company intends to market its products and services internationally, when
the English
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speaking population in these markets has the same level of Internet users as the
US market. To secure a strong international position the Company needs to
establish itself in Canada and US with a strong base of media partners.
Extensive development would be required to compete in other languages.
MARKET SIZE
The Internet market has increased substantially since the World Wide
Web became available for commercial use in 1992. In 1999, eMarketer estimated
that there were over 62 million Americans, or 29 per cent of the US population
connected to the Internet and projected that number to increase to 95.1 million
users or 42% of the population by 2002. International Data Corp. estimated that
world-wide users would increase from 69 million in 1997 to 320 million by 2002
and that online buyers would increase from 18 million or 26 percent of total
users to 128 million or 40 per cent of total users during that time. Although
such projections vary, there is general agreement that growth of Internet usage
and electronic commerce will be rapid and sustained.
MARKET OPPORTUNITY
Dun & Bradstreet reports that of the 40 million businesses that exist
world-wide, about 2 million have commercial web sites, and 381,500 of these
online businesses have active web sites - that is, those that engage customers
via two-way communications, customer service and/or electronic commerce. So,
presently less than two percent of business web sites can be considered active
in this way.
The eCommerce market is divided into two primary segments, the
business-to-business segment (composed of companies whose customers are composed
of other businesses) and the business-to consumer segment (composed of retailers
selling to individual end users). The major growth to date has taken place in
the business-to-business market but the business-to consumer segment is
projected to undergo significant growth over the next two years. Revenues in the
business-to-consumer segment are forecast to rise from US$4.5 billion in
December 1998 to US$15 billion by 2000, and $35 billion by 2002. And, while the
US has led the way in Internet and eCommerce penetration, non-US sectors
represent a significant longer-term opportunity for CityXpress.com because of
the large population base outside the US. As the growth in Internet expands to
non-US countries the market opportunities for CityXpress.com products will
increase.
Small businesses accounted for only 16% of all consumer eCommerce
revenues in 1998, though that was expected to grow to 18% in 1999 and 24% by
2002. Because it is relatively expensive and complicated for individual
retailers to drive traffic to their web sites, small businesses have been less
successful at capturing eCommerce revenue than large national and multinational
consumer products and services companies. This situation creates a compelling
opportunity for the Company to meet a very real market need for products that
will assist small businesses to build an Internet presence and promote their
products and services in their regional markets.
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MARKET SEGMENTS
STANDALONE STOREFRONTS
This market segment consists of online storefronts that list only the
products or services sold by an individual retailer or wholesaler. These include
storefronts that have been established by companies that have a 'bricks and
mortar' presence, such as EddieBauer.com, or whose business is conducted
entirely on the Internet, such as Amazon.com. These storefronts typically
include functionality that allows a purchaser to browse the products listed in
the catalog, save items of interest in a shopping cart, and pay for items in the
shopping cart by using a credit card.
ONLINE SHOPPING MALLS
An online shopping mall offers consumers a collection of standalone
storefronts aggregated under "one roof" where consumers can locate merchants and
browse for goods, but must go to the merchant's site to complete the
transaction. Online shopping malls were the first response to the problem that
smaller merchants were facing of being found on the Internet by consumers. By
joining a mall, merchants had the opportunity to share in the traffic that the
mall was generating through its own promotional efforts.
ONLINE DEPARTMENT STORES
Online Department Stores offer consumers a variety of merchandise from
multiple vendors and the ability to purchase goods from one or more vendors
through a single shopping cart and checkout procedure (rather than going to
multiple merchant's sites to complete each purchase). Department stores offer
the merchant an entry-level online solution, as the merchant is buying
shelf-space along with other merchants in the department store, rather than
building and maintaining a standalone storefront. As well, the merchant is not
solely responsible for promoting the site and building traffic to it.
MARKET TRENDS
Market penetration rates are highest in the upper tier of the market,
with major corporations having introduced web-based storefronts, and lowest
amongst small and mid-sized business. The difficulty and expense of promoting an
online storefront have been inhibitors to development of such sites. This is
projected to change over the next two years, as more cost-effective means of
promoting a storefront's presence, particularly within its regional market,
become available.
Regional portal sites are forecast to provide the vehicle for the
growth of regional eCommerce. Jupiter Communications has stated that regional
portals will in fact represent "the main avenue through which online customers
travel." Regional portals are sites that provide online users with access to
information for their geographic communities, featuring news, weather, sports,
entertainment, and related local information. Media companies (newspapers,
television stations) that have traditionally provided local information to their
customers are driving the growth of regional portals. Over the past two years,
media companies have devoted considerable resources to building regional
Internet sites that offer online users access to the information already being
gathered and disseminated through their existing print and broadcast media
properties. This trend was first driven by the need to defend traditional
sources of
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revenue, particularly classified advertising revenues, that was being
threatened by Internet start-ups offering similar services. As the Internet
market developed, media companies saw the opportunity to build new sources of
revenue in the online world. The increasing volume of traffic being drawn to
their sites meant that they could offer their traditional retail advertisers a
range of web-based products analogous to their traditional print offerings.
These products, initially banner advertising on the media company's portal site,
could readily be integrated into the product line cards carried by their print
and broadcast sales forces.
As the portal sites offered by media companies evolve, a group of
promotional products will be offered to allow local business to divert traffic
coming into the portal to their eCommerce sites and convert new viewers to
customers. These products include:
BANNER ADVERTISING
Banner advertising consists of small ads that are rotated and displayed
on web pages served up as viewers navigate from page to page on a site. Although
still small compared to print and media advertising, banner advertising is
growing. In 1999, it represented a $3.1 billion industry, according to
eMarketer, who predicts that it will grow to $13.29 billion by 2003 when it will
represent 4.7% of total advertising spending.
National firms currently place the majority of banner advertising but,
as the Internet becomes increasingly focussed on providing regional sources of
information, the percentage of banner advertising that is placed by regional
companies will grow. Because 80 per cent of consumer spending takes place within
20 miles of home, local advertising captures 30 per cent or $60 billion of the
$200 billion spent on advertising each year in the US. In spite of the fact that
online local advertising is growing slowly, Forrester Research projects an
eightfold increase from $186 million in 1998 to $1.5 billion in 2001.
ONLINE COUPONS
Another promotional tool that is growing in popularity on the Internet
is the online coupon that offers the consumer a discount on the purchase of a
product or service. Online coupon promotions currently call for the customer to
print the coupon and present it later at a bricks-and-mortar store for
redemption. It is expected that coupon promotions will be increasingly offered
online, so that the customer can actually redeem the coupon at an online
storefront. Coupon-enabling banner ads will thus become an effective means of
driving customers to a storefront to purchase promoted products and will help
reduce the high cost of Internet customer acquisition. Regional portals with
their ability to draw large numbers of online viewers will be able to offer
online coupon promotions to local retailers to help convert these viewers into
customers.
LOYALTY PROGRAMS
Loyalty programs have experienced rapid growth over the past 20 years
as companies have searched for ways to retain customers in an increasingly
value-conscious consumer market. Extending such programs to the web is a natural
step in the evolution of these programs. Loyalty products will include points
programs where customers are rewarded for purchases by accruing points that can
be used to acquire other products or services and member-only flyer sites where
merchants communicate current promotions to their customers in a timely fashion
through the site or through e-mail notifications.
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CITYXPRESS.COM PRODUCTS
The Company has developed a regional business directory, a unique
coupon-enabling banner ad system, and eCommerce tools for businesses.
The Company's regional business directory includes a proprietary search
engine. The regional business directory technology was developed by the Company
to provide an easy way for Internet users to find businesses in a regional
market. This service is similar to an online yellow pages. The directory
utilizes listings for approximately 12 million businesses provided under a
license agreement that the Company has signed with Dun & Bradstreet. Basic
business listings are provided free-of charge in the directory, however a
business may purchase a Premier Listing to better profile itself. The business
directory allows for multiple searching means and the display of search results
depends on the listing types under any one category. Premier Listings are
displayed at the top of any search followed by basic listings. Banner Ads can
also be sold in various positions throughout the directory, allowing businesses
to advertise their products and services. The regional business directory is
also integrated with CityXpress.com's other eCommerce products.
The Company's suite of eCommerce products includes:
XpressDepartment Store: XpressDepartment Store is an Internet software
product that allows multi-vendor department stores to be created, product
listings to be managed, and orders accepted through a single shopping cart.
Orders are split and sent to the appropriate vendor(s). Revenue is generated on
a monthly basis by selling product listings in the department store. Presently
our media partner is selling a five-product listing in the department store for
$50.00 per month.
XpressStores Online: XpressStores Online is an Internet software
product that allows businesses to build an electronic storefront or catalog
through a browser-based Internet application. The business can then administer
the site through a browser-based administrative module. This module allows the
user to add detailed product information such as part number, description, sale
prices and product graphics. Revenue is generated monthly based on the size of
the catalog and number of listings in the catalog. Presently our media partner
is selling a 50 product online store at $50 per month and a 200 product online
store for $100 per month.
XpressStores Pro: XpressStores Pro is a software application that
allows business users to enhance an electronic storefront or catalog built
through XpressStores Online by adding additional features and functionality.
These include features such as customer-based pricing options, customer-specific
catalog views, customized listing forms, and custom buttons and backgrounds.
Revenue is generated monthly based on the size of the catalog and number of
listings in the catalog. Presently our media partner is selling a 50 product
online store at $50 per month and a 200 product online store for $100 per month.
XpressStores Enterprise: XpressStores Enterprise is a product that
allows web developers to create sophisticated catalogues or storefronts or to
customize the business functionality and look-and-feel of an electronic
storefront or catalog built through XpressStores Online or XpressStores Pro and
populate/manage the site's
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product listings through a browser-based administrative module. Revenue is
generated monthly based on the size of the catalog and number of listings in the
catalog. Presently our media partner is selling a 250 product online store at
$200 per month and a 500 product online store for $500 per month.
The Company's promotional products include:
XpressListings: Basic business listings in the business directory
include company name, address, and telephone number and business web site
address. A business may choose to list itself under up to 5 business categories.
A business may optionally choose to purchase a Premier Listing that highlights
its listing and provides a 250-character business description. Premier listings
are displayed at the top of any search results. Revenue is generated by selling
Premier Listings on an annual basis. Annual revenue is amortized monthly over
the listing year. Presently our media partner is selling a Premier XpressListing
for $360 per year.
XpressAds: XpressAds consist of banner ads that can be placed in the
regional business directory within assigned categories and/or regional markets.
XpressAds allow businesses to promote themselves within business categories they
target and provide a means for them to generate traffic to their web sites.
Revenue is generated by selling banner ads on a monthly basis throughout the
business directory and multi-vendor department store. Revenue is recognized in
the month in which the ad runs. Presently our media partner is pricing XpressAds
dependent on their regional market. The range for XpressAds is $300 to $900 per
month depending on city, ad size and ad position on the web site.
XpressCoupons: The XpressCoupon system provides online businesses with
the ability to link a banner ad promoting a specific product directly to the
shopping basket of a vendor's eCommerce site. The XpressCoupon system allows the
business to set up a discount for the order or against a specific product and
interacts with the eCommerce site so that the shopping basket displays both the
product and the discount. The XpressCoupons system is designed to build traffic
to a company's eCommerce site and decrease the cost of customer acquisition.
Revenue is generated by XpressCoupons on a click-through or transactional basis.
Each time a user clicks on a XpressCoupon ad, the advertiser is charged a fee of
$0.30. Revenue is recognized in the month in which the transaction fee is
generated.
XpressFlyers: XpressFlyers provide companies with an ability to build
and maintain a flyer site containing coupons offering discounts on a range of
products. Each company's flyer site can be private labeled or branded, so that
the site uses the same look-and-feel as that of their marketing collateral.
Flyer sites can be password restricted, so the company can restrict discounts to
their club members. Revenue is generated by creating XpressFlyers for companies
and charging a transaction fee of $0.30 each time a coupon in the flyer is
clicked through.
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PRODUCT FAMILY DIAGRAM
<TABLE>
<CAPTION>
Regional Business Directory and Search Engine
---------------------------------------------
<S> <C> <C>
Business Search
Listings Engine
<CAPTION>
Advertising and Promotion Services
----------------------------------
Xpress Xpress Xpress Xpress
Listings Ads Coupons Flyers
<CAPTION>
Electronic Commerce Products
----------------------------
Xpress Xpress Stores Xpress Stores Xpress Stores
Dept Store Online Pro Enterprise
</TABLE>
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PRODUCT DEVELOPMENT
The Company's products have been developed by its internal software
development staff. It is a member of the Microsoft Developer Network and is a
Microsoft Independent Software Vendor. The Company's product development is
based upon industry-standard Microsoft technologies, including Microsoft NT
Server, SQL Server and Internet Information Server. As of December 31, 1999, the
Company employed 12 developers and software engineers.
The Company estimates that it has spent on company-sponsored research
and development activities $404,000 for the year ended June 30, 1999 and $70,000
for the period from October 27, 1997 (inception) to June 30, 1998.
The Company's development efforts focus on extending its products'
capabilities in a number of areas, all coupled with its plan of offering
regionally-specific value to businesses and consumers.
To support its products and services and to enhance the content of its
media partners' regional portals, the Company has developed business
relationships with a number of companies.
The Company has developed a business relationship with Dun &
Bradstreet. Under this business relationship, Dun & Bradstreet provides to the
Company business listing content for the Company's regional business directory
under an annual License Agreement. This represents approximately 12 million
business listings for North America. This information is updated quarterly by
Dun & Bradstreet.
The Company has an agreement with CyberCash, Inc. to provide the
Company's customers with secure online credit card processing services when they
use any version of XpressStores.
SALES AND MARKETING.
The Company began actively promoting its products in June 1999. The Company's
sales strategy is based on developing and leveraging alliances with media
partners and using their sales force to market its products and services to
small and mid-sized businesses in their territories. Media partners incorporate
our products into their regional portal sites, which typically feature content
such as news, weather, business, sports, and entertainment information. As well
as providing a local sales force, each media partner promotes their portal
within their regional market to build a steady stream of new and repeat traffic
to the site. In addition to distributing its products through media companies,
the Company is also building other third party relationships to market
XpressCoupons and XpressFlyers to large retailers and Internet advertisers.
In October 1999, the Company signed its first agreement with a media
company, Lee Enterprises Inc. Under this agreement, the Company provides its
suite of products and support and training for the Lee sales force. Revenue
generated from the sale of the Company's products by the Lee sales force is
shared by the Company and Lee Enterprises.
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Beginning in November 1999, Lee Enterprises began preparation for the
initial roll out the Company's products to a group of its television stations
and newspaper sites in four states and 10 locations. By December 1999, Lee
Enterprises had completed a roll out to two selected cities. Lee Enterprises
operates in 20 states and has 21 daily newspapers, 75 other weekly publications
and 9 television stations. Lee has indicated to the Company that it intends to
roll out the Company's products to all its media locations. The Company has not
received any revenue or cash from the agreement to date and does not expect to
until early 2000. At this time no forecasts have been prepared to estimate the
revenue potential from this agreement with Lee Enterprises.
CLIENT SERVICES
The Company provides levels of customer support appropriate to each of
its products. Each media partner's individual properties are offered a training
program developed by the Company to train its sales representatives on the
Company's products and selling techniques for each product. Customer support for
software usage issues is provided by a small team and delivered via e-mail and
telephone. Listing administrators are assigned to each portal site to validate
requests for new regional directory listings and revisions to existing listings,
and to schedule banner ads.
At December 31, 1999, 3 persons were involved in the Company's client
services department.
COMPETITION
The market for regional eCommerce portal sites has been developing
rapidly. Significant competitors include:
Zip2, located in Mountain View, California, offers Internet
directory solutions. Zip2 is owned by Compaq and has a large number of media
alliances and strategic partners.
Ticketmaster Online-CitySearch, Inc., located in Pasadena,
California is a leading provider of local city guides, local advertising, local
news and entertainment and live event ticketing on the internet.
In addition, several web sites, including major search engines such as
Yahoo! and Excite, offer information and news at a city or regional level. The
Company believes that it enjoys a competitive advantage over such search engines
because of the underlying ability of its search engine to provide business
information at a very granular level, down to specific sub-categories and
community levels.
These competitors are larger and have greater financial and other
resources than the Company. They do not currently offer integrated eCommerce
products, so at this time management of the Company believes that it has a
competitive advantage based on its ability to offer businesses a very localized
and well-integrated suite of products.
The market for eCommerce tools is highly competitive. A number of
companies offer eCommerce tools which enable small businesses to set up online
shops, including Yahoo Store, iCat Commerce Online and Open Market. However,
these competitive eCommerce products do not have the advantage of being linked
with a regional
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business directory and search engine offering integrated coupon and flyer
technology such as that developed by the Company. The Company believes that its
eCommerce tools effectively compete with other eCommerce tools and that it
enjoys a competitive advantage because it can offer its customers products
designed to drive traffic to their storefronts.
There are a number of companies offering electronic coupon-related
products on the Internet. These range from "locate-and-print" coupons offered by
companies such as HotCoupons and CoolSavings and coupon flyers offered by
E-centives that link the coupon to a merchant's web site or a special
promotional page. The Company enjoys several competitive advantages with
XpressCoupons. As well as a higher degree of coupon-usage security, the
Company's products are unique in offering the means of coupon-enabling a banner
ad outside the confines of a dedicated flyer site. This means a XpressCoupon can
be placed on any high traffic web site and be linked back to the XpressCoupon
flyer. Also XpressCoupons and XpressFlyers can be packaged as private branded
sites for merchants looking to build a loyalty program for their customers.
Although the Company continues to aggressively develop the promotional
and marketing tools that set it apart from its competition, its competitors are
larger and have the resources to introduce competitive offerings similar to
those the Company markets.
INTELLECTUAL PROPERTY.
The Company regards its software as proprietary and attempts to protect
it with a combination of copyright, trademark and trade secret laws, employee
and third-party non-disclosure agreements, licensing agreements and other
methods of protection. Despite these precautions, it may be possible for
unauthorized third parties to copy certain portions of the Company's products or
reverse engineer or obtain and use information the Company regards as
proprietary. While the Company's competitive position may be affected by its
ability to protect its proprietary information, the Company believes that trade
secret and other protections are less significant to the Company's success than
other factors. These include the knowledge, ability and experience of the
Company's personnel and management team, the relationships with its media
partners, and its responsive product development programs.
As the number of software products in the industry increases and the
functionality of these products further overlaps, the Company believes that
software programs will increasingly become subject to infringement claims. There
can be no assurance that third parties will not assert infringement claims
against the Company in the future. Any such assertion could require the Company
to enter into royalty arrangements or result in costly litigation.
EMPLOYEES
As of December 31, 1999, the Company had 22 full-time employees,
including 12 in product development, 4 in sales and marketing, 3 in client
services and 3 in management and administration. The Company believes that its
employee relations historically have been good. The Company's employees are not
represented by a collective bargaining organization, and the Company has never
experienced a work stoppage.
14
<PAGE> 17
FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The consolidated operating results and financial position of the
Company are presented in the following tabulated format. The selected financial
data has been derived from our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States ("US GAAP"). See Financial Information and Summary of Operational
results." The following selected financial data is qualified in its entirety by,
and should be read in conjunction with, the audited consolidated financial
statements for the year ended June 30, 1999 and the period from October 27, 1997
(inception) to June 30, 1998, and notes thereto included elsewhere in this
registration statement and the unaudited consolidated financial statements of
the Company for the nine months ended March 31, 2000 All figures are presented
in U.S. Currency, unless otherwise stated.
<TABLE>
<CAPTION>
=====================================================================================================
Fiscal Year Period Oct. 27, 1997 Nine months Nine months
Ended (date of inception) Ended Ended
to
June 30,1999 June 30, 1998 March 31, 2000 March 31, 1999
- -----------------------------------------------------------------------------------------------------
$ $ $ $
=====================================================================================================
<S> <C> <C> <C> <C>
Net Sales 11,710 0 63,580 4,853
Operating Expenses 1,725,041 1,096,067 1,388,897 1,018,893
Net Loss from Operations (1,713,331) (1,096,067) (1,325,317) (1,014,040)
Net Loss per Share (0.12) (0.13) (0.07) (0.06)
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================
As at As at As at
June 30, 1999 June 30,1998 March 31, 2000
=====================================================================================================
$ $ $
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash 234,214 60,778 17,166
Total Current Assets 302,326 77,372 194,204
Total Assets 1,621,829 100,175 1,133,812
Total Current Liabilities 367,047 893,815 506,403
Deferred Tax Liability 413,100 0 293,100
Stockholders' Equity (Deficit) 841,682 (793,640) 334,309
Cash Dividends 0 0 0
=====================================================================================================
</TABLE>
15
<PAGE> 18
SUMMARY OF OPERATIONAL RESULTS
The Company incurred a net loss for the year ended June 30, 1999 of
$1,642,078 as compared to a loss of $1,096,067 for the period from October 27,
1997 (date of inception) to June 30, 1998. Revenue of $11,710 represented
eCommerce product sales from Xceedx for the period January 27, 1999 to June 30,
1999. The increase in net loss of $546,011 in the year ended June 30 1999 is
attributable to the following factors:
- Increase of amortization and depreciation for the year of
$225,188.
- Increase cost of employees for the year caused by internal
growth and acquisition of companies amounted to $376,000 for
the year.
Sales and marketing costs increased dramatically over the year as the
Company beta tested its regional business directory in Vancouver, British
Columbia, Canada from March 1999 to July 1999. During this period the Company
assembled marketing and sales employees to find companies to utilize the
selected products that would later be sold by the sales forces of our media
partners. During the beta program the Company gave away its regional business
portal products to stress test the regional business directory prior to
finalizing the product. In the previous year, the Company had little marketing
and sales expenses as it was only developing products. Product development and
technology includes the cost of developing the Company's product offerings. All
product development costs are expensed as incurred during the year. The
acquisition of Xceedx resulted in the capitalization of $1,416,484, which
represents eCommerce technology. This asset is being amortized over three year's
straight line and the amortization expense is being shown as a non-operating
expense. As of June 30, 1999 the accumulated amortization was $196,750 and as of
March 31, 2000 it was $550,900.
The year ended June 30, 1999 was spent developing the Company's core
Internet technologies, consolidating operations and defining its core market
segments. The Company has determined that for it to be successful in its core
business market it must partner with media companies which own newspaper and/or
television stations in regional markets. In October 1999, the Company signed an
agreement with Lee Enterprises, a media company operating in 20 states with 21
daily newspapers, 80 weekly publications and 9 TV stations. Under this agreement
the Company is implementing 10 regional business portals in 10 cities in four
states. Eight of these cities were active by March 31, 2000 and generating
revenue. The balance of their locations will be rolled out on a phased basis.
In the nine months ended March 31, 2000 the Company finalized the
development of its back office administration tool for the eCommerce business
portal and completed the development of XpressCoupons and XpressFlyers. It also
developed the Newspaper Special Section concept. This is a combination of all
our products to duplicate the newspaper special section in an Internet format.
Special Sections will be implemented at 11 Lee sites in the next 5 months. It
also began the implementation of three regional business portal sites for Lee
Enterprises. During the nine months ended March 31, 2000, the Company incurred a
net loss for the period of $1,548,722 compared to $1,063,414 for the same nine
month period in 1999, an increase of $485,308. During, the period ended March
31, 2000 the Company recorded revenue of $53,177, which consisted primarily of
media partner revenue from Lee. This increase in net loss of
16
<PAGE> 19
$485,308 is the result of increased expenses resulting primarily from the
following items in the nine months ended March 31, 2000:
- Depreciation and amortization of $291,354
- Cost of the listing information for the database of $127,502
- Promotion and marketing materials of $82,199
- Increase in general office expenses caused by the increase in
employee count of $45,000
- Operating expenses reduced by revenue increase of $58,727
FINANCING AND LIQUIDITY
At June 30 1999, the Company had cash of $234,214, and a working
capital deficiency of $64,721 that included a loan payable of $72,704. The loan
payable is a demand term loan bearing interest at the Canadian Imperial Banks
prime rate plus 1% per annum, with monthly principal payments of $445 per month.
The Company also has a revolving demand credit with interest at the Canadian
Imperial Bank's prime rate plus 1%; at March 31,2000 the amount outstanding
under this facility was $10,665. As of March 31, 2000, the Company had a cash
balance of $17,166, a working capital deficiency of $312,199 that included a
loan payable of $166,077 and accounts payables and accrued liabilities of
$275,292.
As of January 14, 2000, the Company negotiated a restructuring of its
credit facilities so that the demand loan was transferred from its subsidiary
Xceedx Technologies to the Company. The credit facility was also increased as
well. The Company obtained a Demand Installment Loan of $169,687 ($250,000 Cdn.)
from the Canadian Imperial Bank of Commerce. Borrowings by the Company bear
interest at the rate of the Bank's Prime Rate plus 1% per year. Unless the Bank
makes demand for repayment, the indebtedness is repaid in 180 regular monthly
payments of $1,573 ($2,318 Cdn.) each beginning March 15, 2000. The indebtedness
is secured by all personal property of the Company and is personally guaranteed
by Mr. Phil Dubois and Mr. Ken Bradley, officers of the Company. As of March 31,
2000, the loan payable under this credit facility had a balance of $166,077.
In the nine months ended March 31, 2000, the Company raised in twelve
separate private placements a total of $1,039,859, representing an additional
1,789,198 common shares all of which were issued by March 31,2000.
The Company also converted consulting services worth $9,570 to 12,467
common shares in March 2000. These shares are included in the to be issued total
of 12,467 at March 31, 2000. These shares were issued subsequent to March 31,
2000.
Based on the expenditures for the nine months ended March 31, 2000, the
Company forecasts minimum annual operating cash requirements of approximately
$1.5 million. The Company as of March 31, 2000 does not have sufficient
financial resources to maintain current operations or to undertake all of its
planned development programs and capital equipment purchases for the next 12
months. Revenue generated under agreements with additional media companies will
help to offset the Company's cash flow shortfall.
17
<PAGE> 20
PLAN OF OPERATION
The Company is dependent on obtaining new financing for ongoing
operation, capital expenditures and working capital. There is no assurance that
such financing will be available when required by or under terms favorable to
the Company.
The Company anticipates that media revenue from Lee will to grow as
they implement additional portal sites at their newspapers. Revenue for the
period ended March 31, 2000 amounted to $53,177. Revenue for the fourth quarter
from Lee is expected to exceed the previous period revenue as additional portal
sites are implemented. Lee is committed to implementing 33 Special Sections by
September 30, 2000, which will result in additional incremental revenue. The
Company in April 2000 implemented a business development program with Lee that
will include a CityXpress.com business development employee working with each
city's sales manager to maximize the Internet revenue opportunities using
CityXpress.com products. The Company believes this direct contact with each
sales manager will ensure successful implementation of our products within Lee
and maximize revenue.
The Company is actively calling on other media companies regarding its
product offerings. Each additional media company agreement will generate
additional revenue and cash flow. Management is confident it will be successful
in closing additional media agreements.
The Company has made application to increase its demand loan to
$339,374 ($500,000 Cdn.). When approved this increase would double the existing
credit under the demand loan with the Canadian Imperial Bank of Commerce.
The Company is presently seeking additional funding through private
offerings with individuals and institutions. The Company raised through private
placements $1,039,859 in the nine months ended March 31, 2000. The Company
believes it can continue to raise funds through private offerings. The Company
has just finalized a private placement for $70,000 and is actively seeking
private offerings in the range of $100,000 to $500,000 to increase its cash
position.
The management of the Company believes that it will generate sufficient
cash through private offerings, customer revenue and operating loans to fund its
operations for the 12-month period ending March 31, 2001.
BUSINESS RISKS
The Company faces three significant business risks on a going forward
bases:
- Raising the equity financing needed to operate the Company at
its current operating level and providing the operating funds,
capital additions and repayment of liabilities in a timely
manner. If the Company is unsuccessful in this regard it will
be required to reduce operating expenditures to a level that
will be in line with cash flows.
- The Company may be unsuccessful in obtaining additional media
partners or the Lee agreement may be unsuccessful in
generating revenues. In either case, the Company would have to
re-evaluate its business model to determine if there was
another partnership arrangement that would provide
18
<PAGE> 21
the economic, cash flow or business advantages it currently
believes will be provided by media companies. The Company at
this time cannot assess whether it could find other business
partners and negotiate favorable terms that would provide the
necessary revenue and cash flow required by the Company.
- A major competitor or new company could dominate the market
sector being targeted by the Company. The Company would then
have to assess the impact of the situation. The regional
eCommerce market sector is large and there may be room for two
suppliers to media companies. If not, then the Company would
have to assess what other market sector it could successfully
target.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's principal business office is located at Suite 200, 1727
West Broadway, Vancouver, British Columbia, Canada V6J 4W6. The Company signed a
lease agreement for four years commencing on May 1, 1999. Our monthly payments
are approximately $8,000 U.S.
We do not presently own or lease any other property or real estate.
19
<PAGE> 22
ITEM 3. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning the
number of shares of our common stock owned beneficially as of December 31, 1999
by (i) each of the Company's directors; (ii) each of the Company's named
executive officers; and (iii) all directors and executive officers of the
Company as a group; and (iv) each person (including any group) known to us to
own more than five percent (5%) of any class of our
Voting securities. Unless otherwise indicated, the shareholders listed
possess sole voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percentage of
Beneficial Owner Beneficial Ownership Class
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Shares Phil Dubois 2,561,250 (1) 11.5%
Suite 200 - 1727 West Broadway
Vancouver, B.C.
V6J 4W6
Common Shares Ken Bradley 2,561,250 (1) 11.5%
Suite 200 - 1727 West Broadway
Vancouver, B.C.
V6J 4W6
Common Shares Brent Forgeron 1,130,000 (1) 5.1%
23-1243 Thurlow Street
Vancouver, B.C.
V6E 1X4
Common Shares Greg Beaudin 1,130,000 (1) 5.1%
321 Cartelier Road
North Vancouver, B.C.
V7N 3B6
Common Shares Freddy Fuller 1,130,000 5.1%
2538 Ross Road
Abbotsford, B.C.
V4X 1J3
All officers and directors as a group (6) 7,382,500 33.2% (2)
- -------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
(1) Certain of these shares are subject to transfer restrictions.
(2) The percentages in this table are based on a total number of
outstanding common shares equal to 22,319,049. This number does not
include shares issuable under outstanding warrants. No options or
warrants have been granted to any executives, officers, directors or
beneficial owners listed in this table.
SECURITY OWNERSHIP OF MANAGEMENT
We are not aware of any arrangement that might result in a change in
control in the future.
ITEM 4. DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES
DIRECTORS AND OFFICERS
All directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until successors are
duly elected and qualified, unless they resign or cease to be directors in
accordance with the Company's Articles and Bylaws. The date of our next Annual
General Meeting has not been determined. The executive officers of the Company
are appointed by the Board of Directors.
At our last Annual General Meeting on August 25, 1999, the following
persons were directors and/or executive officers:
<TABLE>
<CAPTION>
DIRECTOR/OFFICER
NAME AND PRESENT OFFICE HELD EMPLOYEE SINCE
- ------------------------------------------------------------------------------
<S> <C>
Phil M Dubois January 27, 1999
President & CEO, Director
Ken R Bradley January 27, 1999
Chief Operating Officer & CFO, Director
Brent Forgeron January 27, 1999
Vice President
Ken Spencer August 3, 1999
Chairman, Director
Bob Smart August 25, 1999
Director
Ian Thomas August 25, 1999
Director
</TABLE>
The following is a brief biography of each of the executive officers
and directors listed above:
PHIL M. DUBOIS, age 53, has served as President, CEO and a director of the
Company since the acquisition of Xceedx on January 27, 1999. From January 1996
to present, Mr. Dubois serves as President and CEO of Xceedx a company he
co-founded in 1996.
21
<PAGE> 24
Xceedx is a provider of Internet technology services and eCommerce software
solutions. From September 1994 to December 1995, Mr. Dubois was an independent
consultant providing consulting services to technology companies. From May 1992
to August 1994, Mr. Dubois served as President and CEO of Modatech Systems Inc.,
a company in the North American sales force automation marketplace. From May
1989 to May 1992, Mr. Dubois served as Vice President of Development of
Modatech. From May 1989 to August 1994, Mr. Dubois was a director of Modatech.
Mr. Dubois is the chair and a director of AceTech, a not-for-profit association
of high tech CEOs, and a director of the BC Softworld Society; a not-for-profit
organization dedicated to the growth of the software industry in the province of
British Columbia.
KEN R. BRADLEY, age 52, has served as Chief Operating Officer, CFO and a
director of the Company since the acquisition of Xceedx on January 27, 1999.
From January 1996 to present, Mr. Bradley serves as Vice President Finance and
Vice President of Operations of Xceedx a company he co-founded in 1996. From
September 1994 to December 1995, Mr. Bradley was an independent consultant
providing consulting services to technology companies. From September 1990 to
August 1994, Mr. Bradley was Vice President Finance and Administration at
Modatech Systems Inc., a company in the North American sales force automation
marketplace. Mr. Bradley's past experience also includes serving as Regional
Controller at Domtar Packaging, a national company involved in the manufacturing
of corrugated containers. From February 1983 to January 1997, Mr. Bradley served
as Manager of Finance and Administration at Mobile Data International Inc., a
company that developed mobile data terminals that operated over radio frequency.
From February 1979 to February 1983, Mr. Bradley served as Corporate Controller
at Canadian Auto Carriers a specialized carrier of automobiles in western
Canada. Mr. Bradley is a Certified Management Accountant.
BRENT FORGERON, age 30, co-founded WelcomeTo Search Engine Inc. in October 1997
after completing graduate degrees in business from both Simon Fraser University
and the British Columbia Institute of Technology. Since January 1999, he has
served as Vice President Business Development and is responsible for developing
the strategic media alliances the Company is now pursing. From October 1997 to
October 1998 Mr. Forgeron served as Vice President of WelcomeTo Search Engine
Inc. with responsibility for strategic business relationships. From October 1998
to January 27, 1999, Mr. Forgeron served as President of WelcomeTo Search Engine
Inc. guiding WelcomeTo financing, growth and development. From October 1998 to
August 1999, Mr. Forgeron was a director of the Company.
KEN SPENCER, age 55, has served as Chairman and a director of the Company since
August 3, 1999. In 1983, Mr. Spencer co-founded Creo Products, a company that
manufactures complex, high-value equipment utilizing precision mechanics,
digital design, lasers, optics and software for the printing industry. He served
as CEO of Creo Products from 1985 to 1995, and as Chairman of the Creo Products
Board of Directors from 1985 to 1996. Mr. Spencer remains a director of Creo
Products. Mr. Spencer also serves as a director of De Novo Enzymes, a
bio-technology company, Science World, a government organization that promotes
science and technology throughout the province of British Columbia and the BC
Institute of Technology and as Chairman of the Board of Spectrum Signal
Processing, a position he has held since December, 1997.
BOB SMART, age 49, has served as a director since August 25, 1999. Bob has over
20 years of senior management experience in a variety of businesses. He
currently is a
22
<PAGE> 25
Partner in the consulting firm of Radford & Smart, a position he has held since
February 1999. From June 1998 to February 1999, he served as Executive Vice
President and a director of Bargain Castle International Discount Centres Ltd.,
a wholesale and retail products liquidator. From December 1997 to June 1998, Mr.
Smart served as President of Webcastsystems Inc., a software developer. From
October 1996 to December 1997, he served as President of ActionView Advertising
Ltd. an outdoor advertising media company. From October 1994 to October 1996 Mr.
Smart served as Vice President Corporate Development of Imperial Ginseng
Products Ltd. a grower and distributor of ginseng and ginseng products.
IAN THOMAS, age 53, has served as a director since August 25, 1999. In 1979, he
founded Thomas Consultants Inc., which presently operates offices in Vancouver
Canada and the Gold Coast Australia. Mr. Thomas serves as CEO of Thomas
Consultants Inc. a position he has held since the company was founded. Thomas
Consultants Inc. specializes in the planning and development of large-scale
retail projects and undertakes strategic planning assignments for major national
and international retailers, and currently works in over 30 countries. Mr.
Thomas sits on the Board of Trustees of the International Council of Shopping
Center's Education Foundation in New York, and is a director of Future Shop,
North America's third largest electronics chain, a position he has held since
August since 1993.
Members of the Board of Directors are elected by the Company's
shareholders. The Board of Directors meets periodically to review significant
developments affecting the Company and to act on matters requiring Board
approval. Although the Board of Directors delegates many matters to others, it
reserves certain powers and functions to itself. The Company's Audit Committee
comprises Ken Spencer, Bob Smart and Phil Dubois. The Audit Committee is
directed to review the scope, costs and results of the independent audit of the
Company's books and records, the results of the annual audit with management and
the adequacy of the Company's accounting, financial and operating controls; to
recommend annually to the Board of Directors the selection of the independent
auditors; to consider proposals made by the Company's independent auditors for
consulting work; and to report to the Board of Directors, when so requested, on
any accounting or financial matters. The Compensation Committee consists of Ken
Spencer, Ian Thomas and Ken Bradley. The role of this committee is to set
executive compensation for the senior executives and administer the 0ptions Plan
for executive officers and employees.
None of our directors or executive officers is a party to any
arrangement or understanding with any other person pursuant to which he was
elected as a director or officer. None of our directors or executive officers
has any family relationship with any other officer or director.
None of our officers or directors have been involved in the past five
years in any of the following: (1) bankruptcy proceedings; (2) subject to
criminal proceedings or convicted of a criminal act; (3) subject to any order,
or decree entered by any court limiting in any way his or her involvement in any
type of business, securities or banking activities; or (4) subject to any order
for violation of federal or state securities laws or commodities laws.
23
<PAGE> 26
ITEM 5. REMUNERATION OF DIRECTORS AND OFFICERS
As of January 27, 1999, the Company's executive officers consisted of
Phil Dubois, President and CEO, Ken R. Bradley, Chief Operating Officer and CFO,
and Brent Forgeron, Vice President.
During the year ended June 30, 1999, salary compensation was paid to
our executive officers. The following table contains information concerning
compensation paid to named executive officers for the financial year ended June
30, 1999 and for the period ended June 30, 1998.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------------------------------
AWARDS PAY-OUTS
----------------------------------
OTHER SECURITIES LTIP
ANNUAL RESTRICTED- UNDER- PAYOUTS ALL OTHER
COMPEN- STOCK LYING COMPEN-
NAME AND SALARY BONUS SATION AWARD(S) OPTIONS/ SATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) SARS(#) ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phil Dubois 1999 21,846 nil nil nil nil
President & CEO 1998 nil nil nil nil nil
Ken Bradley, 1999 21,846 nil nil nil nil
COO & CFO 1998 nil nil nil nil nil
Brent Forgeron 1999 32,769 nil nil nil nil
Vice President 1998 nil nil nil nil (1) nil
</TABLE>
Note 1 Mr. Forgeron was an executive officer of WelcomeTo Search Engine Inc.,
the private company acquired by the Company on January 7, 1999. For services
rendered by Mr. Forgeron during the period from October 27, 1997 through June
30, 1998, salary compensation of $10,867 was paid to Mr. Forgeron and 1,129,800
common shares of WelcomeTo Search Engine Inc. were issued to him. The stock
award was priced at $0.19 per share, and the compensation expense is noted in
note 8(a)(vii) to the Company's audited financial statements. Mr. Forgeron
became an executive officer of the Company in January 1999.
24
<PAGE> 27
STOCK OPTIONS
During the year ended June 30, 1999, no stock options or share purchase
options were granted to or exercised by any of our executive officers and no
long-term incentive plans were made to our executive officers. Therefore, no
share purchase options were outstanding during the year ended June 30, 1999.
Also, we do not have a defined benefit or actuarial plan.
At the Annual General Meeting on August 25, 1999, the shareholders
approved a stock option plan, which reserved the granting of 2,000,000-share
purchase options under the plan. Subsequently, 675,000 share purchase options
were granted to acquire common shares to employees. The stock option plan is
exercisable over a four-year period ending on July 13, 2003 at an exercise price
of $1.50 per common share. The options are exercisable on a cumulative basis at
1/3 per year commencing July 13, 2000. As of December 31, 1999 no share purchase
options have been granted to any officers or directors of the Company.
The following table summarizes information concerning options granted
and or paid to named executive officers during the Company's financial year
ended June 30, 1999 and to December 31, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
OPTIONS / SAR GRANTS IN LAST FINANCIAL YEAR
- -------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL EXERCISE OR MARKET VALUE OF COMMON
SECURITIES OPTIONS/SARS BASE PRICE SHARES UNDERLYING OPTIONS
NAME UNDERLYING GRANTED TO ($/SH) EXPIRATION ON THE DATE OF GRANT
OPTIONS/SARS EMPLOYEES IN DATE ($/COMMON SHARE)
GRANTED FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phil Dubois (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Bradley (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Brent Forgeron (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: (1) There were no options granted by the Company to executive officers
during the year ended June 30, 1999 and to December 31,1999
The following is a summary of the share purchase options exercised by
the Company's directors, officers, and employees during the financial year ended
June 30, 1999 and to December 31, 1999:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES DURING THE LAST
FINANCIAL YEAR END AND FINANCIAL YEAR END OPTION/SAR VALUES
- -------------------------------------------------------------------------------------------------------------
VALUE OF
COMMON SHARES UNEXERCISED OPTIONS UNEXERCISED
NAME ACQUIRED ON AGGREGATE VALUE AT FINANCIAL IN-THE-MONEY
EXERCISE (#) REALIZED ($) YEAR-END OPTIONS/SARS AT
FINANCIAL YEAR-END
($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Phil Dubois (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Bradley (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Brent Forgeron (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Spencer (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Bob Smart (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ian Thomas (1) Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: (1) There were no options granted by the Company to executive officers
during the year ended June 30, 1999 and to December 31,1999
25
<PAGE> 28
The following is a summary of long-term incentive plans granted to the
Company's directors, officers and employees during the financial year ended June
30, 1999 and to December 31, 1999:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------
NUMBER OF PERFORMANCE
SHARES, UNITS OR OTHER
NAME OR OTHER PERIOD UNTIL THRESHOLD TARGET MAXIMUM
RIGHTS MATURATION OR ($ OR #) ($ OR #) ($ OR #)
# PAY-OUT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phil Dubois (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Bradley (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Brent Forgeron (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ken Spencer (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Bob Smart (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
Ian Thomas (1) Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: (1) There were no options granted by us during the year ended June 30,
1999 and to December 31,1999
DESCRIPTION OF 1999 STOCK OPTION PLAN
The Company's 1999 Stock Option Plan (the "Stock Option Plan") was
adopted by the Board of Directors and approved by the Company's shareholders in
August 1999. The purpose of the Plan is to reward the contributions made to the
Company by employees, directors and consultants, to provide such persons with
additional incentive to devote themselves to the future success of the Company,
and to improve the ability of the Company to attract, retain and motivate
individuals upon whom the Company's sustained growth and financial success
depend. Pursuant to the Stock Option Plan, the Company may grant or issue stock
options to directors, officers, advisors and employees of the Company or any
other person or company engaged to provide ongoing services to the Company. As
of December 1, 1999, the Company has granted a total of 675,000 share purchase
options to employees. The stock option plan is exercisable over a four-year
period ending on July 13, 2003 at an exercise price of $1.50 per common share.
The options are exercisable on a cumulative basis at 1/3 per year commencing
July 13, 2000.
26
<PAGE> 29
A total of 2,000,000 shares of Common Stock have been reserved for
issuance under the Stock Option Plan of which 675,000 have been granted to
employees. The Board of Directors determines the terms and provisions of the
stock options granted under the Stock Option Plan.
The Stock Option Plan may be amended at any time by the Board of
Directors, although certain amendments may require shareholder approval. The
Board of Directors may terminate the Stock Option Plan at any time.
COMPENSATION OF DIRECTORS
Directors receive no compensation for serving as Directors.
EXECUTIVE OFFICERS CONSULTING AGREEMENT
On January 21, 1999, the Company entered into separate Consulting
Agreements with Phil Dubois, and with Ken Bradley, named executive officers of
the Company. Pursuant to these Consulting Agreements, Mr. Dubois and Mr. Bradley
provide corporate financing and business strategy consulting services to and on
behalf of the Company and each receive compensation of $6,000 Canadian per
month.
Each consulting agreement is for a term of two years. The Company may
renew either or both of the consulting agreements for successive terms of a
duration decided by the Company by written notice to the other party. Absent
agreement by the parties or notice by the Company, each of the Consulting
Agreements automatically renews for a one-year term. Each consulting agreement
contains confidentiality and certain non-compete provisions. Each consulting
agreement provides that the Company determines what corporate benefit plans and
programs Mr. Dubois or Mr. Bradley will participate in and the terms of such
participation.
The Company has the right to terminate Mr. Dubois at any time for legal
cause without notice or payment to him. If the Company terminates the consulting
agreement of Mr. Dubois without cause, the Company is obligated to pay him
$12,000 Canadian for each month remaining in the term of the Consulting
Agreement.
The Company has the right to terminate Mr. Bradley at any time for
legal cause without notice or payment to him. If the Company terminates the
Consulting Agreement of Mr. Bradley without cause, the Company is obligated to
pay him $12,000 Canadian for each month remaining in the term of the Consulting
Agreement.
Either Mr. Dubois or Mr. Bradley may terminate his Consulting Agreement
on three- (3) month's prior notice to the Company.
ITEM 6. INTEREST OF MANAGEMENT AND OTHERS IN TRANSACTIONS
Except for (a) the issuance of shares of its stock to Mr. Forgeron
pursuant to the Acquisition Agreement between WelcomeTo Search Engine, Inc. and
the Company and the issuance of shares of its stock to Messrs. Dubois and
Bradley pursuant to the Acquisition Agreement between Xceedex Technologies, Inc.
and the Company, (b) the
27
<PAGE> 30
compensation described herein, and (c) advances to and by certain officers to
cover expenses, all of which were reimbursed or repaid without interest, no
director, executive officer, holder of ten percent of the Company's outstanding
common stock, or any relative or spouse of any of the foregoing persons, or any
relative of such spouse, who has the same house as such person or who is a
director or officer of any parent or subsidiary of the Company, to the Company's
knowledge, had a material interest either direct or indirect, in any particular
transaction or series of transactions to which the Company or any subsidiary was
a party, during the two fiscal years ended June 30, 1998 and 1999, and to
December 31, 1999.
ITEM 7. DESCRIPTIONS OF REGISTRANT'S SECURITIES TO BE REGISTERED
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, par value $0.001 per share.
Holders of Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of shareholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor. Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company available after the payment of all debts and other
liabilities. Holders of Common Stock, as such, have no preemptive, subscription,
redemption or conversion rights, and there are no sinking fund provisions
applicable to the Common Stock.
The transfer agent and registrar for the Company's Common Stock is
Interwest Transfer Co. Inc.
28
<PAGE> 31
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Shares of the Company's Common Stock trade on the OTCBB under the
symbol CYXP. The following table at month end sets forth the range of high and
low bid quotations (as reported by NASDAQ) for the period October 30, 1998 to
April 30, 2000:
<TABLE>
<CAPTION>
MONTH HIGH BID LOW BID
ENDED -------- -------
- -----
<S> <C> <C>
October 30,1998 4.0625 2.7500
November 30, 1998 3.0000 2.5625
December 31,1998 2.1250 2.0000
January 29,1999 7.2500 5.8750
February 26,1999 4.0625 3.8750
March 31, 1999 6.4375 4.9375
April 30,1999 3.9688 3.8438
May 28,1999 2.9688 2.7500
June 30,1999 2.4375 2.0625
July 30,1999 2.5000 2.4375
August 31,1999 1.7500 1.6875
September 30,1999 1.5000 1.3750
October 31, 1999 1.2500 1.1250
November 30,1999 0.8438 0.6875
December 31,1999 0.3750 0.3600
January 31, 2000 0.7500 0.5900
February 29, 2000 0.6200 0.6000
March 31, 2000 0.5100 0.4500
April 30, 2000 0.3400 0.3100
</TABLE>
On December 31, 1999 the last reported sale price of the Common Stock,
as reported by NASDAQ was $0.3750 per share.
As of December 31, 1999 there were 186 holders of record of shares of
the Company's Common Stock.
The Company has not declared or paid any cash dividends on its Common
Stock since inception, and the Company's Board of Directors currently intends to
retain all earnings for use in the business for the foreseeable future. Any
future payment of
29
<PAGE> 32
dividends will depend upon results of operations, financial condition, cash
requirements and other factors deemed relevant by the Company's Board of
Directors.
ITEM 2. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party,
which could have a material adverse effect on the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
PricewaterhouseCoopers was engaged by WelcomeTo Search Engine, Inc. to
audit its financial statements as of June 30, 1998 and for the period October
27, 1997 (the date of incorporation of WelcomeTo Search Engine Inc.) through
June 30, 1998. PricewaterhouseCoopers resigned on January 28, 1999.
PricewaterhouseCoopers report on the financial statements referenced above did
not contain an adverse opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles.
The decision to change accountants was approved by the Board of
Directors on March 29, 1999.
During the period of its engagement there was no disagreements with
PricewaterhouseCoopers on any matter of accounting principles, financial
statement disclosure or auditing scope or procedures.
The Company engaged Ernst & Young, LLP as its principal accountant on
March 30, 1999. Ernst & Young LLP were appointed as accountants at the Annual
General Meeting on August 25, 1999.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Prior to the acquisition of WelcomeTo Search Engine Inc. by the Company
WelcomeTo Search Engine Inc. had issued 8,510,000 common shares for cash,
services and charitable donations in private offerings under Section 4(2) of the
Securities Act of 1933 as amended (the "Securities Act") and under Regulation S
promulgated under the Securities Act. The 8,510,000 common shares issued by
WelcomeTo Search Engine Inc. can be summarized as follows. On October 27, 1999,
800 common shares were issued to four non-U.S. persons upon incorporation of
WelcomeTo Search Engine Inc. for total consideration of $5. From October 27,
1997 to January 6, 1999, WelcomeTo Search Engine Inc. issued 5,836,448 common
shares at an average price of $0.19 per share for services rendered to
employees, an officer and a director. A total compensation expense of $1,117,654
was recorded, $863,718 in the period from October 27, 1997 (inception) to June
30, 1998 and $253,936 in the year ended June 30, 1999. This offering was made to
twenty-six non-U.S. persons outside the United States.
30
<PAGE> 33
The offering was exempt from registration under Regulation S promulgated under
the Securities Act. No placement agent was retained in connection with the
offering. No fees or commissions were paid in connection with the transaction.
During the year ended June 30, 1999, an additional 2,392,752 common shares were
issued at an average price of $.18 per share for a total cash consideration of
$459,118. This offering was made to fifty non-U.S. persons outside the United
States. The offering was exempt from registration under Regulation S promulgated
under the Securities Act. A commission of $32,487 was paid to a Canadian firm
relating to this offering of securities resulting in net cash proceeds of
$426,631. ($459,118 less $32,487). During the year ended June 30, 1999, an
additional 160,000 common shares were issued for consulting services at an
average price of $.19 per share for a total cash consideration of $30,521. This
offering was made to four non-U.S. persons outside the United States. The
offering was exempt from registration under Regulation S promulgated under the
Securities Act. During the year ended June 30, 1999, 40,000 common shares were
issued as consideration for an investment in Golf Escape at an average price of
$.09 per share for $3,406. This investment has been written off in the year,
ended June 30, 1998. This offering was made to one non-U.S. person outside the
United States. The offering was exempt from registration under Regulation S
promulgated under the Securities Act. In November 1998, WelcomeTo Search Engine
Inc. donated 80,000 common shares to two Canadian charitable organizations for
purposes of this donation each common share was valued at $0.19 for a total
donation of $15,207. This offering was made outside the United States. The
offering was exempt from registration under Regulation S promulgated under the
Securities Act. No placement agent was retained in connection with the offering.
No fees or commissions were paid in connection with the transaction.
Pursuant to a share purchase agreement dated January 7, 1999, the
shareholders of WelcomeTo sold their 100% interest in WelcomeTo to
CityXpress.com for 8,510,000 shares in CityXpress.com which represented a
controlling interest of approximately 62.5%. For accounting purposes this
transaction was considered the recapitization of WelcomeTo and the acquisition
of CityXpress.com by WelcomeTo. The reverse acquisition resulted in one-time
costs of $225,000 for finders fees pertaining to the acquisition of Xceedx and
WelcomeTo, which was paid for by the issuance of 450,000 common shares issued in
an offering exempt from registration under Regulation S promulgated under the
Securities Act to two Canadian companies outside the United States. Each common
share was valued at $0.50. These shares were issued after the year-end June 30,
1999 and are included in the total to be issued of 627,860 shares at June 30,
1999.
At the time of acquisition, CityXpress.com had outstanding shares
totaling 5,100,000. After the acquisition total common shares outstanding were
13,610,000.
In January 1999, CityXpress.com acquired all of the issued and
outstanding shares of Xceedx by exchanging one share of CityXpress.com for each
share of common stock of Xceedx. As a result CityXpress.com issued 6,250,000
shares of common stock in a private offering under section 4(2) of the
Securities Act. No fees or commissions were paid in connection with the
transaction.
In March 1999, the Company issued 33,333 shares of common stock at a
purchase price of $3.00 per share for a total offering of $99,999. This offering
was made to seven subscribers outside the United States. The offering was not
underwritten. The offering was exempt from registration under Regulation S
promulgated under the
31
<PAGE> 34
Securities Act. No placement agent was retained in connection with the offering.
No fees or commissions were paid in connection with the transaction.
In June 1999, the Company accepted subscription agreements for 177,860
shares of common stock at a purchase price of $1.50 per share for a total
offering of $266,790. The shares were issued after the year ended June 30, 1999
and are included in the total to be issued at June 30, 1999 of 627,860 shares.
This offering was made to five subscribers outside the United States. The
offering was not underwritten. The sale was exempt from registration under
Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $1.50 each
during the first year and $2.00 during the second year. The warrants expire on
June 10, 2000 and June 10, 2001 respectively.
In July 1999, the Company issued 45,260 shares of common stock at a
purchase price of $1.50 per share for a total offering of $67,890. This offering
was made to one subscriber outside the United States. The offering was not
underwritten. The sale was exempt from registration under Regulation S
promulgated under the Securities Act. No placement agent was retained in
connection with the offering. No fees or commissions were paid in connection
with the transaction. Each common share issued has an attached warrant which
entitles the holder to acquire one common share for $1.50 each during the first
year and $2.00 during the second year. The warrants expire on July 14, 2000 and
July 14, 2001 respectively.
In August 1999, the Company accepted a subscription agreement for
100,000 shares of common stock at a purchase price of $1.50 per share for a
total offering of $150,000. This offering was made to one subscriber outside the
United States. The offering was not underwritten. The sale was exempt from
registration under Regulation S promulgated under the Securities Act. No
placement agent was retained in connection with the offering. No fees or
commissions were paid in connection with the transaction. Each common share
issued has an attached warrant which entitles the holder to acquire one common
share for $1.50 each during the first year and $2.00 during the second year. The
warrants expire on August 15, 2000 and August 15, 2001 respectively.
In September 1999, the Company accepted a subscription agreement for
46,666 shares of common stock at a purchase price of $1.50 per share for a total
offering of $70,000. This offering was made to one subscriber outside the United
States. The offering was not underwritten. The sale was exempt from registration
under Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $1.50 each
during the first year and $2.00 during the second year. The warrants expire on
September 30, 2000 and September 30, 2001 respectively. This subscription
agreement provided that the Company could issue additional shares if subsequent
subscriptions were accepted by the Company at a lower purchase price per share
than $1.50 until March 31, 2000. After December 31, 1999, the Company issued an
additional 93,334 common shares to the subscriber and the exercise prices of the
warrants have been reduced from $1.50 to $0.50 per share during the first year
and from $2.00 to $0.75 during the second year. The effect of issuing additional
93,334 common
32
<PAGE> 35
shares results in an average share price of $0.50 per share. The additional
93,334 shares is reflected in the to be issued total of 172,617 at December 31,
1999.
In September 1999, the Company accepted a subscription agreement for
325,800 shares of common stock at a purchase price of $0.50 per share for a
total offering of $162,900. The shares were issued after the quarter ending
December 31, 1999 and are included in the total to be issued amount of 742,458
at December 31,1999.This offering was made to two subscribers outside the United
States. The offering was not underwritten. The sale was exempt from registration
under Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $0.50 each
during the first year and $0.75 during the second year. The warrants expire on
September 30, 2000 and September 30, 2001 respectively.
In October 1999, the Company accepted a subscription agreement for
52,855 shares of common stock at a purchase price of $1.25 per share for a total
offering of $66,069. This offering was made to one subscriber outside the United
States. The offering was not underwritten. The sale was exempt from registration
under Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $1.25 each
during the first year and $2.00 during the second year. The warrants expire on
October 13, 2000 and October 13, 2001 respectively. This subscription agreement
provided that the Company could issue additional shares if subsequent
subscriptions were accepted by the Company at a lower purchase price per share
than $1.25 until March 31, 2000. After December 31, 1999, the Company issued an
additional 79,283 common shares to the subscriber and the exercise prices of the
warrants have been reduced from $1.25 to $0.50 per share during the first year
and from $2.00 to $0.75 during the second year. The effect of issuing additional
79,283 common shares results in an average share price of $0.50 per share. The
additional 79,283 shares is reflected in the to be issued total of 172,617 at
December 31, 1999.
In December 1999, the Company accepted a subscription agreement for
408,000 shares of common stock at a purchase price of $0.50 per share for a
total offering of $204,000. The shares were issued after the quarter ending
December 31, 1999 and are included in the total to be issued of 742,458 at
December 31, 1999. This offering was made to two subscribers outside the United
States. The offering was not underwritten. The sale was exempt from registration
under Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $0.50 each
during the first year and $0.75 during the second year. The warrants expire on
December 10, 2000 and December 10, 2001 respectively.
In January 2000, the Company accepted a subscription agreement for
138,000 shares of common stock at a purchase price of $0.50 per share for a
total offering of $69,000. This offering was made to one subscriber outside the
United States. The offering was not underwritten. The sale was exempt from
registration under Regulation S promulgated under the Securities Act. No
placement agent was retained in connection with the offering. No fees or
commissions were paid in connection with the transaction. Each common share
issued has an attached warrant which entitles the holder to acquire one common
share for $0.50 each during the first year and $0.75 during the second year. The
warrants expire on January 18, 2001 and January 18, 2002 respectively.
In January 2000, the Company accepted a subscription agreement for
500,000 shares of common stock at a purchase price of $0.50 per share for a
total offering of $250,000. This offering was made to two subscribers outside
the United States. The offering was not underwritten. The sale was exempt from
registration under Regulation S promulgated under the Securities Act. No
placement agent was retained in connection with the offering. No fees or
commissions were paid in connection with the transaction.
33
<PAGE> 36
Each common share issued has an attached warrant which entitles the holder to
acquire one common share for $0.50 each during the first year and $0.75 during
the second year. The warrants expire on January 31, 2001 and January 31, 2002
respectively.
In March 2000, the Company converted consulting services worth $9,570
to 12,467 common shares for at an average price of $0.77 per share. This
offering was made to one non-U.S. person outside the United States. The offering
was exempt from registration under Regulation S promulgated under the Securities
In May 2000, the Company accepted a subscription agreement for 280,000
shares of common stock at a purchase price of $0.25 per share for a total
offering of $70,000. This offering was made to one subscriber outside the United
States. The offering was not underwritten. The sale was exempt from registration
under Regulation S promulgated under the Securities Act. No placement agent was
retained in connection with the offering. No fees or commissions were paid in
connection with the transaction. Each common share issued has an attached
warrant which entitles the holder to acquire one common share for $0.25 each
during the first year and $0.75 during the second year. The warrants expire on
May 5, 2001 and May 5, 2002 respectively
Tabular information regarding the warrants issued in these securities
placements is contained in the unaudited consolidated financial statements for
the nine months ended March 31, 2000 note 4 (d) attached hereto.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that no director or
officer of the Company shall be personally liable to the Company or its
shareholders for damages for breach of any duty owed to the Company or its
shareholders. Section 607.0831 of the Florida 1989 Business Corporation Act (the
"Florida Act") provides that a director is not personally liable for monetary
damages to the Company or any other person for any statement, vote, decision, or
failure to act, regarding corporate management or policy, by a director, unless:
(a) the director breach or failed to perform his or her duties as a director;
and (b) the director's breach of, or failure to perform, those duties
constitutes: (1) a violation of the criminal law, unless the director had
reasonable cause to believe his or her conduct was lawful or had no reasonable
cause to believe his or her conduct was unlawful; (2) a transaction from which
the director derived an improper personal benefit, either directly or
indirectly; (3) a circumstance under which the liability provisions of Section
607.0834 (liability for unlawful distributions); (4) in a proceeding by or in
the right of the Company to procure a judgment in its favor or by or in the
right of a shareholder, conscious disregard for the best interest of the
Company, or willful misconduct; or (5) in
34
<PAGE> 37
a proceeding by or in the right of someone other than the Company or a
shareholder, recklessness or an act or omission which was committed in bad faith
or with malicious purpose or in a manner exhibiting wanton and willful disregard
of human rights, safety or property.
The Company's Articles of Incorporation provide that the Company has
the power, in its bylaws or in any resolution of its shareholders or directors,
to undertake to indemnify the officers and directors of the Company against any
contingency or peril as may be determined to be in the best interest of the
Company, and in conjunction therewith, to procure, at the Company's expense,
policies of insurance.
Section 607.0850 of the Florida Act provides that the Company has the
power to: (a) indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the Company), by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
Company or is or was serving at the request of the Company as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise against liability incurred in connection with such
proceeding, including any appeal thereof, if he or she acted in good faith and
in a manner he or she reasonably believed to be in, or not opposed to, the best
interest of the Company and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful; and (b)
indemnify any person who was or is a party to any proceeding by, or in the right
of, the Company to procure a judgment in its favor by reason of the fact that
the person is or was a director, officer, employee, or agent of the Company or
is or was serving at the request of the Company as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise against expenses and amounts paid in settlement not exceeding,
in the judgment of the Company's Board of Directors, the estimated expense of
litigating the proceeding to conclusion, actually and reasonably incurred in
connection with the defense or settlement of such proceeding, including any
appeal thereof. Such indemnification shall be authorized, if such person acted
in good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interest of the Company, except that no indemnification
shall be made under this subsection in respect of any claim, issue, or matter as
to which such person shall have been adjudged to be liable unless, and only to
the extent that, the court in which such proceeding was brought, or any other
court of competent jurisdiction, shall determine upon application, that, despite
the adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses. which
such court shall deem proper. To the extent that a director, officer, employee,
or agent of the Company has been successful on the merits or otherwise in
defense of any proceeding referred to in (a) or (b) above, or in defense of any
claim, issue, or matter therein, he or she shall be indemnified against expenses
actually and reasonably incurred by him or her in connection therewith.
In addition, expenses incurred by an officer or director in defending a
civil or criminal proceeding may be paid by the Company in advance of the final
disposition of such proceeding, upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if he or she is ultimately
found not to be entitled to indemnification by the Company pursuant to Section
607.0850.
Pursuant to Section 607.0850(9) of the Florida Act, unless the
Company's Articles of Incorporation provide otherwise, (the Company's Articles
of Incorporation do
35
<PAGE> 38
not provide otherwise) notwithstanding the failure of the Company to provide
indemnification, and despite any contrary determination of the Company's Board
of Directors or shareholders in the specific case, a director, officer, employee
or agent of the Company who is or was a party to a proceeding may apply for
indemnification or advancement of expense, or both, to the court conducting the
proceeding or to another court of competent jurisdiction.
Pursuant to Section 607.0850(12) of the Florida Act, the Company is
empowered to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee, or agent of the Company or is or was serving
at the request of the Company as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against any liability asserted against the person and incurred by him or her in
any such capacity or arising out of his or her status as such, whether or not
the Company would have the power to indemnify the person against such liability
under the provisions of Section 607.0850 of the Florida Act.
The Company has not agreed to indemnify its officers and directors as
permitted by Section 607.0850 of the Florida Act. The Company does not maintain
indemnification insurance for its officers and directors.
PART F/S
FINANCIAL STATEMENTS
Audited Consolidated Financial Statements of Cityxpress.com Corp.
(formerly WelcomeTo Search Engine, Inc.) as at June 30, 1999.
Audited Combined Financial Statements of Xceedx Technologies Inc. for
the years ended January 14, 1999 and 1998.
Unaudited Consolidated Financial Statements of CityXpress.com Corp. as
at March 31, 2000 and 1999.
Unaudited Consolidated Pro Forma Statement of Operations of
CityXpress.com Corp. for the year ended June 30, 1999.
36
<PAGE> 39
CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
MARCH 31, 2000
<PAGE> 40
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
[See Nature of Business and Liquidity - Note 1]
<TABLE>
<CAPTION>
(expressed in U.S. dollars)
MARCH 31 JUNE 30
2000 1999
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash 17,166 234,214
Accounts and other receivables 57,938 29,350
Prepaid expenses and deposits 119,100 38,762
- --------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 194,204 302,326
- --------------------------------------------------------------------------------------------------
Property and equipment, net 74,024 99,769
eCommerce technology, net [note 2] 865,584 1,219,734
- --------------------------------------------------------------------------------------------------
1,133,812 1,621,829
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Bank indebtedness 10,665 7,999
Accounts payable and accrued liabilities 275,292 280,154
Deferred revenue 2,819 6,190
Loan payable [note 3] 166,077 72,704
Shareholders loans 51,550 --
- --------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 506,403 367,047
- --------------------------------------------------------------------------------------------------
Deferred tax liability 293,100 413,100
- --------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 799,503 780,147
- --------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock [note 4]
Common stock, $0.001 par value, 50,000,000 13,628 11,383
authorized, issued and outstanding - 22,310,391 at March 31,
2000 and 19,893,333 at June 30, 1999
Common stock to be issued - 12,467 at March 31, 2000
and 627,860 at June 30, 1999 9,570 266,790
Additional paid in capital 4,569,766 3,282,029
Other accumulated comprehensive income 28,212 19,625
Deficit accumulated during the development stage (4,286,867) (2,738,145)
- --------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 334,309 841,682
- --------------------------------------------------------------------------------------------------
1,133,812 1,621,829
==================================================================================================
</TABLE>
See accompanying notes
<PAGE> 41
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
(expressed in U.S. dollars)
PERIOD FROM
NINE MONTHS NINE MONTHS OCTOBER 27, 1997
ENDED ENDED (INCEPTION) TO
MARCH 31 MARCH 31 MARCH 31,
2000 1999 2000
$ $ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE 63,580 4,853 75,290
- --------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Sales and marketing 171,650 113,770 330,439
Product development and technology 711,253 287,671 1,293,848
Finance and administration 505,994 617,452 2,388,968
- --------------------------------------------------------------------------------------------------
1,388,897 1,018,893 4,013,255
- --------------------------------------------------------------------------------------------------
Net loss from operations (1,325,317) (1,014,040) (3,937,965)
Amortization of eCommerce technology (354,150) (78,700) (550,900)
Interest and miscellaneous income 10,745 1,826 13,098
Deferred income tax recovery 120,000 27,500 188,900
- --------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD (1,548,722) (1,063,414) (4,286,867)
- --------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS
Net loss for the period (1,548,722) (1,063,414) (4,286,867)
Foreign currency translation 8,587 -- 28,212
- --------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD (1,540,135) (1,063,414) (4,258,655)
- --------------------------------------------------------------------------------------------------
Basic and diluted loss per share (0.07) (0.06)
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE> 42
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' DEFICIT (EQUITY)
(UNAUDITED)
<TABLE>
<CAPTION>
(expressed in U.S. dollars)
COMMON STOCK COMMON COMMON
COMMON TO BE STOCK ISSUED STOCK TO BE
STOCK ISSUED AND OUTSTANDING ISSUED
# # $ $
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deemed outstanding as of June 30, 1998 800 -- -- --
Deemed common shares issued for services rendered in prior year 4,739,200 -- -- --
Deemed common shares issued for services rendered in current year 1,337,248 -- -- --
Deemed common shares issued for cash pursuant to warrants exercised 237,667 -- -- --
Deemed common shares issued to charitable organizations 80,000 -- -- --
Prior year's subscription shares issued in current year 1,516,380 -- -- --
Deemed common shares issued pursuant to private placement 598,705 -- -- --
Issue costs -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of January 7, 1999 8,510,000 -- -- --
Acquisition of CityXpress.com by WelcomeTo 5,100,000 -- 5,100 --
Acquisition of Xceedx 6,250,000 -- 6,250 --
Shares to be issued for services rendered -- -- -- --
Finders fees acquisition costs -- -- -- --
Shares issued pursuant to private placement 33,333 -- 33 --
Net loss for the period -- -- -- --
Foreign currency translation -- -- -- --
Shares to be issued -- 627,860 -- 266,790
- -----------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of June 30, 1999 19,893,333 627,860 11,383 266,790
Shares issued pursuant to share subscriptions [note 4(a)(i)] 177,860 (177,860) 178 (266,790)
Shares issued for services [note 4(a)(i)] 450,000 (450,000) 450 --
Shares issued pursuant to private placement [note 4(a)(ii)] 145,260 -- 145 --
Shares issued pursuant to private placement [note 4(a)(iii)] 46,666 -- 47 --
Shares issued pursuant to private placement [note 4(a)(iv)] 52,855 -- 53 --
Shares issued pursuant to private placement [note 4(a)(vi)] 172,617 -- -- --
Shares issued pursuant to private placement [note 4(a)(v)] 733,800 -- 734 --
Shares issued pursuant to private placement [note 4(a)(vii)] 638,000 -- 638 --
Net loss for the period -- -- -- --
Foreign currency translation -- -- -- --
Shares to be issued [note 4(a)(v)] -- 12,467 -- 9,570
Issue costs -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of March 31, 2000 22,310,391 12,467 13,628 9,570
=============================================================================================================================
<CAPTION>
OTHER
ADDITIONAL ACCUMULATED ACCUMULATED TOTAL
PAID IN COMPREHENSIVE DEVELOPMENT STOCKHOLDERS'
CAPITAL LOSS STAGE DEFICIT EQUITY
$ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deemed outstanding as of June 30, 1998 276,908 25,519 (1,096,067) (793,640)
Deemed common shares issued for services rendered in prior year 863,718 -- -- 863,718
Deemed common shares issued for services rendered in current year 253,936 -- -- 253,936
Deemed common shares issued for cash pursuant to warrants exercised 40,337 -- -- 40,337
Deemed common shares issued to charitable organizations 15,207 -- -- 15,207
Prior year's subscription shares issued in current year -- -- -- --
Deemed common shares issued pursuant to private placement 175,805 -- -- 175,805
Issue costs (32,487) -- -- (32,487)
- -----------------------------------------------------------------------------------------------------------------------------------
Deemed outstanding as of January 7, 1999 1,593,424 25,519 (1,096,067) 522,876
Acquisition of CityXpress.com by WelcomeTo 719,889 -- -- 724,989
Acquisition of Xceedx 868,750 -- -- 875,000
Shares to be issued for services rendered 225,000 -- -- --
Finders fees acquisition costs (225,000) -- -- --
Shares issued pursuant to private placement 99,996 -- -- 99,999
Net loss for the period -- -- (1,642,078) (1,642,078)
Foreign currency translation -- (5,894) -- (5,894)
Shares to be issued -- -- -- 266,790
- -----------------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of June 30, 1999 3,282,029 19,625 (2,738,145) 841,682
Shares issued pursuant to share subscriptions [note 4(a)(i)] 266,612 -- -- --
Shares issued for services [note 4(a)(i)] (450) -- -- --
Shares issued pursuant to private placement [note 4(a)(ii)] 217,745 -- -- 217,890
Shares issued pursuant to private placement [note 4(a)(iii)] 69,953 -- -- 70,000
Shares issued pursuant to private placement [note 4(a)(iv)] 66,016 -- -- 66,069
Shares issued pursuant to private placement [note 4(a)(vi)] -- -- -- --
Shares issued pursuant to private placement [note 4(a)(v)] 366,166 -- -- 366,900
Shares issued pursuant to private placement [note 4(a)(vii)] 318,362 -- -- 319,000
Net loss for the period -- -- (1,548,722) (1,548,722)
Foreign currency translation -- 8,587 -- 8,587
Shares to be issued [note 4(a)(v)] -- -- -- 9,570
Issue costs (16,667) -- -- (16,667)
- -----------------------------------------------------------------------------------------------------------------------------------
Total shares issued and to be issued as of March 31, 2000 4,569,766 28,212 (4,286,867) 334,309
===================================================================================================================================
</TABLE>
See accompanying notes
<PAGE> 43
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(expressed in U.S. dollars)
PERIOD FROM
NINE MONTHS NINE MONTHS OCTOBER 27, 1997
ENDED ENDED (INCEPTION) TO
MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000
$ $ $
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss for the period (1,548,722) (1,063,414) (4,286,867)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization 354,150 78,700 550,900
Depreciation 34,180 18,276 63,344
Gain on disposal of assets -- -- (28)
Shares issued for services 9,570 269,143 309,234
Write-down of investment -- -- 3,406
Deferred income tax recovery (120,000) (27,500) (188,900)
Changes in operating assets and liabilities
Accounts and other receivable (28,588) 2,287 (44,713)
Prepaid expenses and deposits (80,338) (11,392) (119,135)
Accounts payable and accrued liabilities (4,862) 8,956 1,113,100
Deferred revenue (3,371) 1,437 2,819
- -----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,387,981) (723,507) (2,596,840)
- -----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Loan advance 169,687 -- 169,687
Repayment of loan payable (76,314) (1,330) (78,976)
Shareholders loans 51,550 -- 51,550
Proceeds from stock issued and to be issued, net 1,023,192 143,318 1,782,019
Proceeds from exercise of warrants -- 40,337 40,337
Borrowings under bank indebtedness 2,666 2,093 10,665
- -----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,170,781 184,418 1,975,282
- -----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds on disposition of property and equipment -- -- 1,221
Acquisition of property and equipment (8,435) (78,872) (131,272)
Cash acquired on acquisition of subsidiaries -- 763,500 763,500
- -----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (8,435) 684,628 633,449
- -----------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash 8,587 (3,839) 5,275
NET INCREASE (DECREASE) IN CASH DURING THE PERIOD (217,048) 141,700 17,166
Cash, beginning of period 234,214 60,778 --
- -----------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD 17,166 202,478 17,166
===========================================================================================================
</TABLE>
See accompanying notes
<PAGE> 44
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at March 31, 2000 and for the nine months ended March 31, 2000
and 1999 is unaudited.
1. NATURE OF BUSINESS AND LIQUIDITY
These consolidated financial statements are the continuing financial statements
of WelcomeTo Search Engine ("WelcomeTo") (a development stage enterprise), a
British Columbia corporation which was incorporated on October 27, 1997. On
January 7, 1999, WelcomeTo acquired the net assets of CityXpress.com Corp.
(formerly Wicked Wings of Buffalo) ("CityXpress.com"), a United States
non-operating company traded on the NASDAQ OTC Bulletin Board. After the
acquisition, the accounting entity continued under the name of CityXpress.com.
CityXpress.com Corp (the Company) is a software developer and Internet
publisher. The Company intends to be the preferred means by which Internet
consumers can locate and purchase products and services from online companies in
their regional markets. This goal will be met by building alliances with media
companies who own newspaper and television stations and providing them with a
suite of Internet products that can be profitably sold to businesses looking for
cost-effective means of establishing and promoting an eCommerce presence in both
their regional markets.
The Company's consolidated financial statements for the period ended March 31,
2000 have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Company incurred a loss of $1,548,722 for the
nine months ended March 31, 2000, has a net working capital deficit of $312,199
at March 31, 2000 ($64,721 at June 30, 1999). The Company is still a development
stage enterprise and is expected to incur losses and expenditures prior to the
commencement of full-scale operations in the future. The ability of the Company
to continue as a going concern is dependent upon its ability to achieve
profitable operations and to obtain additional capital. The outcome of these
matters cannot be predicted at this time. No assurances can be given that the
Company will be successful in raising sufficient additional capital. Further,
there can be no assurance, assuming the Company successfully raises additional
funds, that the Company will achieve positive cash flow. If the Company is
unable to obtain adequate additional financing, management will be required to
sharply curtail the Company's operating expenses. These financial statements do
not include any adjustments to the specific amounts and classifications of
assets and liabilities which might be necessary should the Company be unable to
continue in business.
1
<PAGE> 45
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at March 31, 2000 and for the nine months ended March 31, 2000
and 1999 is unaudited.
1. NATURE OF BUSINESS AND LIQUIDITY (CONT'D.)
These financial statements have been prepared by management in accordance with
generally accepted accounting principles in the United States and in the opinion
of management reflect all adjustments, which consist only of normal and
recurring adjustments necessary to present fairly the financial position and
results of operations and cash flows.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended June 30,
1999.
2. ECOMMERCE TECHNOLOGY
eCommerce technology arose as part of the acquisition of Xceedx Technologies
Inc. and is being amortized on a straight-line basis over its useful life, which
is 36 months.
3. LOAN PAYABLE
During the period ended March 31, 2000, the Company restructured its credit
facility with the bank. The subsidiary's loan was transferred to the parent and
converted into a Demand instalment loan pursuant to which the Company received
an additional $99,651 for a total of $169,687 ($250,000 Cdn) with terms
consisting of principal and interest payments of $1,573 ($2,318 Cdn) per month,
starting March 15, 2000.
4. SHARE STOCK
[A] ISSUANCE OF SHARES
[i] In July 1999, the company issued 177,860 common shares pursuant
to share subscriptions of $266,790 received prior to June 30,
1999. In addition, the Company issued 450,000 common shares in
respect of finders' fees incurred prior to June 30, 1999.
[ii] In July and August 1999, the Company issued 145,260 common shares
for cash $217,890. Each common share has one attached warrant
which entitles the holder to acquire one common share for an
exercise price of $1.50 during the first year and $2.00 during
the second year. The warrants expire July 14, 2001 to August 15,
2001.
2
<PAGE> 46
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
4. SHARE STOCK (CONT'D)
[A] ISSUANCE OF SHARES (CONT'D)
[iii] In September 1999, the Company received a subscription for 46,666
common shares for $70,000. The shares were issued in December
1999. Pursuant to the subscription agreement, if at any time
until March 31, 2000 the Company issues common shares at a share
price of less than $1.50 per share, then additional common shares
will be issued to such investors, such that the effective issue
price of the common shares issued is equal to the lower price
paid [see note 4(a)(vi)]. Each common share has one attached
warrant which entitles the holder to acquire one common share for
an exercise price of $1.50 during the first year and $2.00 during
the second year. [see note 4(a)(vi)]. The warrants expire
September 30, 2001.
[iv] In October 1999, the Company issued 52,855 common shares for
$66,069. Pursuant to the subscription agreement , if at any time
until March 31, 2000 the Company issues common shares at a share
price of less than $1.25 per share, then additional common shares
will be issued to such investors, such that the effective issue
price of the common shares issued is equal to the lower price
paid [see note 4(a)(vi)]. Each common share has one attached
warrant which entitles the holder to acquire one common share for
an exercise price of $1.25 during the first year and $2.00 during
the second year. [see note 4(a)(vi)]. The warrants expire October
13, 2001.
[v] In September and December 1999, the Company received
subscriptions for 733,800 common shares for $366,900. These
shares were issued in January 31, 2000. In addition, in December
1999 and March 2000, the Company received subscriptions for
12,467 common shares for $9,570. These shares were issued after
March 31, 2000.
With respect to the subscriptions for the 733,800 common shares,
each common share has one attached warrant which entitles the
holder to acquire one common share for an exercise price of $0.50
during the first year and $0.75 during the second year. The
warrants expire September 30, 2001 to December 10, 2001.
3
<PAGE> 47
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at March 31, 2000 and for the nine months ended March 31, 2000
and 1999 is unaudited.
4. SHARE STOCK (CONT'D)
[A] ISSUANCE OF SHARES (CONT'D)
[vi] Pursuant to the agreements referred to in notes 4(iii) and (iv)
above, the Company is required to issue an additional 172,617
common shares for no additional consideration. These shares were
issued in January 31, 2000. In addition, the number of warrants
granted was increased by 93,334 to 140,000 and by 79,283 to
132,138, respectively, and the exercise price decreased to $0.50
during the first year and $0.75 during the second year.
[vii] In January 2000, the Company received subscriptions for 638,000
common shares for $319,000. These shares were issued before March
31, 2000. Each share has one attached warrant which entitles the
holder to acquire one common share for an exercise price of $0.50
during the first year and $0.75 during the second year.
[B] BASIC AND DILUTED LOSS PER SHARE
The basic loss per share figures are calculated using the weighted average
number of common shares outstanding. Diluted loss per share is computed giving
effect to all dilutive potential common shares that were outstanding during the
period. For the periods ended March 31, 2000 and 1999, there were no dilutive
potential common shares outstanding.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31 MARCH 31
2000 1999
$ $
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net loss for the period (1,548,722) (1,063,414)
Weighted average number of common shares used
in computation 21,191,589 17,778,750
Basic and diluted loss per common share (0.07) (0.06)
====================================================================================
</TABLE>
4
<PAGE> 48
CITYXPRESS.COM CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(expressed in U.S. dollars)
Information as at March 31, 2000 and for the nine months ended March 31, 2000
and 1999 is unaudited.
4. SHARE STOCK (CONT'D)
[C] STOCK OPTIONS
At the Annual General Meeting on August 25, 1999, shareholders approved a stock
option plan which reserved the granting of 2,000,000 options under the plan.
Options were granted to acquire common shares as follows:
<TABLE>
<CAPTION>
NO. OF COMMON EXERCISE PRICE
SHARES ISSUABLE $ EXERCISABLE DATES DATE OF EXPIRY
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
188,333 1.50 July 13, 2000 July 13, 2003
188,333 1.50 July 13, 2001 July 13, 2003
188,334 1.50 July 13, 2002 July 13, 2003
- -----------------------------------------------------------------------------------------------
565,000
===============================================================================================
</TABLE>
The stock options are exercisable over a four-year period ending July 13,
2003 at an exercise price of $1.50 per common share. The options are
exercisable on a cumulative basis at 1/3 per year commencing July 13, 2000.
[D] WARRANTS
At March 31, 2000, the Company has the following warrants outstanding, all of
which expire two years after the grant date.
<TABLE>
<CAPTION>
SHARES TO BE WARRANT GRANT WARRANT PRICE WARRANT PRICE
ISSUED DATE DURING YEAR 1 DURING YEAR 2
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
177,860 June 10, 1999 $1.50 $2.00
45,260 July 14, 1999 $1.50 $2.00
100,000 August 15, 1999 $1.50 $2.00
140,000 September 30, 1999 $0.50 $0.75
132,138 October 13, 1999 $0.50 $0.75
325,800 September 30, 1999 $0.50 $0.75
408,000 December 10, 1999 $0.50 $0.75
138,000 January 18, 2000 $0.50 $0.75
500,000 January 31, 2000 $0.50 $0.75
---------
1,967,058
---------
</TABLE>
5
<PAGE> 49
PART III EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------------------------------------------------------------------------------
<S> <C>
1. Articles of Incorporation of Wicked Wings of Buffalo Inc. effective
January 15,1981.
2. Articles of amendment of Wicked Wings of Buffalo Inc. effective August
3, 1998.
3. Articles of name change from Wicked Wings of Buffalo to WelcomeTo
Search Engine, Inc. effective January 7, 1999.
4. Articles of name change from WelcomeTo Search Engine, Inc. to
CityXpress.com Corp. effective August 25, 1999.
5. Bylaws of CityXpress.com Corp.
6. Acquisition Agreement by and between WelcomeTo Search Engine, Inc. and
Xceedx Technologies Inc. dated January 27, 1999.
7. Acquisition Agreement by and between WelcomeTo Search Engine, Inc. and
WelcomeTo Search Engine Inc. dated January 7, 1999.
8. Pooling Agreement by and between The Shareholders of WelcomeTo Search
Engine, Inc. listed on Schedule A to the Agreement and Russell &
DuMoulin dated as of December 11, 1999.
9. Voluntary Pooling Agreement by and between the undersigned Shareholders
of WelcomeTo Search Engine, Inc., WelcomeTo Search Engine, Inc. and
Russell & DuMoulin dated as of December 11, 19999.
10. Stock Option Agreement.
11. Service Agreement by and between WelcomeTo Search Engine, Inc. and Phil
Dubois, dated January 27, 1999.
12. Service Agreement by and between WelcomeTo Search Engine, Inc. and Ken
R. Bradley, dated January 27, 1999.
13. Data and service Agreement by and between WelcomeTo Search Engine, Inc.
and Dun and Bradstreet dated March 5, 1999.
14. Strategic Partner Agreement by and between CityXpress.com Corp. and Lee
Enterprises Incorporated.
15. Ernst & Young consent letter.
</TABLE>
37
<PAGE> 50
<TABLE>
<S> <C>
16. Canadian Imperial Bank of Commerce Credit Agreement with the Company.
17. Canadian Imperial Bank of Commerce Securities Pledge Agreement with the
Company.
18. Canadian Imperial Bank of Commerce Security Agreement with the Company.
19. Guarantee of Mr. Phil Dubois.
20. Guarantee of Mr. Ken Bradley
21. CyberCash Agreement.
22. CityXpress.com Corp. specimen share certificate.
23. Pricewaterhouse letter dated May 17, 2000
</TABLE>
LIST OF SUBSIDIARIES OF THE REGISTRANT
1. WelcomeTo Search Engine Inc.
2. Xceedx Technologies Inc.
38
<PAGE> 51
EXHIBIT 23
[PRICEWATERHOUSECOOPERS LETTERHEAD]
Mr. Phil Dubois
CityXpress.com Corp.
200 - 1727 West Broadway
Vancouver, BC
V6J 4S5
and
United States Securities & Exchange Commission
Washington, D.C.
USA 20549
May 17, 2000
Subject: CityXpress.com Corp. Form 10SB; filed May 9, 2000
Dear Sirs
As requested, we confirm we have read Item 3 - "Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure" in the Company's Form
10SB filing with the United States Securities & Exchange Commission on May 9,
2000 and the reference to PricewaterhouseCoopers LLP. We limit our comments only
to Item 3 and confirm we are in agreement with the comments contained within
Item 3.
We have not read or otherwise reviewed any other part of the Company's Form 10SB
document.
Yours truly
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
<PAGE> 52
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this amendment #1 to its Registration Statement on Form 10-SB
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 18, 2000
CITYXPRESS.COM CORP.
By: /s/ Ken Bradley
--------------------------------------------------
Ken Bradley, Chief Operating Officer & CFO
