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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 23, 2000
GLOBAL E TUTOR, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-29765 88-0444539
State or other jurisdiction of Commission File No. I.R.S. Employer I.D. No.
incorporation or organization
3340 PEACHTREE ROAD, SUITE 1800, ATLANTA, GA 30326
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (404) 978-1640
Former name and former address: Kilimanjaro Group.com Inc., 1601 Fifth Avenue,
Suite 2100, Seattle, Washington 98101-1686.
ITEM 1. Changes in Control of Registrant.
On May 23, 2000, we entered into an Agreement and Plan of Merger with
Kilimanjaro Group.com Inc., a Nevada corporation ("Kilimanjaro"). The agreement
provided that Kilimanjaro would merge into our company, Global e Tutor, Inc.,
and we would issue 50,000 common shares pro rata to the three shareholders of
Kilimanjaro and pay $75,000 pro rata to such shareholders, in exchange for all
of the outstanding shares of Kilimanjaro. Merger documents were filed with the
States of Nevada and Delaware and the merger became effective May 25, 2000. As a
result of the merger, Kilimanjaro was merged into Global e Tutor, Inc. and we
were the surviving entity and assumed Kilimanjaro's reporting obligations as a
successor issuer
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pursuant to Section 12(g)(3) of the Securities Exchange Act. The information
contained in this report pertains to the successor issuer, Global e Tutor, Inc.,
unless otherwise designated.
The merger agreement was adopted by the unanimous consent of Kilimanjaro's
Board of Directors and approved by the unanimous consent of its shareholders on
May 24, 2000. The merger agreement was adopted by the unanimous consent of our
Board of Directors also on May 24, 2000.
Prior to the effectiveness of the merger, we had an aggregate of 27,467,747
shares of common stock issued and outstanding. As a result of the merger, we
currently have a total of 27,517,747 shares outstanding.
The officers, directors, and bylaws of Global e Tutor, Inc. shall remain
unchanged as a result of the merger and shall be the officers, directors, and
bylaws of the successor issuer. None of the officers or directors of Kilimanjaro
succeeded to any positions with our company. Thus, James L. Vandeberg, the sole
director and executive officer of Kilimanjaro, no longer controls the
registrant. The certificate of incorporation of Global e Tutor, Inc., as
amended, remains unchanged and shall be the certificate of incorporation of the
successor issuer.
The following table sets forth certain information furnished by the named
shareholders and others concerning the ownership of our common stock as of May
18, 2000, of (i) each person who is known to us to be the beneficial owner of
more than 5 percent of the common stock; (ii) all directors and executive
officers; and (iii) directors and executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial
of Beneficial Owner Ownership (1) Percent of Class
------------------- ------------- ----------------
<S> <C> <C>
Executive officers and directors:
Thomas E. McMurrain(2) 9,660,725(3) 35.14%
3340 Peachtree Rd.
Suite 1800
Atlanta, GA 30326
Claes Nobel 160,667(4) *
Vincent A. Riggio(2) 133,333(5) *
Leslie Ennis(2) 61,667(6) *
Shawn Cartmill(2) 61,667(7) *
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Robert V. Willison(2) 549,333(8) 1.96%
Lara Stegman(2) 61,667(9) *
Executive Officers and 10,689,059 37.48%
Directors as a Group
(5 Persons)
Other 5% shareholders:
The Lancer Group and 9,525,000(10) 34.68%
Michael Lauer(10)
200 Park Avenue
Suite 3900
New York, NY
Globalepartners, LLC 9,158,000(11) 33.34%
3340 Peachtree Rd. NE
Suite 1800
Atlanta, GA 30326
</TABLE>
-------------------
* Represents less than 1%.
(1) Unless otherwise indicated, this column reflects amounts as to which
the beneficial owner has sole voting power and sole investment power.
(2) Each of these persons is a member of Globalepartners, LLC which is a
principal shareholder. See footnote (11) below.
(3) Of the shares listed, Mr. McMurrain is the direct owner of 482,000
which are held in his own name. He also beneficially owns 9,158,000 shares which
are held in the name of Globalepartners, LLC. Mr. McMurrain is the managing
partner of the limited liability company. Mr. McMurrain holds options to
purchase 62,174 shares. Of these options, 20,725 are immediately exercisable.
For purposes of computing Mr. McMurrain's total shares beneficially owned and
his percentage ownership, the options which are currently exercisable are deemed
to have been exercised and the shares are deemed to be outstanding.
(4) Mr. Nobel holds options to purchase 482,000 shares. Of these options,
160,667 are immediately exercisable. For purposes of computing Mr. Nobel's total
shares beneficially owned and his percentage ownership, the options which are
currently exercisable are deemed to have been exercised and the shares are
deemed to be outstanding.
(5) Mr. Riggio holds option to purchase 400,000 shares. Of these options,
133,333 are immediately exercisable. For purposes of computing Mr. Riggio's
total shares beneficially owned and his percentage ownership, these options are
deemed to have been exercised and the shares are deemed to be outstanding.
(6) Ms. Ennis holds option to purchase 185,000 shares. Of these options,
61,667 are immediately exercisable. For purposes of computing Ms. Ennis' total
shares beneficially owned
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and her percentage ownership, these options are deemed to have been exercised
and the shares are deemed to be outstanding.
(7) Mr. Cartmill holds option to purchase 185,000 shares. Of these
options, 61,667 are immediately exercisable. For purposes of computing Mr.
Cartmill's total shares beneficially owned and his percentage ownership, these
options are deemed to have been exercised and the shares are deemed to be
outstanding.
(8) Mr. Willison holds option to purchase 816,000 shares. Of these
options, 549,333 are immediately exercisable. For purposes of computing Mr.
Willison's total shares beneficially owned and his percentage ownership, these
options are deemed to have been exercised and the shares are deemed to be
outstanding.
(9) Ms. Stegman holds option to purchase 185,000 shares. Of these options,
61,667 are immediately exercisable. For purposes of computing Ms. Stegman' total
shares beneficially owned and her percentage ownership, these options are deemed
to have been exercised and the shares are deemed to be outstanding.
(10) The Lancer Group is composed of Lancer Offshore, Inc., Lancer
Partners, LP, The Orbiter Fund, and Michael Lauer. Mr. Lauer is the sole general
partner of Lancer Partners LP and is the sole investment manager of all three
entities. Of the total shares, 5,320,000 are held directly by Lancer Offshore,
Inc.; 2,100,000 are held directly by Lancer Partners LP; and 500,000 are held
directly by The Orbiter Fund. Mr. Lauer is believed to control the voting and
disposition of these shares by virtue of being the investment manager for these
entities. Also, 690,000 of these shares are held in the name of the Lancer
Group. Also, 500,000 shares are held by The Viator Fund Ltd, a fund controlled
by Mr. Lauer. The remaining 415,000 shares are held directly by Mr. Lauer in his
name.
(11) Globalepartners, LLC is a Georgia limited liability of which Thomas E.
McMurrain, one of our officers and directors, is the sole managing partner.
These shares are also included in the shares designated as being beneficially
owned by Mr. McMurrain. Mr. McMurrain controls approximately 64.74% of the
ownership interest of the limited liability company by virtue of his control of
Thomas E. McMurrain Family, LLLP, Global Funding Group, Inc., and TDV
Consulting. The initial capital contributions of the members of the limited
liability company were the outstanding shares of GLOBALETUTOR.COM, INC. Prior to
the reorganization with us, all of the shares of GLOBALETUTOR.COM, INC., except
the shares held personally by Mr. McMurrain, were transferred to the limited
liability company. Set forth below are the names and percentage interests held
by the members of the limited liability company:
<TABLE>
<CAPTION>
Name of Member Percentage of Ownership Interest
-------------- --------------------------------
<S> <C>
Thomas E. McMurrain Family, LLLP 45.09%
Global Funding Group, Inc. 13.10%
Mandalay Sports Action Entertainment, LLC 10.52%
Robert Willison 9.08%
TDV Consulting 6.55%
Ray Story 5.26.%
Shawn Cartmill 2.18%
Lara Stegman 2.18%
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Leslie Ennis 1.09%
Don Ruttenberg 0.55%
Bob Cohn 0.55%
Steve Martin 0.55%
Gary Hill 0.55%
Barry Morris 0.55%
Amanda Anderson 0.55%
Lloyd Skidmore 0.55%
Karen Lennon 0.55%
Samuel Sykes 0.55%
</TABLE>
We are not aware of any arrangements which may result in a change of
control of the registrant.
ITEM 2. Acquisition or Disposition of Assets.
The consideration exchanged pursuant to the merger agreement with
Kilimanjaro was negotiated between Kilimanjaro and us.
In evaluating our company as a candidate for the proposed merger,
Kilimanjaro used criteria such as the value of our assets, our current business
operations and anticipated operations, and our business name and reputation.
Kilimanjaro determined that the consideration for the merger was reasonable.
We intend to continue the business of Global e Tutor, Inc. and enhance
shareholder value through the identification, acquisition and or development and
commercialization of proprietary technology, both hardware and software, in the
online tutoring industry.
FORWARD LOOKING STATEMENTS
This report contains statements that plan for or anticipate the future.
Forward-looking statements include statements about the future of operations
involving the on-line tutoring industry, statements about our future business
plans and strategies, and most other statements that are not historical in
nature. In this report forward-looking statements are generally identified by
the words "anticipate," "plan," "believe," "expect," "estimate," and the like.
Although we believe that any forward-looking statements we make in this report
are reasonable, because forward-looking statements involve future risks and
uncertainties, there are factors that could cause actual results to differ
materially from those expressed or implied. For example, a few of the
uncertainties that could affect the accuracy of forward-looking statements,
include the following:
- Subscription to our ISP may not accelerate as quickly as we have
predicted. The plethora of existing ISP's with similar value
propositions could slow growth if the differentiated features are not
communicated clearly to the target market.
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- Our personal sanctuary databases may not be as secure or meeting the
minimum requirements of COPA, which could subject our information to
Internet hackers.
- The value of click-through rates may decline faster than projected.
- Our system may receive more volume than it can handle.
- Potential competitors may impart an interest in our market prior to
our being fully operational.
- We may experience delays in web site or database design.
- Our youth foundation may be unable to secure funding for its ongoing
operations.
In light of the significant uncertainties inherent in the forward-looking
statements made in this report, particularly in view of our early stage of
operations, the inclusion of this information should not be regarded as a
representation by us or any other person that our objectives and plans will be
achieved.
DESCRIPTION OF BUSINESS
History and Organization
Our company was incorporated under the laws of the State of Delaware on May
9, 1995, under the name Essex Enterprises, Inc. On December 12, 1996, the
company changed its name to Veronique, Inc. and on April 13, 1999, it changed
its name to Digital Launch, Inc. Finally, on February 3, 2000, the name was
changed to Global e Tutor, Inc.
We were originally organized to engage in the television marketing of hair
products, but abandoned this business in approximately 1996. In December 1996 we
acquired Veronique, Inc. as a wholly owned subsidiary and control of our company
was transferred to the shareholders of Veronique. Also, in connection with such
transaction, we forward split the outstanding stock at the rate of two shares
for each one share outstanding. Prior to this forward split we had outstanding
800,000 common shares; following the forward split we had approximately
1,600,000 shares outstanding. We issued 3,012,500 shares to the shareholders of
Veronique. Veronique was incorporated on September 28, 1995, and was engaged in
the business of developing, packaging, marketing and distributing skincare and
beauty products. After its acquisition, it was renamed VI Sub, Inc. On September
29, 1997, we merged VI Sub, Inc., a wholly owned subsidiary, into our parent
corporation because there was no benefit to maintaining both a holding company
and the operating subsidiary.
In 1999 we determined it was no longer feasible to finance our skincare
business under the prevailing corporate structure. We reached an agreement in
principle to transfer the assets of the
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skincare business, subject to the assumption of the related liabilities, and
started the search for a new business venture. In contemplation of a proposed
transaction with GLOBALETUTOR.COM, INC., in December 1999 we transferred all of
our assets to Veronique Europe Ltd, our wholly owned subsidiary which was not
conducting any business operations, in exchange for the assumption of all of our
outstanding liabilities. The subsidiary has agreed to indemnify us from these
liabilities. Subsequent to this transaction we transferred all of the
outstanding stock of Veronique Europe Ltd., which has been renamed to Veronique,
Inc., to Alford S.A. for nominal consideration. Alford S.A. is an entity whose
beneficiaries are relatives of Terrence O. McGrath, our former chairman and CEO.
In December 1999 we entered into an agreement with GLOBALETUTOR.COM, INC.,
a Nevada corporation, to exchange all of the issued and outstanding shares of
this entity for 9,640,000 shares of our common stock. The reorganization
agreement was closed by the parties on January 21, 2000. GLOBALETUTOR.COM, INC.
was incorporated in the State of Nevada on December 10, 1999, to provide
educational services over the Internet. The company has not yet commenced its
principal operations.
In connection with the reorganization transaction we assumed all of the
outstanding options of GLOBALETUTOR.COM, INC. to acquire 3,964,174 shares of
our common stock at prices ranging from $0.25 to $0.275 per share. We also
granted to Thomas E. McMurrain, an officer, director and principal
shareholder, options to purchase 6,584,000 shares. These options were
subsequently canceled. At this time we also granted 416,000 options to Robert
V. Willison, an executive officer, outside of our stock option plan. We also
issued warrants to Finn Partners, an entity controlled by Thomas E.
McMurrain, to purchase 3,000,000 shares. These warrants were subsequently
canceled. We also converted an outstanding promissory note payable to Lancer
Offshore, Inc., an entity for which Michael Lauer, one of our principal
shareholders, acts as investment manager, in the principal amount of $750,000
into 3,000,000 shares of common stock. These funds had been loaned to us in
December 1999 by Lancer Offshore, Inc. and were in turn loaned to
GLOBALETUTOR.COM, INC. pending closing. We also privately placed 500,000
shares at $0.20 per share and 5,000,000 shares at $0.25 per share.
We presently have one wholly owned subsidiary, GLOBALETUTOR.COM, INC.,
through which we propose to conduct our principal business.
Proposed Business
Our company is in the development stage and our efforts have been focused
primarily on the start-up of our proposed business. We are in the process of
creating an Internet destination for global education through Internet-based,
interactive, video-on-demand tutoring services for kindergarten through 12th
grade students with the goal of making learning fun, convenient, and affordable.
Currently we do not have an on-line product, but we are working on its
development. Our web site, upon its completion, is expected to have five
distinct areas for children: a virtual community for children; our top ten
tutorials; a global educational broadcast network; a global
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entertainment network; and a nonprofit foundation. We have engaged the firm of
Comstar.net, Inc. to provide us with our Internet access for our web site.
- The children's community. We are in the process of creating the
content for the community, although it is in the initial development
stage. Its purpose will be to give children a positive, filtered site,
free from pornography and profanity, that parents will feel
comfortable allowing their children to use. At present, we intend to
offer live, monitored chats for children, Saturday night chats with
celebrities, an educational game, short video clips that provide
positive reinforcement like "stay off drugs", "don't smoke", etc.
- Top ten tutorials. The purpose of this site will be to identify and
define the most common difficulties that students have by grade level
and by subject. We have contracted with individuals who have twenty
years' experience teaching elementary, middle and/or high school to
design the site. At present, there are no tutorials for this site
on-line, but we have created, or are in the process of creating, 40
tutorials. Each tutorial will be approximately 10 minutes in length.
We expect to have 300 tutorials completed by the time our web site is
launched, which is tentatively scheduled for September 2000.
All tutorial material developed for us will be our property and the
educators developing it will not be paid royalties for the material.
They will, however, be paid a flat fee.
- The global educational broadcast network. Aside from the "top ten"
tutorials, we do not intend to create educational content. We
recognize that content already exists on the world wide web and
students are using it to supplement their educational process. The
purpose of the broadcast network will be to create a sortal for
existing educational content. By "sortal" we mean a virtual catalog
system for existing content. We want to make it simple for children to
find quality educational content, as well as easy for them to use the
web sites they find. We will do this by providing each content
provider that joins our network with the same tool set, and, much like
the television networks create a standardized "look" and "feel" for
their affiliates, we will be doing the same with the content providers
that join our network. We call this uniform look and feel strategy
"wrapping." This gives each of our partners the same technology and
functionality. This means that the function buttons for each site will
be in the same places so it will be very easy for children to
navigate. The vocabulary we use will be easy for a kindergarten
through 12th grade student to understand. The computer commands for
all of the content providers who join our network will be
standardized. At present, we have two sites wrapped and we are
currently in discussions with several other content providers,
determining their interest in becoming part of our network. It is our
long-term intention to wrap from 800 to 1,000 existing web
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sites. By creating a common forum for existing content providers, we
will be combining their existing audiences. We feel that the sum of
the combined audiences will be of value to corporations that may be
interested in marketing to these audiences.
All affiliates' information will be filtered, screened and held
accountable to standard criteria which we are developing in
conjunction with the United Nations, National Education Association,
and state education boards. Dr. Noel Brown, a 40-year employee of the
United Nations who created Agenda 21, the global blueprint for
environmental sustainment, has agreed to chair our international
advisory board. Dr. Brown will be working to create strategic
relationships with areas of the United Nations that help us with
distribution of our services. The relationships have yet to be
established and their natures are still unknown. We are working with
MRESA, formally known as the Metropolitan Regional Education Strategic
Alliance. This relationship will allow us to place our tutorials in
the public schools with which they are affiliated. Terms of the
agreement are still being discussed.
At present, we are in the research and development stage of creating
standard criteria. Our nonprofit foundation has employed a director of
strategic development to create these relationships with funding and
education partners. These relationships have yet to be established and
therefore, their nature has not been determined.
The terms of each affiliation with content providers will be
different, depending upon the amount of material provided by the
affiliate, whether they already have an audience which they will bring
to our web site, and the amount of web site upgrades we will provide
to them. Another consideration will be the percentages, both volume
and dollar amount, of their e-commerce revenue generated through the
site, which has yet to be determined. The terms of any such
partnerships will be mutually determined by us and the partnering
company.
- The global entertainment network. This location on our web site is
still in the design phase. Its focus will be to provide entertaining
educational materials and games for children. We intend to create a
Hollywood-type environment that attracts and retains a child's
attention. We are currently working with Mandalay Sports Entertainment
in Hollywood, California, to totally design our web site. They will
provide introductions to celebrities and special effects web
designers. We are currently in discussions regarding the scope of
their relationship with us.
- Our nonprofit foundation. The foundation is an independent and
separate corporation from our company. The separate corporation was
filed with the Secretary of State of Georgia under the name Global
Youth Foundation, Inc on
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May 15, 2000. The 501-(c)3 determination status will be filed with the
Internal Revenue Service in May 2000. The mission of the foundation
will be to introduce and foster a global education community through
tutoring, mentoring and environmental awareness activities for youth
ages 5 through 18 from all social, racial, ethnic, and economic
backgrounds. The foundation and its officers will operate as a
separate corporate organization with a separate board of directors and
the assets of the foundation will be acquired, held, and managed
independently of our company. No officer or board member of the
foundation will benefit monetarily from any foundation program or fund
raising activities.
As stated above, none of these services is currently being offered on-line
by us, but we are in the process of developing each of these areas. We do
anticipate that all of them will be offered at the time of our expected launch
in September 2000. We intend to provide our services to children worldwide by
offering them in several different languages. We are currently in discussions
with several companies that specialize in language translation, but at present
we have not determined which one we will use. Additionally, we are working with
the United Nations to make sure educational services will be culturally
sensitive.
It is our intention to work with corporate sponsors that will provide
financial support to the programs we offer children. In return, we will provide
them with marketing opportunities on the web site. At present, we do not have
any corporate sponsors.
Rather than focusing on developing educational content, we intend to
concentrate on marketing and distribution. This means that we are interested in
creating and growing an audience for ourselves and for our five major areas of
focus described above. As a marketing company we will use traditional and
non-traditional marketing, advertising and public relations strategies to
attract students worldwide to our web site. By increasing the audience for our
foundation, we anticipate increasing the marketing value for our associates,
both corporate sponsors and educational content providers.
We have entered into an agreement with OneWeb Systems, Inc., an Atlanta,
Georgia, based software design company, to create original designs, artwork, and
engineering specifications for our web site using systems created by OneWeb. The
agreement also grants to us a perpetual, non-exclusive, non-transferable license
to use these products. Any modifications to these products for our application
will be owned by OneWeb, subject to our license rights. All of the work
performed by OneWeb, including the license fee, will be on a flat-fee basis.
OneWeb will not be entitled to any royalty payments for the license.
Market Overview
The world wide web is the fastest growing technology in history, achieving
25% penetration in less than seven years. Over 700,000 students are now taking
some form of distributed learning courses, including online classes. Since 1994,
education and training
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companies have raised more than $3.4 billion in equity capital through more than
38 initial public offerings and 30 follow-up offerings. The power of technology
provides greater access of tutorial services at a lower cost, largely enabled by
growing access to personal computers and the Internet, as well as expanding
bandwidth. In the United States alone, there are 55 million children in
kindergarten through 12th grade schools, 14 million students in post-secondary
institutions and 136 million working adults. Globally, over 20 percent of the
world's six billion people are currently enrolled in a kindergarten through 12th
grade or post-secondary education system. As the result of technological
innovations like the Internet, video-conferencing and satellite systems, a new
economy has emerged driven by knowledge and information. Management believes
that creating an education-focused gateway to the Internet is a huge
opportunity. (Statistical information provided by the Wit Capital, "E Knowledge
Industry Report," August 11, 1999 and the Merrill Lynch "Book of Knowledge,"
April 9, 1999.)
Research and Development
We have spent approximately $302,000, which was raised in our private
funding in December 1999, on the research and development of our proprietary
technology from the date of the inception of our current business on December
10, 1999, through April 14, 2000. The money has been spent on our web based
educational content distribution. This technology allows us to take traditional
education materials and re-engineer them for the web. The revenues we may
achieve will be primarily from strategic alliances and subscriber fees.
Investment monies generated, while paying directly for research and technology
costs accrued to date, will fund our operations, which include funding on-going
technological development. None of the cost of our research and development is
expected to be borne directly by our customers.
Competition
The market for children's educational products and services is highly
competitive. Competition is generally based on the quality and range of
educational materials made available, price, promotion, and customer service.
However, we believe that we are the first Internet based tutorial services
company that will consolidate educational content provider web-sites in a
standardized format. Other web sites that offer educational content and are
candidates to join our network, include:
- Distributed learning content companies such as Kaplan and Sylvan
Learning Systems;
- Distance enabling companies such as Caliber Learning Center Network
and eCollege.com; and
- Online communities such as Classroom connect, FamilyEducation Company,
and The Lightspan Partnership.
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Very few of our current competitors focuses on distribution. For the most
part they are content providers. We believe that our global focus to aggregate
demand and current service options gives us a decided advantage over the
industry's current fragmented approach. We have also identified that most
children currently use their parent's Internet service. Our mission to provide a
community for them provides a distinguishing feature to our business plan.
Additionally, we intend to be a global marketing company affiliating with
existing content providers and localizing their educational material into seven
languages for our students. This localization makes us unique in understanding
cultures, languages, and lifestyles as they relate to global users.
Additionally, we have found that many providers in the market currently do not
have their content repurposed for the Internet, that is, that the information
has not been put into a format such that the content would be available on the
Internet. We are in negotiations with technology companies that can provide the
ability to do this. We would act as the marketing arm for the technology
company, acquiring the content accounts. We would repurpose the content for the
providers while retaining the use of the content for ourselves and the
technology organization. As a result, we believe our model has the opportunity
to become the most complete, well-rounded educational service in the industry.
We also believe that our strategic corporate alliances will play a role in
differentiating us from the competition. We intend to use their support, both
financial and intellectual, to create joint marketing ventures and to supplement
the cost to consumers and maintain a technological advantage. Additionally, we
are creating a software delivery system that sorts and organizes content
providers whose service is then wrapped with our branding. Our technology team
is currently working to create the system we will use.
Marketing
Management believes that a strong marketing effort is crucial to our
success. Our mission is to attract students to our web site to use our services
and retain their loyalty throughout their education process. Our marketing plan
focuses on distribution of educational content and the entertainment aspect our
on-line community, and concentrates on succeeding in the following categories:
- traffic - the number of users;
- branding - global recognition of products and services for us and our
partners;
- stickiness - how long a user stays at the destination once there; and
- bonding - loyalty of the user over the long term.
During the first years following the launch of our services, our marketing
efforts will be dedicated to the four following areas:
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- Traditional print and broadcast - We intend to implement an
advertising campaign to create brand awareness through traditional
advertising mediums such as print, radio, television and billboards.
- Co-branding sponsorship model - As an inherent part of the
relationship with our strategic partners, such as international
companies that market to the kindergarten through 12th grade
demographic, we anticipate cooperative marketing, branding,
advertising and public relations efforts.
- Grass roots - We intend to engage in web-site and community-based
awareness programs designed to interact with students, parents, and
educators directly to achieve our goals, as well as those of our
affiliates and corporate sponsors. Some ideas for student interaction,
live and on-line, include live Saturday night celebrity chats, a
traveling road show, complete with a specially equipped touring bus, a
network-televised game show, sponsored concerts, music videos, and
brand merchandising.
- Public Relations - As a part of an intensive public relations
campaign, both traditional and non-traditional methods will be
utilized. We intend to select a celebrity spokesperson by second
quarter 2000. We have engaged the firm of 360 Thinc Ltd. Of Atlanta,
Georgia, to assist us in developing a marketing and communications
program to attract corporate affiliates. We have also engaged the firm
of Cohn & Wolfe of Atlanta, Georgia, to assist us in developing a
public relations plan.
Government Regulation
Among the regulatory measures directly applicable to our business model are
those concerning the collection, use, and dissemination of personal information.
As a routine part of our operations it will be necessary for us to collect
individually-identifying information about consumers of our services and to use
that information both in the delivery of services and for certain marketing and
other purposes. We intend to implement appropriate privacy policies informing
our users about the information we collect and how we use it; how and to what
extent we may disclose it to third parties; what choices our users have in these
matters, and how we protect this information from unauthorized use and
disclosure.
Specific laws will apply to our information practices with respect to
certain consumers those twelve years of age and younger and those located in
the countries composing the European Union. The Child Online Privacy
Protection Act of 1998, 15 U.S.C. Sections 6501-6506, also known as COPPA,
applies to the online collection of personal information from persons twelve
and under. In general, COPPA requires obtaining verifiable parental consent
to the collection, maintenance and disclosure of information about children;
gives parents the right at any time to stop further use or collection of
information from their children, and also gives parents the right to
<PAGE>
Page 14 of 30
access stored information about their children. The law also imposes specific
requirements for the content and placement of a web site's privacy policy, and
requires web sites to use reasonable procedures to protect the confidentiality,
security, and integrity of personal information collected from children.
"The European Union Privacy Directive (Counsel Directive 95/46, 1995
O.J.(L281) 31) similarly imposes restrictions on the collection, use and
disclosure of information about residents of EU member states. In addition to
operating within the borders of those nations, the EU Privacy Directive
prohibits the export of personal data concerning Europeans to countries
considered not to have "adequate" privacy protection. At this time the United
States has not been recognized as providing adequate protection, but enforcement
of the embargo on exportation of data to the U.S. has been postponed pending
completion of negotiations between the United States and the European Union
concerning "Safe Harbor" principles that would enable U.S. persons to collect
this information if they agree to comply with the Safe Harbor principles. We
anticipate that in connection with our business in Europe, we will ultimately be
required to comply with the substance of the EU Privacy Directive, either by
virtue of acceding to the Safe Harbor principles or by virtue of direct
application of the EU Privacy Directive and implementing national legislation to
our operations in Europe.
We do not anticipate that compliance with the EU Privacy Directive or with
COPPA will have a material adverse effect upon our operations; however, it
should be noted that there is a great deal of ongoing legislative, regulatory,
and lobbying activity in the area of privacy and information practices, with new
measures being introduced frequently, and there can be no assurance that our
business will not be materially adversely impact by future regulations in this
field.
Intellectual Property Rights
To protect the rights to our intellectual property, we will rely on a
combination of trademark and copyright law, patent, trade secret protection,
confidentiality agreements, and other contractual arrangements with our
employees, affiliates, clients, strategic partners, and others. The protective
steps we have taken may be inadequate to deter misappropriation of our
proprietary information. We may be unable to detect the unauthorized use of, or
take appropriate steps to enforce, our intellectual property rights.
We intend to register certain of our trademarks in the United States. Our
corporate counsel is currently performing the trademark search for 10 brands
associated with globaletutor. Effective trademark, copyright, patent, and trade
secret protection may not be available in every country in which we offer, or
intend to offer, our services. In addition, although we are taking steps to
protect us from infringing on the intellectual property rights of others, other
parties may assert infringement claims against us or claim that we have violated
a patent or infringed a copyright, trademark, or other proprietary right
belonging to them. These claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources on
<PAGE>
Page 15 of 30
our part, which could materially adversely affect our business, results of
operations, and financial condition.
We currently incorporate certain licensed third-party technology developed
by OneWeb Services, Inc. in some of our services. In the license agreements with
OneWeb, they have generally agreed to defend, indemnify, and hold us harmless
with respect to any claim by a third party that the licensed software infringes
any patent or other proprietary right. We are also negotiating with and intend
to use other third-party technology providers in connection with our services,
the licenses for which should also contain provisions to defend us against
potential infringement. We cannot assure that these provisions will be adequate
to protect us from infringement claims. The loss or inability to obtain or
maintain any of these technology licenses could result in delays in introduction
of new services.
Employees
At April 1, 2000, we employed 15 persons on a full-time basis, including
our executive officers. Approximately 60% of the compensation of two of our
employees, Lara Stegman and Shawn Cartmill, is paid by Emergency One Cash Card,
Inc., a company controlled by Thomas E. McMurrain. Ms. Stegman devotes
essentially all of her time to our company and Mr. Cartmill devotes
approximately 60% of his time to our company. We hire independent contractors on
an as-needed basis only. We have no collective bargaining agreements with our
employees. We believe that our employee relationships are satisfactory. In the
long term, we will attempt to hire additional employees as needed based upon our
growth rate.
DESCRIPTION OF PROPERTY
We lease approximately 410 square feet of office space in Atlanta, Georgia,
from Emergency One Cash Card, Inc., a company controlled by Thomas E. McMurrain.
This space is used for the corporate headquarters. The lease can be terminated
by either party at any time upon 60 days' prior notice. Monthly lease payments
are $1,200.
LEGAL PROCEEDINGS
On February 22, 2000, counsel for a company called E-Tutor sent a letter to
us demanding that we cease and desist all use of our "GlobaleTutor" name. The
demand letter claimed that our use of that name violated E-Tutor's service mark
rights in the federally registered trademark "E-TUTOR." We denied that E-Tutor
has service mark rights in E-TUTOR and denied that our use of the GlobaleTutor
name is confusingly similar to or otherwise infringes the E-TUTOR mark.
We have responded to E-Tutor's demand through correspondence by our counsel
dated March 7, 2000. In addition to denying infringement on the grounds stated
above, our counsel noted that the term "E-TUTOR is likely a generic term that,
although federally registered, may be subject to cancellation. Although we
suggested the possibility of cancellation, we did not indicate
<PAGE>
Page 16 of 30
an intent to initiate such cancellation proceedings. No formal proceedings have
been filed by either party to date.
We intend to vigorously defend any claims asserted by E-Tutor, if
necessary. It is possible that E-Tutor will not pursue any claims against us or
will seek to compromise our claims. While there is some possibility of an
adverse outcome for us, at this stage of the matter, our counsel cannot fairly
determine either the likelihood of an adverse outcome or the extent of any
possible loss.
PLAN OF OPERATION
During the next year we plan to launch four phases of our website. In June
2000 we plan to begin our launch with the opening of our website/portal
including "edutainment" offerings and a catalog offering education related
products. Mandalay Sports Entertainment will co-brand the site with us at this
time. In August 2000 we will add ISP and web site hosting services to our
portal, and begin receiving advertising revenue from advertisers on our site.
Also in August Phase III of our site will include the roll-out of our education
foundation which will be headed by Claes Nobel, one of our directors. At
year-end and into the first quarter of 2001 we will launch Phase IV - our
interactive tutoring modules, which include live online learning, collaborative
learning and will include different tutoring sessions for grades kindergarten
through grade 12.
Revenues
We anticipate that our revenues will come from several sources:
- Corporate site sponsorships;
- Advertising revenue;
- ISP subscription fees;
- Tutorial sales; and
- Exchange membership fees and transactions fees.
Expenses
We expect marketing, product development and our information technology
infrastructure will make up the largest portion of our operational expenses at
approximately 45% of revenue.
Capital Requirements
We estimate that we can satisfy our current cash requirements for
approximately the next two months. During that time we intend to seek equity
financing of from $3,000,000 to $5,000,000 to meet our cash requirements for the
remainder of the year and to accomplish the objectives of our business plan
described below.
<PAGE>
Page 17 of 30
The use of these proceeds will be invested to accomplish the objectives of
the business plan. Specifically, we plan to create a sponsorship revenue model,
acquire strategic partners, extend our reach, brand and growth strategy, create
avenues for our affiliates to extend their reach, establish the foundation, and
provide a unique means of distribution of assets for our virtual
philanthropists. To achieve these goals, we require capital investment for the
following purposes:
- developing and executing a brand-building awareness campaign, with
sufficient budget to fund the campaign;
- developing the web site and then continually adding new features and
enhancements to the site;
- expanding corporate office facilities, including appropriate staffing
and equipment to support our business plans;
- augmenting our staff to support and sustain rapid growth;
- acquiring strategic partnerships; and
- increasing unique visitors to our site by marketing and advertising
and other creative promotions for our web site.
During the next six months we intend to perform product research and
development in the following areas:
- a free filtered ISP and premium services;
- personalized tutorials and assessment;
- content and technology development;
- affiliated products and services; and
- licensing and promotions.
We expect that the number of employees will increase from the current
fifteen to approximately thirty persons over the next twelve months.
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
The following table sets forth as of May 18, 2000, the name, age, and
position of each of our executive officers and directors, and the term of office
of such director:
<TABLE>
<CAPTION>
Name Age Position(s) Director Since
---- --- ----------- --------------
<S> <C> <C> <C>
Thomas E. McMurrain 32 Co-Chairman, President, CEO,
& Director 2000
Claes Nobel 69 Co-Chairman, Senior
</TABLE>
<PAGE>
Page 18 of 30
<TABLE>
<CAPTION>
Name Age Position(s) Director Since
---- --- ----------- --------------
<S> <C> <C> <C>
Vice-President, & Director 2000
Vincent A. Riggio 37 Director 2000
Leslie Ennis 44 Vice-President --
Shawn Cartmill 36 Treasurer --
Robert V. Willison 46 Director of Corporate Finance
and Chief Financial Officer --
Lara Stegman 28 Secretary and Director of Operations --
</TABLE>
Directors are elected for a term of one year and until their successors are
elected and qualified. Annual meetings of the stockholders, for the selection of
directors to succeed those whose terms expire, are to be held at such time each
year as designated by the Board of Directors. The Board of Directors has not
selected a date for the next annual meeting of shareholders. Officers are chosen
by the Board of Directors. Each officer holds his office for one year and until
his successor is chosen and qualified.
Set forth below is certain biographical information regarding our executive
officers and directors:
THOMAS E. MCMURRAIN has been the president, CEO, and co-chairman of
GLOBALETUTOR.COM, INC. since December 1999. Since February 1999 he has been the
president, chief executive officer, and sole owner of Emergency One Holding
Corporation, Inc., a commercial holding company providing funding to private
subsidiaries. Since September 1997 Mr. McMurrain has been the president, chief
executive officer, and sole owner of Emergency One Cash Card, Inc., a financial
lending company. From March 1993 until July 1997 he worked as an independent
contractor to World Marketing Alliance, a broker of insurance and securities.
CLAES NOBEL has been the co-chairman of GLOBALETUTOR.COM, INC. since
January 2000. Since 1973 he has been the chairman of United Earth NGO, a
not-for-profit corporation engaged in educating people about environmental
issues.
VINCENT A. RIGGIO has been the vice-president of RAM Development Group, a
commercial real estate development company, since December 1996. From January
1996 until December 1996 he was the president of Riggio Restaurant Management
which managed a seafood restaurant. From December 1990 until July 1995 Mr.
Riggio was the acting president and owner of Checkers Hamburgers which sold
hamburgers, fries, and colas to the public through retail stores.
LESLIE ENNIS has been a vice-president of GLOBALETUTOR.COM, INC. since
January 2000. From June 1999 until February 2000 she was the executive director
of Brain Injury Family Assistance Center a not-for-profit corporation providing
social services to families that have a member with a brain injury. From October
1998 until June 1999 she was employed as an assistant to the president of the
Caring Institute, a not-for-profit corporation engaged in recognition of
humanitarian excellence. From 1996 until 1998 she was employed by Wings
<PAGE>
Page 19 of 30
Service as a site manager of Peachtree DeKalb Airport location. In 1994 Ms.
Ennis filed personal bankruptcy.
SHAWN CARTMILL has been the treasurer and director of accounting for
GLOBALETUTOR.COM, INC. since January 2000. Since December 1998 he has been the
chief information officer for Emergency One Cash Card, Inc. From August 1997
until December 1998 he worked as a driver for Pizza K. From October 1996 until
July 1997 Mr. Cartmill was employed as a regional director of sales for Digital
Music Express, Inc., a provider of background music to retail establishments. He
received bachelor of science degrees in finance management in December 1986, and
in marketing in May 1989, from Clemson University. He also received a masters
degree in business administration in May 1996 from The Citadel, Charleston,
South Carolina.
ROBERT V. WILLISON has been the director of corporate finance for
GLOBALETUTOR.COM, INC. and our company since January 2000 and he has been chief
financial officer of our company since April 2000. Since February 1998 he has
been the president and chief executive officer of Bristol Capital, a sole
proprietorship investment banking company. From January 1995 until January 1998
he was president and chief operating officer of Teledata World Services, Inc., a
telecommunications company.
LARA STEGMAN has been the director of operations, assistant to the
president, and corporate secretary for GLOBALETUTOR.COM, INC. since January
2000. Since November 1998 she has been the chief operating officer for Emergency
One Cash Card, Inc. From July until October 1998 she was employed as a sales
associate for Eclipse Telecommunications, Inc., a company engaged in the
commercial sales of telecommunications service products. From December 1996
through October 1997 Ms. Stegman was employed as a sales associate with
Peachtree Nissan and Troncalli Motors Inc. Ms. Stegman received a bachelor of
arts degree in elementary education in May 1994 from Duquesne University,
Pittsburgh, Pennsylvania.
The table below sets forth as of May 18, 2000, the name, age, and position
of our significant employee who is not otherwise an executive officer but who
makes, or is expected to make, significant contributions to our business. Dr.
Morris accepted employment with our parent company effective January 31, 2000.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Dr. Barry Morris 44 Chief Knowledge Officer
</TABLE>
Set forth below is certain biographical information regarding this
significant employee:
DR. BARRY MORRIS has been the chief knowledge officer for GLOBALETUTOR.COM,
INC. since January 2000. Since August 1997 he has been the director of
development, the dean of advancement, and a vice-president of Whitefield
Academy, Inc., a college preparatory school. From 1991 until 1997 he was an
assistant professor at Georgia State
<PAGE>
Page 20 of 30
University. Dr. Morris received a bachelor of arts degree in political science
and Russian in May 1977 from Tulane University, New Orleans, Louisiana. He
received a bachelor of arts degree in political economy in December 1989 from
Emory University, Atlanta, Georgia. He received his doctorate in international
political economy in August 1998 from Emory University.
EXECUTIVE COMPENSATION
Compensation
The following table sets forth the aggregate executive compensation awarded
to, earned by, or paid to the named executive officer by any person for all
services rendered in all capacities to Global e Tutor, Inc. and its subsidiaries
for the fiscal years ended December 31, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------ ------------------------------------
Awards Payouts
------------------------- -------
Other Restricted All
Name and Principal Annual Stock Options/ LTIP Other
Positions Year Salary Bonus Compensation Award(s) SARs Payouts Compensation
------------------ ---- -------- ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terrence O. 1999 $120,000 -- -- -- -- -- --
McGrath, CEO(1)
1998 $120,000 -- -- -- 1,000,000 -- --
options(2)
1997 $105,000 -- -- -- -- -- --
</TABLE>
-------------------
(1) Mr. McGrath resigned as an officer and a director effective January
21, 2000.
(2) These options were canceled in January 2000 in connection with the
reorganization with GLOBALETUTOR.COM, INC.
Stock Option and Incentive Plans
1996 INCENTIVE PLAN
On December 12, 1996, we adopted an incentive plan, pursuant to which we
are authorized to issue up to 900,000 shares of common stock, either as options
to purchase such shares or as restricted stock awards, to certain employees,
officers, directors, and consultants. Awards of stock options under the plan
consist of both non-qualified options and options intended to qualify as
"Incentive Stock Options" under Section 422 of the Internal Revenue Code of
1986, as amended. Awards of restricted stock will be subject to the terms of
forfeiture and other terms, conditions, and restrictions as may be established
by the Board or committee granting the award.
<PAGE>
Page 21 of 30
Awards of restricted stock will be forfeited if the participant ceases to
be an employee, director, or consultant during the restricted period set by the
Board or committee. However, if the participant's relationship to the company
ceases because of death or disability, he will be entitled to the percentage of
the restricted shares equal to the percentage of the restriction period that has
lapsed.
In connection with qualified stock options, the exercise price of each
option may not be less than 100% of the fair market value of the common stock on
the date of grant (or 110% of the fair market value in the case of a grantee
holding more than 10% of our outstanding stock). The aggregate fair market value
of shares for which qualified stock options are exercisable for the first time
by such employee (or 10% shareholder) during any calendar year may not exceed
$100,000. Non-qualified stock options granted under the plan may be granted at a
price determined by the Board of Directors, not to be less than the fair market
value of the common stock on the date of grant.
The plan is administered by the Board of Directors which will determine the
persons to whom awards will be granted, the number of awards to be granted and
the specific terms of each grant, including the vesting thereof and restriction
periods, subject to the provisions of the plan. The plan may also be
administered by a compensation committee of the Board if one were created.
At May 18, 2000, there were no outstanding options granted under this plan
and 17,740 restricted shares had been issued.
1999 STOCK OPTION PLAN
On December 27, 1999, we adopted, and on January 21, 2000, the shareholders
approved, an employee stock option plan, pursuant to which we are authorized to
grant up to 5,000,000 options to our key employees, officers, directors, and
consultants. Awards under the plan will consist of both non-qualified options
and options intended to qualify as "Incentive Stock Options" under Section 422
of the Internal Revenue Code of 1986, as amended.
The plan is administered by the Board of Directors which will determine the
persons to whom awards will be granted, the number of awards to be granted and
the specific terms of each grant, including the vesting thereof, subject to the
provisions of the plan. Following the filing of this report, the plan, as it
pertains to insiders, will be administered by a committee composed of at least
two non-employee directors.
In connection with qualified stock options, the exercise price of each
option may not be less than 100% of the fair market value of the common stock on
the date of grant (or 110% of the fair market value in the case of a grantee
holding more than 10% of our outstanding stock). The aggregate fair market value
of shares for which qualified stock options are exercisable for the first time
by such employee (or 10% shareholder) during any calendar year may not exceed
$100,000.
<PAGE>
Page 22 of 30
Non-qualified stock options granted under the plan may be granted at a price
determined by the Board of Directors, not to be less than the fair market value
of the common stock on the date of grant.
The plan also contains certain change in control provisions which could
cause options and other awards to become immediately exercisable. Payment of the
exercise price may be in cash, certified check, our common stock, or
cancellation of indebtedness.
Stock Option Grants
As of May 18, 2000, we had a total of 3,964,174 options which remained
outstanding under our 1999 stock option plan and 443,500 options which were
outstanding outside of our 1999 stock option plan, for a total of 4,407,674
outstanding options. The following table sets forth information concerning
individual grants of stock options made through the date of this table to each
of the named executive officers and significant employees, each of which option
grant was made under our 1999 stock option plan, unless otherwise noted, and
vests one-third on January 21, 2000, one-third on January 21, 2001, and
one-third on January 21, 2002, unless otherwise noted:
<TABLE>
<CAPTION>
Number of Percent
Securities of Total
Underlying Outstanding Exercise Expiration
Name Options Options Price Date
---- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Thomas E. McMurrain 62,174 1.4% $0.275 1/31/03
Claes Nobel 482,000 10.9% $0.25 1/31/03
Vincent A. Riggio 400,000 9.1% $0.25 1/31/03
Leslie Ennis 185,000 4.2% $0.25 1/31/03
Shawn Cartmill 185,000 4.2% $0.25 1/31/03
Robert V. Willison 816,000(1) 18.5% $0.25 1/31/03
Lara Stegman 185,000 4.2% $0.25 1/31/03
Dr. Barry Morris 185,000 4.2% $0.25 1/31/03
</TABLE>
-------------------
(1) Of these options, 416,000 were granted outside of our 1999 stock
option plan and vested immediately upon the date they were granted on January
21, 2000.
Compensation of Directors
The bylaws provide that directors, as such, are not entitled to receive any
stated salary for their services. However, they may receive a fixed sum and
expenses for attendance at meetings of the Board. We have not adopted a policy
with regard to establishing any fixed sum for attendance at special or regular
meetings of the board, but we do intend to reimburse directors for out-of-pocket
expenses related to such meetings.
<PAGE>
Page 23 of 30
Employment Contracts
Effective January 31, 2000, we entered into three-year full-time employment
contracts with our executive officers and our significant employee. The
following table sets forth the base salary for each of these contracts:
<TABLE>
<CAPTION>
Annual
Name Base Salary
---- -----------
<S> <C>
Thomas E. McMurrain $ 60,000
Claes Nobel $150,000
Leslie Ennis $ 60,000
Shawn Cartmill $ 24,000
Robert V. Willison $ 24,000
Lara Stegman $ 24,000
Dr. Barry Morris $ 60,000
</TABLE>
As additional compensation, each of the employees is entitled to
participate in all bonus programs generally available to all executive officers.
He or she is also entitled to receive stock options as determined by the Board
of Directors under our stock option plans. Each employee is entitled to vacation
and sick leave in accordance with the company's policy. Each of the employment
contracts contains similar provisions for reimbursing the employee for business
related expenses in accordance with the policies of the company. Each employee
is entitled to benefits as generally may be made available to all other
employees of the company from time to time.
The employment contracts are automatically renewable for additional
one-year terms unless terminated by either party ninety days before the end of
the relevant term of employment. The agreements may be terminated at any time
with or without cause by either party. If terminated without cause, the employee
is entitled to two weeks of base salary, provided the employee shall continue to
work during such period. In the case of termination for cause or the death of
the employee, base salary payments shall terminate immediately. If the
employment agreement is terminated for disability of the employee, we shall
continue to pay base salary tot he extent the employee has any unpaid sick
leave.
The contracts also contain provisions preventing the employees from
disclosing any proprietary information. Each of the contracts also includes
provisions which restrict the employee from certain actions during and after
termination of the agreement. During the term of the contract and for a period
of two years following termination, the employee may not attempt to divert or
solicit any person employed by the company. During the term of the contract and
for a period of one year following termination, the employee may not divert or
solicit to a competing business any individual or entity who is a customer, or
prospective customer, of ours during the two years prior to termination. Also
during the contract and for a period of one year following termination, the
employee may not engage in a competing business in any territory in which we
were engaged in a similar business.
<PAGE>
Page 24 of 30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1999 our wholly owned subsidiary, GLOBALETUTOR.COM, INC.,
entered into an agreement with Bristol Capital Limited, a company controlled by
Robert V. Willison, a significant employee of ours, to assist us in locating
investment capital financing. If Bristol is successful in locating financiers or
investors which provide financing to us, we are obligated to pay a fee to
Bristol equal to 10% of the amount received by us, plus warrants for 10% of the
stock in our company. We have also agreed to grant a first right of refusal to
Bristol for any subsequent financing. The agreement expires on December 21,
2000, but we can terminate the contract upon 30 days' written notice beginning
June 22, 2000. In connection with the acquisition of GLOBALETUTOR.COM, INC. by
us in January 2000, we paid Mr. Willison's company $200,000 pursuant to the
terms of this agreement for locating the company and the financing for the
transaction.
In December 1999 we borrowed $750,000 from Lancer Offshore, Inc., an entity
for which Michael Lauer, one of our principal shareholders, acts as investment
manager. The note was converted in December 1999 at the rate of $0.25 per share
into 3,000,000 shares of common stock.
The initial expenses of GLOBALETUTOR.COM, INC. were advanced by Emergency
One Holding Corporation, a company controlled by Thomas E. McMurrain, our
president, co-chairman, and principal shareholder. These advances were evidenced
by a promissory note dated December 31, 1999, in the principal amount of
$173,890.43, and bearing interest at 10% per annum beginning December 10, 1999.
The promissory note is due on or before December 31, 2000.
During December 1999, our parent company sold off the operations of the
company to the former majority shareholder, Terrence O. McGrath. All of the
assets and liabilities were transferred to a company controlled by the relatives
of Mr. McGrath for nominal consideration of $1.00 and an agreement to indemnify
us against any liabilities relating to the former operations.
Mr. McMurrain, who founded GLOBALETUTOR.COM, INC., paid $25,000 for
4,820,000 shares in that entity. All but 241,000 of these shares were
subsequently sold to Globalepartners, LLC for approximately 64.74% interest in
such entity. The limited liability company beneficially owns approximately
9,158,000 shares of our company.
Mr. McMurrain owes the company approximately $158,000 as of May 31, 2000,
for an employee loan. The loan is due on demand and does not accrue interest.
<PAGE>
Page 25 of 30
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 50,000,000 shares of common stock, par value
$.001 per share. As of May 18, 2000, we had outstanding 27,467,747 shares of
common stock. All common shares are equal to each other with respect to voting
rights. They are also equal to each other with respect to dividend rights and
with respect to liquidation rights, subject to any preferential rights of any
then-outstanding preferred stock. Special meetings of the shareholders may be
called by the Board of Directors, the president, or the holders of not less than
one-fifth of all the shares entitled to vote at the meeting. Holders of shares
of common stock are entitled to one vote at any meeting of the shareholders for
each share of common stock they own as of the record date fixed by the Board of
Directors. At any meeting of shareholders, one-third of the outstanding shares
of common stock entitled to vote, represented in person or by proxy, constitutes
a quorum. A vote of the majority of the shares of common stock represented at a
meeting will govern, even if this is substantially less than a majority of the
shares of common stock outstanding. Holders of shares are entitled to receive
such dividends as may be declared by the Board of Directors out of funds legally
available therefor, and upon liquidation are entitled to participate pro rata in
a distribution of assets available for such a distribution to shareholders,
subject to any preferential rights of any then-outstanding preferred stock.
There are no conversion, pre-emptive, or other subscription rights or privileges
granted by us with respect to any shares. Reference is made to our certificate
of incorporation and bylaws, as well as to the applicable statutes of the State
of Delaware for a more complete description of the rights and liabilities of
holders of shares. The common shares do not have cumulative voting rights, which
means that the holders of more than fifty percent of the shares of common stock
voting for election of directors may elect all the directors if they choose to
do so.
Preferred Stock
Our certificate of incorporation authorizes 500,000 shares of preferred
stock, par value $.001 per share. Such shares may be issued in such series and
have such rights, preferences, an designation as determined by the Board of
Directors. No preferred shares are outstanding.
Change of Control
The creation and issuance of a series of preferred stock or the issuance of
shares of common stock by the Board of Directors could be used to delay, defer,
or prevent a change of control of the company in certain takeover attempts.
Using such shares, the Board of Directors could create impediments to, or delay
persons seeking to effect, a takeover or transfer of control by causing such
additional authorized shares to be issued to a holder or holders who might side
with the Board in opposing a takeover bid that the Board of Directors determines
is not in the best interests of our company and its shareholders. Such an
issuance could diminish the voting
<PAGE>
Page 26 of 30
power of existing shareholders who favor a change in control, and the ability to
issue the shares could discourage an attempt to acquire control of our company.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
Market for Stock
Our common stock was quoted on the OTC Electronic Bulletin Board (OTC BB:
"GETT") through May 2000. The table below sets forth for the periods indicated
the high and low bid quotations as reported by Nasdaq Trading & Market Services.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down,
or commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Quarter High Low
<S> <C> <C> <C>
FISCAL YEAR ENDED
DECEMBER 31, 1998 First $3.00 $1.5625
Second $3.125 $2.00
Third $3.25 $1.50
Fourth $3.25 $2.25
FISCAL YEAR ENDED
DECEMBER 31, 1999 First $3.00 $2.00
Second $2.50 $0.3125
Third $0.875 $0.2813
Fourth $7.00 $0.25
FISCAL YEAR ENDING
DECEMBER 31, 2000 First $7.9375 $1.875
</TABLE>
Outstanding Options, Warrants, and Convertible Instruments
At May 18, 2000, we had outstanding options to purchase 4,407,674 shares.
Of these options, 27,500 were granted prior to the year ended December 31, 1999,
outside of any stock option or incentive plan; 3,964,174 were assumed from our
subsidiary and granted by us on January 21, 2000, under our current 1999 stock
option plan; and 416,000 were granted on January 21, 2000, outside of our 1999
stock option plan.
At May 18, 2000, we had outstanding warrants to purchase 60,000 shares. In
addition, pursuant to an agreement with HAW e-nvestments, LLC, our business
management and financial services firm, we have agreed to issue 39,053 shares
and warrants to purchase 156,208 shares for work performed during February,
March, and April 2000. The warrants will be exercisable at
<PAGE>
Page 27 of 30
prices ranging from $0.25 to $0.50 per share. The agreement provides that 20% of
fees earned by this firm for its services will be compensated in equity, up to
$100,000 annually.
We have also entered into a six-month agreement dated May 9, 2000, with
Trinity Investment Services Corp. To provide marketing and consulting services.
This agreement that we will issue 100,000 shares to them, issuable 20,000 as of
May 9, 2000, and 20,000 each 30 days thereafter. It also provides that we will
grant options to them to purchase up to 300,000 shares at prices ranging from
$4.00 to $8.00 per share, to be issued beginning in June 2000 through November
2000.
Shares Eligible for Future Sale under Rule 144
We had 27,467,747 shares of our common stock outstanding at May 18, 2000.
Of these shares, 19,669,675 are believed to be restricted securities pursuant to
Rule 144 promulgated by the Securities and Exchange Commission. Management
believes that as of May 18, 2000, approximately 1,140,833 of these shares may
have met the one year holding requirement of Rule 144, that approximately
1,220,025 may be eligible for immediate sale under Rule 144(k), and that
approximately 935,000 which are held by affiliates may be eligible for immediate
sale under Rule 144.
Record Holders of Stock; Transfer Agent
At May 18, 2000, we had approximately 113 shareholders of record as
reported by our transfer agent. The transfer agent is Interwest Transfer
Company, Inc., 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117.
Dividends
Since our inception, we have not paid any cash dividends on its common
stock and we do not anticipate that it will pay dividends in the foreseeable
future. The Board of Directors has not adopted a policy regarding dividends.
ITEM 5. Other Events
SUCCESSOR ISSUER ELECTION
Upon effect of the merger, pursuant to Rule 12g-3(a) of the General Rules
and Regulations of the Securities and Exchange Commission, Global e Tutor, Inc.
became the successor issuer to Kilimanjaro for reporting purposes under the
Securities Exchange Act of 1934 and elected to report under the Act effective
May 25, 2000.
<PAGE>
Page 28 of 30
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On or about March 13, 2000, we engaged Prichett, Siler & Hardy, P.C.,
Certified Public Accountants, as our independent auditors for the year ended
December 31, 1999. The decision to retain Pritchett, Siler & Hardy, and not to
re-engage Raines And Fischer, the former independent auditor, was made by the
Board of Directors on such date. The decision not to re-engage Raines And
Fischer did not involve a dispute with us over accounting policies or practices.
The report of Raines And Fischer on our financial statements for the years ended
December 31, 1998, did not contain an adverse opinion or disclaimer of opinion,
nor was it modified as to uncertainty, audit scope, or accounting principals. In
connection with the audit of our financial statements for the years ended
December 31, 1998, there were no disagreements with Raines And Fischer for the
annual period and for the period up to the date of dismissal on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to the satisfaction of Raines And
Fischer, would have caused the firm to make reference to the matter in its
report.
Neither we, nor anyone on our behalf, has consulted Prichett, Siler & Hardy
regarding the application of accounting principles to a specific completed or
contemplated transaction, or the type of audit opinion that might be rendered on
our financial statements, and neither written nor oral advice was provided by
Prichett, Siler & Hardy that was an important factor considered by us in
reaching a decision as to any accounting, auditing, or financial reporting
issue.
CHANGE IN FISCAL YEAR.
The year-end of Kilimanjaro was January 31st. As a result of the merger of
Kilimanjaro into our company, the year-end will be changed to December 31st. The
report on which the transition period will be filed is the Form 10-KSB for the
year ending December 31, 2000.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) The following financial statements are included in this report:
<TABLE>
<CAPTION>
GLOBAL E TUTOR, INC.
Page
<S> <C>
Report of Auditor for Year-end Financial Statements F-1
Balance Sheet as of December 31, 1999 F-2
Statements of Operations for the years ended December 31, 1999
and 1998 F-3
Statement of Stockholders' Equity for the years ended
December 31, 1999 and 1998 F-4
Statements of Cash Flows for the years ended December
31, 1999 and 1998 F-5
Notes to Financial Statements F-7
<PAGE>
Page 29 of 30
Balance Sheet as of March 31, 2000 F-1
Statements of Operations for the three months ended
March 31, 2000 and 1999 F-2
Statements of Cash Flows for the three months ended
March 31, 2000 and 1999 F-3
Notes to Unaudited Financial Statements F-4
GLOBALETUTOR.COM, INC.
Report of Auditor for Year-end Financial Statements F-1
Balance Sheet as of December 31, 1999 F-2
Statements of Operations from inception through
December 31, 1999 F-3
Statement of Stockholders' Equity from inception through
December 31, 1999 F-4
Statements of Cash Flows from inception through
December 31, 1999 F-5
Notes to Financial Statements F-6
</TABLE>
(b) The pro forma financial statements for the merger of Kilimanjaro into
Global e Tutor, Inc. are included in this report.
(c) Exhibits. The following exhibits are included as part of this report:
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2.1 Reorganization Agreement dated December 28, 1999
2.2 Reorganization Agreement dated May 23, 2000
3.1 Certificate of Incorporation, as amended, of GlobaleTutor, Inc.
3.2 Certificate of Merger with Kilamanjaro Group.com, Inc.
3.3 Current Bylaws of GlobaleTutor, Inc.
4.1 Form of Common Stock Certificate
10.1 1996 Incentive Plan
10.2 Non-Statutory Stock Option Plan and Certificate for Jeffrey Brinn
10.3 1999 Stock Option Plan
10.4 Form of 1999 Stock Option Plan Certificate, with schedule of option holders
10.5 Form of Non-Plan Stock Option Grant for Robbie Willison, with schedule
of option prices
10.6 Senior Secured Note for $750,000 dated December 27,1999
10.7 Investment Agreement with Lancer Offshore, Inc. dated
December 31, 1999
10.8 Convertible Promissory Note for $750,000 dated December 31, 1999
<PAGE>
Page 30 of 30
10.9 Asset Transfer Agreement dated December 31, 1999
10.10 OneWeb Systems Software License dated December 6, 1999
10.11 OneWeb Systems Agreement to Proceed dated February 15, 2000
10.12 360 Degrees Project Fee Agreement dated January 10, 2000
10.13 Cohn & Wolfe Agreement dated November 19, 1999
10.14 Bristol Capital Limited Agreement dated December 22, 1999
10.15 Comstar Service Level Agreement dated January 31, 2000
10.16 Office Lease
10.17 Employment Agreement, with schedule
10.18 Promissory Note to Emergency One Holding Company dated
December 31, 1999
18.1 Letter re change of accountants
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
Global e Tutor, Inc.
Date: May 31, 2000 By /s/ Thomas McMurrain, President
Date: May 31, 2000 By /s/ Robert V. Willison, Director of Corporate
Finance and Chief Financial Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
GLOBALETUTOR, INC.
(Formerly Digital Launch, Inc.)
(Formerly Veronique, Inc.)
Atlanta, GA
We have audited the accompanying balance sheet of GLOBALETUTOR, Inc. [A
Development Stage Company] (Formerly Digital Launch, Inc. / Formerly Veronique,
Inc.) at December 31, 1999, and the related statements of operations,
stockholders' equity and cash flows for the year ended December 31, 1999 and for
the period from re-entering of the development stage on December 31, 1999
through 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 audit. The financial statements of
GLOBALETUTOR, Inc. for the period from January 1, 1998 through December 31, 1998
were audited by other auditors whose report dated March 14, 2000, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the 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.
In our opinion, based on our audits and the report of other auditors, the
financial statements audited by us present fairly, in all material respects, the
financial position of GLOBALETUTOR, Inc. (Formerly Digital Launch, Inc. /
Formerly Veronique, Inc.), as of December 31, 1999, and the results of its
operations and its cash flows for the year ended December 31, 1999 and for the
period form the re-entering of the development stage on December 31, 1999
through December 31, 1999 in conformity with generally accepted accounting
principles.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
March 16, 2000
Salt Lake City, Utah
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31,
1999
-----------
<S> <C>
CURRENT ASSETS:
Cash $ 1
-----------
Total current assets 1
NOTE RECEIVABLE - RELATED PARTY 750,000
-----------
$ 750,001
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ --
-----------
Total Current Liabilities --
-----------
COMMITMENTS AND CONTINGENCIES --
-----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value 500,000 shares authorized;
no shares issued and outstanding --
Common stock, $.001 par value 50,000,000 shares authorized,
12,827,747 shares issued and outstanding 12,828
Capital in excess of par 4,627,150
Retained Deficit (3,889,977)
Deficit accumulated during the development stage --
-----------
Total Stockholders' Equity 750,001
-----------
$ 750,001
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-2-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From the re-entering of
the Development Stage
on December 31,
December 31, 1999 Through
-------------------------------- December 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
COST OF GOODS SOLD -- -- --
----------- ----------- -----------
GROSS PROFIT -- -- --
----------- ----------- -----------
EXPENSES:
General and administrative expenses -- -- --
----------- ----------- -----------
LOSS BEFORE INCOME TAXES -- -- --
CURRENT TAX EXPENSE -- -- --
DEFERRED TAX EXPENSE -- -- --
----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS -- -- --
----------- ----------- -----------
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
skin care and cosmetic product
operations, net of no taxes (423,741) (1,379,312) --
Gain on disposal of skin care and
cosmetic product operations net of
no taxes 284,455 -- --
----------- ----------- -----------
LOSS FROM DISCONTINUED
OPERATIONS $ (139,286) $(1,379,312) $ --
----------- ----------- -----------
NET LOSS $ (139,286) $(1,379,312) $ --
----------- ----------- -----------
LOSS PER COMMON SHARE:
Loss from continuing operations $ -- $ -- $ --
Loss from discontinued operations (.04) (.16) --
Gain on disposal of operations .03 -- --
----------- ----------- -----------
Net Loss Per Common Share (.01) (.16) --
----------- ----------- -----------
WEIGHTED AVERAGE SHARES
OUTSTANDING: 9,297,391 8,667,768 12,827,747
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM JANUARY 1, 1998 THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
------------------------- Excess of Retained Development
Shares Amount Par Value Deficit Stage
---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 8,361,840 $ 8,362 $ 2,685,493 $(2,371,379) $--
Shares issued for services
valued at $.91 per share 8,400 9 7,428 -- --
Shares issued for cash at $1.00 to
$1.50 per share, Net of deferred
offering cost of $5,009 543,333 543 754,448 -- --
Net loss for the period ended
December 31, 1998 -- -- -- (1,379,312) --
----------- -------- ----------- ----------- ---
BALANCE, December 31, 1998 8,913,573 8,914 3,447,369 (3,750,691) --
Shares issued for services and
payment of accounts payable
valued at $.20 to $1.53 per share 122,925 123 47,322 -- --
Shares issued for cash at $.20 to $.75 791,249 791 344,209 -- --
Shares issued upon conversion of a
convertible note payable at
$.25 per share 3,000,000 3,000 747,000 -- --
Shares issued for a subscription
receivable at $.75 per share 200,000 200 149,800 -- --
Shares previously issued at $.75 per
share, cancelled upon the cancellation
of subscription receivable (200,000) (200) (149,800) -- --
Granting of options to acquire common
stock at below market value in relation
to services rendered. Compensation
expense calculated in accordance with
APB No. 25 -- -- 41,250 -- --
Net loss for the year ended
December 31, 1999 -- -- -- (139,286) --
----------- -------- ----------- ----------- ---
BALANCE, December 31, 1999 12,827,747 $ 12,828 $ 4,627,150 $(3,889,977) $--
=========== ======== =========== =========== ===
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From the re-entering of
The Development Stage
For the Years Ended on December 31,
December 31, 1999 Through
--------------------------------- December 31,
1999 1998 1999
----------- ----------- -----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (139,286) $(1,379,312) $--
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation & amortization 13,900 10,748 --
Issuance of stock for services 47,445 7,437 --
APB 25 expenses for options and warrants
Issued at below market value 41,250 -- --
Gain on sale of subsidiary (284,455) -- --
Change in assets and liabilities:
(Increase) decrease in accounts receivable 62,260 (43,311) --
(Increase) decrease in inventory 29,714 (39,313) --
(Increase) in other current assets (37,270) 50,619 --
(Decrease) in accounts payable 4,136 203,417 --
(Decrease) in accrued liabilities (97,790) 33,775 --
----------- ----------- ---
Net Cash (Used) by Operating Activities (360,096) (1,155,940) --
----------- ----------- ---
CASH FLOWS FROM INVESTING ACTIVITIES:
Amounts loaned on note receivable (750,000) -- --
Additions of property and equipment -- (4,315) --
Payments for web site -- (24,630) --
Payment for trademarks (490) (1,412) --
Proceeds from sale of subsidiary 1 -- --
----------- ----------- ---
Net Cash (Used) by Investing Activities (750,489) (30,357) --
----------- ----------- ---
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceed from notes payable 810,000 -- --
Payments on note payable (60,000) -- --
Proceeds from stock issuance 345,000 760,000 --
Payment of stock offering costs -- (5,009) --
----------- ----------- ---
Net Cash Provided by Financing Activities 1,095,000 754,991 --
----------- ----------- ---
NET INCREASE (DECREASE) IN CASH (15,585) (431,306) --
CASH AT BEGINNING OF PERIOD 15,586 446,892 --
----------- ----------- ---
CASH AT END OF PERIOD $ 1 $ 15,586 $--
----------- ----------- ---
</TABLE>
[Continued]
-5-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From the re-entering of
The Development Stage
For the Years Ended on December 31,
December 31, 1999 Through
--------------------------------- December 31,
1999 1998 1999
----------- ----------- -----------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,869 $ 169 $--
Income taxes $ -- $ -- $--
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
For the period ended December 31, 1999:
The Company issued 200,000 shares for a $150,000 subscription receivable.
The Company subsequently received back and cancelled the 200,000 shares
upon cancellation of the $150,000 subscription.
The Company issued 3,000,000 common shares in payment of a $750,000 note
payable.
The Company issued 122,925 common shares in payment of approximately
$47,445 of accounts payable and consulting services.
The Company transferred all of the assets and liabilities related to the
skin and hair care products operations to a wholly owned subsidiary and
sold the related subsidiary to the former management of the Company for $1
and the indemnification of the Company against any liabilities related to
the operations, resulting in a gain on disposal of $284,129.
For the period ended December 31, 1998:
None.
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - GLOBALETUTOR, Inc. (Formerly Digital Launch, Inc. [Digital]
/ Veronique, Inc. [Veronique] / Essex Enterprises, Inc. [Essex]) ("The
Company") was organized under the laws of the State of Delaware on May 9,
1995. The Company (Essex) prior to December 12, 1996, had only nominal
activities. On December 12, 1996, Essex entered into a reverse acquisition
with Veronique, Inc. [Purchaser] pursuant to which the legal structure of
Essex survived but in which the Purchaser was deemed to be the acquirer for
accounting purposes and the Company was renamed Veronique, Inc.
Purchaser marketed and distributed skin care and cosmetic products on a
worldwide basis. Effective April 13, 1999 the Company, was renamed Digital
Launch, Inc [Digital]. During December 1999, the Company sold off the
operations of the Company to Alford S.A. by the transfer of all the
Company's assets and liabilities to a newly organized wholly owned
subsidiary Veronique, Inc. Veronique, Inc. was then sold to Alford S.A. for
$1 and indemnification of the Company against any liabilities relating to
the former operations. With the sale of Veronique, Inc., the Company,
effectively discontinued its operations and re-entered the development
stage.
On December 28, 1999, Digital entered into a merger and plan of
reorganization with Globaletutor.com, Inc. which was completed on January
21, 2000 with the exchange of 9,640,000 shares of the Company's common
stock for all of the outstanding shares (4,820,000) of Globaletutor.com
common stock. On February 2, 2000 the Company was renamed GLOBALETUTOR,
Inc. and the OTCBB symbol was changed to GETTE. The Company has not paid
any dividends and any dividends that may be paid in the future will depend
upon the financial requirements of the Company and other relevant factors.
LOSS PER SHARE - The computation of basic and diluted earnings (loss) per
share is based on the weighted average number of shares outstanding during
the period presented, plus, when their effect is dilutive, additional
shares assuming the exercise of certain vested stock option and warrants,
reduced by the number of shares which could be repurchased from the
proceeds of the exercised options or warrants assuming they were exercised;
in accordance with Statement of Financial Accounting Standards No. 128
"Earnings Per Share". [See Note 6] Diluted per share amounts have not been
presented as their effect is anti-dilutive.
STATEMENT OF CASH FLOWS - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
STOCK BASED COMPENSATION - The Company accounts for its stock-based
compensation under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Effective from the date of
inception, the Company adopted the disclosure only provision of Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation ." SFAS No. 123 requires that companies which do
not choose to account for stock-based compensation as prescribed by the
statement shall disclose the pro forma effects on earnings and earnings per
share as if SFAS No. 123 had been adopted.
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (See Note 7).
-7-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reported period. Actual results
could differ from those estimated.
RECENTLY ENACTED ACCOUNTING STANDARDS - Statement of Financial Accounting
Standards (SFAS) No. 135, "Rescission of FASB Statement No. 75 and
Technical Corrections", SFAS No. 136, "Transfer of Assets to a
Not-for-Profit Organization or Charitable Trust that Raise or Hold
Contributions for Others", SFAS No. 137 , "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date and
Amendment of SFAS No. 133", were recently issued. SFAS No. 135, 136 and 137
have no current applicability to the Company or their effect on the
financial statements would not have been significant.
RECLASSIFICATION - The financial statements for the year ended December 31,
1998, have been reclassified to conform with the headings and
classifications used in the December 31, 1999 financial statements.
COMPREHENSIVE LOSS - Comprehensive loss from the date of inception until
December 31, 1999 is the same as net loss presented in the accompanying
statements of operations.
NOTE 2 - DISCONTINUED OPERATIONS / SALE OF SUBSIDIARY
During December 1999, the Company adopted a plan to discontinue it's skin
care and cosmetic product operations. The operations were disposed of on
December 28, 1999. The disposal was accomplished through the Company
transferring all it's assets and liabilities to a newly formed subsidiary
Veronique, Inc. At the time of the transfer liabilities exceeded assets by
$284,454. Veronique, Inc., was then sold to Alford, S.A., for $1,
effectively discontinuing the Company's skin care and cosmetic product
operations. The Company recognized a gain on the sale of the subsidiary of
$284,455. The operations of Veronique, Inc. are reported as a discontinued
operation for the years ended December 31, 1999 and 1998. Net sales related
to operations for 1999 and 1998 were $367,465 and $283,477, respectively.
These amounts have been reclassified to the loss from operations of
discontinued skin care and cosmetic product operations in the accompanying
statement of operations. The discontinued operations have been segregated
on the statements of operations.
-8-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - DISCONTINUED OPERATIONS / SALE OF SUBSIDIARY [CONTINUED]
The following are condensed proforma statements of operations that reflect
what the presentation would have been for the years ended December 31, 1999
and 1998 without the reclassifications required by "discontinued
operations" accounting principles:
<TABLE>
<CAPTION>
1999 1998
--------- -----------
<S> <C> <C>
Net Sales $ 367,465 $ 283,477
Cost of goods sold (98,102) (190,590)
Other operating expenses (616,735) (1,474,796)
Other income (expense) (76,369) 2,597
Provision for taxes -- --
--------- -----------
Net loss $(423,741) $(1,379,312)
--------- -----------
Loss per common share $ (.04) $ (.16)
--------- -----------
</TABLE>
NOTE 3 - NOTES RECEIVABLE
In connection with the merger and plan of reorganization agreement (See
Note 9) the Company loaned GLOBALETUTOR.COM, Inc. $750,000, on December 27,
1999. The note accrues interest at prime plus 1% and matures December 31,
2002.
NOTE 4 - NOTES PAYABLE
During 1999, the Company issued and repaid $60,000 in short-term notes
payable. In connection with short term loans the Company issued 10,000
warrants to purchase the Company's common stock at $1.00 per share,
expiring July to September, 2002.
On December 31, 1999, the Company entered into an investment agreement
wherein the Company, issued a $750,000 convertible note payable. The note
accrues interest at prime plus 1% and matures on December 31, 2000. The
Note was immediately converted into 3,000,000 shares of common stock at
$.25 per share (See Note 5).
NOTE 5 - CAPITAL STOCK
COMMON STOCK ISSUANCES - During January 1999, the Company entered into a
consulting agreement to assist the Company in finding a company interested
in acquiring the Company. In Connection with the agreement the consultant
purchased 200,000 shares of the Company's common stock for $200 and a
$149,800 subscription receivable. During June 1999, the Company signed a
mutual release wherein the consultant returned the 200,000 shares
previously issued for the return of the $200 and cancellation of the
$149,800 subscription receivable.
On December 31, 1999 the Company issued 3,000,000 shares of common stock in
connection with the conversion of a $750,000 convertible promissory note at
a rate of $.25 per share.
-9-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - CAPITAL STOCK [CONTINUED]
During the years ended December 31, 1999 and 1998, the Company issued
122,925 and 8,400 shares, respectively, of common stock at prices ranging
from $.20 to $1.53 per share, the average fair market value of the
Company's stock at the time the services were provided, in payment of
accounts payable and for legal, accounting and consulting services rendered
valued at $47,445 and $7,644, respectively.
During the years ended December 31, 1999 and 1998 the Company issued
791,249 and 543,333 shares of common stock at prices ranging from $.20 to
$1.50 per share for $345,000 and $760,000, respectively. The Company
granted 50,000 warrants to purchase the Company's common stock at $1.25 per
share, expiring July 13, 2002 in connection with receiving $25,000 for
71,249 shares of common stock at $.35 per share, during 1999.
PREFERRED STOCK - The Company is authorized to issue 500,000 shares of
$.001 par value preferred stock with such rights and preferences and in
such series as determined by the Board of Directors at the time of
issuance. No shares are issued or outstanding as of December 31, 1999 and
1998.
WARRANTS - At December 31, 1999, the Company had 10,000 and 50,000 warrants
to purchase common stock outstanding at prices of $1.00 and $1.25 per
share, and expiring in September 2002 and July 2002, respectively. The
warrants were issued in connection with the Company obtaining short-term
notes payable and equity investments.
STOCK OPTIONS - During the periods presented in the accompanying financial
statements the Company has granted options under the 1996 Stock Options
Plan (the Plan) and executive and other employment agreements. The
Corporation has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for
the stock option plans or other agreements.
The Board of Directors adopted the 1996 Stock Option Plan (the Plan)
pursuant to which the Company may issue from time to time up to 900,000
shares of common stock pursuant to stock options and restricted stock
grants, and pursuant to which the Company shall issue stock options to
non-employee directors pursuant to a pre-determined formula. The exercise
price of each option issued to persons other than non-employee directors
shall not be less than 85% of the fair market value of the common stock on
the date of grant. The maximum term of any stock option cannot exceed ten
years from the date of grant. At December 31, 1999, total options available
to be granted under the Plan amounted to 900,000.
The Company issued 27,500 non-plan stock options, to a consultant, to
purchase common stock at $.75 which was below the current market value of
$2.25 per share. Total compensation expense of $41,250 was recorded in
accordance with APB 25.
-10-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - CAPITAL STOCK [CONTINUED]
A summary of the status of the options granted under the Company's stock
option plan and other agreements at December 31, 1999 and 1998, and changes
during the years then ended is presented below:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------------------- ------------------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
---------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of period 2,409,192 $ .74 2,411,444 $ .40
Granted 200,000 $ 2.25 1,233,748 $ 1.11
Exercised -- -- -- --
Forfeited -- -- -- --
Expired (248,862) $ 2.10 (1,155,000) $ .42
---------- -------- ---------- --------
Outstanding at end
of Period 2,441,330 $ .73 2,409,192 $ .74
---------- -------- ---------- --------
Weighted average fair
value of options granted
during the year 200,000 $ .00
---------- --------
</TABLE>
The fair value of each option granted is estimated on the date granted
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants during the year ended December
31, 1999: risk free interest rate of 5% expected dividend yields of zero,
expected life of 3.9 years, and expected volatility 141%.
A summary of the status of the options outstanding under the Company's
stock option plans and employment agreements at December 31, 1999 is
presented below:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- --------------------------------
Range of Weighted-Average Weighted Average Weighted-Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Contractual Life Price Exercisable Price
------------- ----------- ---------------- --------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$.001 1,000,000 5.7 years $.001 -- --
$.75 627,500 3.5 years $.75 627,500 $.75
$1.13 - $1.62 613,830 3.5 years $1.46 613,830 $1.46
$2.00 - $2.25 200,000 2.1 years $2.06 200,000 $2.06
------------- ----------- ---------------- --------------- ----------- ----------------
2,441,330 1,441,330
</TABLE>
Subsequent to the year ended December 31, 1999 the Company had 2,413,830
stock options expire. The Company also issued 4,380,174 stock options at an
exercise price of $.25 to $50 per share, expiring January 31, 2003.
-11-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share for
the periods presented:
<TABLE>
<CAPTION>
From the re-entering of
The Development Stage
For the Years Ended on December 31,
December 31, 1999 Through
----------------------------------- December 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Loss from continuing operations available
to common shareholders (numerator) $ -- $ -- $ --
----------- ----------- -----------
Loss from discontinued operations available
to common shareholders (numerator) (139,286) (1,379,312) --
----------- ----------- -----------
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 9,297,391 8,667,768 12,827,747
----------- ----------- -----------
</TABLE>
The Company had outstanding at December 31, 1999, options to purchase
2,441,330 common shares at prices ranging from $.001 to $2.25 and warrants
to purchase 60,000 common shares that were not included in the computation
of loss per share because their effect is anti-dilutive.
Subsequent to December 31, 1999, the Company issued 9,679,053 common
shares, granted options to purchase 4,380,174 common shares at $.25 per
share and issued warrants to purchase 156,208 common shares at $.25 to $50
per share. The company also canceled 2,413,830 options to purchase common
shares.
NOTE 7 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At December 31, 1999, the
Company has available unused operating loss carryforwards of approximately
$3,850,000, which may be applied against future taxable income and which
expire in various years from 2010 to 2019. The amount of the net operating
loss carryforward which can be utilized by the Company will be subject to
annual limitations due to the substantial change in ownership which has
occurred in the Company.
-12-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES [CONTINUED]
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the amount of the
loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax asset is
approximately $1,500,000 as of December 31, 1999, with an offsetting
valuation allowance at December 31, 1999 of the same amount. The change in
the valuation allowance for 1999 is approximately $50,000.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Management believes that the Company is not liable for any existing
liabilities or claims against the Company related to its former operations,
as the amounts were assumed by Alford, S.A. who continues to operate the
skin care and cosmetic products business which was sold by the Company [See
Note 2]. At December 31, 1999, there is the possibility that creditors and
others seeking relief, which if not paid by Alford, S.A., may cause the
Company to be included in claims and or lawsuits. The Company is not
currently named nor is it aware of any such claims or suits against the
Company. No amounts have been reflected or accrued in these financial
statements for any contingent liability.
Among liabilities from the discontinued operations, assumed by Alford, S.A.
is approximately $258,000 alleged to be due and owing to a vendor for goods
manufactured and partially delivered pursuant to a purchase order. The
Company has not obtained a release from the vender nor has the vender
agreed to a novation substituting Alford, S.A. for the Company as debtor.
Alford, S.A. is continuing to discuss the outstanding debt with the vender
from time to time for a possible settlement. At December 31, 1999, the
vender has not initiated or threatened any formal legal action and it is
not possible to determine whether the supplier will pursue legal action
against the Company. The Company intends to vigorously defend it interests
in this matter and has not recorded an accrual for the outcome of this
uncertainty as the outcome can not be reasonably estimated.
During July 1999, a former consultant to the Company filed claims for
breach of contract, seeking approximately $57,600 for unpaid consulting
fees and breach of implied covenant of good faith, claiming the Company
damaged the goodwill and business reputation of the consultant's business
and is seeking $500,000 in damages. The Company intends to vigorously
defend it interests in this matter and has not recorded an accrual for the
outcome of this uncertainty as the outcome can not be reasonably estimated.
-13-
<PAGE>
GLOBALETUTOR, INC.
[A DEVELOPMENT STAGE COMPANY]
(Formerly Digital Launch, Inc. / Formerly Veronique, Inc.)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES [CONTINUED]
During February 2000, a public relations agency used in the Company's
discontinued operations filed a claim of breach of contract seeking
approximately $20,800 for fees for services rendered. The Company has moved
to dismiss the complaint on grounds that the summons and complaint were
defective in form, in that the claim was filed in an improper venue. The
Company also contends that the agency failed to perform services. The
Company intends to vigorously defend it interests in this matter and has
not recorded an accrual for the outcome of this uncertainty as the outcome
can not be reasonably estimated.
NOTE 9 - SUBSEQUENT EVENTS
NAME CHANGE - Effective February 2, 2000, the Company, was renamed
GLOBALETUTOR, INC., and the OTCBB symbol was changed to GETTE.
MERGER AND PLAN OF REORGANIZATION - On December 28, 1999 the Company
entered into a definitive merger and plan of reorganization agreement with
GLOBALETUTOR.COM, Inc. a privately held Nevada Corporation. The merger
qualifies as a tax-free transaction under Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended. On January 21, 2000, the Company
issued 9,640,000 common shares in exchange for all of the outstanding stock
of Global.com in a transaction accounted for as a recapitalization (reverse
merger), wherein the Company will become a parent of a wholly owned
subsidiary, GLOBALETUTOR.COM. In conjunction with the recapitalization the
Company sold 5,000,000 additional common shares to outside investors in a
private placement transaction at $.25 per share, and issued 4,380,174
options to purchase the GLOBALETUTOR.COM stock at $.25 to $.50 per share.
STOCK / WARRANT ISSUANCES - The Company issued 39,053 shares of common
stock for consulting services. The Company also granted 156,208 warrants to
purchase one share of Company's common stock at $.25 to $.50 per share for
consulting services.
MERGER - On May 23, 2000, the Company entered into an Agreement and Plan of
Merger Agreement with Kilimanjaro Group, Inc. ("Kilimanjaro"), a Nevada
corporation, wherein Kilimanjaro would be merged with and into the Company.
The Company will be the surviving corporation after the merger. The former
shareholders of Kilimanjaro would receive 50,000 shares of restricted
common stock of the Company and cash in the aggregate amount of $75,000 in
exchange for all the issued and outstanding shares of capital stock of
Kilimanjaro.
-14-
<PAGE>
GLOBALETUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
March 31,
2000
-----------
Unaudited
<S> <C>
CURRENT ASSETS
Cash $ 958,091
Employee advances 171,160
-----------
Total current assets 1,129,251
===========
PROPERTY AND EQUIPMENT, at cost
Furniture and equipment 23,959
Computer equipment 10,478
Software 1,699
-----------
36,136
Allowance for depreciation (810)
===========
35,326
-----------
OTHER ASSETS
Intangibles, net of accumulated amortization 3,597
-----------
$ 1,168,174
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 208,773
Accrued Expenses 55,003
Due to related parties 177,939
-----------
Total current liabilities 441,715
-----------
STOCKHOLDERS' EQUITY
Common stock 27,468
Additional paid in capital 1,813,533
Accumulated deficit (1,114,542)
-----------
726,459
-----------
$ 1,168,174
===========
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
GLOBALETUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND
STATEMENT OF OPERATIONS FOR VERONIQUE, INC., THE PREDECESSOR COMPANY
FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
Predecessor
March 31, March 31,
2000 1999
------------ ------------
Unaudited Unaudited
<S> <C> <C>
REVENUE $ -- $ 80,044
------------ ------------
COSTS OF GOODS SOLD
Purchases -- 16,409
------------ ------------
PROFIT MARGIN -- 63,634
EXPENSES
General and administrative 415,588 --
Depreciation/Amortization 875 --
Research and development 362,997 --
Sales and marketing 157,114 --
Professional fees -- 19,632
Rent expense -- 16,293
Consultants -- 75,400
Salaries and wages -- 86,466
All othe expenses -- 93,174
------------ ------------
936,573 290,965
Loss from operations (936,573) (227,331)
OTHER INCOME (EXPENSE)
Interest income 7,665 --
Interst expense (1,970) --
------------ ------------
5,695 --
------------ ------------
Loss before income taxes (930,878) --
Income taxes -- --
------------ ------------
Net loss $ (930,878) $ (227,331)
============ ============
Net loss per share $ (0.03) $ (0.03)
------------ ------------
Weighted average shares outstanding 27,467,747 9,036,498
------------ ------------
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
GLOBALETUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
AND STATEMENT OF CASH FLOWS FOR VERONIQUE, INC., THE PREDECESSOR COMPANY
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Predecessor
March 31, March 31,
2000 1999
---------------- ----------------
Unaudited Unaudited
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ (930,878) $ (227,331)
Adjustments to reconcile net loss to
net cash (used) by operating activities
Depreciation 731 1,402
Amortization 144 (3,533)
Issuance of warrants 16,000
Changes in assets and liabilities
Accounts Receivable 55,563
Inventories (3,522)
Deposits 7,161
Pre-paid expenses 20,000 181
Employee advances (171,160)
Accounts Payable/Accrued expenses 228,670 (72,189)
----------- -----------
Total adjustments 94,385 (14,937)
----------- -----------
Net cash (used)
by operating activities (836,494) (242,268)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (30,767) --
(Acquisition) Disposal of intangible assets (3,609) 31,857
----------- -----------
Net cash used by
investing activities (34,376) 31,857
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party 4,049
Payments on short-term debt (68,386)
Proceeds from sale of common stock 1,050,000 264,395
----------- -----------
Net cash provided by financing activities 1,054,049 196,009
----------- -----------
Net increase (decrease) in cash 183,179 (14,402)
Cash, beginning of period 774,912 15,586
----------- -----------
Cash, end of period $ 958,091 $ 1,184
=========== ===========
</TABLE>
NON-CASH OPERATING TRANSACTIONS
The Company issued 118,816 warrants in February and March, 2000, in exchange for
services rendered.
NON-CASH INVESTING TRANSACTIONS
In accordance with the merger and plan of reorganization, on January 21, 2000,
9,640,000 common shares of Digital Launch, Inc. were exchanged for all of the
outstanding common shares (4,820,000) of GlobaleTutor.com, Inc.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Cash paid during the periods for
Interest - -
Income Taxes - -
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
GLOBALETUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999
Note A
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of the Company (The "Successor") include
the accounts of the parent, GLOBALETUTOR, INC., ("PARENT") and its wholly-owned
subsidiary GLOBALETUTOR.COM, INC., ("SUBSIDIARY").
The Parent (formerly known as Digital Launch, Inc./Veronique, Inc./Essex
Enterprises, Inc.) (the "Predecessor") was organized under the laws of the State
of Delaware on May 9, 1995.
The Subsidiary, a Nevada corporation, was incorporated on December 10, 1999.
All significant intercompany balances and transactions have been eliminated in
consolidation. The parent and its wholly-owned subsidiary are referred to as
"The Company."
The Company is developing a website for global education via web based,
interactive, video-on-demand tutoring services for K-12. The company is
considered a development stage company as defined in SFAS No.7. In a development
stage company, management devotes most of its activities in investigating
business opportunities. Planned principal activities have not yet begun. The
ability of the Company to emerge from the development stage with respect to any
planned principal business activity is dependent upon its successful efforts to
raise additional equity financing. There is no guarantee that the Company will
be able to raise any equity financing. There is substantial doubt regarding the
Company's ability to continue as a going concern.
INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires recognition of deferred tax
liabilities and assets for expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the temporary
difference between the financial statement and tax basis of assets and
liabilities using presently enacted tax rates in effect. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Expenditures for maintenance and
repairs are expensed currently, while renewals and betterments that materially
extend the life of an asset are capitalized. The cost of assets sold, retired,
or otherwise disposed of, and the related allowance for depreciation is
eliminated from the accounts, and any resulting gain or loss is recognized.
Depreciation for the Company is provided using the straight-line method, the
predecessor used the double-declining method over the estimated useful lives of
the assets which are as follows:
Furniture and equipment 5-7 years
Computer equipment 5 years
Software 5 years
<PAGE>
GLOBALETUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999
INTERNAL USE SOFTWARE:
In March 1998, the Financial Accounting Standards Board approved American
Institute of Certified Public Accountants Statement of Position, ACCOUNTING FOR
COMPUTER SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE (SOP 98-1),
effective for fiscal years beginning December 15, 1998. The SOP requires the
capitalization of certain costs incurred in connection with developing or
obtaining software for internal use. The company adopted SOP 98-1 in December
1999 and has capitalized software costs during 2000.
ORGANIZATION COSTS
In accordance with SOP 98-5, "Reporting on the Costs of Start-up Activities",
the Company expenses all organizational costs as incurred.
LOSS PER SHARE
The Company computes basic and diluted earnings per share in accordance with
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share". SFAS 128 requires the Company to report both basic earnings per share,
which is based on the weighted average number of common shares outstanding, and
diluted earnings per share, which is based on the weighted average number of
common shares outstanding and all dilutive potential common shares outstanding.
Since the Company incurred losses for all periods presented, the inclusion of
options and warrants in the calculation of weighted average common shares is
anti-dilutive; and therefore there is no difference between basic and diluted
earnings per share.
CASH IN EXCESS OF FEDERALLY INSURED LIMITS
As of March 31, 2000 and March 31, 1999 the Company and the Predecessor had
deposits with a financial institution in the amounts of $906,099 and $0,
respectively, in excess of federally insured limits.
INTANGIBLE ASSETS:
Intangible assets for the Company, consist of domain name registrations. Domain
name registrations are amortized on a straight-line basis over two years. The
predecessor had no intangible assets as of March 31, 2000. Amortization expense
for the three months ended March 31, 2000 and 1999 was $144 and $-0-
respectively.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
REVENUE RECOGNITION:
For the predecessor, revenue is recognized when products are shipped. The
Company's revenue recognition policies are in compliance with all applicable
accounting regulations. The successor has earned no revenue to date.
<PAGE>
GLOBALETUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999
NON-EMPLOYEE EQUITY COMPENSATION
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date
of the fair value of the equity instrument issued is the earlier of the date on
which the counterparty's performance is complete or the date on which it is
probable that performance will occur.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The book values of cash and cash equivalents, trade accounts receivable, trade
accounts payable, investments, and other financial instruments approximate their
fair values principally because of the short-term maturities of these
instruments. The fair value of the Company's related-party debt is estimated
based on current rates offered to the Company for debt with similar terms and
maturities. Under this method, the Company's fair value of financial instruments
was not materially different from the stated value at March 31, 2000.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of its long-lived assets in accordance
with Statement of Financial Accounting Standards "SFAS" No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 121 requires recognition of impairment of long-lived assets in the
event the net book value of such assets exceeds the future undiscounted cash
flows attributable to such assets.
ADVERTISING:
Advertising is expensed as incurred and totaled approximately $73,081 for the
three months ended March 31, 2000 and $10,020 for the three months ended March
31, 1999.
STOCK BASED COMPENSATION
The Company accounts for (and the Predecessor accounted) its stock-based
compensation plan under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Effective January 1, 1999, the
Predecessor, and now the Company have adopted the disclosure option of SFAS 123,
"Accounting for Stock-Based Compensation." SFAS 123 requires that companies
which do not choose to account for stock-based compensation as prescribed by the
statement shall disclose the pro forma effects on earnings and earnings per
share as if SFAS 123 had been adopted.
RECENTLY ENACTED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 134, "Rescission of FASB
Statement No. 75 and Technical Corrections", SFAS No. 136, "Transfer of Assets
to a Not-for-Profit Organization or Charitable Trust that Raise or Hold
Contributions for Others", SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date and Amendment of SFAS
No. 133", were recently issued. SFAS No. 135, 136, and 137 have no current
applicability to the Company or their effect on the financial statements would
not have been significant.
COMPREHENSIVE LOSS
Comprehensive loss from January 1, 2000 until March 31, 2000 and January 1, 1999
until March 31, 1999 is the same as net loss presented in the accompanying
statement of operations for the periods then ended.
<PAGE>
GLOBALE TUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the current
year presentation.
NOTE B
MERGER AND PLAN OF REORGANIZATION:
On December 28, 1999 the Parent, (formerly Digital Launch, Inc.), entered
into a definitive merger and plan of reorganization agreement with
GLOBALETUTOR.COM, Inc., a privately held Nevada Corporation ("Global.Com").
The merger qualifies as a tax-free transaction under Section 386(a)(1)(B) of
the Internal Revenue Code of 1986, as amended. The agreement requires the
shareholders of the Parent to issue 9,640,000 shares of the parent company in
exchange for all of the outstanding stock of Global.Com in a transaction
accounted for as a recapitalization of the Parent Company, wherein Global.Com
will become a wholly owned subsidiary of the Parent. Additionally, the
agreement calls for the Parent to sell to outside investors in a private
placement transaction, an additional 8,000,000 shares of stock at $.25 per
share, and 500,000 shares of stock at $.20 per share, totaling $2,100,000.
On January 21, 2000 the Company completed the merger with Global.com through the
issuance of 9,640,000 common shares of the Company for Global.com common stock,
the Company sold to outside investors in a private placement transaction an
additional 5,000,000 common shares of the Company at $.25 per share, and issued
416,000 options to purchase common stock.
NOTE C
RELATED PARTY TRANSACTIONS
EMPLOYEE ADVANCES:
The Company has made employee advances totaling $171,160 during the first
quarter 2000. The majority of the advance, $158,000, is due on demand from the
Chief Executive Officer of the Company.
DUE TO RELATED PARTIES:
As of March 31, 2000, due to related parties consist of an unsecured, interest
bearing, due on demand note payable to an affiliate in the amount of $177,939.
Interest on the note to the affiliate is 10% per annum. Accrued interest on the
affiliate note totaled $5,446 as of March 31, 2000 and is included in accrued
expenses.
OFFICE SPACE:
The Company leases its facilities from a related party on a month to month
basis. Because of the nature of these relationships, the amounts charged may
have been different had the parties not been related.
<PAGE>
GLOBALE TUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999
NOTE D
STOCKHOLDERS' EQUITY
Common Stock - The Company is authorized to issue 50,000,000 shares of $.001 par
value common stock. 12,827,747 shares were issued and outstanding as of March
31, 2000.
Preferred Stock - The Company is authorized to issue 500,000 shares of $.001 par
value preferred stock with such rights and preferences and in such series as
determined by the Board of Directors at the time of issuance. No shares are
issued or outstanding as of March 31, 2000.
Warrants - At March 31, 2000, the Company had 178,816 warrants to purchase
common stock outstanding at prices from $.25 to $1.25 per share, and from 2002
to 2005. The warrants were issued in connection with the Predecessor obtaining
short-term notes payable and equity investments, and for professional services
rendered.
Options - See Note F
NOTE E
INCOME TAXES
The components of income taxes are as follows:
<TABLE>
<S> <C>
CURRENT TAXES:
Federal income taxes $ -
State income taxes -
---------------
-
DEFERRED TAXES:
Federal income taxes -
State income taxes -
---------------
-
---------------
$ -
</TABLE>
OPERATING LOSS CARRY FORWARDS
The company had available for carry forward net operating losses totaling
$361,570 for the three months ended March 31, 2000. The carryforward is
available to offset federal and state income taxes and will expire in 2019.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax asset and tax liabilities at March 31, 2000 are presented
below:
<TABLE>
<CAPTION>
NON-CURRENT: 2000
----------
<S> <C>
Deferred tax asset
Net operating loss carryforward $ 361,570
Accumulated Depreciation 34
Accumulated Amortization 17
Research and Development Tax Credits 24,449
----------
Deferred tax asset 386,070
Less valuation allowance (386,070)
----------
Net non-current deferred tax asset $ -0-
------
</TABLE>
<PAGE>
GLOBALE TUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999
NOTE F
STOCK OPTION PLANS
In December 1999, the Parent adopted the 1999 Stock Option Plan (the "1999
Plan"), and on January 21, 2000 the shareholders approved, an employee stock
option plan, pursuant to which the Company is authorized to grant options to key
employees, officers, directors, and consultants. Awards under the plan will
consist of both non-qualified options and options intended to qualify as
"Incentive Stock Options" under Section 422 of the Internal Revenue code of
1986, as amended. In addition, the Company had previously adopted the 1996
Omnibus Plan (the "1996 Plan"). The 1999 Plan and 1996 Plan provide for grants
of options to purchase up to 5,000,000 and 900,000 shares of Common Stock,
respectively, at a purchase price equal to the fair market value on the date of
grant. Generally, options from both plans vest over three years from the date of
grant. Compensation expense for options granted to non-employees, included in
general and administrative, aggregated $0 and $0 during the periods ended March
31, 2000 and March 31, 1999, respectively. A summary of the status of the
options granted under the Company's stock option plan and other agreements at
March 31, 2000, and changes during the period then ended are presented below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
March 31, 2000
--------------
Weighted Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Outstanding at
Beginning of period 2,441,330 $ .73
Granted 4,380,174 .25
Exercised -- --
Forfeited 2,413,830 .73
Expired -- --
--------- -----
Outstanding at end
Of period 4,407,674 $ .25
--------- -----
Weighted average fair
Value of options granted
During the three months ended
March 31, 2000 4,380,174 $1.89
--------- -----
------------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each option granted is estimated on the date granted using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants during the three months ended March 31, 2000: risk
free interest rate of 5%, expected dividend yield of zero, expected life of 3.0
years, and expected volatility of 141%.
A summary of the status of the options outstanding under the Company's stock
option plans and employment agreements at March 31, 2000 is presented below:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------- -------------------------------------
Range of Weighted-Average Weighted-Average Weighted-Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Contractual Life Price Exercisable Price
------------------- --------------- ----------------------- --------------------- -------------- ---------------------
<S> <C> <C> <C> <C> <C>
$.25-$.275 4,380,174 2.9 years $0.25 1,737,391 $0.25
$0.75 27,500 1.9 years $0.75 27,500 $0.75
--------------- --------------
4,407,674 1,764,891
</TABLE>
<PAGE>
GLOBALE TUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDING MARCH 31, 2000 AND MARCH 31, 1999
Note G
LOSS PER SHARE
The following data shows the amounts used in computing loss per share for the
periods presented:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
---------------------------------------
2000 1999
---- ----
<S> <C> <C>
Loss from operations available
to common shareholders (numerator) (930,878) (227,331)
================= =================
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 27,467,747 9,036,498
----------------- -----------------
</TABLE>
The Company had outstanding at March 31, 2000, and March 31, 1999, respectively,
options to purchase 4,407,674 and 2,851,442 common shares at prices ranging
from $.001 to $2.25 and warrants to purchase 118,816 and 0 common shares that
were not included in the computation of loss per share because their effect is
anti-dilutive.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
GLOBALETUTOR.COM, INC.
Atlanta, GA
We have audited the accompanying balance sheet of GLOBALETUTOR.COM, INC. [A
DEVELOPMENT STAGE COMPANY] at December 31, 1999 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the period from
inception on December 10, 1999 through 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits 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.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of GLOBALETUTOR.COM, INC. [A
DEVELOPMENT STAGE COMPANY] as of December 31, 1999 and the results of its
operations and its cash flows for the period from inception on December 10, 1999
through December 31, 1999 in conformity with generally accepted accounting
principles.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
March 14, 2000
Salt Lake City, Utah
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31,
1999
-----------
<S> <C>
CURRENT ASSETS:
Cash in bank $ 774,911
Prepaid expenses 20,000
-----------
Total current assets 794,911
-----------
PROPERTY AND EQUIPMENT, net 5,290
-----------
OTHER ASSETS:
Domain Registration, net 132
Deferred investment banking fees 75,000
-----------
Total other assets 75,132
-----------
$ 875,333
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 98,500
Accrued expenses 11,606
Note payable - related party 923,890
-----------
Total Current Liabilities 1,033,996
-----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value 5,000,000 shares
authorized; no shares issued and outstanding --
Common stock, $.001 par value100,000,000 shares
authorized, 4,820,000 shares issued and outstanding 4,820
Capital in excess of par 20,180
Deficit accumulated during the
development stage (183,663)
-----------
Total Stockholders' Equity (Deficit) (158,664)
-----------
$ 875,333
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-2-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
on December 10,
1999 Through
December 31,
1999
-----------
<S> <C>
REVENUE $ --
-----------
EXPENSES:
General and administrative 134,888
Selling expenses 40,292
-----------
Total expenses 175,180
-----------
LOSS FROM OPERATIONS (175,180)
-----------
OTHER EXPENSE:
Interest expense 8,483
-----------
Total other expenses 8,483
-----------
LOSS BEFORE INCOME TAXES (183,663)
CURRENT TAX EXPENSE --
DEFERRED TAX EXPENSE --
-----------
NET LOSS $ (183,663)
-----------
LOSS PER COMMON SHARE $ (.04)
-----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,820,000
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-3-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON DECEMBER 10, 1999
THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Capital in During the
---------------------- ---------------------- Excess of Development
Shares Amount Shares Amount Par Value Stage
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 10, 1999 - $ - - $ - $ - $ -
Issuance of 4,820,000 shares
common stock for cash at
approx. $.005 per share,
December 1999 - - 4,820,000 4,820 20,180 -
Net loss for the period ended
December 31, 1999 - - - - - (183,663)
-------------------------- ----------- ------------ ------------ ------------
BALANCE, December 31, 1999 - $ - $ 4,820,000 $ 4,820 $ 20,180 $ (183,663)
-------------------------- ----------- ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
-4-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
STATEMENT OF CASH FLOWS
NET INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
From Inception
on December 10,
1999 Through
December 31,
1999
-----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(183,663)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 87
Changes is assets and liabilities:
(Increase) in prepaid expense (20,000)
Increase in accounts payable 23,500
Increase in accrued expenses 11,606
---------
Net Cash Provided (Used) by Operating Activities (168,470)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (5,369)
Purchase of intangible assets (140)
---------
Net Cash Provided (Used) by Investing Activities (5,509)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 25,000
Proceeds from note payable 923,890
---------
Net Cash Provided by Financing Activities 948,890
---------
NET INCREASE IN CASH 774,911
CASH AT BEGINNING OF PERIOD --
---------
CASH AT END OF PERIOD $ 774,911
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ --
Income taxes $ --
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
For the period ended December 31, 1999:
The Company accrued $75,000 in deferred investment banking fees.
</TABLE>
The accompanying notes are an integral part of this financial statement.
-5-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - GLOBALETUTOR.COM, INC. (the Company) was incorporated in
Nevada on December 10, 1999 and is developing a website for global education
via web-based, interactive, video-on-demand tutoring services for K-12. The
Company has not commenced planned principal operations and is considered a
development stage company as defined in SFAS No. 7. The Company has, at the
present time, not paid any dividends and any dividends that may be paid in
the future will depend upon the financial requirements of the Company and
other relevant factors.
ORGANIZATION COSTS - In accordance with SOP 98-5, "Reporting on the Costs of
Start-up Activities", the Company expenses all organizational costs as
incurred.
LOSS PER SHARE - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share". [SEE NOTE 11]
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
CASH IN EXCESS OF FEDERALLY INSURED LIMITS - As of December 31, 1999 the
Company had deposits with a financial institution in the amount of $ 674,911
in excess of federally insured limits.
OTHER ASSETS - Other assets includes domain names in the amount of $140 that
are being amortized on a straight-line basis over two years. Amortization
expense for the period ended December 31, 1999 was $ 8.
ADVERTISING - The Company's policy is to expense advertising costs as
incurred.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Expenditures for major renewals and betterments that extend the useful lives
of property and equipment are capitalized, upon being placed in service.
Expenditures for maintenance and repairs are charged to expense as incurred.
Depreciation is computed for financial statement purposes on a straight-line
method over the estimated useful life of the asset.
STOCK BASED COMPENSATION - The Company accounts for its stock-based
compensation plan under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Effective from the date of
inception, the Company adopted the disclosure only option of SFAS No. 123,
"Accounting for Stock-Based Compensation ." SFAS No. 123 requires that
companies which do not choose to account for stock-based compensation as
prescribed by the statement shall disclose the pro forma effects on earnings
and earnings per share as if SFAS No. 123 had been adopted.
-6-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
ACCOUNTING ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities at the date
of the financial statements, and the reported amount of revenues and expenses
during the reported period. Actual results could differ from those estimated.
RECENTLY ENACTED ACCOUNTING STANDARDS - Statement of Financial Accounting
Standards (SFAS) No. 135, "Rescission of FASB Statement No. 75 and Technical
Corrections", SFAS No. 136, "Transfer of Assets to a Not-for-Profit
Organization or Charitable Trust that Raise or Hold Contributions for
Others", SFAS No. 137 , "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date and Amendment of SFAS No. 133",
were recently issued. SFAS No. 135, 136 and 137 have no current applicability
to the Company or their effect on the financial statements would not have
been significant.
COMPREHENSIVE LOSS - Comprehensive loss from the date of inception until
December 31, 1999 is the same as net loss presented in the accompanying
statement of operations.
NOTE 2 - MERGER AND PLAN OF REORGANIZATION
On December 28, 1999 the Company entered into a definitive merger and plan of
reorganization agreement with GLOBALETUTOR, Inc. (formerly Digital Launch,
Inc.) a publicly held Delaware Corporation ("GLOBAL"). The merger qualifies
as a tax-free transaction under Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended. The agreement requires the shareholders of the
Company to exchange all of the outstanding stock of the Company to Global in
exchange for 9,640,000 shares of Global in a transaction accounted for as a
recapitalization of the Company, wherein the Company will become a wholly
owned subsidiary of GLOBAL. Additionally, the agreement calls for GLOBAL to
sell to outside investors in a private placement transaction, an additional
8,000,000 shares of stock at $.25 per share, and 500,000 shares of stock at
$.20 per share, totaling $2,100,000.
The Company received on December 30, 1999, $750,000 from GLOBAL in exchange
for a senior secured note and a stock pledge, in anticipation of the
acquisition (See Note 5). A separate agreement with an investor, an
investment banking entity, provides for the payment of a 10% finders fee from
the Company to the investor, for all cash raised resulting from the merger. A
$75,000 finders fees was accrued as of December 31, 1999 and was recorded as
deferred investment banking fee.
On January 21, 2000 the Company completed the merger with Global through (1)
the exchange of 4,820,000 shares of Company stock for 9,640,000 shares of
Global common stock, (2) the offset of $75,000 deferred investment banking
fees against additional paid in capital.
-7-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - MERGER AND PLAN OF REORGANIZATION [CONTINUED]
Additionally, in accordance with the merger agreement, Global authorized the
issuance of options, each with a three-year term, to purchase shares of
Global common stock: (1) options to purchase 2,500,000 shares at an exercise
price of $0.25 per share to Tom McMurrain, an officer of the Company, (2)
options to purchase 2,500,000 shares, at an exercise price of $0.50 per share
to Tom McMurrain, and (3) options to purchase 2,000,000 shares, at an
exercise price of $0.25 per share, to certain new members of management of
Global to be designated by Tom McMurrain on or prior to the closing. These
7,000,000 options were subsequently canceled. The agreement also calls for
Global to assume all current outstanding obligations of the Company to
holders of options and warrants to purchase shares of capital stock of the
Company, which had been committed to as of December 28, 1999.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and Equipment consisted of the following at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Computer Equipment $ 5,369
Less accumulated depreciation (79)
-----------
$ 5,290
===========
</TABLE>
During the period ended December 31, 1999 depreciation expense was $79.
NOTE 4 - ACCRUED LIABILITIES
Accrued liabilities include the following as of December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Accrued salaries 3,123
Accrued interest 8,483
---------
$ 11,606
=========
</TABLE>
NOTE 5 - NOTE PAYABLE - RELATED PARTY
Notes payable - related parties as of December 31, 1999 consist of an
unsecured, interest bearing, due on demand note payable to an affiliate in
the amount of $173,890. Interest on the note to the affiliate accrues monthly
at a rate of 5% per month, subsequently and retroactively revised to 10% per
annum. Accrued interest on the affiliate note totaled $8,483 as of December
31, 1999 and is included in accrued expenses on the accompanying balance
sheet. (See Note 4.)
Notes payable - related parties as of December 31, 1999 also includes a
$750,000 secured note payable to Global. The note payable to Global is
secured by a stock pledge agreement with Tom McMurrain, the Company's
president and a significant shareholder and accrues interest at Prime plus
1%. All 4,820,000 shares of the Company's common stock are pledged as
security to the note. Effective with the reorganization, the note was
converted to equity in Global (See Note 2).
-8-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - CAPITAL STOCK
PREFERRED STOCK - The Company has authorized 5,000,000 shares of preferred
stock with such rights and preferences and in such series as determined by
the Board of Directors at the time of issuance. No shares are issued or
outstanding as of December 31, 1999
COMMON STOCK - During December 1999, in connection with its organization, the
Company issued 4,820,000 shares of its previously authorized, but unissued
common stock. The shares were issued for cash of $25,000 (or approx. $.001
per share).
NOTE 7 - STOCK OPTION PLAN
The Company's Stock Incentive Plan (the "Plan") was adopted by the Board of
Directors on December 28, 1999. Incentive stock options may be granted to
employees of the Company entitling them to purchase shares of common stock
for a maximum of ten years (five years in the case of options granted to a
person possessing more than 10% of the combined voting power of the Company
as of the date of grant). The exercise price for incentive stock options may
not be less than fair market value of the common stock on the date of the
grant (110% of fair market value in the case of options granted to a person
possessing more than 10% of the combined voting power of the Company).
Nonqualified stock options may be granted to employees, officers, directors,
independent contractors and consultants of the Company. The aggregate fair
market value of the shares of common stock for which one or more options
granted to any employee under the Plan may for the first time become
exercisable as incentive options during any one calendar year shall not
exceed $100,000.
STOCK OPTIONS - During the periods presented in the accompanying financial
statements the Company has granted options under the Plan. The Corporation
has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized for the stock option
plans or other agreements. Had compensation cost for the Company's stock
option plan and agreements been determined based on the fair value at the
grant date for awards in 1999, consistent with the provisions of SFAS No.
123, there would have been no effect on the Company's net earnings and
earnings per share would have had no effect on the net loss of the Company.
The fair value of each option granted is estimated on the date granted using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants during the period ended December 31, 1999,
risk-free interest rates of 5.1%, expected dividend yields of zero, expected
life of 3 years, and expected volatility 141%.
-9-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - STOCK OPTION PLAN [CONTINUED]
A summary of the status of the options granted under the Company's stock
option plan and other agreements at December 31, 1999 and changes from
inception on December 10, 1999 is presented below:
<TABLE>
<CAPTION>
December 31, 1999
----------------------------
Weighted Average
Shares Exercise Price
-------- ---------------
<S> <C> <C>
Outstanding at December 10, 1999 - -
Granted 241,000 $.25
Exercised - -
Forfeited - -
Expired - -
-------- -------------
Outstanding at December 31, 1999 241,000 $.25
-------- -------------
Weighted average fair value of options granted
during the period 241,000 $.00
-------- -------------
</TABLE>
A summary of the status of the options outstanding under the Company's
stock option plans and employment agreements at December 31, 1999 is
presented below:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------- -------------------------------
Range of Weighted-Average Weighted Average Weighted-Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Contractual Life Price Exercisable Price
---------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$.25 241,000 3 years $.25 241,000 $.25
</TABLE>
-10-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability equal
to the expected future tax benefit/expense of temporary reporting differences
between book and tax accounting methods and any available operating loss or
tax credit carryforwards.
The Company has available at December 31, 1999, unused operating loss
carryforwards of approximately $183,000 which may be applied against future
taxable income and which expire in various years through 2019.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the uncertainty
surrounding the realization of the loss carryforwards the Company has
established a valuation allowance equal to the amount of the loss
carryforwards and, therefore, no deferred tax asset has been recognized for
the loss carryforwards. The net deferred tax assets are approximately $67,000
as of December 31, 1999, with an offsetting valuation allowance at year end
of the same amount resulting in a change in the valuation allowance of
approximately $67,000 during 1999.
NOTE 9 - RELATED PARTY TRANSACTIONS
OFFICE SPACE - The Company leases its facilities from a related party on a
month to month basis. The Company has also borrowed money from several
related entities as disclosed in Note 5. Because of the nature of these
relationships, the amounts charged may have been different had the parties
not been related. The rents paid to the related party amounted to $1,200 for
the period ended December 31, 1999.
NOTE 10 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company was only recently
formed, has incurred losses since its inception, has current liabilities in
excess of current assets and has not yet been successful in establishing
profitable operations. These factors raised substantial doubt about the
ability of the Company to continue as a going concern. In this regard,
management has mitigated the doubt by raising additional funds through the
subsequent merger with GLOBALETUTOR and the sales of 8,000,000 shares of
common stock for total proceeds of $2,000,000 net of a 10% finders fee (See
Note 2). There is no assurance that the Company will be successful in
achieving profitable operations. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
-11-
<PAGE>
GLOBALETUTOR.COM, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share from
inception on December 10, 1999 through December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Loss from continuing operations available to common
shareholders (numerator) $(183,663)
-----------
Weighted average number of common shares outstanding
used in loss per share calculation for the period (denominator) 4,820,000
-----------
</TABLE>
Subsequent to the year ended December 31, 1999, the Company effected a
recapitalization and was acquired by Global (See Note 2).
NOTE 12 - COMMITMENTS AND CONTINGENCIES
INVESTMENT BANKING AGREEMENT - On December 22, 1999, the Company entered into
an investment capital financing agreement. The agreement requires the Company
to pay a ten percent finders fee for any financing, debt or other bridge
loans as well as warrants for 10% of any stock issued by the Company. The
term of the agreement is one year, unless the Company continues to use the
funding sources provided to the Company. At December 31, 1999, the Company
has accrued $75,000 in finders fees in connection with the $750,000 note
payable (See Note 2).
NOTE 13 - SUBSEQUENT EVENTS
MERGER AND PLAN OF REORGANIZATION - On January 21, 2000 the Company completed
the transaction under the Agreement and Plan of Reorganization dated December
28, 1999 with Digital and exchanged 4,820,000 shares of Company stock for
9,640,000 shares of Digital common stock. The Company is now a wholly owned
subsidiary of GLOBALETUTOR, Inc. (formerly known as Digital Launch, Inc.)
(SEE NOTE 2).
-12-
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed consolidated financial
statements give effect to the KilimanjaroGroup.com, Inc. (Kilimanjaro) Merger.
The Kilimanjaro merger was accounted for under the purchase method of accounting
in accordance with APB Opinion No. 16. Under the purchase method of accounting,
the purchase price is allocated to the assets acquired and liabilities assumed
based on their estimated fair values. Estimates of the fair values of the assets
and liabilities of Kilimanjaro have been combined with the recorded values of
the assets and liabilities of GlobaleTutor, Inc. in the unaudited GlobaleTutor,
Inc. combined condensed consolidated financial statements.
The unaudited pro forma combined condensed consolidated balance sheet has been
prepared to reflect the Kilimanjaro Merger as if it occurred on January 1, 2000.
The unaudited pro forma condensed consolidated statements of operations reflect
the results of operation of GlobaleTutor, Inc. and Kilimanjaro for the three
months ended March 31, 2000.
The unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the combined condensed consolidated financial position or results of operations
in future periods or the results that actually would have been realized had
GlobaleTutor, Inc. and Kilimanjaro been a combined company during the specified
periods. The unaudited pro forma combined condensed consolidated financial
statements, including the notes thereto, are qualified in their entirety by
reference to, and should be read in conjunction with, the historical financial
statements of GlobaleTutor, Inc, and KilimanjaroGroup.com, Inc. included in this
filing.
<PAGE>
GLOBALETUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
ASSETS
GlobaleTutor, Inc.
and Subsidiay KilimanjaroGroup.com, Inc.
(A Development (A Development Adjustments/ Consolidated
Stage Company) Stage Company) Eliminations Statements
------------------- -------------------------- ------------ ------------
<S> <C> <C> <C> <C>
Current assets 1,129,251 - (75,000)(a) 1,054,251
------------------- -------------------------- ------------ ------------
Property and equipment, net 35,326 - - 35,326
------------------- -------------------------- ------------ ------------
Goodwill and other purchased intangibles, net 3,597 - 101,200 (a) 104,797
------------------- -------------------------- ------------ ------------
1,168,174 - 26,200 1,194,374
=================== ========================== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities 441,715 1,200 - 442,915
------------------- -------------------------- ------------ ------------
Stockholders' equity
(2,655)(a)
Common stock 27,468 2,655 50 (a) 27,518
Additional paid in capital 1,813,533 - 24,950 (a) 1,838,483
Deficit Accumulated During the Development Stage (1,114,542) (3,855) 3,855 (a) (1,114,542)
------------------- -------------------------- ------------ ------------
726,459 (1,200) 26,200 751,459
------------------- -------------------------- ------------ ------------
1,168,174 - 26,200 1,194,374
=================== ========================== ============ ============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
<PAGE>
GLOBALETUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Global e Tutor, Inc. and
subsidiary (A Development KilimanjaroGroup.com, Inc. Adjustments/ Consolidated
Stage Company) (A Development Stage Company) Eliminations Statements
------------------------- ---------------------------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUE - - -
------------------------- ----------------------------
COSTS OF GOODS SOLD
Purchases - - -
------------------------- ---------------------------- ------------
Profit margin - - -
Operating Expenses
General and administrative 415,588 - 5,000 (a) 420,588
Depreciation/Amortization 875 - 5,060 (b) 5,935
Research and development 362,997 - 362,997
Sales and marketing 157,114 - -
------------------------- ---------------------------- ------------ ------------
936,573 - 10,060 789,519
Loss from operations (936,573) - (10,060) (946,633)
Other income (expense)
Interest income 7,665 - 7,665
Interst expense (1,970) - (1,970)
------------------------- ---------------------------- ------------
5,695 - 5,695
------------------------- ---------------------------- ------------
Loss before income taxes (930,878) - (940,938)
Income taxes - - -
------------------------- ---------------------------- ------------
Net loss (930,878) - (940,938)
========================= ============================ ============
Net loss per share (0.03) (0.03)
Weighted average shares outstanding 27,467,747 27,517,747
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
GLOBALETUTOR, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLDIATED FINANCIAL STATEMENTS
(UNAUDITED) BASIS OF PRESENTATION
MARCH 31, 2000
The pro forma combined condensed consolidated financial statements reflect the
issuance of 50,000 restricted shares of GlobaleTutor, Inc. common stock, $.001
par value. The Kilimanjaro Merger was accounted for under the purchase method of
accounting in accordance with APB Opinion No. 15. Under the purchase method of
accounting, the purchase price is allocated to the assets acquired and
liabilities assumed based on their estimated fair values. Estimates of the fair
values of the assets and liabilities of Kilimanjaro have been combined with the
recorded values of the assets and liabilities of GlobaleTutor, Inc. in the
unaudited pro forma combined condensed consolidated financial statements.
The operations and balance sheet of GlobaleTutor, Inc. and Subsidiary, Inc.
include the pro forma effect of the reverse merger with Digital Launch, Inc.
which occurred in January of 2000.
PRO FORMA ADJUSTMENTS
(a) To reflect issuance of 50,000 shares of GlobaleTutor, Inc. common stock and
$75,000 cash in exchange for 100% of the outstanding common stock of
Kilimanjaro.
Management estimates the value of the 50,000 shares to be $.50 per share.
Management has allocated the purchase price to the assets and liabilities
acquired based upon their relative fair values. The transaction generated
goodwill and other intangibles of $101,200, which will be amortized on a
straight-line basis over a five-year life.
Management continues to study the allocation of the purchase price; upon
completion of such study, the allocation may change.
(b) To reflect three months of amortization of goodwill and other intangibles.
