UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
MINDFULEYE, INC.
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(formerly RABATCO, INC.)
(Name of Small Business Issuer in our charter)
Nevada 87-0616344
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
114 W. Magnolia Street. Suite 400-117
Bellingham, Washington 98225
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (360) 392-2868
Securities to be registered under Section 12(b) of the Act:
None
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Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Stock, with a $0.001 par value per share
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(Title of Class)
Not Applicable
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(Title of Class)
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TABLE OF CONTENTS
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Page
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PART I ....................................................................................................1
ITEM 1 DESCRIPTION OF BUSINESS.............................................................................1
Item 2. Financial Information..............................................................................12
ITEM 3 DESCRIPTION OF PROPERTY............................................................................16
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....................................16
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS......................................17
ITEM 6 EXECUTIVE COMPENSATION.............................................................................20
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................24
ITEM 8 DESCRIPTION OF SECURITIES..........................................................................24
PART II ...................................................................................................26
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER RELATED STOCKHOLDER MATTERS..................................................................26
ITEM 2 LEGAL PROCEEDINGS..................................................................................26
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS......................................................26
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES............................................................26
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................................................27
Part F/S
Part III
ITEM 1. INDEX TO EXHIBITS
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NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for statements of historical fact, certain information contained herein
constitutes "forward-looking statements," including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, as well as all projections of future results. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause actual results or achievements to be materially
different from any of our future results or achievements expressed or implied by
such forward-looking statements. Such factors include, but are not limited to
the following: our lack of an operating history, our lack of revenues and
unpredictability of future revenues; our lack of functional operating systems,
distribution and web site infrastructure; our future capital requirements to
develop our operating systems, distribution systems, web site and administrative
support systems; intense competition from established competitors with greater
resources; our reliance on internally developed systems and system development
risks; the risks of system failure; our dependence on the Internet; the
uncertainty of participating in developing a market; our reliance on third
parties and lack of agreements with such third parties; the risks associated
with rapidly changing technology; intellectual property risks; risks associated
with online commerce security; the risks associated with governmental
regulations and legal uncertainties; and the other risks and uncertainties
described under "Description of Business - Risk Factors" in this Form 10-SB.
Certain of the forward looking statements contained in this registration
statement are identified with cross-references to this section and/or to
specific risks identified under "Description of Business - Risk Factors".
PART I
ITEM 1 DESCRIPTION OF BUSINESS
Our Business
We, Mindfuleye, Inc. (formerly Rabatco, Inc.), were incorporated under the laws
of the State of Nevada on June 16, 1977. From our inception in 1977 through
1982, we were primarily engaged in the business of mineral resource exploration.
We remained inactive from 1982 to 1998. See "History of Our Company." On January
24, 2000, we agreed to acquire MindfulEye.com Systems Inc., subject to the
completion of a definitive agreement. On March 13, 2000, we completed the
acquisition of MindfulEye.com Systems Inc. See "Our Acquisition of
MindfulEye.com Systems Inc." On May 12, 2000, we changed our name to MindfulEye,
Inc. We intend to complete the development and commercialization of the
technologies developed by MindfulEye.com Systems Inc.
We are in the process of completing the development of a technology that is
designed to provide subscribers to our service sources topic-related content
available on the Internet. Our technology is expected to browse and monitor
Internet website for specific types of information, including chat room
discussions, newswire postings and published reports; rank it according to the
number of times such information appears on websites monitored by us; and
deliver it to our subscribers in a summarized format. Once our technology is
fully developed, we anticipate that subscribers will be able to select a number
of delivery options for receiving the information we collect, including cell
phone, pager, email, web, fax, and instant messaging.
Our system is being developed in a modular fashion so that each content source
will have a dedicated collection system that will permit us to add new feeds
quickly as they become available. Our web module, for example, is based on
existing web crawling technology that is supported by our own proprietary
technology, "FeedMaps," which is designed to quickly isolate and extract
relevant content and place it into a database format. We anticipate that our
subscribers will be able to subscribe for information related to specific
topics, including investor information on specific companies, indexes or
markets. Our technology is designed to monitor, rank and deliver the information
to the subscriber in a summarized format.
We have not completed the development of the technology related to the services
that we intend to provide, and we cannot assure you that we will successfully
complete such development or that our subscription service will be commercially
successful.
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Our shares were delisted from the NASD Over The Counter Bulletin Board on March
24, 2000, and began quotation on the National Quotation Bureau, Inc.'s pink
sheets under the symbol "MEYI".
Our principal office is located at Suite 300, 355 Burrard Street, Vancouver,
British Columbia, V6C 2G6. Our World Wide Web address is
http://www.MindfulEye.com. Information contained on our website should not be
considered part of this Registration Statement.
Our Product
The first subscriber service that we intend to provide is designed to monitor
the content on investor related Internet web sites for information of interest
to a subscriber. Our service will monitor information related to specific
companies selected by the subscriber, rank it, retrieve and organize relevant
content, and deliver the content in a summarized format to our subscriber. We
intend to use artificial computer intelligence to rank the information based on
the nature of the comments, reports, news and other information and present this
information in a "Moodindex" or "Moodscore." We anticipate that we will be able
to deliver sourced content immediately, batched in time periods, or summarized
in daily reports. We anticipate that our subscriber may elect to have the
content delivered by one of several methods:
Via PCS, cell phone/pager: Short alert messages can be sent directly to the
screens of PCS (Personal Communications Services), which is a new type of
device that uses digital transmission of voice and data to wireless
handheld devices, wireless cellular phones and pagers. Our initial service
will deliver this information via email at first, then we anticipate we
will use SMS technologies (Short Message Service), which allows users to
receive or transmit short text messages using a PCS wireless phone.
Via instant messaging: We intend to use ICQ ("I Seek You"), a chat program
available from AOL for a number of operating systems. ICO can be used to
deliver alerts directly to the screens of subscribers. We may add
additional instant messaging services in the future.
Via fax report: We plan to use a fax delivery service to deliver a fax
report to our subscribers at their home or office fax.
Via web page: An easy-to-navigate web page, customized for each customer,
shows what alert "hits" the system has identified. Subscribers can access
this information through our website at www.mindfuleye.com.
Via email: An email can be sent to the customer containing either a
notification of an alert and link to our website, or the complete
information in the body of the message.
Based on discussions with potential subscribers, we believe that the ability to
customize the delivery of information is a distinguishing feature of our
technology.
We will not offer investment advice or recommend specific securities. Our
subscribers will select the companies they would like information about.
There is no requirement for any government approval of our principal products or
services. There are no existing or probable governmental regulations, which will
have a material affect on our currently anticipated product or service
offerings.
Although we anticipate that we may offer additional services in the future, none
have been publicly disclosed to date.
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Our Technology
Platform
Our technology is being developed using open system technologies on the
Microsoft Windows 2000 Advanced Server platform. We anticipate that this will
allow for future communications with non-Microsoft systems should the need ever
arise.
Data storage
We use Microsoft SQL Server 7.0 (on Windows 2000 Advanced Server) for data
storage. We believe that this product offers the scalability to allow us to
expand our web site in feeds and service offerings.
User account management
We plan to work with Microsoft, using its "Passport" system to outsource user
authentication. We believe this will relieve us of the network and
administrative burden of account management and allow us to focus on strategic
decisions and developing our core technologies.
In-feeds
We have developed most of our in-feeds in PERL, a general-purpose programming
language. Our tracking software allows us to monitor in-feeds from investor
related web sites, and wire services investor related chat rooms, such as
SiliconInvestor.com, RagingBull.com, StockHouse.com, Yahoo! Finance, and
Quicken.com. We also in-feed stock information and stock quotes through a
dedicated link from Standard & Poors. Our technology processes the communication
from in-feeds and the data stored on our server using simple network shared
drives. After processing this data, we transmit processed data to our
subscribers as out feeds.
While we plan to continue to add new in-feeds after the initial launch of our
service, we intend to broaden our offerings by expanding into coverage of
additional media, including monitoring television coverage via closed-captioning
text, and/or monitoring newscasts over digital radio. This expansion is expected
to attract a wide-range of new customers whose interest may include what is
being said about particular companies and organizations on the Internet and
which may not be investment-related.
Out-Feeds
We use Visual Basic COM objects (on Windows 2000) to program our out feeds so
that they can be invoked by SQL Server triggers. The initial version of our
service will use e-mail to alert most of our subscribers through regular e-mail,
PCS, pager and fax. We anticipate that later versions will interface with these
modes of communications directly by sending SMS messages directly or using WAP
(Wireless Application Protocol), a global standard for developing applications
over wireless communication networks to allow subscribers to access the
MindfulEye.com database from their wireless devices.
Our Research and Development
We acquired our technology by acquiring our subsidiary MindfulEye.com Systems
Inc., then a private British Columbia company. The four founders of
MindfulEye.com Systems Inc., Tod Maffin, Todd Cusolle, Amanda Kerr, and Ray
Torresan, developed the initial prototype of our technology and our business
plan at a cost of approximately $227,000. They spent approximately one year,
full-time developing our technologies and our business plan.
We currently employ 7 programmers and developers, including the founders of
MindfulEye.com Systems Inc. We have employment agreements with all programmers,
developers and administration staff. We have no employment agreements with any
of the founders at this time. We also engage Dave Edis of Interactive Tools to
assist us in the development of our technologies, Tom Haibeck of Haibeck
Consulting to assist us with public relations, Lorna Fadden to assist us with
our NLP (natural language processing) development, Dov Litman to assist us with
analysis of data, and Geoff Lef to assist us with marketing. We may also engage
additional consultants in the future to assist us with the development of
software and information systems and implementation of our business plan.
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Our Marketing Strategy
Our initial marketing program to support launch will be to use media relations
with a goal of creating positive image of the company and awareness of the
company's service offering. Our branding strategy will be to brand our first
subscriber service as "The ultimate trading advantage."
We intend to use the following marketing programs to support the launch of our
web site, provided that sufficient financing is available:
Investment Industry Relations: Members of our advisory board members
include senior executives at Merrill Lynch, TD Waterhouse, Manulife and
Trimark Investments. We intend to provide introductory trial subscriptions,
free of charge, to members in the investment community to develop
relationships in with these individuals and their companies and to
demonstrate our services. We believe that these trials will lead to
subscriptions and recommendations of our services to clients of these
companies.
Media Relations: We intend to launch a targeted media relations program
designed to build awareness of our service offerings. The goal of this
program will be to obtain publicity and coverage in major business media,
print and online.
User Referral Marketing: We will employ user referral marketing techniques
to try to use our delivered product as a marketing vehicle. For example,
service fax cover sheets will have a message indicating how others can sign
up and encouraging referrals. Our free trial services will be upgradeable
to full subscriptions without cost by referring a certain number of
subscribers to our service. In the future our services may include an
ability to "publish" selected hits on a shared workgroup web site, allowing
others to view the content without subscribing.
Advertising: We intend to launch an advertising program using a combination
of print and television advertising, provided we are able to obtain
adequate financing. Our media strategy is expected to use advertisements in
investor oriented publications and may include ads in publications such as:
The Wall Street Journal, Barron's, Institutional Investor, New York Times,
Registered Representative, Forbes, Money, Inc., Globe & Mail, etc.
Personal Sales: We intend to generate awareness of our services by
attending investment and industry tradeshows. We would attend both as
exhibitors, whenever possible, and as speakers. Our president, Tod Maffin,
is currently represented by a speaking bureau and makes more than 50
appearances annually at conferences, company meetings, etc.
Online Marketing: We also plan to use online media to promote our services
by running banner ads on investor related web sites and by maintaining our
web site at http://www.MindfulEye.com.
We have not entered into any arrangements or agreements to promote our services
and we cannot assure you that we will successfully market our services as
planned. We currently do not have sufficient resources to implement all of the
marketing programs that we intend to use. Unless we are able to raise additional
financing or generate sufficient revenues from our operations, we may not be
able market and promote our services effectively.
Industry Background
Growth of the Internet
The Internet is an increasingly significant global medium for communications,
content and online commerce. There are an estimated 97 million users of the
Internet and that number is anticipated to grow to approximately 320 million by
2002 according to Forrester Research Inc. The growth in Internet usage can
likely be attributed to factors such as:
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i) the large and growing base of installed personal computers in the
workplace and at home,
ii) advances in the performance and speed of personal computers and
modems,
iii) improvements in network infrastructure, and
iv) easier and cheaper access to the Internet and increased awareness of
the Internet among businesses and consumers.
The Internet has become an attractive source for information as the
functionality, accessibility and overall usage has increased over the last few
years. The Internet and other online services are evolving into a unique
information channel that allows access to millions of sources of published
information 24 hours a day. Generally the cost of publishing on the Internet is
lower than traditional mediums and the Internet offers the ability to reach and
serve a large and global reader base electronically from a central location.
As the Internet grows in popularity, we believe that the Internet is becoming
crowded and that opportunities exist for companies that are able to assist users
in finding information and web site content in a timely and efficient manner. As
consumers are becoming more comfortable with using, interacting and obtaining
content from the Internet, we believe they are also looking for direct access to
their specific areas of interest or need. This has lead to us to begin
developing search tools that focus on specific types of information content and
categories of interest.
The search engine companies, such as Yahoo!, AOL, AltaVista, Excite, Hotbot,
Infoseek, Lycos, MSN, Netscape and others, have responded to the market demand
for better organization and increased service and have evolved into what are
today referred to as portals or content channels. Other companies have developed
systems that are focused on specific areas of interest, such as food, health
issues, entertainment, children, senior citizens, lifestyles and investing.
Investment Information Services
We intend to offer investment information services by monitoring the information
publicly available on the Internet, the wire services and other sources and
transmitting this information in a convenient format to our subscribers. Based
on our observations, a number of factors are converging to provide growth in
this category:
Interest in investing: Consumer investors are becoming more aware of
investment information resources, including a number of web sites such as
Motley Fool, SiliconInvestor.com, RagingBull.com, StockHouse.com,
Yahoo!Finance, and Quicken.com, a number of books on investing and investor
newsletters. This along with the recent appreciations in the capital
markets have led to a greater number of investors and an increased number
of persons talking about their investments online.
General Internet penetration: The Internet continues to grow at a
phenomenal rate and there are an increasing number of web sites dedicated
to providing investors with information on the Internet.
More public companies: The publicized success of IPOs and the increased
availability of public financing has led to an increased number of public
companies. In addition, the creation of new trading venues such as the CDNX
and ECN, and an increased interest in international public markets have led
to an increased number of public companies that are of interest to
investors.
We believe that this increased activity will provide opportunities for companies
that develop services that assist investors in managing investor related
information and deliver such information in a structured, convenient format.
Our Competition
There are a number of well-known and well-financed companies that provide
investor information services. Our goal is to focus on providing our subscribers
with useful and timely information in a convenient format on companies that they
select. We intend to do this by monitoring information available on the Internet
wire services, and other media using our in-feed/out-feed technologies to
deliver this information over to our subscribers by email, fax and wireless
communication mediums such as cellular phones, pagers and wireless Internet
devices.
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While there are some online content clipping services, there are no direct
competitors in this category. Based on our research we believe MindfulEye.com is
the only company with a service that captures and delivers real-time
discussions. We believe our primary competitors are those services that track
the information of specific companies. We have identified the following
competitors:
CompanySleuth.com: CompanySleuth is a tool for investors that places links
to company discussion boards on a single web page. It also provides
pay-per-view reports such as court filings, domain registrations (free),
and other information, etc. The service tracks information on the companies
their customers' request and provides information on these companies.
eWatch.com: eWatch is a media monitoring service for the Internet.
Positioned as a tool for Fortune 500 companies, eWatch provides general
online monitoring to its subscribers. EWatch uses tracking based on simple
keyword search-engine technology.
InvestorFacts.com: Tracks mostly a public/investor relations information
and provides subscribers with reports on companies that are the targets of
rumors. InvestorFacts uses an automated search engine to monitor discussion
boards.
There are also a number of portals that offer specific information such as stock
prices, trading information, analyst reports, chat rooms, press releases and
other information about specific companies, some of which are free. We are not
aware of any other service providers that currently provide investor information
services by monitoring the Internet and providing such information to
subscribers in a format or using delivery systems similar to ours.
We anticipate that as the growth of the Internet and investor related web sites
continues, more competitors will begin offering services that are similar to
ours.
Intellectual Property
We have filed trademarks for "MindfulEye," "MoodScore" and "MoodIndex" both in
the United States and Canada. We are in the process of filing a patent for our
technologies.
History of Our Company
We, Rabatco, Inc., were incorporated under the laws of the State of Nevada on
June 16, 1977, with authorized capital of 100,000 shares of common stock with a
par value of $0.25 per share.
From our inception in 1977 through 1982, we were primarily engaged in the
business of mineral resource exploration.(1) Between February 3, 1981 and
December 9, 1981, we issued a total of 5,250,000 (70,000 pre-5:1 and 15:1 split)
shares for cash to various individuals as follows:
o On February 3, 1981, we issued 1,500,000 (20,000 pre-5:1 and 15:1
split)(1) shares for $20,000;
o On May 18, 1981, we issued 750,000 (10,000 pre-5:1 and 15:1 split)(1)
shares for $10,000;
o On July 20, 1981, we issued 1,125,000 (15,000 pre-5:1 and 15:1
split)(1) shares for $15,000;
o On November 6, 1981, we issued 1,350,000 (18,000 pre-5:1 and 15:1
split) (1) shares for $18,000; and
o On December 9, 1981, we issued 525,000 (7,000 pre-5:1 and 15:1
split)(1) shares for $7,000.
(1) After giving effect to a five for one forward split on June 20, 1998 and a
fifteen for one forward split on January 4, 2000.
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We used the proceeds from these sales in order to pay for the cost of the
investigation into the mining project. After an examination of our mineral
properties by a geologist, we concluded that continued exploration of our
mineral properties would involve an unacceptably high risk and we abandoned all
of our mineral resource properties in 1982. We remained inactive until 1998.
In March 1998, Randall Ralph Trover and Adrienne Sue Barnett were appointed to
our board of directors. Mr. Trover was appointed as President and Ms. Barnett
was appointed as Vice President of Business Development. We issued 750,000
(10,000 pre-5:1 and 15:1 split)(1) shares to Mr. Trover for $5,000 and 750,000
(10,000 pre-5:1 and 15:1 split) shares to Ms. Barnett for $5,000. We began
efforts to raise additional capital and began discussions to acquire computer
related technology.
On June 20, 1998, we increased our authorized capital to 100,000,000 shares of
common stock with a par value of $0.001 per share, and completed a forward split
of our outstanding common stock on a five share for one share (5:1) basis. Our
efforts to raise additional capital and to acquire computer related technology
failed, and Mr. Trover and Ms. Barnett resigned as officers and directors of the
company. On November 12, 1999, Carmine Bua was appointed as a director of the
company and as our interim President and Secretary.
On January 4, 2000, we completed a forward split of our 450,000 outstanding
common stock on a fifteen share for one share (15:1) basis. After the forward
split, we had a total of 6,750,000 shares of common stock issued and
outstanding. In mid-January 2000, John Meyer was appointed as a director of the
company and Mr. Bua resigned as our President and Secretary and as a director.
Mr. Meyer was appointed as our interim President and Secretary, and began
negotiations to acquire MindfulEye.com Systems Inc., a private company engaged
in the business of developing technology designed to monitor Internet web sites
and sends subscribers to its services messages related to the areas of interest
via email, fax and wireless communication mediums such as cellular phones,
pagers and wireless Internet devices.
On January 24, 2000, we agreed to acquire MindfulEye.com Systems Inc., subject
to the completion of a definitive agreement. On March 13, 2000, we completed the
definitive agreement and the acquisition of MindfulEye.com Systems Inc. closed
on March 20, 2000. See "Our Acquisition of MindfulEye.com Systems Inc." We
intend to change our name to MindfulEye.com, Inc. and to complete the
development and commercialization of the technologies developed by
MindfulEye.com Systems Inc.
On March 13, 2000, we completed a private placement to raise $2,257,500 by
issuing 1,075,000 units at $2.10 per unit, each unit consisting of one share of
our common stock and one-half warrant. Each whole warrant is be exercisable to
acquire one additional common share of share of our common stock at $2.10 on or
before March 13, 2001 and $2.50 on or before March 13, 2002.
On May 3, 2000, our shareholders ratified the adoption of an incentive stock
option plan and an amendment to our Articles of Incorporation to effect a name
change. On May 12, 2000, we filed an amendment to our Articles of Incorporation
to change our name from Rabatco, Inc. to "Mindfuleye, Inc." On May 26, 2000, our
shareholders approved the amendment and restatement of our bylaws.
Our Acquisition of MindfulEye.com Systems Inc.
We acquired our business and technologies by acquiring all of the issued and
outstanding shares of MindfulEye.com Systems Inc., our wholly-owned subsidiary.
Pursuant to a share purchase agreement effective March 13, 2000, we issued
6,910,000 shares of our common stock in exchange for all of the issued and
outstanding shares of MindfulEye.com Systems Inc. to the following MindfulEye
shareholders:
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Shareholder Number of Shares
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Tod Maffin 1,232,770
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Todd Cusolle 1,232,770
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Ray Torresan 1,232,770
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Shareholder Number of Shares
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Amanda Kerr 1,232,770
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Roger Mutimer 259,531
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Varshney Capital Corp., a British 1,719,389
Columbia company
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Total 6,910,000
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See "Recent Sales of Unregistered Securities."
Under the share purchase agreement, we:
o paid the MindfulEye.com Systems shareholders $150,000 as follows:
$50,000 in cash and $100,000 in the form of a promissory note payable,
without interest, upon successful launch of an internet website to
operate the business of MindfulEye.com Systems;
o paid debt of approximately $227,000 owned by MindfulEye.com Systems to
Varshney Capital Corp. for cash advances to MindfulEye.com related to
development costs.
o completed a financing to raise $2,257,500 by issuing 1,075,000 units
at $2.10 per unit, each unit consisting of one share of our common
stock and one-half warrant. Each whole warrant is be exercisable to
acquire one additional common share of share of our common stock at
$2.10 on or before March 13, 2001 and $2.50 on or before March 13,
2002;
o appointed Tod Maffin as our President and Ms. Kerr as our Secretary;
o appointed Tod Maffin, Todd Cusolle, Ray Torresan, Amanda Kerr and
Praveen Varshney as our directors; and
o agreed to file this registration statement to become a reporting
issuer under the Securities Exchange Act of 1934, as amended.
Upon the appointment of our new directors, John Meyer resigned as our President,
Secretary and a director. We acquired all of the assets of MindfulEye.com
Systems, including equipment; the domain names MindfulEye.com, MindfulEye.com,
InvestorTrack.com, RumorTrack.com, RumourTrack.com and MoodIndex.com; and the
technologies developed by MindfulEye.com Systems related to our business.
MindfulEye.com Systems had also applied for trademarks for "Moodscore" and
"MindfulEye" with the United States Patent and Trademark Office. We assumed a
five year lease agreement for office space located at 300, 355 Burrard Street
(Marine Building), Vancouver, British Columbia.
Risk Factors
Our business is subject to a number of risks that are generally associated with
start-up companies in the development stage of their business and companies
engaged in business through the Internet. These risks could cause our actual
results to differ materially from the results we project and any forward-looking
statement we make in this registration statement. Below is a description of some
of the risks that we anticipate will be associated with our business and an
investment in our company.
We have a limited operating history and no revenues from operations, which
makes our ability to continue as a going concern questionable.
We have no material business or results of operation. We have never generated
any revenues from our operations. We acquired MindfulEye.com Systems by issuing
6,910,000 shares of our common stock to the MindfulEye.com shareholders,
resulting in a change in control. As a result, we accounted for the share
exchange as a capital
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transaction, accompanied by a recapitalization of MindfulEye.com Systems. For
accounting purposes, the MindfulEye.com Systems financial statements are
reported as our financial statements. At December 31, 1999, MindfulEye.com
Systems had accumulated losses of approximately $200,308. We anticipate that we
will continue to incur loses at least through 2000. We do not believe that we
will generate sufficient revenues to support our operations in 2000 because of
our projected costs related to development and marketing of our business and
services. In the foreseeable future, we believe that these expenses will
increase our net losses, and we cannot assure you that we will ever be
profitable.
As of December 31, 1999, we had current assets of $nil, of which $nil was in
cash and cash equivalents. We had current liabilities of $nil, of which $nil
were accounts payable. Our working capital position at March 31, 2000 was
$1,609,211. Our recent private placement provided net proceeds of $2,257,500 of
which approximately $250,000 was used to pay off debt we assumed from
MindfulEye.com Systems. We do not anticipate our working capital position will
improve until we can generate revenues from our operations, if any, to cover our
expenses or until we raise additional capital. We anticipate raising additional
capital through sales of our equity and/or debt; however, we cannot assure you
that we will be able to obtain adequate financing to support our operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
Because we have recently begun implementing our business strategy and we have no
subscribers to our services, it is difficult to evaluate our business and our
prospects. Our revenue and income potential is unproven and our business model
is still emerging. We cannot assure you that we will attract subscribers to use
our services or generate significant revenues in the future. We cannot guarantee
that we will ever establish a sizeable market share or achieve commercial
success.
Our success depends on the services of Tod Maffin, Todd Cusolle, Ray
Torresan, and Amanda Kerr, and our ability to attract and maintain
qualified, experienced personnel.
Our future success will depend on Tod Maffin, our Interim Chief Executive
Officer, Ray Torresan, our President, Todd Cusolle, our VP Technology, Amanda
Kerr, our VP Operations. We intend to rely heavily on Tod Maffin, Ray Torresan
and Amanda Kerr to manage our operations and to develop our business. We intend
to rely on Todd Cusolle to develop our technologies and to refine our service
offerings. We also intend to hire additional personnel or consultants to assist
us in developing and implementing our technology and business plan.
The loss of key personnel could have an adverse effect on our operations. We do
not maintain insurance to cover losses that may result from the death of any of
our key personnel. Competition for qualified employees is intense, and an
inability to attract, retain and motivate additional, highly skilled personnel
required for expansion of operations and development of technologies could
adversely affect our business, financial condition and results of operations.
Our ability to retain existing personnel and attract new personnel may also be
adversely affected by our financial situation. We cannot assure you that we will
be able to retain our existing personnel or attract additional, qualified
persons when required and on acceptable terms.
Parties may exercise options and warrants that may affect our ability to
raise additional capital or affect the value of our shares.
As of March 13, 2000, we issued warrants to purchase an aggregate of 537,500
shares of our common stock at the price of $2.10 on or before March 13, 2001 and
$2.50 on or before March 13, 2002.
On April 28, 2000, we adopted an incentive stock option plan under which we
reserved 3,000,000 shares of common stock for issuance upon exercise of options
by our directors, officers, employees and consultants. employees.
See "Executive Compensation-- Stock Options."
Holders of such warrants and options are likely to exercise them when, in all
likelihood, we could obtain additional capital on terms more favorable than
those provided by the options and warrants. Further, while our warrants and
options are outstanding, our ability to obtain additional financing on favorable
terms may be adversely affected.
-9-
<PAGE>
Our executive officers and directors beneficially own or control a large
number of shares of our common stock, which may affect the value of our
shares or these persons may influence all matters submitted to a vote of
our shareholders.
The number of shares of our outstanding common stock held by affiliates is large
relative to the trading volume of the common stock. Any substantial sale of our
common stock or even the possibility of such sales occurring may have an adverse
effect on the market price of the common stock.
Our executive officers and directors (and their affiliates), as a group directly
own 6,650,469 shares or approximately 48.1% of our common stock, and together
have the ability to influence matters submitted to our stockholders for
approval. See "Security Ownership of Certain Beneficial Owners and Management."
Accordingly, such concentration of ownership may have the effect of delaying,
deferring or preventing a change in control of our company, impede a merger,
consolidation, takeover or other business combination involving our company, or
discourage a potential acquirer from making a tender offer or otherwise
attempting to obtain control of our company, which in turn could have an adverse
effect on the market price of our company's common stock.
Investors may not be able to secure foreign enforcement of civil
liabilities against our management.
All of our directors and officers are residents of Canada. Consequently, it may
be difficult for United States investors to effect service of process within the
United States upon those directors or officers, or to realize in the United
States upon judgments of United States courts predicated upon civil liabilities
under the United States Securities Exchange Act of 1934, as amended. A judgment
of a U.S. court predicated solely upon such civil liabilities would probably be
enforceable in Canada by a Canadian court if the U.S. court in which the
judgment was obtained had jurisdiction, as determined by the Canadian court, in
the matter. There is substantial doubt whether an original action could be
brought successfully in Canada against any of such persons or MindfulEye.com,
Inc. predicated solely upon such civil liabilities.
The e-commerce industry is highly competitive, and we cannot assure you
that we will be able to compete effectively.
The market for investor information services providing reports over the Internet
or by wireless communication is new and rapidly evolving. We anticipate the
market will become intensely competitive. We face potential competition from a
number of large online communities and services that have expertise in
developing online commerce and in facilitating the delivery of investor
information both online and by other communications mediums. Certain of these
potential competitors, including Amazon.com, America Online, Inc., Microsoft
Corporation and Yahoo! Inc., currently offer a variety of investor information
services at no charge as a method of attaching visitors to their web sites. Many
of our current and potential competitors have long operating histories, large
customer bases, brand recognition and significantly greater financial,
marketing, technical and other resources than us.
Certain of our competitors with other revenue sources may be able to devote
greater resources to marketing and promotional campaigns, adopt more aggressive
pricing policies and devote substantially more resources to technology and
systems development than us or may offer their services for free. We cannot
assure you that we will be able to compete successfully against current and
future competitors. Further, as a strategic response to changes in the
competitive environment, we may, from time to time, make certain pricing,
service or marketing decisions that could have a material adverse effect on our
business, results of operations and financial condition.
If we are unable to achieve a significant number of paying subscribers, we
may be unable to generate sufficient revenues to earn a profit.
The success of our MindfulEye services may be dependent upon achieving
significant market acceptance of services by subscribers. Our technologies and
services have not been tested on a commercial basis, and we anticipate that we
will have very limited market acceptance until our brand name is established.
Several of the technologies in which we intend to use to deliver our service,
including wireless Internet services and digital text messaging, are in the
-10-
<PAGE>
early stage of development, and our business concept of offering our services
using these delivery methods have not been tested. In addition, we may invest
heavily in developing technologies to deliver our service using methods, which
may become obsolete or fail to gain acceptance in the marketplace.
Our competitors and potential competitors may offer more cost-effective
solutions than us, which could damage our business and our ability to
successfully launch our services. Our failure to attract subscribers,
successfully complete the technologies to deliver our services and/or to develop
an adequate subscriber base will seriously harm our business and our ability to
earn a profit.
Due to the emerging nature of Internet commerce, we may be unable to
develop technologies to adequately monitor investor related information.
As a result of the emerging nature of the Internet, including the growth of
investor related web sites, we may be unable to develop technologies to
adequately monitor investor related information. We believe that due primarily
to the relatively brief time the Internet has been available to the general
public, there are several uncertainties related to the successful development of
technologies that can adequately monitor information on the World Wide Web. Our
current and future technology will attempt to monitor information from a variety
of sources, primarily on the Internet. As the Internet grows, we expect the
number of possible sources for such information to grow as well. We may be
unable to develop technologies that can compile and deliver information in a
timely manner as the World Wide Web grows, and our inability to deliver our
service in a timely manner will have an immediate material adverse effect on our
business, financial condition and operating results.
We have capacity constraints and system development risks that could damage
our customer relations or inhibit our possible growth, and we may need to
expand our management systems and controls quickly.
Our success and our ability to provide high quality customer service largely
depends on the efficient and uninterrupted operation of our computer and
communications systems and the computers and communication systems of third
party vendors in order to accommodate any significant numbers or increases in
the numbers of web sites we monitor and subscribers using our services. Our
success also depends upon us and our vendors' abilities to rapidly expand
information-processing systems and network infrastructure without any systems
interruptions in order to accommodate any significant increases in use of our
service.
We intend to rely on third parties to assist us in expanding our capacity, our
transaction-processing systems and network infrastructure as we grow. We cannot
assure you that the vendors we will select will be capable of accommodating any
significant number or increases in the number of subscribers using our services.
Such failures will have a material adverse affect on our business and results of
operations. We may experience periodic systems interruptions and down time
caused by technical difficulties, which may cause customer dissatisfaction and
may adversely affect our results of operations. Limitations of our and our
vendors' technology infrastructure may prevent us from maximizing our business
opportunities.
Changing technology may render our equipment, software and programming
obsolete or irrelevant.
The market for Internet and wireless-based products and services is
characterized by rapid technological developments, frequent new product
introductions and evolving industry standards. The emerging character of these
products and services and their rapid evolution will require that we continually
improve the performance, features and reliability of our products and services,
particularly in response to competitive offerings. We cannot guarantee that we
will be successful in responding quickly, cost effectively and sufficiently to
these developments. In addition, the widespread adoption of new Internet and
wireless technologies or standards could require substantial expenditures by us
to modify or adapt our services and could fundamentally affect the character,
viability and frequency of Internet-based advertising, either of which could
have a material adverse effect on our business, financial condition and
operating results.
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<PAGE>
Our business may be subject to government regulation and legal
uncertainties that may increase the costs of operating our web site or
limit our ability to generate revenues.
We are subject to the same federal, state and local laws as other companies
conducting business on the Internet and using wireless technologies. Today there
are relatively few laws specifically directed towards online services. However,
due to the increasing popularity and use of the Internet and wireless services,
it is possible that laws and regulations will be adopted with respect to the
Internet or wireless services. These laws and regulations could cover issues
such as online contracts, user privacy, freedom of expression, pricing, fraud,
content and quality of products and services, taxation, advertising,
intellectual property rights and information security. Applicability to the
Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity
and personal privacy is uncertain.
Due to the global nature of the Internet and wireless services, it is possible
that the governments of other states and foreign countries might attempt to
regulate our transmissions or prosecute us for violations of their laws. We
might unintentionally violate such laws. Such laws may be modified, or new laws
may be enacted, in the future. Any such development could damage our business.
Broker-dealers may be discouraged from effecting transactions in our shares
because they are considered penny stocks and are subject to the penny stock
rules.
Rules 15g-1 through 15g-9 promulgated under the Securities and Exchange Act of
1934, as amended, impose sales practice and disclosure requirements on NASD
brokers-dealers who make a market in "a penny stock." A penny stock generally
includes any non-NASDAQ equity security that has a market price of less than
$5.00 per share. Our shares were quoted on the NASD OTCBB and there were no
trades of our shares during 1998 or 1999. During the first quarter of 2000 up to
March 21, 2000, the high and low closing price of our shares ranged from $6.75
(high) to $3.00 (low), and the price of our shares on March 21, 2000 was $5.87.
Our shares were delisted from the NASD OTCBB on March 24, 2000, and began
quotation on the National Quotation Bureau, Inc.'s pink sheets. The quoted price
of our stock on May 26, 2000 was $3.1870. Our stock would be considered a penny
stock. The additional sales practice and disclosure requirements imposed upon
brokers-dealers may discourage broker-dealers from effecting transactions in our
shares, which could severely limit the market liquidity of the shares and impede
the sale of our shares in the secondary market.
Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or an "accredited investor" (generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to sale, unless the broker-dealer or
the transaction is otherwise exempt. In addition, the penny stock regulations
require the broker-dealer to deliver, prior to any transaction involving a penny
stock, a disclosure schedule prepared by the SEC relating to the penny stock
market, unless the broker-dealer or the transaction is otherwise exempt. A
broker-dealer is also required to disclose commissions payable to the
broker-dealer and the registered representative and current quotations for the
securities. Finally, a broker-dealer is required to send monthly statements
disclosing recent price information with respect to the penny stock held in a
customer's account and information with respect to the limited market in penny
stocks.
ITEM 2. FINANCIAL INFORMATION.
Selected Financial Data
On January 24, 2000, we agreed acquired all of the issued and outstanding shares
of MindfulEye.com Systems Inc. in exchange for 6,910,000 (post forward-split)
shares of our common stock; $150,000 in the form of cash ($50,000) and a
promissory note; and the assumption of debt of approximately $227,000, which was
paid at closing. As a result of the share exchange, control of the combined
companies passed to the former shareholders of MindfulEye.com Systems, and
MindfulEye.com Systems became our wholly-owned subsidiary. However, for
accounting purposes, we accounted for the share exchange as a capital
transaction accompanied by a recapitalization
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<PAGE>
of MindfulEye.com Systems. As a result, the financial statements and the
financial data contained in this registration statement represent the financial
position of MindfulEye.com Systems as at December 31, 1999 and the results of
operations of MindfulEye.com Systems for the period from July 21, 1999 (date of
incorporation) to December 31, 1999.
The following table sets forth selected financial data regarding MindfulEye.com
Systems' operating results and financial position. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The following
selected financial data is qualified in its entirety by, and should be read in
conjunction with, MindfulEye.com Systems' financial statements and notes thereto
included elsewhere in this Registration Statement. The financial statements of
MindfulEye.com Systems' prior to December 31, 1999 are presented in Canadian
Dollars. For convenience of the reader, all MindfulEye.com Systems' financial
statements amounts have been converted from Canadian to United States dollars at
Cdn.$1.00 = US$0.6953. The exchange rate is based upon the noon buying rate in
New York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York on December 31, 1999.
<TABLE>
-------------------------------------------------------------------------------------------------------
Period from
Inception on
Period From July 21, 1999 to
Inception on Quarter Ended March March 31, 2000
July 21, 1999 to 31, 2000 Proforma (unaudited)
December 31, 1999 (unaudited) (1)
---------------------- ---------------------- ----------------------
$ $ $
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues -- -- --
General & Administrative Expenses 200,991 230,458 431,449
Net (Loss) from Continuing
Operations (200,991) (226,342) (427,333)
Net Loss Per share (1) -- (0.03)(1) --
-------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on weighted average of shares outstanding: 8,754,945.
December 31, March 31, 2000
1999 (unaudited)
--------------- -----------------
$ $
----------------------------------------------------------------------------
Working Capital (10,559) 1,609,211
Total Assets 31,843 1,802,812
Total Liabilities 232,833 144,926
Shareholders' Equity (200,990) 1,657,886
Long-term Obligations 214,093 --
Cash Dividends -- --
----------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operation
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operation contains "forward looking
statements." Actual results may materially differ from those projected in the
forward looking statements as a result of certain risks and uncertainties set
forth in this report. Although
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<PAGE>
management believes that the assumptions made and expectations reflected in the
forward looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual future
results will not be different from the expectations expressed in this
Registration Statement.
Overview
On January 24, 2000, Rabatco, Inc. acquired all of the issued and outstanding
shares of common stock of MindfulEye.com Systems, Inc., a Canadian corporation
engaged in the development of a technology that is designed to provide
subscribers to its service topic-related content on the Internet. Our
transaction with MindfulEye.com Systems was considered, for accounting purposes,
a capital transaction accompanied by a recapitalization.
The financial statements filed with this Registration Statement and our
management's discussion and analysis of financial condition and results of
operations are for the period from July 24, 1999, the date of inception of
MindfulEye.com Systems, Inc., to December 31, 1999. Our unaudited financial
statements for the first fiscal quarter ended March 31, 2000, includes the
results of Rabatco, Inc. for the period beginning March 13, 2000 (date of
acquisition) through March 31, 2000.
Results of Operations
Period from January 1, 2000 to March 31, 2000
The period from January 1, 2000 to March 31, 2000, we acquired Mindfuleye.com
Systems Inc. in a transaction that was considered, for accounting purposes, a
capital transaction accompanied by a recapitalization. We had no revenues from
operations. Our loss during this period of $226,342 was as a result of
developing our business plan, research and development expenditures related to
the development of our MindfulEye.com web site and general overhead and
administrative expenses. These expenses included $30,138 in consulting fees;
$108,239 in salary expenses; $23,578 in general office expenses; $27,179 in
professional fees; $28,623 in rent, utilities and telephone expenses and $5,747
in expenses related to interest and bank charges.
We expect expenses related to research and development and administrative
expenses to continue to be a material component of our expenses during the
start-up phase of our development. We anticipate that professional fees will
increase during the start-up phase of our development and as we complete the
Exchange Act registration process. We also anticipate that expenses related to
marketing and sales will increase substantially during the second quarter of
2000, as we begin an extensive campaign to market and promote our MindfulEye.com
web site.
Period from our inception on July 24, 1999 to December 31, 1999
The period from July 24, 1999 (inception) to December 31, 1999 was our first
period of operations. We had no revenues from operations. Our loss during this
period of $200,991 was as a result of developing our business plan, research and
development expenditures related to the development of our MindfulEye.com web
site and general overhead and administrative expenses. These expenses included
$106,369 in consulting fees; $46,037 in salary expenses; $19,039 in general
office expenses; $9,252 in professional fees; $9,193 in rent, utilities and
telephone expenses and $1,889 in expenses related to marketing and promotion.
We expect expenses related to research and development and administrative
expenses to continue to be a material component of our expenses during the
start-up phase of our development. We anticipate that professional fees will
increase during the start-up phase of our development and as we complete the
Exchange Act registration process. We also anticipate that expenses related to
marketing and sales will increase substantially during the second quarter of
2000, as we begin an extensive campaign to market and promote our MindfulEye.com
web site.
Liquidity and Capital Resources
On March 13, 2000, we completed a financing to raise $2,257,500 by issuing
1,075,000 units at $2.10 per unit, each unit consisting of one share of our
common stock and one-half warrant. Each whole warrant is be exercisable to
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acquire one additional common share of share of our common stock at $2.10 on or
before March 13, 2001 and $2.50 on or before March 13, 2002.
As of March 31, 2000, we had working capital of $1,609,211. Our expenses are
expected to rise dramatically. See "Our Plan of Operation."
Our Plan of Operation
We anticipate it will need the following financing to implement our business
plan and to meet our financial obligations for the year ending December 31,
2000.
<TABLE>
PERIOD
2000
----------------------------------------------------------------------------------------------------
DESCRIPTION 2nd Quarter 3rd Quarter 4th Quarter
Mar. - June July - Sept. Oct. - Dec.
---------------------------------------------- -----------------------------------------------------
$ $ $
---------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C>
Office and administration 56,761 71,080 46,240
Research and Development 82,700 64,197 103,030
Equipment 191,261 71,553 9,798
Marketing and Sales 6,624 106,707 207
Salaries and Consulting Fees 248,102 192,591 309,091
Misc. 257,180 41,704 37,653
Total expenditures 842,628 547,832 506,019
Working Capital end of Quarter 1,293,372(1) 745,540 239,521
----------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes projected expenditures for March 2000.
As of March 31, 2000, we had working capital of $1,609,211. We anticipate that
our working capital is sufficient to satisfy our cash requirements through our
fiscal year ending December 31, 2000.
We believe our estimates of our capital requirements to be reasonable. The
capital requirements are only estimates and can change for many different
reasons, some of which are beyond our control. We are a development stage
company and are the process of developing our technologies and marketing our
services to subscribers. We currently have no subscribers to our services and no
income from our operations or arrangements for financing, and there can be no
assurance that we will successful acquire financing on terms acceptable to us,
if at all.
Product Research and Development
We currently develop all of our technologies internally. We anticipate we will
spend approximately $1,800,000 to develop the technology related to our
MindfulEye services and support systems. We may also engage consultants to
assist us with product research and development, but currently have no
arrangements to do so.
The cost for developing technology is expensive and the process will require
testing and refinement. Our commercial success will depend on our ability to
attract subscribers to our MindfulEye.com Services. This will require us to
develop and use increasing sophisticated technologies to generate, sustain and
maintain user interest and satisfaction. See "Note Regarding Forward Looking
Statements."
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<PAGE>
We do not anticipate that our technologies will be ready to subscribe to until
at least the fourth quarter 2000. There can be no assurance that we will
successfully develop and test the technologies related to our MindfulEye.com
Services or contemplated in our business plan on a timely basis, if at all. A
substantial delay in obtaining the required financing or developing our
MindfulEye services and the support services for subscribers would have a
materially adverse effect on our business and results of operations. See "Note
Regarding Forward Looking Statements."
Acquisition of Equipment for Our Services
We also intend to acquire computer systems and to develop system software to
support our administrative offices and our subscription services. We anticipate
that the cost of such equipment and systems will be approximately $275,000
during the next twelve months.
Personnel
We have 13 employees, 7 are programmers and developers, who assist us in
development of our business and our internal operating and information systems.
We also employ 6 employees who are engaged in general and administrative and
marketing functions. We also engage Dave Edis of Interactive Tools, as a
consultant, to assist us in the development of our technologies, Tom Haibeck of
Haibeck Consulting to assist us with public relations, Lorna Fadden to assist us
with our NLP (matural language processing) development, Dov Litman to assist us
with analysis of data, and Geoff Lef to assist us with marketing. We may also
engage additional consultants in the future to assist us with the development of
software and information systems and implementation of our business plan.
We anticipate that during 2000, we will hire a Chief Executive Officer to
replace Tod Maffin, our Interim Chief Executive Officer, and to manage our
ongoing operations. We may also hire up to four employees to provide consumer
support services, three to providing marketing and sales support, four
information systems employees and two administration employees.
Our success will depend in large part on our ability to attract and retain
skilled and experienced employees and consultants. We do not anticipate any of
our employees will be covered by a collective bargaining agreement. We do not
currently have any key man life insurance on any of our directors or executive
officers.
Year 2000 Issues
We do not anticipate we will experience any material adverse construence as a
result of the Year 2000 issue.
ITEM 3 DESCRIPTION OF PROPERTY
We currently rent our principal business office at 114 West Magnolia Street,
Suite 400-117 Bellingham, Washington 98225 on a month to month basis for $150
per month.
MindfulEye.com Systems Inc., our operating subsidiary, leases approximately
5,000 square feet of office space at Suite 300, 355 Burrard Street, Vancouver,
BC for approximately US$8,340 per month. This lease expires on February 28,
2005.
We do not presently own or lease any other property or real estate.
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of
shares of Common Stock owned beneficially as of March 13, 2000 by: (i) each
person known to us to own more than five percent (5%) of any class of our voting
securities; (ii) each of our directors; and (iii) all our directors and officers
as a group. Unless otherwise indicated, the shareholders listed possess sole
voting and investment power with respect to the shares shown.
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<PAGE>
<TABLE>
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNER CLASS(1)
----------------------- -------------------------------------------- ----------------------------- -----------------
<S> <C> <C> <C>
Common Stock Tod Maffin 1,232,770 8.9%
111-1045 Haro Street
Vancouver, BC
Canada V6E 3Z8
----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Todd Cusolle 1,232,770 8.9%
701-1433 Beach Avenue
Vancouver, BC
Canada V6G 1Y3
----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Ray Torresan 1,232,770 8.9%
403-1000 Beach Avenue
Vancouver, BC
Canada V6E 4M2
----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Amanda Kerr 1,232,770 8.9%
198 Aquarius Mews
Vancouver, BC
Canada V6Z 2Y4
----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Varshney Capital Corp.(2) 1,719,389 12.4%
1304-925 West Georgia St
Vancouver, BC
Canada V6C 3L2
----------------------- -------------------------------------------- ----------------------------- -----------------
Common Stock Officers and Directors 6,650,469 48.1%
as a Group
----------------------- -------------------------------------------- ----------------------------- -----------------
</TABLE>
(1) Based on an aggregate 13,815,000 shares outstanding as of March 31, 2000.
(2) Varshney Capital Corp. is beneficially owned by Praveen Varshney, a
director of the company.
We are not aware of any arrangement, which might result in a change in control
in the future.
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Officers
All of our directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until their successors
are duly elected and qualified, unless they sooner resign or cease to be
directors in accordance with our Articles of Incorporation. We have not held an
annual regular general meeting and the next regular meeting is anticipated to be
held in May 2001. Our executive officers are appointed by and serve at the
pleasure of our Board of Directors.
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As at May 31, 2000, the following persons were our directors and/or executive
officers:
<TABLE>
Principal occupation and if not
at present an elected director,
Name and present office held Age Director since occupation during the preceding
five years
------------------------------- ------------------- ----------------------- -----------------------------------
<S> <C> <C> <C>
Tod Maffin, Director
Interim Chief Executive 28 March 2000 Internet Consultant
Officer
------------------------------- ------------------- ----------------------- -----------------------------------
Ray Torresan, Director, 37 March 2000 Corporate Communications
President Consultant
------------------------------- ------------------- ----------------------- -----------------------------------
Todd Cusolle, Director, VP 28 March 2000 Internet Programmer
Technology
------------------------------- ------------------- ----------------------- -----------------------------------
Amanda Kerr, Director, 29 March 2000 Internet Project Manager
Secretary, VP Operations
------------------------------- ------------------- ----------------------- -----------------------------------
Praveen Varshney, Director 34 March 2000 Chartered Accountant
------------------------------- ------------------- ----------------------- -----------------------------------
</TABLE>
The following is a brief biographical information on each of the officers and
directors of listed:
Tod Maffin, Interim Chief Executive Officer and Director
After a career in broadcast journalism and public relations, Mr. Maffin became a
founding staff member and Vice President, Marketing, for Emerge Online in March
1996. He then served as Executive Vice President, Marketing, at communicate.com
(formerly IMEDIAT Digital) from September 1998 to January 1999 when he left to
pursue a successful consulting practice securing clients that included AT&T,
Ericsson, Microcell, Mackenzie Financial, Netcom, The Investment Funds Institute
of Canada, Connex GSM, Telus, and others). He is editor of the
MobileCommerce.org and FutureFile.com newsletters and web sites and is a
national broadcaster and columnist. Mr. Maffin serves on the advisory board for
Microcell Solutions Inc. and Tech BC University. Mr. Maffin served as our
President from March 13, 2000 through April 28, 2000, when he was appointed as
our interim CEO. Mr. Maffin will dedicate approximately 40% of his business time
to the business affairs of the Company.
Ray Torresan, President and Director
Ray Torresan was president of Torresan Communications Inc., a leading financial
public relations firm based in Vancouver, until he left to start MindfulEye.com
in 1999. Mr. Torresan has been active in corporate communications in Vancouver
and Toronto with the Torresan group of companies since the early 1980s. He is an
Accredited Public Relations Practitioner (APR), certified by the Canadian Public
Relations Society, a Certified Advertising Agency Practitioner (CAAP),
accredited by the Institute of Canadian Advertising. He has served as a director
of St. Paul's Hospital in Vancouver since 1998 and is involved as a director in
various charitable organizations. Mr. Torresan will serve as President on a
full-time basis.
Todd Cusolle, VP Technology and Director
Mr. Cusolle served as a senior developer and architect at Quadravision
Communications (now Bowne Internet) from December 1995 to August 1996, Emerge
Online from August 1996 until September 1998, Communicate.com from September
1998 to January 1999, and at RLG netPeformance from January 1999 to July 1999.
While working with these organizations Mr. Cusolle lead the development of some
of the largest investment and financial web sites, including HSBC USA, TD Bank,
Comerica Bank, Fleet Bank USA, Canada Trust, Canadian Corporate News, Bayshore
Trust. Mr. Cusolle will serve as President on a full-time basis.
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Amanda Kerr, VP Operations, Secretary and Director
Ms. Kerr served as a senior project manager for Emerge Online from July 1996 to
September 1998 and as senior project manager for communicate.com (formerly
IMEDIAT Digital) from October 1998 to July 1999. Ms. Kerr managed the
development of large-scale transaction web sites such as London Drugs
PhotoStation, CKWX News1130, HSBC Bank USA (formerly Marine Midland Bank) and
the Jim Pattison Trade Group web site and extranet while at Emerge Online and
communicate.com. Ms. Kerr owned a web consulting firm from May 1994 to December
1996. Ms. Kerr will serve as VP of operations on a full-time basis.
Praveen Varshney, Director
Mr. Varshney is a Chartered Accountant. He obtained his CA designation in 1990
from the Institute of Chartered Accountants of B.C. and graduated from the
University of British Columbia in 1987 with a degree in Bachelor of Commerce in
Accounting. He was a consultant for the Varshney Chowdhry Group, a venture
capital firm, from 1993 to 1999, and Varshney Capital Corp., a merchant banking
and venture capital firm in which he is a principal and co-founder, from 1999 to
present. From 1987 to 1991, he was with KPMG, Chartered Accountants. Mr.
Varshney is a member of the Vancouver chapters of The Young Entrepreneurs
Organization (Y.E.O.) and The IndUS Entrepreneurs (T.I.E.).
Additional Information
Members of our Board of Directors are elected by our shareholders to represent
the interests of all our shareholders. Our Board of Directors meets periodically
to review significant developments affecting us and our business and to act on
matters requiring Board approval. Although our Board of Directors may delegate
many matters to others, it reserves certain powers and functions to itself. The
only standing committee of the Board of Directors of the Registrant is an Audit
Committee. The Audit Committee currently consists of Ray Torresan and Amanda
Kerr. This committee is directed to review the scope, cost and results of the
independent audit of our books and records, the results of the annual audit with
management and the adequacy of our accounting, financial and operating controls;
to recommend annually to our Board of Directors the selection of the independent
auditors; to consider proposals made by our independent auditors for consulting
work; and to report to our Board of Directors, when so requested, on any
accounting or financial matters.
None of the our directors or executive officers are parties to any arrangement
or understanding with any other person pursuant to which the individual was
elected as a director or officer.
None of our directors or executive officers has any family relationship with any
other officer or director.
None of the officers or directors of the Registrant have been involved in the
past five years in any of the following: (1) bankruptcy proceedings; (2) subject
to criminal proceedings or convicted of a criminal act; (3) subject to any
order, judgment or decree entered by any court limiting in any way his or her
involvement in any type of business, securities or banking activities; or (4)
subject to any order for violation of federal or state securities laws or
commodities laws.
Advisory Board
Our advisory board consists of various individuals that assist the company in
strategic and business development. Our advisory board consists of the following
individuals:
-19-
<PAGE>
--------------------------- ------------------------------ ---------------------
Name Title Company
City
--------------------------- ------------------------------ ---------------------
Tim Hockey Vice President Canada Trust
Investment & Banking Toronto ON
--------------------------- ------------------------------ ---------------------
Jeff Brock Principal Sierra Systems
E-Commerce Seattle WA USA
--------------------------- ------------------------------ ---------------------
Joel Chamish President PickYourPresent.com
Vancouver BC
--------------------------- ------------------------------ ---------------------
Edward Trapunski Editor, Silicon Valley N. Globe and Mail
Writer, Globe and Mail Toronto ON
--------------------------- ------------------------------ ---------------------
Chris Merry Vice President Merrill Lynch
Toronto ON
--------------------------- ------------------------------ ---------------------
Pat Dunwoody (f) Assistant Vice President Trimark Investments
Toronto ON
--------------------------- ------------------------------ ---------------------
Larry Cardy Vice President Canada NewsWire
Western Canada Vancouver BC
--------------------------- ------------------------------ ---------------------
Lynn Richards Vice President Horizon Computer
Surrey BC
--------------------------- ------------------------------ ---------------------
Richard Ketchen Owner Ketchen & Company
West Vancouver BC
--------------------------- ------------------------------ ---------------------
Jacqueline Voci Manager Pivotal Corporation
Corporate Cmns. North Vancouver BC
--------------------------- ------------------------------ ---------------------
ITEM 6 EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table sets forth compensation information for our year ended
December 31, 1999 and anticipated compensation for our year ended December 31,
2000:
-20-
<PAGE>
<TABLE>
=========================================================================================================================
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
------------------------ -----------
Awards Pay-outs
-------- ------------ ----------- ----------- ------------ -----------
Other
Annual Restricted Securities All Other
Compen-satioStock Under-lying Compen-
Name and Salary Bonus ($) Award(s) Options/ LTIP sation
Principal Position Year Ended ($) ($) ($) SARs (#) Payouts ($)
---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tod Maffin, (1) Not Not Not Not Not Not
Interim CEO, 12/31/00 69,000 available available available available available available
Director
---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
Todd Cusolle, (1) Not Not Not Not Not Not
VP Technology, 12/31/00 89,700 available available available available available available
Director
---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
Amanda Kerr, (1) Not Not Not Not Not Not
VP Operations, 12/31/00 69,000 available available available available available available
Secretary,
Director
---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
Ray Torresan, (1) 12/31/99 Not Not Not Not Not Not
President, 12/31/00 69,000 available available available available available available
Director
---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
Carmine J. Bua (2) 12/31/00 Nil Nil Nil Nil Nil Nil Nil
President and 12/31/99 Nil Nil Nil Nil Nil Nil Nil
Director
---------------------- -------------- -------- ------------ ----------- ----------- ------------ ----------- ------------
John A. Meyer (3) 12/31/00 8,400 Nil Nil Nil Nil Nil Nil
President and
Director
=========================================================================================================================
</TABLE>
(1) Appointed on March 13, 2000.
(2) Mr. Bua served as our President and Director from November 12, 1999 to
January 24, 2000.
(3) Mr. Meyer served as our President and Director from January 24, 2000 to
March 13, 2000.
Our Directors do not receive any stated salary for their services as directors
or members of committees of the Board of Directors, but by resolution of the
Board, a fixed fee and expenses of attendance may be allowed for attendance at
each meeting. Directors may also serve our company in other capacities as an
officer, agent or otherwise, and may receive compensation for their services in
such other capacity.
Stock Options
On April 28, 2000, our board of directors approved and adopted our 2000 Stock
Option Plan. Under the plan, the board of directors may grant incentive and
non-qualified options to acquire up to a total of 3,000,000 shares of our common
stock to our directors, officers, employees and consultants.
-21-
<PAGE>
The plan is intended to retain the services of our valued key employees and
consultants and others that the plan administrator may select to:
encourage our employees and consultants to acquire a greater proprietary
interest in Mindfuleye, Inc.;
serve as an aid and inducement in the hiring of new employees; and
provide an equity incentive to consultants and others selected by the plan
administrator.
The primary difference between "incentive stock options" and non-qualified
options is the tax treatment of the option holder. If a holder complies with
Internal Revenue Service rules regarding incentive stock options, a holder of an
incentive stock can defer recognition of income for tax purposes until the
shares underlying the options are sold. A holder of a non-qualified option
generally recognizes income on the date of exercise. Incentive stock options may
be granted to any individual who, at the time the option is granted, is an
employee of China Broadband or any related corporation. Non-qualified stock
options may be granted to employees and to others at the discretion of the plan
administrator. The plan administrator fixes the exercise price for options in
the exercise of its sole discretion, except that the exercise price for an
incentive stock option must be at least the fair market value per share of the
common stock at the date of grant (as determined by the plan administrator in
good faith), or in the case of greater-than ten percent shareholders, at least
one hundred ten percent of the fair market value per share. The exercise price
may be paid in cash or, with the approval of the plan administrator, by other
means, including withholding of option shares or delivery of previously held
shares. Options granted under the plan vest over a three-year period, with
one-third becoming exercisable at the end of each of the three years following
the date of grant. The plan administrator may accelerate the vesting of options
in its sole discretion.
Options are non-transferable except by will or the laws of descent and
distribution or subject to a qualified domestic relations order. With some
exceptions, vested but unexercised options terminate upon the earlier of:
o the expiration of the option term specified by the plan administrator
at the date of grant (generally 10 years; or, with respect to
incentive stock options granted to greater-than ten percent
shareholders, a maximum of five years);
o the expiration of 30 days from the date of an employee optionee's
termination of employment with us or any related corporation "for
cause" as defined in the plan;
o the expiration of 90 days from the date of an employee optionee's
termination of employment with us or any related corporation for any
reason whatsoever other than for cause, death or disability (unless,
in the case of non-qualified stock options, extended by the plan
administrator); or
o the expiration of one year from the date of death or disability (as
defined in the plan) of the optionee.
If an employee optionee's employment is terminated by death, any option held by
the optionee is exercisable only by the person or persons to whom such
optionee's rights under the option pass by the optionee's
We have reserved 2,075,250 shares for issuance pursuant to our 2000 Stock Option
Plan. We anticipate we will issue shares to certain of our directors, executive
officers and consultants during our second fiscal quarter ending June 30, 2000.
We intend to register our stock option plan under the Securities Act after we
adopt a plan and this registration statement is declared effective.
-22-
<PAGE>
We intend to grant stock options to the following officers, directors and
consultants:
--------------------------------------------------------------------------------
Grantee(1) Number of Options Exercise Price
------------------------------------ --------------------- ---------------------
Tod Maffin, Interim CEO and Director 80,000 Not available(1)
------------------------------------ --------------------- ---------------------
Ray Torresan, President and Director 200,000 Not available(1)
------------------------------------ --------------------- ---------------------
Todd Cusolle, VP Technology and 200,000 Not available(1)
Director
------------------------------------ --------------------- ---------------------
Amanda Kerr, VP Operations, 200,000 Not available(1)
Secretary and Director
------------------------------------ --------------------- ---------------------
Employee pool 2,320,000(2) Not available(1)
--------------------------------------------------------------------------------
(1) We intend to determine the exercise price on the date of grant based on the
fair market value of our shares.
(2) We intend to use the employee pool to grant options to our current and
future employees.
Employment Agreements
We currently have employment agreements with the following employees:
Heather Macintosh: Under the terms of our employment agreement dated
February 1, 2000. The agreement is for a term of 1 year. We also agreed to
issue Ms. Macintosh options to acquire shares our common stock under a
stock option plan.
Xiaowei (William) Tang: Under the terms of our employment agreement dated
February 17, 2000. The agreement is for a term of 1 year. We also agreed to
issue Mr. Tang options to acquire shares of our common stock under a stock
option plan.
Steve Ritchie: Under the terms of our employment agreement dated February
16, 2000. The agreement is for a term of 1 year. We also agreed to issue
Mr. Ritchie options to acquire shares of our common stock under a stock
option plan.
Edna (Rox) Zurbuchen: Under the terms of our employment agreement dated
February 1, 2000. The agreement is for a term of 1 year. We also agreed to
issue Ms. Zurbuchen options to acquire shares of our common stock under a
stock option plan.
Dr. Maria-Teresa (MAITE) Taboada: Under the terms of our employment
agreement dated March 2, 2000. The agreement is for a term of 1 year. We
also agreed to issue Dr. Taboada options to acquire shares of our common
stock under a stock option plan.
Mr. Ashley Webster: Under the terms of our employment agreement dated
February 29, 2000. The agreement is for a term of 1 year. We also agreed to
issue Mr. Webster options to acquire shares of our common stock under a
stock option plan.
Leonard Nelson: Under the terms of our employment agreement dated June 1,
2000. The employment agreement is for a term of 1 year. We also agreed to
issue Mr. Nelson options to acquire shares of our common stock under a
stock option plan.
Pravin Shaw: Under the terms of our employment agreement dated June 1,
2000. The employment agreement is for a term of 1 year. We also agreed to
issue Mr. Shaw options to acquire shares of our common stock under a stock
option plan.
Pedro Lam: Under the terms of our employment agreement dated April 1, 2000.
The employment agreement is for a term of 1 year. We also agreed to issue
Mr. Lam options to acquire shares of our common stock under a stock option
plan.
-23-
<PAGE>
We currently have no other employment, consulting or other service contracts or
arrangements between us or our subsidiaries and our directors and/or executive
officers.
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise disclosed herein, no director, senior officer, principal
shareholder, or any associate or affiliate thereof, had any material interest,
direct or indirect, in any transaction since our organization that had or is
anticipated to have a materially affect on us or our business, or any proposed
transaction that would materially affect us or our business, except for an
interest arising from the ownership of our shares where the member will receive
no extra or special benefit or advantage not shared on a pro rata basis by all
holders of shares in our capital.
o We acquired our business and technologies by acquiring all of the
issued and outstanding shares of MindfulEye Systems Inc., our
wholly-owned subsidiary. Pursuant to a share purchase agreement
effective March 13, 2000, we issued 6,910,000 shares of our common
stock in exchange for all of the issued and outstanding shares of
MindfulEye Systems to the following MindfulEye shareholders:
---------------------------------------------------------------------
Shareholder Number of Shares
---------------------------------------------------------------------
Tod Maffin 1,232,770
---------------------------------------------------------------------
Todd Cusolle 1,232,770
---------------------------------------------------------------------
Ray Torresan 1,232,770
---------------------------------------------------------------------
Amanda Kerr 1,232,770
---------------------------------------------------------------------
Roger Mutimer 259,531
---------------------------------------------------------------------
Varshney Capital Corp., a British 1,719,389
Columbia company
---------------------------------------------------------------------
Total 6,910,000
---------------------------------------------------------------------
o We repaid a loan from Varshney Capital Corp. to MindfulEye.com
Services, Inc. in connection with our acquisition of Mindful eye.
Services Inc.
o MindfulEye, our subsidiary, leases its office space from Marine
Building Holdings Ltd. and Omers Realty Corporation, collectively
See "Description of Business-- Our Acquisition of MindfulEye.com Systems, Inc."
We believe that all of the above described transactions are on as favorable
terms to us as such agreements could have been negotiated at arms' length with
unrelated third-parties.
ITEM 8 DESCRIPTION OF SECURITIES
Our authorized capital consists of 100,000,000 shares of common stock with a par
value of $0.001 per share. At March 13, 2000, there were 13,815,000 shares
issued and outstanding and we reserved for issuance an additional 537,500 shares
for issuance pursuant to warrants and 2,072,250 shares for issuance pursuant to
incentive stock option grants.
All shares are of the same class and have the same rights, preferences and
limitations. The holders of the shares are entitled to dividends in cash,
property or shares as and when declared by the Board of Directors out of funds
legally available therefor, to one vote per Share at meetings of our security
holders and, upon liquidation, to receive such assets as are distributable to
the holders of the shares. Upon any liquidation, dissolution or winding up of
our business proceeds, if any, after payment or provision for payment of all our
debts, obligations or liabilities shall be distributed to the holders of shares.
There are no pre-emptive rights or conversion rights attached to the Shares.
There are also no redemption or purchase for cancellation or surrender
provisions, sinking or purchase fund provisions, or any provisions as to
modification, amendment or variation of any such rights or provisions attached
to our shares.
-24-
<PAGE>
Our Outstanding Share Capital
Our business activities and operations have been funded to date through issuance
of shares of our common stock in the following transactions:
<TABLE>
-------------------------------------------------------------------------------------------------------------------------
Number of Shares Total Price of Shares($)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Founders shares issued at par value (post-forward 5,250,000(1)(2) 70,000(1)(2)
split)
-------------------------------------------------------------------------------------------------------------------------
Issued for cash at $0.0066 per share (post-forward split) 1,500,000(1)(2) 10,000(1)(2)
-------------------------------------------------------------------------------------------------------------------------
Issued as consideration for the acquisition of all the 6,910,000
issued and outstanding shares of MindfulEye.com Systems
Inc. (3)
-------------------------------------------------------------------------------------------------------------------------
Cancellation/Surrender of 920,000 shares(4) (920,000)
-------------------------------------------------------------------------------------------------------------------------
Issued for cash at $2.10 per share(5) 1,075,000 2,257,500
-------------------------------------------------------------------------------------------------------------------------
TOTAL 13,815,000
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On a post-forward split basis. On June 20, 1998, we amended our
Articles of Incorporation to increase the authorized share capital
from 100,000 to 100,000,000 common shares with a par value of $0.001
and to affect a forward split of our issued and outstanding share
capital on a five shares for one share basis. Prior to the forward
split, we had 90,000 issued and outstanding shares of common stock,
with a par value of $0.25 each, and after giving effect to the forward
split, such shares were automatically reclassified and changed into
450,000 fully-paid and non-assessable shares of common stock, with a
par value of 0.001 each.
(2) On January 4, 2000 we amended our Articles of Incorporation to affect
a forward share split of our issued and outstanding share capital on a
fifteen shares for one share basis. Prior to the forward split, we had
450,000 shares of issued and outstanding shares of common stock, with
a par value of $0.001, and after giving effect to the forward split,
such shares were automatically reclassified and changed into 6,750,000
fully paid and non-assessable shares of common stock, with a par value
of $0.001, without increasing or decreasing the amount of our capital
or paid-in surplus.
(3) On January 25, 2000, we agreed to acquire all of the issued and
outstanding shares of MindfulEye.com, our subsidiary for 6,910,000
shares of common stock.
(4) On March 13, 2000, 920,000 shares of common stock issued to John Meyer
were contributed to the company and cancelled since John Meyer
resigned as a an officer and a director of the company and will no
longer play an active role.
(5) We completed a private placement of 1,075,000 units at $2.10 per unit,
each unit consisting of one share of our common stock and one-half
warrant. Each whole warrant is be exercisable to acquire one
additional common share of our common stock at $2.10 on or before
March 13, 2001 and $2.50 on or before March 13, 2002.
-25-
<PAGE>
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER RELATED STOCKHOLDER MATTERS
On November 20, 1998, our common stock was approved for trading on the OTCBB
under the symbol "RBTC". There was no material market for our common shares and
no trades of our shares from November 20, 1998 to February 29, 2000. On May 12,
2000, we changed our name to MindfulEye.com, and our trading symbol was changed
to "MEYI."
On May 26, 2000, the last reported price of our common stock quoted by on the
National Quotation Bureau Inc.'s "pink sheets" was $3.187.
We have not declared or paid any cash dividends on our common stock since our
inception, and our Board of Directors currently intends to retain all earnings
for use in the business for the foreseeable future. Any future payment of
dividends will depend upon our results of operations, financial condition, cash
requirements, and other factors deemed relevant by our Board of Directors.
ITEM 2 LEGAL PROCEEDINGS
We are not a party to, and none of our property is subject to, any pending or
threatened legal proceeding.
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
From our inception to December 31, 1981, we issued 5,250,000 (70,000 pre-5:1 and
15:1 split) shares of our common stock for cash of $70,000. We issued these
shares in connection with the initial seed capital investment and the
organization of our corporation. At the time these shares were issued, we were a
shell company with no material business or assets, and there was no market for
our common stock. The issuance of those shares was exempt from registration
under the provisions of Section 4(2) of the Securities Act of 1933, as amended.
The issuance of the shares did not involve a public offering.
On May 1, 1998, we issued 750,000 (10,000 pre-5:1 and 15:1 split)(1) shares to
Randall Trover, our then President and director, for $2,500 and 750,000 (10,000
pre-5:1 and 15:1 split) shares to Adrienne Barnett, our then vice president of
business development, for $2,500. At the time these shares were issued, we were
a shell company with no material business or assets, and there was no market for
our common stock. The issuance of those shares was exempt from registration
under the provisions of Section 4(2) of the Securities Act of 1933, as amended.
The issuance of the shares did not involve a public offering.
(1) After giving effect to a five for one forward split on June 20, 1998 and a
fifteen for one forward split on January 4, 2000.
In early 2000, we began negotiations to acquire MindfulEye Systems, Inc.. At the
time the negotiations began there was no market for our shares. On January 25,
2000, we entered into a letter agreement to acquire all of the issued and
outstanding shares of MindfulEye Systems for 6,910,000 shares of our common
stock. On March 13, 2000, we closed the acquisition of MindfulEye Systems and
issued 6,910,000 pursuant to a definitive agreement and issued 6,910,000 shares
of our common stock, which represents approximately 50% of our issued capital.
These shares were issued to Tod Maffin, Todd Cusolle, Ray Torresan, Amanda Kerr,
Roger Mutimer and Praveen Varshney for all of the issued and outstanding shares
of common stock of MindfulEye Systems. The shares were issued pursuant
-26-
<PAGE>
to an exemption from registration pursuant to Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended. The issuance of the
shares did not involve a public offering.
Pursuant to a resolution of the Board of Directors dated March 13, 2000, we
issued 1,075,000 units to Soledad Holdings Ltd., a company controlled by Kelley
Cook, at the price of $2.10 per unit to raise $2,257,500. Each unit consisted of
one share of our common stock and one half of one non-transferable share
purchase warrant. The offering was not underwritten. The offer and sale was made
to non-U.S. persons outside of the United States and was exempt from
registration in reliance upon under Regulation S promulgated under the
Securities Act of 1933, as amended. The issuance of the shares did not involve a
public offering.
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Bylaws require us to indemnify to the fullest extent permitted by law each
person that is empowered by law to indemnify. Our Articles of Incorporation
require us to indemnify to the fullest extent permitted by Nevada law, each
person that we have the power to indemnify.
Nevada law permits a corporation, under specified circumstances, to indemnify
its directors, officers, employees or agents against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit, or proceeding
brought by third parties by reason of the fact that they were or are directors,
officers, employees or agents of the corporation, if such directors, officers,
employees or agents acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reason to believe their
conduct was unlawful. In a derivative action, i.e. one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Our Articles of Incorporation and Bylaws also contain provisions stating that no
director shall be liable to us or any of our stockholders for monetary damages
for breach of fiduciary duty as a director, except with respect to (1) a breach
of the director's duty of loyalty to the corporation or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) liability under Nevada law (for unlawful payment
of dividends, or unlawful stock purchases or redemptions) or (4) a transaction
from which the director derived an improper personal benefit. The intention of
the foregoing provisions is to eliminate the liability of our directors or our
stockholders to the fullest extent permitted by Nevada law.
-27-
<PAGE>
PART F/S
FINANCIAL STATEMENTS
Consolidated Financial Statements for MindfulEye.com Systems Inc. for the Year
Ended December 31, 1999
Consolidated Financial Statements for Rabatco, Inc. for the Year Ended December
31, 1999
Unaudited Consolidated Financial Statements for Rabatco, Inc. for the Fiscal
Quarter Ended March 31, 2000
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
<PAGE>
DAVIDSON & COMPANY Chartered Accountants A Partnership of Incorporated
Professionals
INDEPENDENT AUDITORS' REPORT
To the Directors of
MindfulEye.com Systems Inc.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
We have audited the accompanying balance sheet of MindfulEye.com Systems Inc.
(formerly Investortrack.com Technologies Inc.) as at December 31, 1999 and the
related statement of operations, changes in stockholders' equity and cash flows
for the period from date of incorporation on July 21, 1999 to December 31, 1999.
These financial statements, expressed in Canadian dollars, are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that
MindfulEye.com Systems Inc. will continue as a going concern. As discussed in
Note 1 to the financial statements, unless the Company attains future profitable
operations and/or obtains additional financing, there is substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regards to these matters are discussed in Note 1. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of MindfulEye.com Systems Inc. (formerly
Investortrack.com Technologies Inc.) as at December 31, 1999 and the results of
its operations, changes in its stockholders' equity and its cash flows for the
period from date of incorporation on July 21, 1999 to December 31, 1999 in
accordance with generally accepted accounting principles in the United States of
America.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
February 7, 2000
A Member of SC INTERNATIONAL
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Centre, Vancouver, BC, Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
BALANCE SHEET
(Expressed in Canadian Dollars)
AS AT DECEMBER 31, 1999
================================================================================
<TABLE>
ASSETS
Current
<S> <C>
Cash $ 9,411
Accounts receivable 2,397
-------------
Total current assets 11,808
Capital assets (Note 3) 35,155
-------------
$ 46,963
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities $ 27,047
-------------
Total current liabilities 27,047
Long-term debt (Note 4) 309,000
-------------
336,047
Stockholders' equity
Capital stock
Authorized
100,000 common shares without par value
Issued and outstanding
December 31, 1999 - 160 common shares 2
Deficit accumulated during the development stage (289,086)
-------------
(289,084)
$ 46,963
===============================================================================================
</TABLE>
Nature and continuance of operations (Note 1)
Subsequent events (Note 9)
On behalf of the Board:
Director Director
---------------------------- -------------------------------
The accompanying notes are an integral part of
these financial statements.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Expressed in Canadian Dollars)
PERIOD FROM DATE OF INCORPORATION ON JULY 21, 1999 TO DECEMBER 31, 1999
================================================================================
<TABLE>
ADMINISTRATIVE EXPENSES
<S> <C>
Amortization $ 3,270
Consulting fees 158,033
Contract work 1,900
Insurance 500
Interest and bank charges 6,442
Investor relations 2,806
Legal and audit fees 13,745
Office and miscellaneous 21,342
Rent and utilities 10,072
Telephone and communications 3,587
Wages and benefits 67,389
-------------
Loss for the period $ 289,086
=================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in Canadian Dollars)
================================================================================
<TABLE>
Deficit
Accumulated
Common Stock During the Total
----------------------------- Development Stockholders'
Shares Amount Stage Equity
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, July 21, 1999 - $ - $ - $ -
Common stock issued 160 2 - 2
Loss for the period - - (289,086) (289,086)
------------ -------------- -------------- --------------
Balance, December 31, 1999 160 $ 2 $ (289,086) $(289,084)
============================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Expressed in Canadian Dollars)
PERIOD FROM DATE OF INCORPORATION ON JULY 21, 1999 TO DECEMBER 31, 1999
================================================================================
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (289,086)
Adjustment to reconcile net loss to net cash from operating activities:
Amortization 3,270
Changes in non-cash working capital items:
Increase in accounts receivable (2,397)
Increase in accounts payable and accrued liabilities 27,047
-------------
Net cash used in operating activities (261,166)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of capital assets (38,425)
-------------
Net cash used in investing activities (38,425)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 309,000
Issuance of capital stock 2
-------------
Net cash provided by financing activities 309,002
-------------
Change in cash position during the period 9,411
Cash position, beginning of period -
------------
Cash position, end of period $ 9,411
============================================================================================================
</TABLE>
Supplemental disclosure with respect to cash flows (Note 7)
The accompanying notes are an integral part of
these financial statements.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
================================================================================
1. NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated on July 21, 1999 under the laws of British
Columbia. The Company is in the development stage and is currently
developing a subscription-based service for the retail and institutional
investment community that delivers proprietary content directly to
subscribers by wireless devices, fax, email, and the web.
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan in
this regard to obtain additional working capital through equity financings.
========================================================================
Working capital (deficiency) $ (15,239)
Deficit accumulated during the development stage (289,086)
========================================================================
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Capital assets
Capital assets are recorded at cost less accumulated amortization.
Amortization is being provided for annually, using the declining balance
method at the following rates:
Computer hardware 30%
Computer software 100%
Financial instruments
The Company's financial instruments consist of cash, accounts receivable,
accounts payable and accrued liabilities and long term debt. Unless
otherwise noted, it is management's opinion that the Company is not exposed
to significant interest, currency or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards. Deferred
tax expenses (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" which establishes accounting
and reporting standards for derivative instruments and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In June 1999, the FASB issued SFAS 137 to
defer the effective date of SFAS 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. The Company does not anticipate that the
adoption of the statement will have a significant impact on its financial
statements.
Comprehensive income
In 1999, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total stockholders'
equity as of December 31, 1999.
Software development
The Company has adopted Statement of Position 98-1 ("SOP 98-1"),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", as its accounting policy for internally developed computer
software costs. Under SOP 98-1, computer software costs incurred in the
preliminary development stage are expensed as incurred. Computer software
costs incurred during the application development stage are capitalized and
amortized over the software's estimated useful life.
3. CAPITAL ASSETS
================================================================================
Accumulated Net
Cost Amortization Book Value
-------------------------------------------------------------------------------
Computer hardware $ 32,604 $ 2,050 $ 30,554
Computer software 5,821 1,220 4,601
-------------- -------------- --------------
$ 38,425 $ 3,270 $ 35,155
================================================================================
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
================================================================================
4. LONG-TERM DEBT
==========================================================================
Note payable to a related party, bearing interest
at the prime rate of Bank of Montreal plus 2%, or
10% if undeterminable; secured; repayable on either
receipt of proceeds from second round Phase II
Equity financing or Initial Public Offering,
whichever is earlier. $ 309,000
==========================================================================
5. RELATED PARTY TRANSACTIONS
The Company had the following balances owing to or from directors, officers
or companies in which directors or officers have an interest:
======================================================================
Accounts payable and accrued liabilities $ 8,040
Long-term debt 309,000
======================================================================
During the period, the Company included in its expenses the following
amounts paid or payable to directors, officers and companies in which its
directors have an interest.
======================================================================
Consulting fees $ 142,543
Investor relations 2,266
Legal and audit fees 210
Office and miscellaneous 3,743
Telephone and communications 1,230
======================================================================
6. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may incorrectly
recognize the year 2000 as some other date, resulting in errors. The
effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000 and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems
failure which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
7. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
================================================================================
December 31,
1999
--------------------------------------------------------------------------------
Cash paid for income taxes $ -
Cash paid for interest -
================================================================================
There were no non-cash investing and financing transactions during the
period from incorporation on July 21, 1999 to December 31, 1999.
<PAGE>
MINDFULEYE.COM SYSTEMS INC.
(formerly Investortrack.com Technologies Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
DECEMBER 31, 1999
================================================================================
8. INCOME TAXES
The Company's total deferred tax asset is as follows:
Net operating loss carryforward $ 98,289
Valuation allowance (98,289)
----------------
$ -
================
The Company has a net operating loss carryforward of approximately $289,086
which expires in 2006. The Company provided a full valuation allowance on
the deferred tax asset because of the uncertainty regarding realizability.
9. SUBSEQUENT EVENTS
The following events occurred subsequent to December 31, 1999:
a) On January 21, 2000, the Company issued 53 common shares to a company
in which its director has an interest.
b) On January 25, 2000, the shareholders of the Company entered into a
letter of intent with Rabatco, Inc ("Rabatco") to sell all of the
Company's issued and outstanding common shares in exchange for
6,910,000 common shares of Rabatco at a deemed value of US$0.01 per
share and cash proceeds in the amount of US$150,000.
The term of the Letter of Intent between the shareholders of the
Company and Rabatco include the following provision:
i) Rabatco will complete a private placement financing of
US$2,257,500 at US$2.10 per unit. Each unit consisting of one
share and one half share purchase warrant exercisable at US$2.10
in the first year and US$2.50 in the second year.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
DAVIDSON & COMPANY Chartered Accountants A Partnership of Incorporated
Professionals
INDEPENDENT AUDITORS' REPORT
To the Directors and Stockholders of
Rabatco, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Rabatco, Inc. (A Development
Stage Company) as at December 31, 1999 and 1998 and the related statements of
operations, changes in stockholders' equity and cash flows for the years then
ended and the cumulative amounts from inception on June 16, 1977 to December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Rabatco, Inc. (A Development Stage Company)
as at December 31, 1999 and 1998 and the results of its operations and the
changes in its stockholders' equity and its cash flows for the years then ended
and the cumulative amounts from inception on June 16, 1977 to December 31, 1999
in conformity with generally accepted accounting principles in the United States
of America.
The accompanying financial statements have been prepared assuming that Rabatco,
Inc. will continue as a going concern. The Company is in the development stage
and does not have the necessary working capital for its planned activity which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are discussed in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
February 16, 2000
A Member of SC INTERNATIONAL
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Centre, Vancouver, BC, Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
<PAGE>
RABATCO, INC.
(A Development Stage Company)
BALANCE SHEETS
AS AT DECEMBER 31
================================================================================
<TABLE>
1999 1998
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ - $ -
----------- -----------
Total current assets $ - $ -
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ - $ -
----------- -----------
Total current liabilities - -
----------- -----------
STOCKHOLDERS' EQUITY
Common stock
Authorized
100,000,000 common shares with a par value of $0.001
Issued and outstanding
December 31, 1999 - 6,750,000 common shares (1998 - 6,750,000) 6,750 6,750
Additional paid-in capital 73,250 79,325
Deficit accumulated during the development stage (80,000) (80,000)
----------- -----------
Total Stockholders' Equity - -
----------- -----------
$ - $ -
===========================================================================================================
</TABLE>
On behalf of the Board:
Director Director
---------------------------- -------------------------------
The accompanying notes are an integral part of
these financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31
================================================================================
<TABLE>
Cumulative
Amounts from
June 16,
1977
(Date of
Inception) to Year Ended Year Ended
December 31, December 31, December 31,
1999 1999 1998
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
OPERATING EXPENSES
Consulting fees 80,000 - 10,000
--------------- --------------- --------------
Loss for the year $ 80,000 $ - $ 10,000
===========================================================================================================
Basic and diluted loss per share $ (0.00) $ (0.01)
===========================================================================================================
Weighted average number of shares outstanding 6,750,000 6,750,000
===========================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
================================================================================
<TABLE>
Cumulative
Amounts from
June 16,
1977
(Date of
Inception) to Year Ended Year Ended
December 31, December 31, December 31,
1999 1999 1998
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (80,000) $ - $ (10,000)
Adjustments to reconcile net loss to net cash
provided by operating activities - - -
------------- ------------ ------------
Net cash used in operating activities (80,000) - (10,000)
------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities - - -
------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 80,000 - 10,000
------------- ------------ ------------
Net cash provided by financing activities 80,000 - 10,000
------------- ------------ ------------
Change in cash position for the year - - -
Cash position, beginning of year - - -
------------- ------------ ------------
Cash position, end of year $ - $ - $ -
===================================================================================================================
Amounts paid for:
Interest expense $ - $ - $ -
Income taxes - - -
===================================================================================================================
</TABLE>
Supplemental disclosure with respect to cash flows (Note 4)
The accompanying notes are an integral part of
these financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
================================================================================
<TABLE>
Deficit
Accumulated
Common Stock Additional During the Total
------------- -------------- Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, June 16, 1977 (date of inception) - $ - $ - $ - $ -
Issuance of common stock for cash at $0.013333
February 3, 1981 1,500,000 1,500 18,500 - 20,000
Issuance of common stock for cash at $0.013333
May 18, 1981 750,000 750 9,250 - 10,000
Issuance of common stock for cash at $0.013333
July 20, 1981 1,125,000 1,125 13,875 - 15,000
Issuance of common stock for cash at $0.013333
November 6, 1981 1,350,000 1,350 16,650 - 18,000
Issuance of common stock for cash at $0.013333
December 9, 1981 525,000 525 6,475 - 7,000
Net operating loss for the year ended
December 31, 1981 - - - (70,000) (70,000)
----------- ---------- ----------- ----------- ----------
Balance, December 31, 1996 5,250,000 5,250 64,750 (70,000) -
----------- ---------- ----------- ----------- ----------
Balance, December 31, 1997 5,250,000 5,250 64,750 (70,000) -
Issuance of common stock for cash at $0.006666
May 1, 1998 1,500,000 1,500 8,500 - 10,000
Net operating loss for the year ended
December 31, 1998 - - - (10,000) (10,000)
----------- ---------- ----------- ----------- ----------
Balance, December 31, 1998 6,750,000 6,750 73,250 (80,000) -
Net operating loss for the year ended
December 31, 1999 - - - - -
----------- ---------- ----------- ----------- ----------
Balance, December 31, 1999 6,750,000 $ 6,750 $ 73,250 $ (80,000) $ -
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
1. ORGANIZATION OF THE COMPANY
The Company was incorporated under the laws of the state of Nevada on June
16, 1977 with authorized common stock of 100,000 shares with par value of
$0.25. On June 20, 1998, the authorized common stock was increased to
100,000,000 shares with a par value of $0.001.
On June 20, 1998, the Company completed a forward common stock split of one
share of its outstanding stock for five shares. This report has been
prepared showing after stock split shares with a a par value of $0.001 from
its inception.
The Company has been in the development stage since its inception and has
been primarily engaged in the business of developing mining properties.
During 1982, the Company abandoned its remaining assets and settled its
liabilities and since that date has remained inactive.
2. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan in
this regard to obtain additional working capital through equity financings.
<TABLE>
=================================================================================
December 31, December 31,
1999 1998
---------------------------------------------------------------------------------
<S> <C> <C>
Deficit accumulated during the development stage $ (80,000) $ (80,000)
Working capital - -
=================================================================================
</TABLE>
3. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Cash and cash equivalents
The Company considers all investments with a maturity of three months or
less to be cash equivalents.
Loss per share
Earnings per share are provided in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings Per Share". Due to the Company's
simple capital structure, with only common stock outstanding, only basic
loss per share is presented. Basic loss per share is computed by dividing
losses applicable to common stockholders by the weighted average number of
common shares outstanding during the period.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards. Deferred
tax expenses (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" which establishes accounting
and reporting standards for derivative instruments and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In June 1999, the FASB issued SFAS 137 to
defer the effective date of SFAS 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. The Company does not anticipate that the
adoption of the statement will have a significant impact on its financial
statements.
Reporting on costs of start-up activities
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities" which provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle. The adoption during the current year of SOP 98-5 had no affect
on the Company's financial statements.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock.
Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total stockholders'
equity as of December 31, 1999.
4. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
There were no non-cash transactions during the years ended December 31,
1999 and 1998.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
5. INCOME TAXES
The Company's total deferred tax asset is as follows:
Net operating loss carryforward $ 3,400
Valuation allowance (3,400)
-----------
$ -
===========
The Company has a net operating loss carryforward of approximately $10,000
which expires in 2008. The Company provided a full valuation allowance on
the deferred tax asset because of the uncertainty regarding realizability.
6. SUBSEQUENT EVENTS
The following events occurred subsequent to year end:
a) On January 4, 2000, the Company implemented a 15:1 forward stock
split. The statement of changes in stockholder's equity has been
restated to give retroactive recognition of the stock split presented
by reclassifying from common stock to additional paid-in capital, the
par value of shares arising from the split. In addition, all
references to the number of shares and per share amounts of common
stock have been restated to reflect the stock split.
b) The Company cancelled 920,000 common shares.
c) On January 25, 2000, the Company entered into a Letter of Intent with
the shareholders of MindfulEye.com Systems Inc. ("MindfulEye") to
acquire all of the issued and outstanding common shares of MindfulEye
in exchange for cash payment of US$150,000 and issuance of 6,910,000
common shares at a deemed value of US$0.01.
The term of the Letter of Intent between the Company and the shareholders
of MindfulEye include the following provision:
i) The Company will complete a private placement financing of
US$2,257,500 at US$2.10 per unit. Each unit consists of one share
and one half share purchase warrant exercisable at US$2.10 in the
first year and US$2.50 in the second year.
As new shareholders of Rabatco, Inc. hold approximately 54% of the
outstanding shares of the Company after the combination, the business
combination of the two companies is to be accounted for as a capital
transaction accompanied by a recapitalization of MindfulEye.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
<PAGE>
RABATCO, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
================================================================================
<TABLE>
March 31, December 31,
2000 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,637,037 $ 6,520
Accounts receivable 8,875 1,661
Prepaid expenses 8,225 --
----------- -----------
Total current assets 1,654,137 8,181
Capital assets (Note 4) 148,675 23,662
----------- -----------
$ 1,802,812 $ 31,843
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 5,570 $ 18,740
Note payable (Note 5) 39,356 --
----------- -----------
Total current liabilities 44,926 18,740
Long-term debt (Note 6) -- 214,093
Due to related parties (Note 7) 100,000 --
----------- -----------
144,926 232,833
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock (Note 10)
Authorized
100,000,000 common shares with a par value of $0.001
Issued and outstanding
March 31, 2000 - 13,815,000 common shares (1999 - 6,750,000) 13,815 1
Additional paid-in capital 2,067,069 --
Cumulative translation adjustment 4,335 --
Deficit accumulated during the development stage (427,333) (200,991)
----------- -----------
Total Stockholders' Equity 1,657,886 (200,990)
----------- -----------
$ 1,802,812 $ 31,843
=========================================================================================================================
</TABLE>
History and organization of the Company (Note 1)
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
================================================================================
<TABLE>
Cumulative
Amounts from
July 21,
1999
(Date of Three Month
Inception) to Period Ended
March 31, March 31,
2000 2000
-----------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING EXPENSES
Amortization 9,240 6,954
Consulting fees 136,507 30,138
Contract work 1,279 -
Foreign exchange loss 6,412 -
Insurance 337 -
Interest and bank charges 10,083 5,747
Investor relations 1,889 -
Legal and audit fees 36,431 27,179
Office and miscellaneous 37,858 23,578
Rent and utilities 26,264 19,485
Telephone and communications 11,552 9,138
Wages and benefits 153,597 108,239
--------------- --------------
Loss before other item (431,449) (230,458)
--------------- --------------
OTHER ITEM
Interest income 4,116 4,116
--------------- --------------
Loss for the period $ (427,333) $ (226,342)
===============================================================================================
Basic and diluted loss per share $ (0.03)
===============================================================================================
Weighted average number of shares outstanding 8,754,945
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
================================================================================
<TABLE>
Cumulative
Amounts from
July 21,
1999
(Date of Three Month
Inception) to Period Ended
March 31, March 31,
2000 2000
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss $ (427,333) $ (226,342)
Other comprehensive income, net of tax:
Foreign currency translation adjustments 4,335 4,335
--------------- ---------------
Consolidated comprehensive loss $ (422,998) $ (222,007)
==================================================================================================
Basic and diluted comprehensive loss per share $ - $ (0.03)
==================================================================================================
Weighted average number of shares outstanding - 8,754,945
==================================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
================================================================================
<TABLE>
Cumulative
Amounts from
July 21,
1999
(Date of Three Month
Inception) to Period Ended
March 31, March 31,
2000 2000
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (427,333) $ (226,342)
Items not affecting cash:
Amortization 9,240 6,954
Changes in non-cash working capital items:
Increase in accounts receivable (8,875) (7,214)
Increase (decrease) in accounts payable and accrued liabilities 2,069 (16,670)
Increase in promissory note payable 16,240 30,000
Increase in prepaid expenses (8,225) (8,225)
----------- -----------
Net cash used in operating activities (416,884) (221,497)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of capital assets (157,915) (131,968)
Acquisition of investment in subsidiary (net of cash acquired) 2,257,500 2,284,384
----------- -----------
Net cash provided by investing activities 2,099,585 2,152,416
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1 --
Due to related parties (50,000) (50,000)
Repayment of long-term debt -- (214,093)
----------- -----------
Net cash used in financing activities (49,999) (264,093)
----------- -----------
Change in cash and cash equivalents for the period 1,632,702 1,666,826
Effect of exchange rates on cash and cash equivalents 4,335 4,335
Cash and cash equivalents, beginning of period -- 6,520
----------- -----------
Cash and cash equivalents, end of period $ 1,637,037 $ 1,677,681
=========================================================================================================================
</TABLE>
Supplemental disclosure with respect to cash flows (Note 11)
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
================================================================================
<TABLE>
Deficit
Accumulated
Additional During the Cumulative Total
Paid-in Development Translation Stockholders'
Shares Amount Capital Stage Adjustment Equity
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 21, 1999 -- $ -- $ -- $ -- $ -- $ --
Common stock issued 160 1 -- -- -- 1
Loss for the period -- -- -- (200,991) -- (200,991)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 160 1 -- (200,991) -- (200,990)
Common stock issued 53 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, March 13, 2000 213 1 -- (200,991) -- (200,990)
Capital stock of
MindfulEye at
March 13, 2000 (213) (1) 1 -- -- --
Capital stock of
Rabatco at
March 13, 2000 6,905,000 -- -- -- -- --
Shares issued to acquire
MindfulEye 6,910,000 6,910 2,073,973 -- -- 2,080,883
Adjustment to par value -- 6,905 (6,905) -- -- --
Loss for the period -- -- -- (226,342) 4,335 (222,007)
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2000 13,815,000 $ 13,815 $ 2,067,069 $ (427,333) $ 4,335 $ 1,657,886
======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated under the laws of the state of Nevada on June
16, 1977 with authorized common stock of 100,000 shares with par value of
$0.25. On June 20, 1998, the authorized common stock was increased to
100,000,000 shares with a par value of $0.001.
On June 20, 1998, the Company completed a forward common stock split of one
share of its outstanding stock for five shares. This report has been
prepared showing after stock split shares with a a par value of $0.001 from
its inception.
The Company has been in the development stage since its inception and has
been primarily engaged in the business of developing mining properties.
During 1982, the Company abandoned its remaining assets and settled its
liabilities and since that date remained inactive until March, 2000.
Effective March 13, 2000, the Company acquired all of the issued and
outstanding common stock of MindfulEye.com Systems, Inc. ("MindfulEye").
MindfulEye was incorporated on July 21, 1999, under the laws of British
Columbia. MindfulEye is in the development stage and is currently
developing a subscription-based service for the retail and institutional
investment community that delivers proprietary content directly to
subscribers by wireless devises, fax, e-mail and the web.
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
financial position, results of operations, changes in stockholders' equity
and cash flows at March 31, 2000 and for the periods then ended have been
made. These financial statements should be read in conjunction with the
audited financial statements of the Company for the year ended December 31,
1999. The results of operations for the period ended March 31, 2000 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2000.
2. BASIS OF PRESENTATION
These financial statements contain the financial statements of Rabatco,
Inc. ("Rabatco") and MindfulEye presented on a consolidated basis. On March
13, 2000, Rabatco acquired all of the issued and outstanding share capital
of MindfulEye by issuing 6,910,000 common shares (Note 7). As a result of
the share exchange, control of the combined companies passed to the former
shareholders of MindfulEye. This type of share exchange has been accounted
for as a capital transaction accompanied by a recapitalization of
MindfulEye. Recapitalization accounting results in consolidated financial
statements being issued under the name Rabatco, but are considered a
continuation of MindfulEye. As a result, the financial statements presented
represent the consolidated financial position of the above companies as at
March 31, 2000 and the results of operations and cash flows of MindfulEye
for the period from July 21, 1999 to March 31, 2000 and the results of
operations and cash flows of Rabatco from its deemed date of acquisition
during the period. The number of shares outstanding at March 31, 2000 as
presented are those of Rabatco.
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include Rabatco, Inc. and
MindfulEye.com Systems, Inc. All significant intercompany balances and
transactions have been eliminated upon consolidation.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Loss per share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). Under SFAS 128, basic and diluted earnings per share are to be
presented. Basic earnings per share is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding in the period. Diluted earnings per share takes into
consideration common shares outstanding (computed under basic earnings per
share) and potentially dilutive common shares.
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". A
deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carryforwards.
Deferred tax expenses (benefit) result from the net change during the year
of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" which establishes accounting
and reporting standards for derivative instruments and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In June 1999, the FASB issued SFAS 137 to
defer the effective date of SFAS 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. The Company does not anticipate that the
adoption of the statement will have a significant impact on its financial
statements.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
================================================================================
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components.
Financial instruments
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, promissory
note payable, long term debt and due to related parties. Unless otherwise
noted, it is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate
their carrying values, unless otherwise noted, except for due to related
parties which is undeterminable as they have no repayment terms.
Foreign currency translation
Translation amounts denominated in foreign currencies are translated into
United States currency at exchanges rates prevailing at transactions dates.
Carrying values of monetary assets and liabilities are adjusted at each
balance sheet date to reflect the exchange rate at that date. Gains and
losses from restatement of foreign currency monetary assets and liabilities
are included in income.
Capital assets
Capital assets are recorded at cost less accumulated amortization.
Amortization is being provided for annually, using the declining balance
method at the following rates:
Computer software 100%
Computer hardware 30%
Furniture and equipment 20%
4. CAPITAL ASSETS
<TABLE>
=========================================================================================================
Net Book Value
---------------- ---------------
Accumulated March 31, December 31,
Cost Amortization 2000 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer hardware $ 107,616 $ 6,115 $ 101,501 $ 20,565
Computer software 7,339 2,051 5,288 3,097
Furniture and equipment 42,960 1,074 41,886 -
------- ------ ------- -------
$ 157,915 $ 9,240 $ 148,675 $ 23,662
=========================================================================================================
</TABLE>
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
================================================================================
5. LONG TERM DEBT
<TABLE>
=====================================================================================================================
March 31, December 31,
2000 1999
------------------------------------------------------------------------------------ --------------- ----------------
<S> <C> <C>
Note payable to a related party, bearing interest at the Bank of
Montreal prime rate plus 2%, or 10% if undeterminable; secured;
repayable on either receipt of proceeds from second round Phase II
Equity financing or Initial Public Offering, whichever is earlier. $ - $ 214,093
=====================================================================================================================
</TABLE>
6. DUE TO RELATED PARTIES
Amounts due to related parties are non-interest bearing and unsecured with
no stated terms of repayment.
7. RECAPITALIZATION
On March 13, 2000, the Company acquired all of the issued and outstanding
share capital of MindfulEye. As consideration, the Company issued 6,910,000
shares at a deemed value of $1,929,365 and paid $150,000. Legally, the
Company is the parent of MindfulEye. However, as a result of the share
exchange described above, control of the combined companies passed to the
former shareholders of MindfulEye. This type of share exchange has been
accounted for as a capital transaction accompanied by a recapitalization of
MindfulEye, rather than a business combination. Accordingly, the net assets
of MindfulEye will be included in the balance sheet at book values and the
deemed acquisition of the Company will be accounted for by the purchase
method with the net assets of the Company recorded at fair market value at
the date of acquisition. The revenues and expenses and assets and
liabilities reflected in the financial statements prior to the date of
acquisition are those of MindfulEye. Revenue and expenses and assets and
liabilities subsequent to the date of acquisition include the accounts of
the Company.
The cost of an acquisition should be based on the fair value of the
consideration given, except where the fair value of the consideration given
is not clearly evident. In such a case, the fair value of the net assets
acquired is used.
The 6,910,000 common shares issued pursuant to the acquisition agreement
were deemed to have a value of $1,930,883 based on the fair value of the
Company's net assets.
The total purchase price of $2,080,833 was allocated as follows:
Cash $ 2,257,500
Due to related parties (173,117)
Accounts payable and accrued liabilities (3,500)
--------------
$ 2,080,883
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
================================================================================
8. WARRANTS
As at March 31, 2000, the Company has 537,500 warrants enabling the holders
to acquire common shares of the Company at a price of US$2.10 in the first
year and US$2.50 in the second year.
9. CAPITAL STOCK
As a result of the recapitalization described in Note 7, whereby MindfulEye
is deemed to be the acquiror for accounting purposes, the number and value
of common shares issued and outstanding at March 31, 2000 are Rabatco's.
10. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
<TABLE>
===============================================================================
March 31, December 31,
2000 1999
--------------------------------------------------------------- ---------------
<S> <C> <C>
Cash paid during the period for interest $ 4,296 $ -
Cash paid during the period for income taxes - -
===============================================================================
</TABLE>
The following non-cash transaction occurred during the three month period
ended March 31, 2000:
a) The Company issued 6,910,000 shares at a deemed value of $1,929,365 to
acquire 100% of the outstanding shares of MindfulEye.
11. RELATED PARTY TRANSACTIONS
The Company entered into the following transactions with related parties
during the period:
a) Paid or accrued $29,546 to directors and an officer for consulting
fees.
b) Included in long-term debt is an amount of $Nil (December 31, 1999 -
$214,093) which is payable to a director of the Company.
c) Included in accounts payable and accrued liabilities at December 31,
1999 was $5,571 which was payable to directors of the Company.
<PAGE>
RABATCO, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
================================================================================
12. INCOME TAXES
The Company's total deferred tax asset is as follows:
<TABLE>
================================================================================== ================
March 31, December 31,
2000 1999
---------------------------------------------------------------------------------- ----------------
<S> <C> <C>
Tax benefit of net operating loss carryforward $ 145,293 $ 68,337
Valuation allowance (145,293) (68,337)
--------------- ---------------
$ - $ -
================================================================================== ================
</TABLE>
The Company has a net operating loss carryforward of approximately $427,333
which expires in 2006 and 2007. The Company provided a full valuation
allowance on the deferred tax asset because of the uncertainty regarding
realizability.
13. ACCUMULATED OTHER COMPREHENSIVE LOSS
Total comprehensive loss for the three month period ended March 31, 2000,
and the period from July 21, 1999 to March 31, 2000 was $222,007 and
$422,998, respectively. The only item included in other comprehensive loss
is foreign currency translation adjustments in the amounts of $4,335 for
the three month period ended March 31, 2000 and $4,335 for the period from
July 21, 1999 to March 31, 2000.
<TABLE>
==============================================================================================
Foreign Accumulated
Currency Other
Translation Comprehensive
Adjustment Income
---------------------------------------------------------------------------- -----------------
<S> <C> <C>
Beginning balance, December 31, 1999 $ - $ -
Current period change 4,335 4,335
---------------- ----------------
Ending balance, March 31, 2000 $ 4,335 $ 4,335
==============================================================================================
</TABLE>
14. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. Although the change in date has
occurred, it is not possible to conclude that all aspects of the Year 2000
Issue that may affect the entity, including those related to customers,
suppliers, or other third parties, have been fully resolved.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
Exhibit 2.1(1) Articles of Incorporation
Exhibit 2.2(1) Certificate of Amendment to Articles of Incorporation
Exhibit 2.3 Certificate of Amendment to Articles of Incorporation
dated May 12, 2000
Exhibit 2.4 Amended and Restated Bylaws, effective May 26, 2000
Exhibit 6.1(1) Share Exchange Agreement dated March 13, 2000
Exhibit 6.2(1) Lease Agreement dated February 28, 2000
Exhibit 6.3(1) Form of Employment Agreement
Exhibit 6.4 2000 Stock Option Plan
Exhibit 6.5 Form of Stock Option Agreement
Exhibit 27.1 Financial Data Schedule
---------------------------
(1) Previously filed on Form 10 SB dated April 4, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 10-SB and has duly caused this Registration Statement to be signed on
our behalf by the undersigned, thereunto duly authorized.
MINDFULEYE.COM, INC.
Date: June 2, 2000 By: /s/ Ray Torresan
-----------------------------------------
Ray Torresan, President
<PAGE>
INDEX TO EXHIBITS
Exhibit Sequentially
Number Description Numbered Page
Exhibit 2.1(1) Articles of Incorporation
Exhibit 2.2(1) Certificate of Amendment to Articles
of Incorporation
Exhibit 2.3 Certificate of Amendment to Articles of
Incorporation dated May 12, 2000
Exhibit 2.4 Amended and Restated Bylaws, effective
May 26, 2000
Exhibit 6.1(1) Share Exchange Agreement dated March 13,
2000
Exhibit 6.2(1) Lease Agreement dated February 28, 2000
Exhibit 6.3(1) Form of Employment Agreement
Exhibit 6.4 2000 Stock Option Plan
Exhibit 6.5 Form of Stock Option Agreement
Exhibit 27.1 Financial Data Schedule
---------------------------
(1) Previously filed on Form 10 SB dated April 4, 2000.