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GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
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Amendment No. 2
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Westergaard.com, Inc.
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(Name of Small Business Issuer in its charter)
Delaware 52-2002729
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
560 West 43rd Street New York, New York 10036
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(Address of principal executive offices) (Zip Code)
Issuer's telephone (212) 947-1999
Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
Common and Preferred Stock $0.001 par value
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(Title of class)
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TABLE OF CONTENTS
Part I
Item One. Description of the Business
A. Business Development
B. Business of the Issuer
Item Two. Management's Discussion and Analysis or Plan of Operations.
Item Three. Description of Properties
Item Four. Security Ownership of Certain Beneficial Owners and Management
Item Five. Directors, Executive Officers, and Control Persons
Item Six. Executive Compensation
A. Directors' Compensation
B. Compensation of Executive Officers
Item Seven. Certain Relationships and Related Transactions
Item Eight. Description of Securities
A. Common Stock
B. Preferred Stock
Part II
Item One. Market for Common Equity & Related Stockholder Matters
A. Principal Market or Markets
B. Approximate Number of Holders of Common Stock
C. Dividends
Item Two. Legal Proceedings
Item Three. Changes in and Disagreements with Accountants
Item Four. Recent Sales of Unregistered Securities
Item Five. Indemnification of Directors and Officers.
Part F/S
Financial Statements
Part III
Index to Exhibits
Signatures
Exhibits
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PART I
ITEM ONE. DESCRIPTION OF THE BUSINESS
A. BUSINESS DEVELOPMENT
Westergaard.com, Inc. ("Westergaard" or "the Company") is a Delaware
Corporation. Our principal business address is 560 West 43rd Street, New York,
New York 10036. Our telephone number is (212) 947-1999.
We were incorporated under the laws of the State of Delaware on August 15, 1996,
as "Westergaard Online Systems, Inc." On February 18, 1999, we formally changed
our name to Westergaard.com.
We have never been a party to any bankruptcy, receivership, or similar
proceeding.
B. BUSINESS OF THE ISSUER
General
We operate primarily through a wholly owned subsidiary, Westergaard Broadcasting
Network.com, Inc. ("WBN"), investment research, publishing and broadcasting
venture. We engage in providing a paid Internet-based research listing service
to small cap (up to $1.5 billion marketcap) public companies defined as "Member
Affiliates." The service is designed to assist in creating market liquidity and
shareholder values for our Member Affiliates. We believe that liquidity is
equally a function of access to accurate and timely fundamental information and
analysis as it is a function of dealer/auction market making activities.
We employ Senior Contributing Analysts with an average of more than 20 years
professional experience with institutional brokerage firms, investment bankers
and investment institutions. These analysts provide accurate, credible,
objective, and timely research and analysis characterized by sound investment
judgment that can only derive from extensive experience. Their research is
delivered to online institutional and private investors via the Internet in a
unique and original format providing a global reach and quality of investment
analysis not previously available on equal terms to private and institutional
investors.
The "unique and original format" is the WBNcyberStation(TM) ("cyberstation"), a
service of our subsidiary Westergaard Broadcasting Network.com, Inc., which
operates two Internet broadcast channels accessible via the Universal Resource
Locator (URL) at www.westergaard.com. They are Westergaard Broadcasting
Network.com and Westergaard Portal-to-Wall Street.
The WBNcyberStation(TM)
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The WBNcyberStation(TM) is an Internet publishing concept developed by John
Westergaard and associates over five years beginning in April 1995. It provides
original investment analysis and aggregates financial information for our
"Member Affiliates." The purpose of the service is:
(1) to enhance shareholder value and improve market liquidity of the common
shares of Member Affiliates by accurately defining them to the Internet
investment community and helping protect them from the effects of
misleading, fraudulent, and otherwise hostile information posted anonymously
on Internet message boards for purposes of stock manipulation or other
malicious intent;
(2) to reach out to shareholders, other investors and other stakeholders such as
customers, vendors, employees, educators and students by employing the
facilities of the Internet in conjunction with traditional media to provide
awareness of the services of WBN and Member Affiliates.
WBNcyberStations(TM) are constructed and maintained by Senior Contributing
Analysts and Editors. Each station is composed of 15 substations, which are
called "cyberstudios," of which six provide analytical information and analysis,
five "community" oriented services, and four resource links to other sites.
Visitors initially enter a "Briefing Room" where a short overview of the Member
Affiliate is presented. They then have a choice of cyberstudios to visit as
follows:
Analysis
Briefing Room - the introduction to a WBN Member Affiliate in which
its business strategy is outlined along with a one to three year
scenario of the Member Affiliate's future prospects.
Institutional Analysis - WBN's detailed analysis, carefully drafted
after extensive due diligence by a WBN Contributing Analyst.
News Analysis - recent news and events impacting a Member
Affiliate's business and its prospects are presented and commented
upon by the WBN analyst.
ProVestor(TM) Plus - a co-branded product of MarketGuide, Inc.
ProVestor(TM) consists of ten to fifteen pages of carefully crafted
statistics and comparative financial data on the Member Affiliate.
Wall St. Research - other investment research is referenced by
source and analyst coverage. Market makers, exchange specialist
firms and other pertinent information is also carried in this
section.
Archive - this space is designated to host referenced WBN articles
and
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other information posted or available through hypertext links.
Community
Company Web Site - a direct hyperlink to the WBN Member Affiliate's
home page.
Meet the Analyst - biographical information on the WBN analyst and
editor responsible for covering the Member Affiliate.
Ask the Analyst - this feature is the most popular on the WBN web
site. It is in effect an e-mail bulletin board by which readers
direct questions to, and receive answers from, WBN analysts and
editors.
WBNcyberPatrol(TM) - this service links to message boards engaged in
posting commentary and information about Member Affiliates. Hostile
and misinformed postings are examined and refuted or explained
depending upon circumstances.
Auditorium - this space presents slide shows and prospectively
advanced multimedia content.
Resource Links
Corporate Info - contains basic corporate information including
address, universal resources locators, corporate officers,
directors, contact information and investor relations representation
if applicable.
Quote & Chart - WBN provides a co-branded direct link to Big Charts
for market data including charts, stock and volume quotations, price
volume relationships and price volume history.
SEC Edgar Online - a direct link is presented to SEC filings,
government filings and all stock exchange filings.
EPS Estimates - WBN provides a link to Quicken.com for the latest
information on Zacks earnings estimates.
Member Affiliates
Before becoming a Member Affiliate, we conduct a rigorous screening process
utilizing both professional and ethical standards. In evaluating a potential
Member Affiliate, we will conduct a through due diligence review of a company.
In performing our screening process, we will visit the proposed member affiliate
and investigate its management, its directors, and any investment bank(er) that
it is working with. In addition, we will perform a comprehensive analysis of the
company's business plan, including a determination as to what are the ideas
behind, and the feasibility of, the business plan;
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does the company have sufficient management and resources to develop its
business plan; and whether the technology exists to accomplish the company's
business objectives. In the event that we are unsure whether a potential member
affiliate's proposed business plan is achievable, we will meet with the company
in an effort to redefine goals which we determine to be realistic for that
company with the desired result that the company will become a Member Affiliate.
However, if we are unsure regarding a company's proposed business, and the
company cannot justify its goals, we will not accept it to become a Member
Affiliate. To date, we have rejected providing coverage on 40.7% of companies
considering becoming Member Affiliates. Member Affiliates pay an annual listing
fee for construction and maintenance of the cyberStation of $48,000 a year,
which is billed quarterly.
The Audience
We market our services to an audience of small cap oriented institutional
investors and educated, affluent private investors. These audiences are defined
by certain attributes including a long term idea-driven investment perspective,
a respect for knowledge and learning, a global perspective on social, political,
and economic affairs as they relate to the investment decision process, and
shared values as to a commitment to honesty and integrity in the sourcing and
application of investment information. We believe this growing, influential
Internet audience will lead to acceptance of the WBNcyberStation(TM) for
web-delivered analytical investment content.
There is no user charge to investors for access 24 hours a day, seven days a
week, to WBNcyberStations(TM), Westergaard Daily Interpreter, Westergaard's
Portal-to-Wall Street, or our other services. Prior to the emergence of
Internet-based research it would not have been possible to economically produce
and deliver such a service free to all end users, if at all.
WBNcyberStation(TM) Research Components, Additional Sources of Information,
Additional Revenue Streams
In addition to a proprietary research component, each WBNcyberStation(TM)
aggregates a range of ancillary content and provides direct links to other Web
sources of relevant information. Such other sources include Market Guide
ProVestor(TM), a comprehensive analytical service, on-line sources and articles,
SEC or other government filings, market data (including price and volume data
and charts) and links to Member Affiliates' home pages. Users may directly
question our analysts by email via "Ask the Analyst." Future plans call for
introduction of multimedia presentations and facilities for user interactivity.
Our main source of revenues is the listing fee charged to Member Affiliates for
construction and maintenance of the WBNcyberStations(TM). Conferences which we,
and companies run by our founder and John Westergaard, are also a source of
revenues and profits, albeit in a declining phase as Wall Street conferencing
increasingly migrates to the Internet.
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We anticipate establishing other revenue streams from multiple sources,
including but not limited to user payments for value-added services, such as
when a Member Affiliate generates press, releases news or an event occurs which
appears to affect a Member Affiliate's industry or business, WBN analysts
discuss both the pertinence and relevance of the event to the Affiliate's
strategic corporate plan, and provides a detailed analysis of how and why this
event is important to the Member Affiliate. This is a value-added service to
standard event reporting, and if syndicated to other news or content providers,
could become an additional revenue stream.
In addition, we further anticipate revenue streams from web advertising,
co-branding/subcontracting and proposed formation of an all day Internet-based
radio station, known commonly as "webcasting." In the foreseeable future,
however, the core revenue stream will remain primarily dependent on
WBNcyberStation(TM) listing fees.
WBNcyberPatrol(TM)
We have formed WBNcyberPatrol(TM), which constitutes an integral component of
the service. The Internet contains several heavily trafficked message boards at
sites such as Yahoo!, Motley Fool, Raging Bull and Silicon Investor. These
message boards sometimes contain thousands of postings, most of which are
anonymous. Such postings occasionally influence markets, notably in the case of
thinly traded stocks, and may be employed for purposes of stock manipulation by
the posting of misleading information and rumors. WBNcyberPatrol(TM) monitors
Member Affiliate's message boards at these locations. Misleading, erroneous,
malicious or fraudulent material is brought to the attention of the editor and
analyst assigned to the targeted Member Affiliate so that clarifications can be
posted or, if called for, remedial action taken.
Our Conference Series
The Westergaard Conference Series is in its 23rd year. We produce approximately
three to four conferences a year designed to introduce micromidcap public
companies (defined as up to $2 billion in market capitalization) to investment
professionals. In the past attendance at our conferences have ranged from 125 to
over 400 participating companies. Participating co-host companies are charged a
fee to present to a specified group of investment professionals in a one-day
road show format. We try to entice our Member Affiliates to participate in the
conferences by offering them a discount on the conference fees. We handle all
logistical elements of each conference including promotion and registration of
conference attendees.
Westergaard's Portal-to-Wall Street
Our Portal-to-Wall Street is an Internet portal, which can be accessed at
www.portal-to-wallstreet.com, or through a link at www.wbn.com, connects
investors to several hundred investment-related Internet sites of which many,
but not all, are reviewed by an editor. It
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provides a comprehensive, efficient, one-stop gateway to financial web sites and
services on the Internet. Selected sites are reviewed and categorized examples
are "Best Economic Sites," "Best Research Sites," and "Best Internet Brokers."
This service is designed to position us as an upscale provider of services to
the thoughtful long-term investor consistent with the audience we seek to
develop.
WBNfn
Our subsidiary, WBN, has been working with RadioWallStreet.com, a service of
Vcall (vcall.com) in broadcasting "Johnny Dotcom's Journal," a weekly one-half
hour CEO interview conducted by John Westergaard. Due to the positive response
by listeners to "Johnny's Dotcom's Journal," we anticipate in the fall of 2000
launching WBNfn, which we plan to be a daytime Internet radio station.
Internet radio transmissions are possible as a result of audio streaming,
meaning that a complete audio file does not have to be downloaded before music
or talk on the radio begins to broadcast. The listener does, however, need to
have a computer equip with a sound card, speakers, and an audio plug-in for the
web-browser.
WBNfn will broadcast between 9:00 a.m. and 5:00 p.m., and will carry news and
information on micromidcap stocks, including interviews with industry insiders
engaged in the micromidcap market segment, such as analysts, CEOs, brokers, and
portfolio managers. We anticipate that we will be able to offer features not
presently available to conventional television or radio stations. Specifically,
our listeners will be able to play, rewind, and fast-forward the program at
their will, allowing them to move to specific segments of interest. Listeners
will be able to access old broadcasts in our archives. Also, we also plan to
issue daily emails alerting subscribers to the day's programming for recall at
their homes that evening and we expect that our programs will be accessible
globally via the Internet.
Organization
We presently comprise one corporation, Westergaard.com, Inc. (OTCBB:WSYS) with
one wholly owned subsidiary: Westergaard Broadcasting Network.com. Inc (WBN).
Raw Materials
The use of raw materials is not now a material factor in our operations.
Competition
We are not aware of any organization that is presently or is contemplating the
business model outlined in this document, which is the aggregation of investment
analysis and information on small and mid-cap companies, including independent,
proprietary investment analysis performed by experienced professionals,
delivered over the Internet
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without charge to private and institutional investors. There is, however, no
technical, financial or other barrier to entry for some individual, group of
individuals, or corporate entity to provide a comparable service to ours.
Several conventional and online brokerage and investment banking firms and other
providers of quality investment and financial information are making research
available over Internet. In addition, there are financial news and information
sources that compete for readers' and advertisers' attentions and spending.
Many of our existing competitors, as well as potential direct competitors, have
longer operating histories, greater name recognition, larger consumer and reader
bases and greater financial, technical, research, and marketing resources than
ours. This may allow them to devote greater resources than we can to develop and
promote their services. These competitors may also engage in more research and
development, undertake more far reaching marketing campaigns, and make more
attractive offers to existing and potential clients and employees, outside
contributors, strategic partners, and advertisers. These competitors may develop
content that is equal or superior to ours or that gains greater market
acceptance than our content. It is also possible that new competitors may emerge
and rapidly acquire a significant market share. We accordingly may not be able
to compete successfully for clients, advertisers, readers, and analysts, which
could materially adversely affect our business, results of operations, and
financial condition.
Dependence on a Few Major Customers
We are primarily dependent on Member Affiliates (WBNcyberStations(TM)) for
revenues. There are at the present time (15) WBNcyberStations(TM). Although we
believe that the potential for growth in that number to be large, in which event
dependence on any single client would be proportionately lessened. However, if
we are unable to retain more Member Affiliates, we will remain dependent on our
current portfolio of Member Affiliates and be financially vulnerable if we were
to lose any of these affiliates as clients.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements, or Labor Contracts, Including Duration.
We filed for trademarks for the names of "WBNcyberStation" and "WBNcyberPatrol"
on December 22, 1998. The application is still open pending potential opposition
from third parties. If there is no opposition filed in the Office of Patent and
Trademark, we will be granted both marks. There has been no opposition filed to
date.
We also filed for trademarks for the names "Johnny Dotcom" and "Johnny Dotcom's
Journal" on January 7, 2000. These applications are still open pending potential
opposition from third parties. If no opposition is filed in the Office of Patent
and Trademark, we will be granted both marks. There has been no opposition filed
to date.
Need for Government Approval
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The Company does not require approval of any government agency to produce or
market its services.
Effect of Existing or Probable Government Regulations on the Business
Certain existing laws or regulations specifically regulate communications or
commerce on the Web. Moreover, laws and regulations that address issues such as
user privacy, pricing, online content regulations, taxation and the
characteristics and quality of online products and services are under
consideration by federal, state, local and foreign governments and agencies.
Several telecommunications companies have petitioned the Federal Communications
Commission to regulate Internet service providers and online services providers
in a manner similar to the regulation of long distance telephone carriers and to
impose access fees on such companies. Such regulation, if imposed, could
increase the cost of transmitting data over the web. Moreover, it could take
years to determine the extent to which existing laws relating to issues such as
intellectual property ownership and infringement, libel, obscenity, and personal
privacy are applicable to the web. The Federal Trade Commission and government
agencies in certain states have been investigating certain Internet companies
regarding their use of personal information. Any new laws regulating and/or
relating to the web, or certain application or interpretation of existing laws,
could decrease the growth in the use of the web, decrease the demand for our web
site or otherwise materially adversely affect our business.
Research and Development
Our research and development requirements primarily consist of keeping current
on developments relating to technology to support the objectives of our business
plan and other aspects of operating an Internet-based investment research,
publishing and broadcasting venture. We hired, as of January 20, 2000, a
non-executive Vice President of Business Development whose primary
responsibility is developing strategic partnerships, promoting community
business and relationships, and engaging in other common marketing tactics
designed to expand our Internet relationships. He is responsible for the "look
and feel" of the site and of developing and implementing an Internet branding
strategy.
Management and other employees all engage in "surfing" the net in the normal
pursuit of their duties. They report observations of potential strategic
interest to the CEO and the Editorial Director including, but not limited to,
examples of new applications of technology, design and other features at other
Internet web sites. We intend to embark on a redesign of our web site in the
spring of 2000 at an estimated cost of between $50,000 and $100,000.
Environmental Compliance
We do not face any environmental compliance issues or costs.
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Employees
We employ eight (8) full time employees. We expect to hire additional full time
employees in the next fiscal year. In addition, we also retain eleven (11)
Senior Contributing analysts.
Risk Factors
Investors should be aware that there are various risks associated with us and
our business, including the ones discussed below. The following risk factors
should be carefully considered, together with other information contained in
this Form 10-SB, in evaluating us.
Our Limited Operating History Makes It Difficult To Determine Our Future
Success. We were incorporated on August 15, 1996, and launched the first
WBNcyberStation(TM) in December, 1997. Accordingly, we have a limited operating
history upon which to evaluate our business and prospects. An investor in us
should consider the risks, expenses, and difficulties associated with companies
with limited operating histories and information companies. These risks include,
but are not limited to, the absences of a significant operating history, lack of
market recognition, and limited banking and financial relationships.
We May Not Be Able to Obtain the Financing and Capital Required to Maintain and
Grow Our Business. To date, we have incurred net losses, including net losses of
$581,576 and $1,165,939 for the years 1998 and 1999, respectively. As of October
31, 1999, we had an accumulated deficit of $2,423,993. We expect to incur
substantial up-front capital expenditures and operating costs in connection with
the operation and expansion of our web sites, which will result in significant
losses for the foreseeable future. There can be no assurance that we will
generate significant revenues or achieve profitable operations. Our independent
certified public accountants' report on the financial statements includes an
explanatory paragraph stating that our ability to continue our business is
dependant upon our ability to obtain additional capital, among other things,
which raises doubts about our ability to continue as a going concern.
We May Not be Able to Accomplish Our Business Plan, If We Cannot Attract and
Retain Qualified Analysts. Our future success depends substantially upon
continued efforts to recruit qualified securities analysts to evaluate and
produce institutional level investment analysis. There is fierce competition
among brokerage and investment banking firms to recruit analysts. We will focus,
as we have, primarily on recruitment of senior analysts with 20 or more years
experience with first line brokerage and investment banking firms and investment
institutions who are at a semi-retired stage in their careers or otherwise have
cause to work independently. Were the services of a significant number of our
analysts lost or were we unable to attract additional qualified analysts, our
business, results of operations, and financial condition could be materially or
adversely affected.
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We Are Dependent On Key Existing And Future Personnel For Our Success. Our
success will depend to a large degree upon the efforts and abilities of our
officers and key management employees. The loss of the services of one or more
of our key employees could have a material adverse effect on our business
prospects and potential earning capacity. As our business continues to grow, we
will need to recruit and retain additional management and key employees in
virtually all phases of our operations. There can be no assurances that we will
be able to recruit or retain such new employees on terms suitable to us.
Failure to Maintain and Recruit Member Affiliate Clients May Affect Our
Profitability. Our future success is substantially dependent on maintaining and
increasing the number of micromidcap companies that subscribe for the
construction and administration of WBNcyberStations(TM). The number of
micromidcap public companies willing to pay for our services may not increase.
If the market for our services develops more slowly than anticipated, our
business, results of operations, and financial condition may be materially
adversely affected.
Our Stock Has A Limited Trading Market, Which May Affect Our Stock's Liquidity.
Approximately 1,600,000 shares of our Common Stock are estimated to be currently
free trading. There are approximately 10,000,000 shares of our Common stock,
which are "restricted securities," subject to volume limitations and other
conditions of Rule 144 under the Securities Act. Our Common Stock currently
trades on the over-the-counter Bulletin Board ("OTCBB"). We cannot assure that
an active trading market for our stock will develop or continue. In the absence
of any readily available secondary market for our securities, holders thereof
may experience great difficulty in selling their securities at or near the price
originally paid by them.
Furthermore, Penny stocks typically are equity securities with a price of less
than $5.00 a share, other than securities registered on certain national
securities exchanges or quoted on the Nasdaq Stock Market, provided that current
price and volume information with respect to transactions in such securities are
provided by the exchange or system. Currently our Common Stock does fall under
the definition of a penny stock and is subject to Section 15(g) of the
Securities Exchange Act of 1934 and the relevant rules thereunder. The "penny
stock" rules impose additional sales practice requirements on the broker-dealers
who sell our securities to persons other than established customers and
accredited investors (generally those with assets in excess of $1,000,000 or
annual incomes exceeding $200,000 or $300,000 together with their spouse). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation received
by the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules generally require
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that prior to a transaction in a penny stock, the broker-dealer must make a
special written determination the penny stock is a suitable investment for the
purchaser and the broker-dealer must obtain the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules and investors may find it more difficult to
sell their securities.
We Do Not Pay A Dividend On Our Common Stock. We have not paid any cash
dividends to date, and there are no plans for paying cash dividends on our
Common Stock in the foreseeable future. Initial earnings that we realize, if
any, will be retained to finance our growth. Any future dividends, of which
there can be no assurance, will be directly dependent upon our earnings, our
financial requirements, and other factors.
ITEM TWO. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following discussion of the financial condition and results of our
operations should be read in conjunction with our financial statements and
related notes appearing in Part III of this Form 10-SB. The results shown herein
are not necessarily indicative of the results to be expected in any future
periods. This discussion contains forward-looking statements based on current
expectations, which involve risks and uncertainties. Actual results and the
timing of events could differ materially from the forward-looking statements as
a result of a number of factors. For a discussion of the risk factors that could
cause actual results to differ materially from the forward-looking statements,
you should read the "Risk Factors" section of this Form 10-SB.
Overview
We were incorporated in 1996. Our primary activities to date have consisted of
the following:
Developing a business model;
Marketing our services to smallcap companies;
Recruiting employees and analysts;
Initial planing and development of our web sites; and
Building of infrastructure of web sites.
COMPARISON OF RESULTS FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998 TO THE FISCAL
YEAR ENDED OCTOBER 31, 1999.
Our fiscal year ends on October 31st. Therefore, any reference to the end of the
year refers to the end of the stated fiscal year.
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REVENUE. Total revenues decreased $166,838 or by 30% for 1999 to $380,528, as
compared to 1998. This is primarily due to decreasing the number of Westergaard
Conferences that we conducted in 1999 from four conferences in 1998 to three
conferences in 1999. At the conferences, participating co-host companies are
charged a fee to present to a specified group of investment professionals. The
fees charged to co-hosts are recognized when the conference is presented and not
when received by us. Total revenues from our conferences in 1999 decreased by
$214,598 or 52% to $196,468 compared to 1998. We decreased the number of
conferences in 1999 as a result of what we perceived to be generally
inhospitable market conditions for smallcap companies in early 1999.
Revenues from our membership fees associated with construction and maintenance
of the Cyberstations increased $334 or by .25% to $131,667 as compared to 1998.
We currently have fifteen Member Affiliates. In 1997, we had two Member
Affiliates. In 1998 we had six Member Affiliates. In 1999 we had ten Member
affiliates. The current fee for WBNcyberStation service is $48,000 per year,
which was a price point decision reached in January 1999. Previous to that date,
there were varying pricing schedules: prior to 1997 the fee was $4,000 per year,
in 1997 the fee was changed to $20,000 and in 1998 the fee was increased to
$24,000, and then $30,000.
In several instances we have waived and/or deferred fees with respect to our
conferences and in providing services to various Member Affiliates. In
conference fees we waived $54,000 and $18,000 in 1999 and 1998, respectively.
Conference fees are partially or totally waived for two reasons: (1) "Make
Goods" - when host companies do not have a satisfactory turnout for their
sessions we will typically invite them back the following year at a discount or,
in some instances, for free (in advertising parlance, these are "Make Goods").
They remain obligated for cost of the Waldorf suite where their meetings are
held so the net out of pocket cost is minimal and therefore the effect on
liquidity is minimal. (2) On rare occasions a company may be invited to co-host
as an inducement to come on as a WBNcyberStation. We are then waiving a $9,000
fee at minimal cost to pick up a $48,000 fee.
In member fee income, we waived $76,000 and $22,000 in 1999 and 1998,
respectively. Cyberstation fees have been waived in whole or in part on occasion
in order to get stations up to showcase our service and our analysts. We
consider waiving fees for these purposes to be a means to establish customer
loyalty and assist the development of our business. We will continue to waive
fees on occasion for these purposes and do not believe that this practice will
materially impact our operations or liquidity.
OTHER OPERATING EXPENSES. Other operating expenses consist primarily of salary
and administrative costs as well as professional services and fees. These
expenses also include rent, office supplies, conference expenses, leases of
computer equipment, and
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telephone charges. Total Other Operating Costs increased $417,525 or 37% in 1999
to $1,546,467. This was primarily due to hiring additional employees and
analysts, costs to support web site operations and building the infrastructure
of the web sites, and Internet Service Provider costs, which amounted to
$559,878.
In addition, in March of 1999 we entered in to an agreement with MarketGuide,
Inc., for ProVestor Reports, a comprehensive analytical service, that provides
on-line sources and articles, SEC or other government filings, market data, such
as price and volume data and charts on our member affiliates. Pursuant to this
agreement we pay MarketGuide $100 a month per Member Affiliate, subject to a
$2,000 per month minimum royalty fee.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses consist
primarily of the depreciation of furniture, computer equipment and software, and
telecommunications equipment. Total depreciation and amortization expense in
1998 was $14,555 and $16,352 for the year ended 1999.
LIQUIDITY AND CAPITAL RESOURCES. We have incurred losses since inception, and at
the end of the fiscal year on October 31, 1999, had an accumulated deficit of
$2,423,993. We have financed our operations primarily through private financing,
discussed later in this Form 10-SB.
Net cash used in operations increased to $1,375,333 from $111,818 for 1999 as
compared to the same period in 1998. This was primarily due to an increase in
the addition of new employees, consultants and analysts, an increase in general
and administrative expenses including hiring an executive search firm to find
our new CEO, legal and accounting fees in accordance with completing an audit,
the hiring of a Marketing Director and marketing and travel expenses associated
with marketing the product.
Our material capital commitments consist of obligations under facilities,
operating leases, and salaries of our employees and analysts. We anticipate that
we will experience an increase in our capital expenditures consistent with our
anticipated growth in operations, infrastructure, including redesigning our web
site, upgrading our software and in-house computers, and increasing personal. We
anticipate that our costs for the above expenditures will be approximately
$90,000 to $150,000. We further anticipate devoting additional resources to
building strength in our brand name and business model through increased
marketing and advertising in both print media and on the Internet. In fiscal
year ended October 31, 1999, we spent $24,097 on advertising expenses. We expect
to spend approximately $500,000 on marketing and advertising in the year 2000.
We also plan to launch WBNfn, our Internet radio station, in the fall of 2000.
We anticipate that we will have to hire personnel for the radio station
including financial journalists and producers. We foresee payroll costs for
WBNfn will be approximately $500,000 for its first year. We anticipate that our
operating costs for the radio station will be approximately $800,000 for its
first year.
<PAGE>
We plan to support the radio station through advertising fees. The Internet
radio station is suitable for advertisements on-air and banner advertisements.
However, there can be no assurance that we will generate sufficient revenues
from advertisements to cover our costs or make a profit. If we do not raise
sufficient funds as a result of advertisements it may have a material adverse
effect on our business, results of operations, and our financial condition.
We anticipate seeking additional funding for our operations through a private
offering of our preferred stock. Adequate funding may not be available when
needed or may not be available on terms acceptable to us. If additional funds
are raised by issuing preferred stock, dilution to existing shareholders could
result. Furthermore, in the event that we are unable to obtain the outside
financing, we will have to scale back our growth plans and business operations
to allow us to continue without the addition of capital. Specifically, we would
eliminate or delay plans to pursue the formation of our Internet radio station,
limit our marketing and advertising budget, and, if necessary, scale down in
payroll expenses. If we are not able to obtain additional capital, we may be
unable to develop or enhance our products and services, take advantage of
business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on our business, financial condition, and results
of operations.
COMPARISON OF RESULTS FOR THE FISCAL QUARTER ENDED JANUARY 31, 1999 TO THE
FISCAL QUARTER ENDED JANUARY 31, 2000.
Our first fiscal quarter ends on January 31st. Any reference to the end of the
fiscal quarter refers to the end of the first fiscal quarter for the periods
discussed herein.
REVENUE. Total revenues for the fiscal quarter ended January 31, 2000 decreased
$96,197 or by 49% to $97,940 as compared to the fiscal quarter ended January 31,
1999. This is primarily due to the annual Westergaard-Strain Oil & Gas
Conference being held this year in February, after the close of the January 31
quarter, vs. being held last year in January 1999. This is also due to a decline
in member fee income which decreased by $21,001 or by 50% to $21,000. This
decrease in member fees was a result of our focus during this time period on
reorganizing our marketing effort under the direction of our new chief executive
officer.
Moreover, for fiscal quarter ended January 31, 2000, we waived $20,000 in member
fee income as compared to fiscal quarter ended January 31, 1999, when we waived
$14,500. With respect to our conference series for fiscal quarter ended January
31, 2000, we waived $54,000 in member fee income as compared to fiscal quarter
ended January 31, 1999, when we waived $18,000. We expect to continue to waive
fees on occasion to promote legitimate business purposes.
OTHER OPERATING EXPENSES. Other operating expenses consist primarily of salary
and administrative costs as well as professional services and fees. These
expenses also include rent, office supplies, conference expenses, leases of
computer equipment,
<PAGE>
advertising and marketing, and telephone charges. Total Other Operating Costs
increased $131,897 or 68% in the fiscal quarter ended January 31, 2000 to
$324,372, of which $5,954 was on advertising. Our operating expenses increased
primarily due to the hiring of a Chief Executive Officer, which includes the
retainer of an Executive Search firm, a Vice President of Business Development,
and other legal and accounting expenses related to becoming a reporting company.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses consist
primarily of the depreciation of furniture, computer equipment and software, and
telecommunications equipment. Total depreciation and amortization expense in the
fiscal quarter ended January 31, 2000 was $38,018 and $17,363 for the fiscal
quarter ended January 31, 1999. LIQUIDITY AND CAPITAL RESOURCES. We incurred
losses during the fiscal quarter ended January 31, 2000. Our net loss for the
fiscal quarter ended January 31, 2000 was $226,432. In the first fiscal quarter
of 1999 we had net income of $1,662.
Net cash used in operations increased to $335,543 from $297,398 for the fiscal
quarter ended January 31, 2000 as compared to the same period in the first
fiscal quarter of 1999.
Our limited operating history makes predictions of our future results of
operations difficult to assess. Our operations may never generate significant
revenues, and we may never achieve profitable operations. Indeed, our history of
operating losses raises doubt about our ability to continue operations. In the
years 1998 and 1999, we incurred net losses of $581,576 and $1,165,939,
respectively. As of the end of the 1999 fiscal year, we had an accumulated
deficit of $2,423,993. Based upon our projected costs for the year 2000 and our
past operating losses, we will need to obtain sufficient additional financing or
other working capital to fund our operations, if we do not obtain additional
financing or working capital, we may not be able to continue our operations. As
a result of our operating losses and anticipated expenditures, our independent
certified public accountants' report on the financial statements includes an
explanatory paragraph stating there is substantial doubt about our ability to
continue our business as a going concern.
ITEM THREE. DESCRIPTION OF PROPERTIES
Our executive offices are maintained in a combination commercial/residential
building at 560 West 43rd Street, Suites 39E and 31K, New York, New York 10036.
The current monthly rent for the two suites is $6,316.82 for 2,037 square feet.
On May 26, 1999, we signed a two-year lease for these premises. The building has
agreed to rent additional space to us satisfy our growth requirements. Our
Internet servers are hosted off-site at Hi-way Technologies, Inc. (a Verio, Inc.
subsidiary), 5050 Blue Lake Drive, Boca Raton, FL 33431 and Digiweb.com, 4716
Pontiac Street, Suite 306, College Park, MD 20740 at $5,746.32 per year (478.86
per month).
ITEM FOUR. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
<PAGE>
MANAGEMENT
The following sets forth the number of shares of our $.001 par value common
stock beneficially owned by (i) each person who, as of the date hereof, was
known by us to own beneficially more than five percent (5%) of our issued and
outstanding common stock; (ii) each of the named Executive Officers; (iii) the
individual Directors; and (iv) the Officers and Directors as a group. As of the
date hereof, there were 11,916,445 common shares issued and outstanding.
- --------------------------------------------------------------------------------
Title of Class Name and Address of Amount of Percent of Class(1)
Beneficial Owner Beneficial Ownership
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common John Westergaard 5,565,000 47%
(director)
560 West 43rd Street,
New York, New York
10036
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Dov Perlysky 1,000,000 8%
9 Beachwood Drive,
Lawrence, NY 11559
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Thomas Wojciechowski 0(2) 0%
11 Greenbriar Lane
Wilton, CT. 06897
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Anne Straton (officer) 480,000(3) 4%
63 East 79th Street,
#3B
New York, NY 10021
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Derrick Ashcroft 1,000(3) .01%
(director)
Flying X Ranch
HC 30 Box 66
Monticello, NM 87939
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Wenke B. Thoman 0(3) 0%
(director)
180 East 95th Street
New York, NY 10028
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common William R. Grant 40,000(4) .03%
(director)
30 Sutton Place,
Apartment 7B, New
York, New York 10022
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Joseph Allen (director) 0(5) 0%
235 West 48th Street
New York, NY 10036
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Officers and Directors 7,086,000 59%
as group
- --------------------------------------------------------------------------------
(1) All percentages are rounded to the nearest one hundredth.
(2) Mr. Wojciechowski was issued 500,000 stock options exercisable $0.80 per
share.
<PAGE>
(3) On March 31, 1998, Directors Ashcroft and Thoman and Executive Vice
President Straton were each issued 100,000 stock options exercisable at $1.00
per share. These options expire on March 31, 2008.
(4) Does not include 289,855 shares owned by Galen Advisors, of which William
R. Grant is a General Partner.
On May 1, 1999, Mr. Grant was issued 100,000 stock options exercisable at $3.00
per share. On the same day, he was issued 20,000 options exercisable at $0.69
per share. All 120,000 of Mr. Grant's options expire on May 1, 2009.
(5) Does not include 100,000 shares owned by Allen & Caron, Inc., of which
Mr. Allen is a 75% owner.
On July 7, 1999, Mr. Allen was issued 100,000 stock options exercisable at $1.00
per share. Mr. Allen's options expire on May 1, 2009.
ITEM FIVE. DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS
Our current directors and executive officers, who will serve until the next
annual meeting, or until their successors are elected or appointed and
qualified.
- --------------------------------------------------------------------------------
NAME AGE POSITION
- --------------------------------------------------------------------------------
John Westergaard 68 Chairman of Board, Publisher, Editorial
Director
- --------------------------------------------------------------------------------
Thomas J. Wojciechowski 40 President, Chief Executive Officer &
Director
- --------------------------------------------------------------------------------
Anne H. Straton 36 Executive VP, Secretary, and Executive
Editor
- --------------------------------------------------------------------------------
Derrick Ashcroft 70 Director
- --------------------------------------------------------------------------------
Wenke B. Thoman 54 Director
- --------------------------------------------------------------------------------
William R. Grant 75 Director
- --------------------------------------------------------------------------------
Joseph Allen 55 Director
- --------------------------------------------------------------------------------
BACKGROUNDS OF OFFICERS AND DIRECTORS
John Westergaard, Chairman of the Board, Publisher and Editorial Director: Mr.
Westergaard is an internationally respected investment analyst and financial
writer whose
<PAGE>
professional investment career spans 43 years. He entered the investment
business in 1957 with Standard and Poor's Corporation where he served as a
member of the President's Staff. In 1962, he co-founded Equity Research
Associates. In 1968, Equity Research Associates became a New York Stock Exchange
Member. From 1978 to 1990, he served as a Managing Director of Ladenburg
Thalmann & Co. Inc., investment bankers and New York Stock Exchange members for
over 100 years. In 1984, he founded a public mutual fund, The Westergaard Fund,
which was liquidated in 1987. From 1990 until the founding of Westergaard.com,
Inc. in 1996, Mr. Westergaard was engaged in founding, managing, and serving as
an editor with Westergaard Publishing Corporation, a fax and directory
publishing and conference business. Mr. Westergaard is the Chairman of our
subsidiary WBN and has also served from 1998 to the present on the board of
directors for Paulson Capital Corporation, a public company.
Mr. Westergaard graduated from Williams College in 1953 and served in military
counterintelligence from 1953 to 1956. He has served as a guest panelist at the
U.S. Army and U.S. Navy War Colleges, has on numerous occasions been a featured
guest on "Wall Street Week" with Louis Rukeyser, a guest many times on CNBC,
CNN, PBS, and a featured speaker before several dozen investment analyst
societies and educational institutions, including Harvard Business School, The
Wharton School, and Yale University.
Thomas J. Wojciechowski, President/Chief Executive Officer: Mr. Wojciechowski
comes to Westergaard.com, Inc. from MoneyLine Network, Inc., an Internet startup
engaged in delivering financial services to the global institutional
marketplace. As a core member of the executive management, he was responsible
for strategic relationships, global sales and product marketing. Mr.
Wojciechowski is also the President and Chief Executive Officer of our
subsidiary WBN.
From 1983 to 1998, Mr. Wojciechowski held various executive positions with
Reuters, Ltd. From 1996 to 1998, he was Director of National Accounts, Reuters
America, Inc. and Vice President of Reality Online, a Reuters subsidiary
providing Internet based transaction solutions aimed at the individual investor.
From 1988 to 1996, he was responsible for sales and operations of Reuters'
Information Management Systems in an 18 state region. Previous to that he served
five years in Germany and Switzerland primarily in sales, marketing and product
development capacities. Mr. Wojciechowski graduated from Purdue University in
1982 with a B.S. in Electrical Engineering.
Anne H. Straton, Executive Vice President, General Manager and Executive Editor:
Ms. Straton has been a manager, writer and an editor in the communications
industry for fifteen years. Prior to joining us, Ms. Straton worked for the
United States Embassy in Bonn, Germany, where she managed the English speaking
television network, ACT Entertainment from 1994-1997. In addition to station
management, Ms. Straton wrote, directed and produced network programming,
special programs and local news. Responsible for the coordination of satellite
transmissions and special broadcasts, Ms. Straton worked with international
journalists covering the European Union. Ms. Straton is also the Executive Vice
President of our subsidiary WBN.
<PAGE>
From 1993-1994, Ms. Straton worked for CNN International in London and ongoing
from 1987-1997 co-wrote, directed and produced documentary and feature films
through her film production company, foureyesfilms. She received a Master of
Arts in International Communication from the European Institute for
International Communication in Maastricht, The Netherlands in 1993, and a
Bachelor of Arts in from the University of Vermont in 1985.
Derrick Ashcroft, Director: Mr. Ashcroft owns and operates a 75,000 acre
commercial cattle ranch in New Mexico and sits on the board directors of Golf
Entertainment, Inc., Leasing Edge Corp., LEC Technologies, Inc., and Omap
Holdings, Inc. He served as Chairman of Cardiopet from 1988 to 1995, previously
held various executive positions including President, with several ventures
marketing tax-driven leasing transactions, and from 1961 to 1980 founded and
built one of the largest typesetting and graphic communications groups in
Europe. He was educated at Magdalen College in Oxford with an M.A. in History
and served as an officer in the Royal Artillery.
Wenke B. Thoman, Director: Ms. Thoman is the Vice President of Eastern
Industrial Mineral Holdings, Inc., a company engaged in importing minerals from
the Mediterranean and producing high temperature insulation in Georgia and
Louisiana. From 1990 to 1995, she served as Chairman of Rain Hill Group, a
consulting firm specializing in corporate development issues. She served as VP
Corporate Finance at Paine Webber from 1987-1990, VP Merger and Acquisitions at
American Can Company from 1985-1987, VP Investment Banking at Donaldson Lufkin &
Jenrette from 1980 - 1985 and Director of Corporate Development at Chargeurs SA,
a diversified French company from 1977 to 1979. She currently serves as Director
of various private companies and non-profit organizations. Ms. Thoman was born
in Norway and raised in Canada. She received her MBA from INSEAD, France in 1977
and attended McGill University in Canada from 1964-1966.
William R. Grant, Director: Mr. Grant is Chairman of Galen Associates, a venture
capital firm focused on the healthcare industry with currently over $1 billion
under management. Mr. Grant serves on the board of directors of OSI Corp. Until
recently, he served as non-executive Vice-Chairman of SmithKline Beecham and
currently is on the boards of Allergan, Flex-Foot, Bank Audi, Vasogen, MiniMed,
Ocular Sciences and Witco Chemical Corporation. Prior to establishing Galen in
1989, Mr. Grant was Chairman of MacKay-Shields Financial, an investment
management and venture investment firm from 1987 - 1989. He began his career as
a drug and chemical analyst with Smith Barney, eventually becoming the firm's
President. Mr. Grant graduated in 1949 from Union College on whose board of
trustees he currently serves.
Joseph Allen, Director: Joseph Allen is founder and principal owner of Allen &
Caron (formerly South Coast Communications), an investor relations firm based in
Irvine, California and New York City. Prior to its founding in 1988, Mr. Allen
served two years as Vice President/Corporate Affairs of General Automation,
Inc., as president and principal of Allen & McGarvey, a corporate and financial
relations agency from 1981 -
<PAGE>
1987, and previous to that as Vice President of Bozell & Jacobs in charge of
their Newport Beach and Los Angeles offices from 1979 - 1981. Earlier in his
career, Mr. Allen was employed in publishing with Sage Publications, a publisher
of scholarly journals. He has written four books, of which "Systems in Action"
(Scott Foresman) was used in the course study at leading graduate schools of
management. Mr. Allen has lectured on public relations at UCLA Anderson Graduate
School of Management and UCLA Extension. Mr. Allen serves on the board of
directors for Ophthalmic Imaging Systems, Inc.
ITEM SIX. EXECUTIVE COMPENSATION
A. DIRECTORS' COMPENSATION
Directors receive compensation of $200 per board meeting and are reimbursed for
out-of-pocket expenses incurred while attending board meetings.
B. COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the current salaries for our named Executive
Officers:
SUMMARY COMPENSATION TABLE. The following table sets forth certain summary
information concerning the compensation paid to our CEO and other executive
officers.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Name Other Annual All
And Annual Restricted Under- Other
Principal Compen- Stock lying LTIP Compen-
Position sation Award(s) Options/ Payouts sation
($) SARs (#) ($) ($)
Position Year Salary($) Bonus($) ($)
- ----------------------------------------------------------------------------------------------------
John Westergaard 1/1/99-1/1/00 $166,000 ____ ____ ______ ____ ____
Chairman, Director and Editorial Director
Tom Wojciechowski: 11/29/99 - $200,000 $100,000 500,000 options @ $0.80
President, CEO and Director
Anne Straton 1/1/99-1/1/00 $72,000 ____ ____ _____ ____ ____
Executive Vice President, Secretary, 100,000options @ $1.00
Managing Editor
</TABLE>
<PAGE>
Option/SAR Grants in Last Fiscal Year. The following table sets fourth summary
information concerning the issuance of options during the last fiscal year. No
stock appreciation rights (SAR) have been granted.
<TABLE>
<CAPTION>
(Individual Grants)
- -------------------------------------------------------------------------------------------------
Name Number of Percent of total Exercise or Expiration Market
- -------------------------------------------------------------------------------------------------
Securities options/SARs base price date Price on
Underlying granted to ($/Sh) Date of
Options/SARs employees in Grant
Granted (#) fiscal year
- -------------------------------------------------------------------------------------------------
(a).......................(b)..... .......(c)...............(d).............(e)........(f).....
<S> <C> <C> <C> <C> <C>
Tom Wojciechowski 500,000 82% $0.80 11/29/09 $1.43
</TABLE>
ITEM SEVEN. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following transactions have been undertaken within the last two years with
related parties.
Westergaard Publishing Corp., a separate New York Corporation which was founded
by John Westergaard, is currently in the process of being dissolved. During all
times that Westergaard Publishing was incorporated, John Westergaard was an
officer, a director and a shareholder. An asset that Westergaard Publishing held
was 1,445,000 shares of Westergaard.com. Upon dissolution it was determined by
the shareholders of Westergaard Publishing, John Westergaard and Dov Perlysky,
that 1,355,000 shares of Westergaard.com would be distributed as 355,000 shares
to John Westergaard and 1,000,000 to Dov Perlysky. The 1,000,000 shares that Mr.
Perlysky received made him a beneficial owner of Westergaard.com providing him
with an 8% interest. The remaining 90,000 were distributed as compensation to
the following: 50,000 shares to Strain Consulting, Inc., for consulting
services; 25,000 to A. Joseph Tandet for legal services; 10,000 shares to Robert
Arnold as compensation for legal advice; and 5,000 shares to Alvin Rosen for
accounting services.
During the year ended October 31, 1998, Westergaard Publishing Corporation
transferred to us securities valued at approximately $93,000 in full settlement
for a $50,000 noninterest-bearing loan from us. As a result of this transaction,
we recognized a capital contribution of approximately $42,000 which represents
the excess value of securities received over the affiliated receivable.
<PAGE>
We have unpaid expense reimbursements made by Westergaard Publishing Corporation
on behalf of us and an outstanding loan balance of $50,000 from Westergaard
Publishing Corporation. The loan bears interest of 8% per annum and does not
have a scheduled repayment date.
William R. Grant, a Westergaard.com Director, provided significant assistance to
the Company with regard to our second round of financing in January 1999. In
conjunction with this financing, Mr. Grant assisted in structuring the offering
and played a significant role in arranging a $200,000 bridge loan to fund
operations pending completion of the financing. As consideration for his
services to the Company he received 20,000 options to purchase Westergaard.com
common stock.
In connection with the offering of our common stock completed in the year ending
October 31, 1997, we granted 500,000 options to James Goldberg, a consultant,
who assisted with the offering. These options were granted in fiscal 1998 and
the fair value of such options was approximately $335,000 at grant date.
Some technical operations are housed with our webmaster, Paul Compton, who works
out of a home office in Minneapolis, Minnesota. We do not pay any rent to Mr.
Compton to house these operations. However, Mr. Compton is paid an annual salary
of $48,000 in his position as Webmaster for the Company.
ITEM EIGHT. DESCRIPTION OF SECURITIES
A. COMMON STOCK
The total number of shares of Common Stock that we have the authority to issue
is 100,000,000 at $0.001 par value. As of the date hereof, 11,916,445 common
shares were issued and outstanding. Holders of shares of Common Stock are
entitled to one vote for each share on all matters to be voted on by the
shareholders, including the election of directors. Thus, holders of more than
50% of the shares voting for the election of directors can elect all of the
directors, if they so choose.
B. PREFERRED STOCK
On February 15, 2000, our shareholders approved a proposed amendment to our
Certificate Incorporation allowing the issuance of 10,000,000 Shares of
Preferred Stock $.001 par value per share in such series and designations as the
Board may form time to time approve. On March 2, 2000, we amended our
Certificate of Incorporation to reflect this amendment. On March 7, 2000, our
Board designated 250,000 shares as Series A Preferred Stock. The Series A
Preferred Stock has the following rights and preferences:
Preference as to Earnings, Assets and Liquidation- The Series A Preferred Stock
is preferred
<PAGE>
as to both earnings and assets, and in the event of our liquidation,
dissolution, or winding up, the holders of our Series A Preferred Stock are
entitled, before any of our assets are distributed among or paid over to the
holders of the Common Stock, to be paid in full $10.00 per share of Series A
Preferred Stock. After payment of $10.00, the holders of the Series A Preferred
Stock and Common Stock may participate ratably in the division of our remaining
assets.
Conversion- The Preferred Stock is convertible into shares of Common Stock at
the applicable conversion rate (1:10 assuming no share splits) either
voluntarily by the Preferred Shareholder 90 days after the purchase of the
Shares or by us if the market value of the shares of Common Stock exceeds $2.00
per share for ten (10) consecutive trading days. We have defined Market value as
the average of the bid and asked prices (or the closing price if the stock is
listed on the NASDAQ National Market System) on any given date.
Voting Rights- The holders of the Preferred Stock are be entitled to the number
of votes equal to the number of shares of Common Stock that the shares of
Preferred Stock could be converted on the declared record date. The shares of
Preferred Stock have voting rights and powers equal to the voting rights and
powers of the Common Stock, unless otherwise expressly provided under Delaware
law.
Registration Rights- The holders of the Preferred Stock receive "piggyback"
registration rights for one year from the date of purchase on unconverted
Preferred Stock. These shares will be included in any "primary registration"
statement, where we are selling our own stock; or in any "secondary
registration" statement, where we are filing a registration statement to permit
others to sell (other than registrations filed pursuant to Forms S-4 or S-8).
The piggyback registration rights will be subject to standard underwriting
provisions such as cut backs due to market conditions and market standoff
agreements.
Dividends- Holders of shares of Preferred Stock are entitled to receive, when
and if declared by our Board of Directors, out of funds at the time legally
available, dividends at a rate of 6% per annum, payable in cash or in kind
(shares of restricted Common Stock at fair market value) at our discretion
annually on the last day of our fiscal year beginning October 31, 2000. The
initial dividend will be prorated based upon the date of purchase. Dividends
will accrue and are cumulative from the date of the first issuance of the
Preferred Stock and will be payable to the holders of record as they appear on
our stock books on the declared record date as fixed by our Board of Directors.
Accumulated dividends on shares of Preferred Stock will not bear interest.
PART II
ITEM ONE. MARKET FOR COMMON EQUITY & RELATED STOCKHOLDER MATTERS
A. PRINCIPAL MARKET OR MARKETS
NASDAQ OTC Bulletin Board
Our securities began trading on the Nasdaq Bulletin Board under the symbol
"WSYS" on June 12, 1997. During the prior two calendar years the low and high
bid prices as reflected by interdealer quotations were:
<PAGE>
- --------------------------------------------------------------------------------
QUARTER Low Bid High Bid
- --------------------------------------------------------------------------------
3rd Quarter '97 1 5/8 2 7/8
- --------------------------------------------------------------------------------
4th Quarter `97 1 2
- --------------------------------------------------------------------------------
1st Quarter '98 5/8 15/16
- --------------------------------------------------------------------------------
2nd Quarter '98 1/2 3/4
- --------------------------------------------------------------------------------
3rd Quarter '98 1/4 9/16
- --------------------------------------------------------------------------------
4th Quarter '98 43/246 23/4
- --------------------------------------------------------------------------------
1st Quarter '99 15/16 6 3/8
- --------------------------------------------------------------------------------
2nd Quarter '98 15/16 1 7/8
- --------------------------------------------------------------------------------
3rd Quarter `99 1/2 1 3/16
- --------------------------------------------------------------------------------
4th Quarter `99 9/16 1 5/8
- --------------------------------------------------------------------------------
1st Quarter '00 to date 5/8 1 1/8
- --------------------------------------------------------------------------------
B. APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
As of the date hereof, a total of 11,916,445 shares of our common stock were
outstanding. Of these, 1,603,975 are free trading and 10,312,470 are restricted
shares.
The number of holders of record of our common stock is estimated to be 155. Of
these 89 are listed by our transfer agent and the balance are thought to hold
shares purchased in the market and held in brokerage accounts.
C. DIVIDENDS
The holders of our common stock are entitled to receive such dividends as may be
declared by our Board of Directors. No dividends on the common stock were paid
by us during the periods reported herein nor do we anticipate paying dividends
on our common shares in the foreseeable future.
ITEM TWO. LEGAL PROCEEDINGS
At this time we are not involved in any litigation and we are not aware of any
pending litigation or the possibility of future litigation which could adversely
effect the Company or our Shareholders.
We had been the subject of a formal order of investigation dated February 13,
1998, pursuant to Rule 79(a) of the Securities and Exchange Commission (the
"SEC") Rules relating to investigations. The investigation concerned allegations
that we may have failed to make appropriate disclosures on our web pages.
The SEC took testimony of John Westergaard, our Chief Executive Officer, on
October 1, 1998, and interviewed at least two of our corporate clients. We fully
cooperated with the investigation and reviewed with the SEC staff members our
disclosure policies. On
<PAGE>
February 24, 2000, we were notified by the SEC that the investigation has been
terminated and that no enforcement action has been recommended.
Currently, we display on our web site a disclaimer allowing visitors to the site
to review compensation the Company, our employees, and our officers receive for
their services. Neither the Company, its employees, nor its Contributing
Analysts accept cash, stock, stock options or other consideration from any
Member Affiliate for services rendered for any purpose other than the
construction and maintenance of a WBNcyberStation or participation in a
Westergaard Conference.
ITEM THREE. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have not had any disagreements on accounting and financial disclosures with
our accounting firm during the reporting period or during the preparation of its
audited financial statements for the years ending October 31, 1998, and October
31, 1999.
ITEM FOUR. RECENT SALES OF UNREGISTERED SECURITIES
We have issued the following unregistered common stock in the three-year period
preceding the date of this Registration Statement:
On October 31, 1996, we issued an aggregate of 1,000,000 shares of our common
stock pursuant to the exemption from registration provided by Regulation D Rule
504 and Section 3(b) of the Securities Act of 1933 to approximately 103
investors at a price of $1.00 per share. The offering was fully subscribed and
closed, we raised $1,000,000, and the shares began trading publicly on the
Nasdaq OTC Bulletin Board on June 7, 1997. Our use of this exemption is claimed
based on the fact that we raised only $1,000,0000 and that we conducted no
financing in the twelve months prior and the six months subsequent to this
offering.
On January 15, 1999, the Company sold an aggregate of 2,922,470 shares of our
restricted common stock in a private placement pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and the provisions of Regulation D
promulgated thereunder. The shares were offered at $0.69 per share to a limited
number of individual and entity investors. Pursuant to this offering we raised
$2,016,500.
ITEM FIVE. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
<PAGE>
Our Articles of Incorporation limit, to the maximum extent permitted by law, the
personal liability of directors and officers for damages for breach of any duty
owed to us or to our shareholders. The Articles of Incorporation provide further
that we shall have the power, in our by-laws or in any resolution of our
stockholders or directors, to undertake to indemnify our officers and directors
against any contingency or peril as may be determined to be in our best
interest, and in conjunction therewith, to procure, at our expense, policies of
insurance. Quotations on a Director's and Officer's Insurance Policy, and an
Errors and Omissions Policy are currently being sought.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
WESTERGAARD.COM, INC.
Date: April 28, 2000
By: /s/ Thomas J. Wojciechowski
---------------------------
Thomas J. Wojciechowski, President
Chief Executive Officer
/s/ Anne H. Straton
---------------------------
Anne H. Straton, Executive Vice President
<PAGE>
PART F/S
FINANCIAL STATEMENTS.
F-1 Audited financial statements for the Company for the period ending
December 31, 1999. The following financial statements are attached to this
report and filed as a part thereof.
1) Independent Auditors' Report
2) Financial Statements as of October 31, 1999
4) Notes to Consolidated Financial Statements as of October 31, 1999
F-2 Unaudited financial statements for the Company for the quarters ended
January 31, 2000, and January 31, 1999. The following financial statements are
attached to this report and filed as part of thereof.
1) Statement of Operations
2) Balance Sheet
3) Consolidated Statement of Cash Flows
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
WESTERGAARD.COM, INC. AND SUBSIDIARY
October 31, 1999
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of
Westergaard.com, Inc.
We have audited the consolidated balance sheet of Westergaard.com, Inc. and
Subsidiary (the "Company") as of October 31, 1999, and the related consolidated
statements of operations, shareholders' equity (deficit), comprehensive income
and cash flows for the years ended October 31, 1999 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Westergaard.com, Inc. and Subsidiary as of October 31, 1999, and the
consolidated results of their operations and their consolidated cash flows for
the years ended October 31, 1999 and 1998, in conformity with generally accepted
accounting principles.
As discussed in Note C, the Company restated its financial statements for the
year ended October 31, 1998.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note H, the Company is
experiencing difficulty in generating sufficient cash flow to meet its
obligations and sustain its operations, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note H. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/Grant Thornton, LLP
New York, New York
December 10, 1999
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEET
October 31, 1999
(as restated)
ASSETS
CURRENT ASSETS
Cash $ 626,164
Investment in securities, at market 15,787
Accounts receivable 49,000
Employee advances 20,765
-----------
Total current assets 711,716
NONCURRENT ASSETS
Property and equipment (less accumulated
depreciation and amortization of $33,715) 62,934
Other assets 8,714
-----------
Total noncurrent assets 71,648
-----------
Total assets $ 783,364
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 136,290
Deferred revenues 122,000
Due to affiliate 60,033
Other liabilities 45,993
-----------
Total current liabilities 364,316
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $.001;
100,000,000 shares authorized;
11,916,445 shares issued and outstanding 11,916
Additional paid-in capital 2,861,275
Accumulated deficit (2,423,993)
Accumulated other comprehensive loss (30,150)
-----------
Total shareholders' equity 419,048
-----------
Total liabilities and shareholders' equity $ 783,364
===========
The accompanying notes are an integral part of this statement.
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended October 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(as restated)
Revenues
<S> <C> <C>
Member fee income (net of fees waived of $76,000 $ 131,667 $ 131,333
and $22,000 in 1999 and 1998, respectively)
Conferences (net of fees waived of $54,000 and 196,468 411,066
$18,000 in 1999 and 1998, respectively)
Realized gain from investment in securities 3,783
Interest 30,006
Other 22,387 1,184
----------- ----------
Total revenues 380,528 547,366
Expenses
Conference expense 93,706 181,375
Compensation and benefits 507,230 431,150
Professional services 320,429 166,122
Rent and occupancy 65,224 58,939
General and administrative expenses 552,183 280,929
Interest 7,695 4,821
Miscellaneous expense 5,606
----------- ----------
Total expenses 1,546,467 1,128,942
---------- ----------
NET LOSS $(1,165,939) $ (581,576)
========== ==========
Loss per share
Basic and diluted $(0.10) $(0.06)
==== =====
Weighted-average common shares outstanding
Basic and diluted 11,307,592 8,993,975
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Westergaard.com, Inc. and Subsidiary
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Years ended October 31, 1999 and 1998
Common stocks Accumulated
Additional Accumu- other
Par paid-in lated comprehensive
Shares value capital deficit income (loss) Total
------ ------- ------------ ----------- --------------- ----------
(as (as (as
restated) restated) restated)
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1997 8,993,975 $ 8,994 $ 742,981 $ (676,478) $ -- $ 75,497
Net loss -- -- -- (539,060) -- (539,060)
Unrealized depreciation on
investment in securities -- -- -- -- (34,922) (34,922)
----------- ----------- ----------- ----------- ----------- -----------
Balance at October 31, 1998, as
previously reported 8,993,975 8,994 742,981 (1,215,538) (34,922) (498,485)
Adjustment-capital contributed -- -- 42,516 (42,516) -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at October 31, 1998
as adjusted 8,993,975 8,944 785,497 (1,258,054) (34,922) (498,485)
Issuance of common shares 2,922,470 2,922 2,013,578 2,016,500
Fair value of stock options issued -- -- 62,200 -- -- 62,200
Net loss -- -- -- (1,165,939) -- (1,165,939)
Unrealized appreciation on
investment in securities -- -- -- -- 4,772 4,772
----------- ----------- ----------- ----------- ----------- -----------
Balance at October 31, 1999 11,916,445 $ 11,916 $ 2,861,275 $(2,423,993) $ (30,150) $ 419,048
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended October 31,
<TABLE>
<CAPTION>
1999 1998
----------- -------------
(as restated)
<S> <C> <C>
Comprehensive income
Net loss $(1,165,939) $(581,576)
Other comprehensive income (loss)
Unrealized depreciation on investment in securities (30,150) (34,922)
----------- ---------
Comprehensive income (loss) $(1,196,089) $(616,498)
========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended October 31,
<TABLE>
<CAPTION>
1999 1998
----------- -------------
(as restated)
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,165,939) $ (581,576)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 16,352 14,555
Short-term financing cost - fair value of stock 62,200
options issued
Realized gain on investment in securities (3,783)
Changes in operating assets and liabilities
(Increase) in employee advances (4,125) (12,090)
(Increase) in accounts receivable (49,000) --
Decrease in other assets 7,020
(Decrease) increase in accounts payable and
accrued expenses (106,349) 164,991
(Decrease) increase in deferred revenues (24,135) 99,135
(Decrease) increase in due to affiliate (50,000) 99,600
(Decrease) increase in other liabilities (54,337) 100,330
----------- -----------
Net cash used in operating activities (1,375,333) (111,818)
----------- -----------
Cash flows from investing activities
Proceeds from sale of investment in securities 50,362
Purchase of fixed assets (26,018) (3,584)
----------- -----------
Net cash (used in) provided by investing (26,018) 46,778
activities
----------- -----------
Cash flows from financing activities
Proceeds from issuance of stock 2,016,500 20,000
----------- -----------
Net cash provided by financing activities 2,016,500 20,000
----------- -----------
NET INCREASE (DECREASE) IN CASH 615,149 (45,040)
Cash at beginning of year 11,015 56,055
----------- -----------
Cash at end of year $ 626,164 $ 11,015
- ------------------- =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 10,849
===========
Noncash investing activities
- ----------------------------
Securities received in settlement of affiliated receivable $ 50,000
===========
Noncash financing activities
- ----------------------------
Value of securities contributed in excess of affiliated receivable $ 42,516
===========
Stock options issued relating to short-term financing $ 62,200
===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998
NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
1. Organization
Westergaard.com, Inc. (formerly known as Westergaard Online Systems,
Inc.)(the "Company"), a Delaware company, was organized on August 15, 1996
and commenced operations on October 1, 1996. The Company was formed to
engage in the business of online publishing on the Internet, primarily for
the purpose of providing investment research on publicly traded Micro-Mid
Cap companies. Additionally, the Company publishes a directory of publicly
traded health care companies and sponsors conferences focusing on
Micro-Mid Cap companies.
The consolidated financial statements include the assets,
liabilities and results of operations of the Company's subsidiary,
Westergaard Broadcasting Network, Inc. All intercompany balances and
transactions have been eliminated.
2. Investments in Securities
The Company's investments in securities are categorized as
available-for-sale securities, as defined by Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." These securities consist of equity securities and
are stated at fair value, which is estimated based on quoted market
prices, when available. If a quoted price is not available, fair value is
estimated using quoted market prices for similar financial instruments.
Unrealized holding gains and losses are reflected as a net amount in a
separate component of shareholders' equity until realized. Realized gains
and losses on sales of investments in securities are determined on a
specific identification basis.
3. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed on a
straight-line basis over the estimated useful life of the asset. Computer
equipment and furniture are depreciated over 5 to 7 years. Computer
software is amortized over 3 years. Leasehold improvements are amortized
over the lives of their respective leases or the service lives, whichever
is shorter.
4. Stock-Based Compensation
<PAGE>
The Company, as permitted by Statement of Financial Accounting Standards
No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation," has
elected to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE A (continued)
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." Accordingly,
compensation cost
for common share options is measured as the excess, if any, of the quoted
market price of the Company's common shares at the date of grant over the
amount an employee must pay to acquire the common shares. The Company has
adopted the disclosure requirements of SFAS No. 123.
5. Earnings Per Share
Earnings per share are calculated under the provisions of Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per
Share." SFAS No. 128 requires the presentation and disclosure of basic
earnings per share, and, if applicable, diluted earnings per share. Basic
earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share are based on the
weighted-average number of common and common equivalent shares
outstanding. The calculation takes into account the shares that may be
issued upon exercise of stock options, reduced by the shares that may be
repurchased with the funds received from the exercise, based on the
average price during the year. In computing diluted earnings per share,
only potential common shares that are dilutive (those that reduce earnings
per share or increase loss per share) are included. Exercise of stock
options is not assumed if the result would be antidilutive, such as when a
loss from continuing operations is reported.
6. Revenue Recognition
Conference revenue is recognized when the conference is presented. Funds
received in advance are treated as deferred revenue until the service is
provided.
The Company receives fees from its members for CyberStation services to be
provided over one-year contracts. Such fees are treated as deferred
revenue and are recognized as fee income over the course of the contract.
The Company publishes a directory of publicly traded health care
companies. Revenue is recognized upon the shipment of the directory.
Subsequent subscription revenue will be recognized upon the shipment of
the updated directory.
7. Use of Estimates
<PAGE>
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Computer equipment $ 67,922
Computer software 1,738
Telecommunications equipment 13,795
Furniture and fixtures 13,194
-------
96,649
Less accumulated depreciation and amortization (33,715)
-------
$ 62,934
========
NOTE C - RELATED PARTY TRANSACTIONS
During the year ended October 31, 1998, Westergaard Publishing Corporation
("Publishing"), an affiliated entity under common control, transferred to the
Company securities valued at approximately $93,000 in full settlement for a
$50,000 noninterest-bearing loan from the Company. As a result of this
transaction, the Company recognized as a capital contribution approximately
$42,000 which was the excess value of the securities received over the
affiliated receivable. The Company had previously recorded this excess as a
gain in the statement of operations. As a result, the Company restated its
financial statements for the year ended October 31, 1998. The effect net of
taxes of zero was to increase the net loss for the year ended October 31,
1998 by approximately $42,000 from $539,000 to $581,000.
Included in due to affiliate are liabilities in connection with unpaid
expense reimbursements made by Publishing on behalf of the Company and an
outstanding loan balance of $50,000 from Publishing. The loan bears interest
of 8% per annum. The loan does not have a scheduled repayment date.
NOTE D - STOCK OPTIONS AND STOCK-BASED COMPENSATION
The Company has a Stock Option Plan (the "Plan") which provides an
opportunity for participants to obtain a proprietary interest in the Company
through the grant of nonqualified stock options to purchase shares of Common
Stock of the Company. The
<PAGE>
Plan authorizes the issuance of options to purchase up to an aggregate of
5,000,000 shares of Common Stock, with vesting periods of up to four years
and maximum option terms of ten years. The Plan is administered by a
committee which is comprised of members of the Board of Directors.
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE D (continued)
Information regarding the stock options is summarized below:
<TABLE>
<CAPTION>
November 1, 1998 to October 31, 1999 November 1, 1997 to October 31, 1998
------------------------------------ ------------------------------------
Weighted- Weighted-
average average
Number exercise Number exercise
of options price of options price
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Outstanding at November 1, 1,002,500 $1.50 - -
Options granted 1,280,000 1.07 1,402,500 $1.36
Options cancelled (775,000) 0.69 (400,000) 1.00
-------- ----------
Outstanding at October 31, 1,507,500 $1.55 1,002,500 $1.50
========= ==== ========= ====
Exercisable at October 31, 1,184,000 $1.56 737,500 $1.68
========= ==== ======= ====
</TABLE>
In connection with a short-term financing, the Company, during year ended
October 31, 1999, issued 20,000 options, with fair market value of
approximately $62,200, to a member of the Board of Directors for services
rendered. In connection with the offering of the Company's common stock
completed during the period ended October 31, 1997, the Company, during the
year ended October 31, 1998, granted 500,000 options to a consultant who
assisted with the offering. The fair value of such options was approximately
$335,000 at grant date.
SFAS No. 123 established the financial accounting and reporting standards for
stock-based compensation. It defines a fair value method of accounting for an
employee stock option or similar equity instrument. SFAS No. 123 also gives
entities the choice between adopting the fair value method or continuing to
use the intrinsic value method under APB 25 with footnote disclosures of the
pro forma effects as if the fair value method had been adopted. The Company
has opted for the latter approach. Accordingly, no compensation expense has
been recognized for the stock options. Had the compensation expense for the
Company's stock options been determined based on the fair value at the grant
date for awards during the years ended October 31, 1999 and 1998 consistent
with the provisions of SFAS No. 123, the Company's results of operations
would have been reduced to the pro forma amounts indicated below:
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE D (continued)
Year ended October 31,
1999 1998
----------- ----------
Net loss - as reported $(1,165,939) $(539,060)
Net loss - pro forma (4,438,187) (608,060)
Loss per share - as reported $(.10) $(.06)
Loss per share - pro forma (.39) (.07)
The fair value of each option grant is established on the date of grant using
the Black-Scholes option pricing model with the following assumptions:
Year ended October 31,
1999 1998
-------- -----
Expected dividend yield - -
Expected stock price volatility 157% 108%
Expected life of options 9 years 9 years
The risk-free interest rate used in the valuation of the option grants ranged
from 5.26% to 6.69% for the year ended October 31, 1999, and from 5.11% to
5.58% for the year ended October 31, 1998, depending on the expiration date
of the options.
The weighted-average fair value of options granted for the years ended
October 31, 1999 and 1998 were $2.70 and $0.63, respectively. During the year
ended October 31, 1999, the Company granted stock options whose exercise
prices were either above or below the underlying stock's fair market value at
the date of grant as indicated in the schedule below:
<TABLE>
<CAPTION>
Year ended October 31, 1999 Year ended October 31, 1998
--------------------------- ---------------------------
Weighted- Weighted- Weighted- Weighted-
average average fair average average fair
Stock options granted exercise price value exercise price value
---------------------- -------------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
Exercise price exceeds market
price of stock at grant date $1.00 $0.48 $1.36 $0.65
Exercise price less than market
price of stock at grant date 1.09 3.11
</TABLE>
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE D (continued)
The following summarizes information about the stock options outstanding at
October 31, 1999:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------ -----------------------------------
Weighted-
Number average Number
Outstanding remaining Weighted- exercisable Weighted-
Range of at contractual average at average
exercise October 31, life exercise October 31, exercise
prices 1999 (years) price 1999 price
------------- --------------- ------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$0.69 - $1 822,500 7.73 $0.95 584,000 $0.94
$1.01 - $2 500,000 8.42 2.00 500,000 2.00
$2.01 - $3 185,000 9.28 3.00 100,000 3.00
---------- ----------
$0.69 - $3 1,507,500 1,184,000
========= =========
</TABLE>
NOTE E - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future,
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The tax effect of the temporary differences at
October 31, 1999 is as follows:
October 31, October 31,
1999 1998
--------- ---------
Deferred tax asset
Net operating loss benefit $ 1,079,000 $ 570,000
Less valuation allowance (1,079,000) (570,000)
---------- --------
Net deferred tax asset $ - 0 $ - 0 -
======== ========
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE E (continued)
At October 31, 1999, the Company has carryforward losses which are available
to offset future Federal and state taxable income. Such losses expire as
follows:
Net operating loss Expiration date
$ 617,000 10/31/2017
543,000 10/31/2018
1,170,000 10/31/2019
---------
$2,330,000
==========
NOTE F - COMMITMENTS AND CONTINGENCIES
1. Operating Leases
The Company is obligated to make payments under noncancellable operating
leases expiring in 2001 . Such leases contain renewable options which allow
the Company to renew the lease for two additional years at the end of each
lease period. Total rental expenses for the years ended October 31, 1999 and
1998 were approximately $61,000 and $59,000, respectively. Future aggregate
minimum annual rent payments under these operating leases are approximately
as follows:
Minimum rental
Fiscal year commitment
----------- ---------------
2000 $73,000
2001 21,000
------
$94,000
=======
2. SEC Investigation
The Company is currently subject to a formal order of investigation dated
February 13, 1998 pursuant to Rule 79(a) of the Securities and Exchange
Commission (the "SEC") Rules relating to investigations. The investigation
concerns certain allegations that the Company may have failed to make
appropriate disclosures on its Web pages.
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE F (continued)
The SEC took testimony of Company's Chief Executive Officer on October 1,
1998 and interviewed at least two of the Company's corporate clients. The
Company is unaware of any activity since October 1, 1998 by the SEC in
this matter. The Company has fully cooperated with the investigation and
has reviewed with the SEC staff members its disclosure polices. The
Company cannot predict whether this investigation will result in any type
of formal enforcement action and whether any such action might have an
adverse effect on the financial condition of the Company.
NOTE G - EARNINGS PER SHARE
The weighted-average shares used in computing earnings per share were
11,307,597 and 8,993,975, respectively, for the years ended October 31, 1999
and 1998. As the Company had net operating loss from continuing operations,
the effect of stock options outstanding at October 31, 1999 and 1998 is
antidilutive and is therefore not part of the computation of diluted earnings
per share.
NOTE H - GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements during the years ended October 31, 1999 and 1998, the Company
incurred losses of $1,165,939 and $581,576, respectively. The Company's
continuing operating losses and insufficient cash flow to meet its operating
needs are factors, among others, which may indicate that the Company will be
unable to continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability of assets and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
obtain additional financing as may be required, and ultimately to attain
profitability. The Company currently anticipates conducting a private
offering of preferred stock in the fiscal year of 2000 in order to raise
additional capital required to fund operations for the foreseeable future and
implement its business plan. In the event that the Company is not able to
obtain such additional outside financing, the Company would scale back its
growth plans and business operations to allow it to continue without
<PAGE>
the additional capital. Specifically, the Company would eliminate or delay
plans to pursue formation of an online radio station, limit its marketing and
advertising budget, and, if necessary, scale down its payroll expenses.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
WESTERGAARD.COM, INC. AND SUBSIDIARY
For the three months ended January 31, 2000 and 1999
Unaudited
<PAGE>
<TABLE>
<CAPTION>
Westergaard.com, Inc.
STATEMENTS OF FINANCIAL CONDITION
January 31, 2000 and 1999
Unaudited
2000 1999
---- ----
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 284,055 $ 1,710,029
Investment in securities, at market 15,787 11,015
Accounts receivable 39,000 --
Subscription receivable -- 212,000
Employee advances 20,665 18,940
----------- -----------
Total current assets 359,507 1,951,984
NONCURRENT ASSETS
Property and equipment (less accumulated
depreciation and amortization of $38,018 and $17,363, respectively) 65,197 61,356
Other assets 13,502 10,714
----------- -----------
Total noncurrent assets 78,699 72,070
----------- -----------
Total assets $ 438,206 $ 2,024,054
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short term loan $ -- $ 200,000
Accounts payable and accrued expenses 63,881 55,522
Deferred revenues 76,000 48,661
Due to affiliate 55,217 110,033
Other liabilities 50,492 90,161
----------- -----------
Total current liabilities 245,590 504,377
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $.001; 100,000,000 shares authorized;
11,916,445 shares issued and outstanding 11,916 11,916
Additional paid-in capital 2,861,275 2,799,075
Accumulated deficit (2,650,425) (1,256,392)
Accumulated other comprehensive loss (30,150) (34,922)
----------- -----------
Total shareholders' equity 192,616 1,519,677
----------- -----------
Total liabilities and shareholders' equity $ 438,206 $ 2,024,054
=========== ===========
</TABLE>
<PAGE>
Westergaard.com, Inc.
STATEMENTS OF OPERATIONS
For the three months ended January 31,
Unaudited
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues
Member fee income (net of fees waived of $20,000 and
and $14,500 in 2000 and 1999, respectively) $ 21,000 $ 42,001
Conferences (net of fees waived of $45,000 in 1999) 67,480 145,473
Interest 6,680 1,035
Other 2,780 5,628
------------ ------------
Total revenues 97,940 194,137
Expenses
Conference expense 18,618 32,781
Compensation and benefits 159,306 83,846
Professional services 26,888 9,996
Rent and occupancy 18,180 18,741
General and administrative expenses 100,324 44,991
Interest 1,000
------------
Miscellaneous expense 1,056 2,120
------------ ------------
Total expenses 324,372 192,475
------------ ------------
NET (LOSS) INCOME $ (226,432) $ 1,662
============ ============
(Loss) income per share
Basic and diluted $ (0.02) $ (0.00)
Weighted-average common shares outstanding
Basic and diluted 11,916,445 9,115,745
============ ============
</TABLE>
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended January 31, 2000 and 1999
Unaudited
<TABLE>
<CAPTION>
2000 1999
----------- -----------
Comprehensive income
<S> <C> <C>
Net loss $(226,423) $ 1,662
Other comprehensive income (loss)
Unrealized depreciation on investment in securities (30,150) (34,922)
--------- ---------
Comprehensive income (loss) $(254,573) $ (33,260)
========= =========
</TABLE>
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended January 31, 2000 and 1999
Unaudited
<TABLE>
<CAPTION>
2000 1999
------------- ------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (226,432) $ 1,662
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 4,303 --
Changes in operating assets and liabilities
Decrease (Increase) in employee advances 100 (2,300)
Decrease in accounts receivable 10,000 --
(Increase) in other assets (4,788) (2,000)
(Decrease) in accounts payable and accrued (72,409) (187,117)
expenses
(Decrease) in deferred revenues (46,000) (97,474)
(Decrease) in due to affiliate (4,816) --
(Decrease) increase in other liabilities 4,499 (10,169)
----------- -----------
Net cash used in operating activities (335,543) (297,398)
----------- -----------
Cash flows from investing activities
Purchase of fixed assets (6,566) (8,088)
----------- -----------
Net cash (used in) provided by investing (6,566) (8,088)
activities ----------- -----------
Cash flows from financing activities
Proceeds from short term loan 200,000
Proceeds from issuance of stock -- 1,804,500
----------- -----------
Net cash provided by financing activities -- 2,004,500
----------- -----------
NET INCREASE (DECREASE) IN CASH (342,109) 1,699,014
Cash at beginning of year 626,164 11,015
----------- -----------
Cash at end of year $ 284,055 $ 1,710,029
- ------------------- =========== ===========
</TABLE>
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended January 31, 2000 and 1999
NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
1. Organization
Westergaard.com, Inc. (the "Company"), a Delaware company, was organized
on August 15, 1996 and commenced operations on January 1, 1996. The
Company was formed to engage in the business of online publishing on the
Internet, primarily for the purpose of providing investment research on
publicly traded Micro-Mid Cap companies. Additionally, the Company
publishes a directory of publicly traded health care companies and
sponsors conferences focusing on Micro-Mid Cap companies.
The consolidated financial statements include the assets,
liabilities and results of operations of the Company's wholly-owned
subsidiary, Westergaard Broadcasting Network, Inc. All intercompany
balances and transactions have been eliminated.
The unaudited interim financial statements reflect all adjustments
(consisting of normal, recurring accruals) which are, in the opinion of
management, necessary to a fair statement of the results for the interim
periods presented.
2. Investments in Securities
The Company's investments in securities are categorized as
available-for-sale securities, as defined by Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." These securities consist of equity securities and
are stated at fair value, which is estimated based on quoted market
prices, when available. If a quoted price is not available, fair value is
estimated using quoted market prices for similar financial instruments.
Unrealized holding gains and losses are reflected as a net amount in a
separate component of shareholders' equity until realized. Realized gains
and losses on sales of investments in securities are determined on a
specific identification basis.
3. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation
and
<PAGE>
amortization. Depreciation and amortization are computed on a
straight-line basis over the estimated useful life of the asset. Computer
equipment and furniture are depreciated over 5 to 7 years. Computer
software is amortized over 3 years. Leasehold improvements are amortized
over the lives of their respective leases or the service lives, whichever
is shorter.
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the three months ended January 31, 2000 and 1999
NOTE A (continued)
4. Stock-Based Compensation
The Company, as permitted by Statement of Financial Accounting Standards
No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation," has
elected to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25 ("APB
25"), "Accounting for Stock Issued to Employees." Accordingly,
compensation cost for common share options is measured as the excess, if
any, of the quoted market price of the Company's common shares at the date
of grant over the amount an employee must pay to acquire the common
shares. The Company has adopted the disclosure requirements of SFAS No.
123.
5. Earnings Per Share
Earnings per share are calculated under the provisions of Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per
Share." SFAS No. 128 requires the presentation and disclosure of basic
earnings per share, and, if applicable, diluted earnings per share. Basic
earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share are based on the
weighted-average number of common and common equivalent shares
outstanding. The calculation takes into account the shares that may be
issued upon exercise of stock options, reduced by the shares that may be
repurchased with the funds received from the exercise, based on the
average price during the year. In computing diluted earnings per share,
only potential common shares that are dilutive (those that reduce earnings
per share or increase loss per share) are included. Exercise of stock
options is not assumed if the result would be antidilutive, such as when a
loss from continuing operations is reported.
6. Revenue Recognition
Conference revenue is recognized when the conference is presented. Funds
received in advance are treated as deferred revenue until the service is
provided.
The Company receives fees from its members for CyberStation services to be
provided over one-year contracts. Such fees are treated as deferred
revenue and are
<PAGE>
recognized as fee income over the course of the contract.
The Company publishes a directory of publicly traded health care
companies. Revenue is recognized upon the shipment of the directory.
Subsequent subscription revenue will be recognized upon the shipment of
the updated directory.
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the three months ended January 31, 2000 and 1999
NOTE A (continued)
7. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Computer equipment $ 68,469 54,210
Computer software 4,927 0
Telecommunications equipment 11,776 13,795
Furniture and fixtures 18,043 10,714
--------- ---------
103,215 78,719
Less accumulated depreciation and amortization (38,018) (17,363)
--------- ---------
$ 65,197 $ 61,356
========= =========
</TABLE>
NOTE C - RELATED PARTY TRANSACTIONS
Included in due to affiliate are liabilities in connection with unpaid
expense
<PAGE>
reimbursements made by Westergaard Publishing Corporation, an affiliated
entity under common control, on behalf of the Company and an outstanding loan
balance of $50,000 and $100,000 at January 31, 2000 and 1999 respectively
from Publishing. The loan bears interest of 8% per annum. The loan does not
have a scheduled repayment date.
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the three months ended January 31, 2000 and 1999
NOTE D - STOCK OPTIONS AND STOCK-BASED COMPENSATION
The Company has a Stock Option Plan (the "Plan") which provides an
opportunity for participants to obtain a proprietary interest in the Company
through the grant of nonqualified stock options to purchase shares of Common
Stock of the Company. The Plan authorizes the issuance of options to purchase
up to an aggregate of 5,000,000 shares of Common Stock, with vesting periods
of up to four years and maximum option terms of ten years. The Plan is
administered by a committee which is comprised of members of the Board of
Directors.
Information regarding the stock options is summarized below:
<TABLE>
<CAPTION>
November 1, 1999 to January 31, 2000 November 1, 1998 to January 31, 1999
------------------------------------ ------------------------------------
Weighted- Weighted-
average average
Number exercise Number exercise
of options price of options price
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Outstanding at November 1, 1,507,500 $1.55 1,002,500 $1.50
Options granted 525,000 0.81 100,000 1.00
--------- ---------
Outstanding at January 31, 2,032,500 1.36 1,102,500 1.45
========= ==== ========= ====
Exercisable at January 31, 1,184,000 $1.56 864,000 1.58
========= ==== ========= ====
</TABLE>
SFAS No. 123 established the financial accounting and reporting standards for
stock-based compensation. It defines a fair value method of accounting for an
employee stock option or similar equity instrument. SFAS No. 123 also gives
entities the choice between adopting the fair value method or continuing to
use the intrinsic value method under APB 25 with footnote disclosures of the
pro forma effects as if the fair value method had been adopted. The Company
has opted for the latter approach. Accordingly, no compensation expense has
been recognized for the stock options. Had the compensation expense for the
Company's stock options been determined based on the fair value at the grant
date for awards during the three months ended January 31, 2000 and 1999
consistent with the provisions of SFAS No. 123, the Company's results of
operations would have been reduced to the pro forma amounts indicated below:
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the three months ended January 31, 2000 and 1999
NOTE D (continued)
Three months ended January 31,
---------------------------------
1999 1999
----------- ----------
Net (loss)/income - as reported $ (226,432) $ 1,662
Net loss - pro forma (318,245) (19,612)
Loss/income per share - as reported $ (.02) $ .00
Loss per share - pro forma (.03) (.00)
The fair value of each option grant is established on the date of grant using
the Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
Three months ended January 31,
---------------------------------
2000 1999
----------- ----------
<S> <C> <C>
Expected dividend yield - -
Expected stock price volatility 166% 140%
Expected life of options 8.5 years 9 years
</TABLE>
The risk-free interest rate used in the valuation of the option grants was
approximately 5.26% for the three months ended January 31, 2000, and range
from 5.26% to 6.56% for the three months ended January 31, 1999, depending on
the expiration date of the options.
The weighted-average fair value of options granted for the three months ended
January 31, 2000 and 1999 were $1.39 and $0.49, respectively. During the
three months ended January 31, 2000, the Company granted stock options whose
exercise prices were either above or below the underlying stock's fair market
value at the date of grant as indicated in the schedule below:
<TABLE>
<CAPTION>
Three ended January 31, 2000 Three ended January 31, 1999
---------------------------- -------------------------------
Weighted- Weighted- Weighted- Weighted-
average average fair Average average fair
Stock options granted exercise price value exercise price Value
---------------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Exercise price exceeds market
price of stock at grant date $1.00 $0.68 $1.00 $0.49
Exercise price less than market
price of stock at grant date 0.80 1.43 - -
</TABLE>
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the three months ended January 31, 2000 and 1999
NOTE D (continued)
The following summarizes information about the stock options outstanding at
January 31, 2000:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------ -----------------------------------
Weighted-
Number average Number
outstanding remaining Weighted- exercisable Weighted-
Range of at contractual average at average
exercise January 31, life exercise January 31, exercise
prices 2000 (years) price 2000 price
------------- --------------- ------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$0.69 - $1 1,347,500 8.43 $0.95 584,000 $0.94
$1.01 - $2 500,000 8.17 2.00 500,000 2.00
$2.01 - $3 185,000 9.03 3.00 100,000 3.00
---------- ----------
$0.69 - $3 2,032,500 1,184,000
========= =========
</TABLE>
NOTE E - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future,
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The tax effect of the temporary differences is as
follows:
January 31, January 31,
2000 1999
----------- -----------
Deferred tax asset
Net operating loss benefit $ 1,184,000 $ 539,000
Less valuation allowance (1,184,000) (539,000)
---------- --------
Net deferred tax asset $ - 0 - $ - 0 -
========== =========
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the three months ended January 31, 2000 and 1999
NOTE E (continued)
At January 31, 2000, the Company has carryforward losses which are available
to offset future Federal and state taxable income. Such losses expire as
follows:
Net operating loss Expiration date
$ 617,000 10/31/2017
543,000 10/31/2018
1,170,000 10/31/2019
227,000 10/31/2020
----------
$ 2,557,000
===========
NOTE F - COMMITMENTS AND CONTINGENCIES
1. Operating Leases
The Company is obligated to make payments under noncancellable operating
leases expiring in 2000 and 2001. Such leases contain renewable options which
allow the Company to renew the lease for two additional years at the end of
each lease period. Total rental expenses for the three months ended January
31, 2000 and 1999 were approximately $18,000 and $19,000, respectively.
Future aggregate minimum annual rent payments under these operating leases
are approximately as follows:
Fiscal Minimum Rental
Year Commitment
2000 $ 54,000
2001 21,000
--------
$ 75,000
========
2. SEC Investigation
The Company had been the subject to a formal order of investigation dated
February 13, 1998 pursuant to Rule 79a) of the Securities and Exchange
Commission (the "SEC") Rules relating to investigations. The investigation
concerns certain allegations that the Company may have failed to make
appropriate disclosures on its Web pages.
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the three months ended January 31, 2000 and 1999
NOTE F (continued)
The SEC took testimony of Company's Chief Executive Officer on October
1, 1998 and interviewed at least two of the Company's corporate clients.
The Company had fully cooperated with the investigation and has reviewed
with the SEC staff members its disclosure polices. Subsequent to January
31, 2000, the Company has been notified by the SEC that the investigation
has been terminated and that no enforcement action has been recommended.
NOTE G - EARNINGS PER SHARE
The weighted-average shares used in computing earnings per share were
11,916,445 and 9,115,745, respectively, for the three months ended January
31, 2000 and 1999. As the Company had net operating loss from continuing
operations, the effect of stock options outstanding at January 31, 2000 and
1999 is antidilutive and is therefore not part of the computation of diluted
earnings per share.
NOTE H - GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, the Company incurred accumulative losses of $2,650,425 as of
January 31, 2000. The Company's continuing operating losses and insufficient
cash flow to meet its operating needs are factors, among others, which may
indicate that the Company will be unable to continue as a going concern for a
reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability of assets and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
obtain additional financing as may be required, and ultimately to attain
profitability. The Company currently anticipates conducting a private
offering of preferred stock in the fiscal year of 2000 in order to raise
additional capital required to fund operations for the foreseeable future and
implement its business plan. In the event that the Company is not able to
obtain such additional outside financing, the Company would scale back its
growth plans and business operations to allow it to continue without
<PAGE>
the additional capital. Specifically, the Company would eliminate or delay
plans to pursue formation of an online radio station, limit its marketing and
advertising budget, and, if necessary, scale down its payroll expenses.
<PAGE>
PART III
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
(2) Articles of Incorporation and By-laws:
*2.1 Certificate of Incorporation
2.2 Amendment to Certificate if Incorporation
*2.3 By-Laws
2.4 Designation of certificate of designation
of rights and preferences of series a preferred stock of
Westergaard.com, Inc.
(4) Instruments defining rights of security holders
**4.1 Designation of certificate of designation
of rights and preferences of Series A preferred stock of
Westergaard.com, Inc.
(6) Material Contracts
6.1 Form of a Member Affiliate Contract
- ------------
* Filed as Exhibit 2, 2.1 and 2.3 respectively in Westergaard.com, Inc.'s
From 10-SB filed on March 2, 2000, and incorporated herein reference.
**Contained in Exhibit 2.4
<PAGE>
EXHIBIT 2.2
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION
OF
WESTERGAARD.COM, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation")
is Westergaard.com, Inc.
2. The certificate of incorporation of the corporation is hereby
amended by striking out Article Four thereof and by substituting in lieu of said
Article Four the following new Article Four:
"The total number of shares of all classes of stock that the Corporation
shall have authority to issue is 110,000,000 of which 10,000,000 shares will
be Preferred Stock, par value $0.001 per share, and 100,000,000 shares will
be Common Stock, par value $0.001 per share."
3. The amendment of the certificate of incorporation of the corporation
herein certified was duly adopted, pursuant to the provisions of Section 242 of
the General Corporation Law of the State of Delaware.
4. The amendment of the certificate of incorporation herein certified
has been duly adopted and written consent has been given in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
Signed on March 2, 2000
/s/ JOHN WESTERGAARD
------------------------
John Westergaard
3
<PAGE>
EXHIBIT 2.4
CERTIFICATE OF DESIGNATION
OF RIGHTS AND PREFERENCES OF
SERIES A PREFERRED STOCK OF
OF WESTERGAARD.COM, INC.
Pursuant to the provisions of Delaware, Chapter 1, Title 8, Westergaard.com,
Inc. (the "Company"), a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
1. Designation, Amount, Par Value, and Rank. The Company hereby
designates the issuance of a series of Preferred Stock to be called the "Series
A Convertible Preferred Stock" (the "Series A Preferred Stock"). The total
number of shares of Series A Preferred Stock that the corporation shall have the
authority to issue is 250,000. Each share of Series A Preferred Stock shall have
a par value of $.001 per share.
2. Voting Rights. The holder of each share of the Series A Preferred
Stock shall be entitled to the number of votes equal to the number of shares of
Common Stock into which such share of Series A Preferred Stock could be
converted on the record date set for purposes of determining the shares entitled
to vote at any regular, annual, or special meeting of shareholders of the
Company, and shall have voting rights and powers equal to the voting rights and
powers of the Common Stock (except as otherwise expressly provided herein or as
required by law, voting together with the Common Stock as a single class) and
shall be entitled to notice of any shareholders' meeting in accordance with the
Bylaws of the Company. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series A Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
3. Conversion. (a) Voluntary Conversion. Each share of Series A
Preferred Stock may be, at the option of the holder, converted into ten (10)
shares of Common Stock of the Company anytime after ninety (90) days of the
purchase of the Series A Preferred Stock.
(b) Before any holder of Series A Preferred Stock shall be entitled to
convert the same into shares of Common Stock, he or she shall surrender the
certificate or certificates thereof, duly endorsed, at the office of the Company
or of any transfer agent for such stock, and shall give written notice to the
Company at such office that he or she elects to convert the same and shall state
therein the name or names in which he or she wishes the
4
<PAGE>
certificate or certificates for shares of Common Stock to be issued. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of surrender of the shares of Series A Preferred Stock to
be converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date. On the
Conversion Date, all rights with respect to the Series A Preferred Stock so
converted shall terminate, except any of the rights of the holders thereof upon
surrender of their certificate or certificates therefor to receive certificates
for the number of shares of Common Stock into which such Series A Preferred
Stock has been converted plus all declared but unpaid dividends. Upon surrender
of such certificates the Company shall issue and deliver to such holder,
promptly at such office and in its name as shown on such surrendered certificate
or certificates or as otherwise directed by the holder, a certificate or
certificates for the number of shares of common stock into which the shares of
the Series A Preferred Stock surrendered are convertible on the Conversion Date
and shall pay all declared but unpaid dividends in respect of the shares of
Series A Preferred Stock which are converted.
(c) Conversion by the Company. The Company may at its discretion convert
all or part of the shares of Preferred Stock into shares of Common Stock if the
market value of the shares of Common Stock exceeds $2.00 per share for ten (10)
consecutive trading days. Market value shall be the average of the bid and asked
prices (or the closing price if the stock is listed on the NASDAQ National
Market System) on any given date.
(d) Upon notice by the Company of Series A Preferred Stock conversion into
shares of Common Stock, shareholders of the Series A Preferred Stock shall
surrender the certificate or certificates thereof, duly endorsed, at the office
of the Company or of any transfer agent for such stock and shall state therein
the name or names in which he or she wishes the certificate or certificates for
shares of Common Stock to be issued. Such conversion shall be deemed to have
been made on the date of the notice by the Company to the shareholder. On the
Conversion Date, all rights with respect to the Series A Preferred Stock so
converted shall terminate, except any of the rights of the holders thereof upon
surrender of their certificate or certificates therefor to receive certificates
for the number of shares of Common Stock into which such Series A Preferred
Stock has been converted plus all declared but unpaid dividends. Upon surrender
of such certificates the Company shall issue and deliver to such holder,
promptly at such office and in its name as shown on such surrendered certificate
or certificates or in such other name as the holder shall designate in writing,
a certificate or certificates for the number of shares of common stock into
which the shares of the Series A Preferred Stock surrendered are convertible on
the Conversion Date and shall pay all declared but unpaid dividends in respect
of the shares of Series A Preferred Stock which are converted.
4. Dividends; Ranking. All of the preferential amounts to be paid to
the holders of the Series A Preferred Stock as provided in this Article Four
shall be paid or
5
<PAGE>
set apart for payment before the payment or setting apart for payment of any
amount for, or the distribution of, any property of the Corporation to the
holders of any other equity securities of the Corporation, whether now or
hereafter authorized. The holders of the Series A Preferred Stock shall be
entitled to receive, out of funds legally available therefor, an annual 6%
dividend payable in cash or in kind (shares of restricted Common Stock at fair
market value) when, if and as declared by the Board of Directors. The initial
dividend will be prorated based upon the date of purchase. Dividends will accrue
and are cumulative from the date of first issuance.
5. Preference as to Earnings, Assets and Liquidation. The Series A
Preferred Stock shall be preferred as to both earnings and assets, and in the
event of liquidation, dissolution, or winding up of the Company, whether
voluntary or involuntary, the holders of the Series A Preferred Stock of the
Company shall be entitled, before any assets of the Company shall be distributed
among or paid over to the holders of the Common Stock, to be paid in full the
face value of $10.00 per share of Series A Preferred Stock. After payment in
full of the above preferential rights of the holders of the Series A Preferred
Stock, the holders of the Series A Preferred Stock and Common Stock shall
participate ratably in the division of the remaining assets of the Company, so
that from the remaining assets the amount per share of Series A Preferred Stock
distributed to the holders of the Series A Preferred Stock shall equal the
amount per share of Common Stock distributed to the holders of the Common Stock.
6. Amendment. Any term relating to the Series A Preferred Stock may be
amended and the observance of any term relating to the Series A Preferred Stock
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the vote or written consent of holders
of at least fifty-one (51%) percent of all Series A Preferred Stock then
outstanding of the Company. Any amendment or waiver so effected shall be binding
upon the Company and all holders of Series A Preferred Stock.
7. Registration Rights. (a) The holders of the Series A Preferred Stock
shall be entitled to "piggy-back" registration rights for one year from the date
of purchase on unconverted preferred stock on registrations of the Company made
pursuant to the Securities Act of 1933, as amended (other than a registration
relating solely to a transaction under Rule 145 under such Act (or any successor
thereto), a registration made pursuant to Form S-4, Form S-8 or pursuant to an
employee benefit plan of the Company) subject to the right, however, of the
Company and its underwriters, in the case of an underwritten public offering, to
reduce the number of shares proposed to be registered pro rata in view of market
conditions.
(b) The Company shall bear the registration expenses (exclusive of
underwriting discounts and commissions) of all piggy-back registrations.
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(c) The registration rights described herein shall be expressly
conditioned upon acceptance by any participating shareholder of such other
provisions in any purchase or underwriting agreement, if any, relating to such
registration as are reasonable and customary, including, but not limited to,
cross-indemnification, the period of time in which the Registration Statement
shall be kept effective, market stand off agreements, underwriting arrangements,
and the like.
(d) All registration rights granted in this Section 7 shall immediately
expire and be deemed null and void upon the conversion, whether voluntary or by
the Company, of any shares of Series A Preferred Stock into shares of Common
Stock not made in connection with the piggy-back registration rights granted in
this Section 7.
8. Adjustments for Combinations, Subdivisions Reclassifications and
Reorganizations. (a) In the event that this Company at any time or from time to
time after the date hereof shall declare or pay any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or in the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, then the conversion ratio in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that this
Company shall declare or pay, without consideration, any dividend on the Common
Stock payable in any right to acquire Common Stock for no consideration then the
Company shall be deemed to have made a dividend payable in Common Stock in an
amount of shares equal to the maximum number of shares issuable upon exercises
of such rights to acquire Common Stock.
(b) If the Common Stock issuable upon conversion of the Series A Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for in 8(a) (above), the conversion ratio then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that the Series A Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of the Series A Preferred Stock immediately before that change.
9. No Reissuance of Series A Preferred Stock. No share or shares of
Series A Preferred Stock acquired by the Company by reason of conversion or
otherwise shall be
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reissued, and all such shares shall be canceled, retired and eliminated from the
shares which the Company shall be authorized to issue.
10. Restrictions and Limitations. So long as any shares of Series A
Preferred Stock remain outstanding, the Company shall not, without the vote or
written consent by the holders of at least fifty-one (51%) percent of the then
outstanding shares of Series A Preferred Stock:
(a) Effect any reclassification, recapitalization or other change with
respect to any outstanding shares of stock which results in the issuance of
shares of stock having any preference or priority as to dividend or redemption
rights, liquidation preferences, conversion rights or otherwise, superior to, or
on a parity with, any such preference or priority of the Series A Preferred
Stock, or
(b) Authorize or issue, or obligate itself to issue, any other equity
security senior to or on a parity with the Series A Preferred Stock as to
dividend or redemption rights, liquidation preferences, conversion rights or
otherwise, or create any obligation or security convertible into or exchangeable
for, or having any option rights to purchase, any such equity security which is
senior to or on a parity with the Series A Preferred Stock, or
(c) Amend, alter or repeal the preferences, special rights or other powers
of the Series A Preferred Stock, or otherwise amend the Company's Certificate of
Incorporation, so as to effect adversely the Series A Preferred Stock.
11. Miscellaneous Provisions. (a) The Company shall not engage a
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, in order to avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock against impairment.
(b) The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A Preferred Stock;
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Series A Preferred Stock, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to its
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Certificate of Incorporation.
(c) No fractional share shall be issued upon the conversion of any share
or shares of Series A Preferred Stock. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of Series A
Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fraction of a share of Common Stock, the Company
shall, round the number of shares to be issued upon conversion up to the next
whole number.
(d) Any notice required by the provisions of this Designation to be given
to the holders of shares of Series A Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Company.
IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer and
President of the Company, has executed these Articles this 7th day of March,
2000.
/s/ Thomas J. Wojciechowski
- ---------------------------
Thomas J. Wojciechowski,
Chief Executive Officer
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EXHIBIT 6.1
Date
Letter of Agreement
This letter, when executed, will constitute an agreement (the "Affiliate
Agreement") between XXXX (the "Affiliate"), a publicly traded company, and
Westergaard Broadcasting Network.com, Inc. ("WBN.com"), an Internet-based
financial publishing and broadcasting company, whereby the Affiliate agrees to
have WBN.com construct and maintain a WBNcyberStation on the Affiliate's behalf
within WBN.com's website.
The annual Affiliate fee of $48,000, will be billed quarterly in advance. The
term of this agreement shall be 12 months. After the 12 month term, this
agreement shall remain in place unless either party gives notice to cancel with
90 days notice. WBN.com agrees to perform the following services:
o Construct and maintain a WBNcyberStation(TM) in a manner and style
consistent with other Westergaard WBNcyberStations(TM) which shall
include:
i. an independent research report prepared annually by an analyst
assigned by WBN.com (the "Analyst")
ii. routine commentary and follow-up as warranted to be provided
by the Analyst and WBN.com editors (the "Editor") with respect
to the Affiliate or with respect to matters pertaining to the
Affiliate
iii. an aggregation of information and data prepared by WBN.com
and/or references to published information (both on-line and
off-line) as deemed relevant by WBN.com.
o Conduct occasional live Internet radio interviews and make
interviews available for replay on demand.
o Maintain a review of Affiliate message boards at Yahoo!, Silicon
Investor, Motley Fool, Raging Bull and other similar forums for the
purpose of assuring accuracy of information exchange and guarding
against posting of purposefully misleading and fraudulent
information.
o Extend invitations to the Affiliate, to co-host Westergaard Waldorf
conferences at a 50% discount to the published fee.
The Affiliate explicitly recognizes WBN.com's independence and that of its
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<PAGE>
contracted Analysts with respect to all editorial content including judgments,
conclusions, projections analysis. The Affiliate further waives any recourse to
Analysts contracted by WBN.com with respect to any editorial content provided by
such Analysts. WBN.com may, at its discretion, provide the Affiliate the
opportunity to review materials or reports prior to their being published within
the Affiliate's WBNcyberStation. The purpose of such prior viewing would be to
allow for the correction of any misinformation or misrepresentations of fact.
WBN.com shall not be liable for the content of published materials or reports to
the extent that the Affiliate has exercised its right to prior review hereunder.
WBN.com accepts responsibility for all editorial material published at the
WBNcyberStation(TM) to the extent factual material contained therein is derived
from independent sources. To the extent that editorial material contains factual
information about the Affiliate provided by the Affiliate for presentation at
the Affiliate's WBNcyberStation(TM), WBN.com shall not be liable for its
accuracy.
Accepted by:
Affiliate Westergaard Broadcasting Network.com,
Inc.
Signature: Signature:
-------------------- ------------------
Name: Name:
------------------------- ----------------------
Title: Title:
------------------------ ----------------------
Date: Date:
------------------------ ----------------------
