<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
Date of Report August 18, 2000
GLOBAL E TUTOR, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE
State or other jurisdiction of incorporation or organization
000-30743
Commission File No.
88-0444539
I.R.S. Employer I.D. No.
3340 PEACHTREE ROAD, SUITE 1800 ATLANTA, GA
(Address of Principal Executive Offices)
30326
(Zip Code)
Registrant's telephone number, including area code: (404) 978-1640
<PAGE>
GLOBAL E TUTOR, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets--June 30, 2000 (unaudited) and
December 31, 1999
Condensed Consolidated Statements of Operations (unaudited)
Consolidated Statements of Stockholders' Equity--from Inception on
December 10, 1999 through June 30, 2000
Consolidated Statements of Cash Flows (unaudited)--Six months ended
June 30, 2000 (unaudited) and Period From Inception Through
June 30, 2000 (unaudited)
Notes to consolidated Financial Statements (unaudited)--June 30, 2000
and December 31, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Risk Factors
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK--not applicable
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
PART I FINANCIAL INFORMATION............................................
Item 1. Financial Statements
<PAGE>
GLOBAL E TUTOR, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
------
Subsidiary
June 30, December 31,
2000 1999
------------------- ------------------
<S> <C> <C>
Current assets
--------------
Cash $ 74,240 $ 774,911
Other current assets 6,026 20,000
------------------- ------------------
Total current assets 80,266 794,911
------------------- ------------------
Property and equipment, at cost
-------------------------------
Furniture and equipment 19,478 -
Computer equipment 30,043 5,369
Software 2,208 -
Leasehold improvements 15,386 -
Web site development costs 387,653 -
------------------- ------------------
454,768 5,369
Allowance for depreciation (30,271) (79)
------------------- ------------------
Net property and equipment 424,497 5,290
------------------- ------------------
Other assets
------------
Employee advances 169,999 -
Intangibles, net of accumulated amortization 102,346 132
Other assets 18,078 75,000
------------------- ------------------
Total other assets 290,423 75,132
------------------- ------------------
$ 795,186 $ 875,333
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
-------------------
Accounts payable $ 214,464 $ 98,500
Accrued expenses 76,368 11,606
Due to related parties 339,129 923,890
------------------- ------------------
Total current liabilities 629,961 1,033,996
------------------- ------------------
Stockholders' equity
--------------------
Common stock 27,568 9,640
Additional paid in capital 2,483,985 15,360
Deferred compensation, net of accumulated
amortization (474,422) -
Accumulated deficit (1,871,906) (183,663)
------------------- ------------------
Total stockholders' equity 165,225 (158,663)
------------------- ------------------
$ 795,186 $ 875,333
=================== ==================
</TABLE>
Note: The balance sheet at December 31, 1999 was taken from the audited
financial statements at that date and condensed
See notes to unaudited condensed consolidated financial statements
<PAGE>
GLOBAL E TUTOR, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
For the Six For the Three From inception
Months Ended Months Ended on December 10,
June 30, June 30, 1999 Through
2000 2000 June 30, 2000
-------------- ---------------- -------------------
<S> <C> <C> <C>
Revenue $ - $ - $ -
------- -------------- ---------------- -------------------
Costs of goods sold - - -
------------------- -------------- ---------------- -------------------
Gross profit - - -
------------ -------------- ---------------- -------------------
Expenses
--------
General and administrative 1,081,290 689,128 1,216,178
Depreciation/Amortization 220,044 50,969 220,044
Research and development 43,073 6,773 43,073
Sales and marketing 355,519 198,216 395,811
-------------- ---------------- -------------------
Total expenses 1,699,926 945,086 1,875,106
-------------- ---------------- -------------------
Loss from operations (1,699,926) (945,086) (1,875,106)
-------------------- -------------- ---------------- -------------------
Other income (expense)
----------------------
Interest income 17,605 9,938 17,605
Misc. income 1,200 1,200 1,200
Interest expense (7,122) (5,149) (15,605)
-------------- ---------------- -------------------
Total other income (expense) 11,683 5,989 3,200
-------------- ---------------- -------------------
Loss before income taxes (1,688,243) (939,097) (1,871,906)
------------------------
Income tax expense - - -
------------------ -------------- ---------------- -------------------
Net loss $ (1,688,243) $ (939,097) $ (1,871,906)
-------- ============== ================ ===================
Loss per common Share $ (0.06) $ (0.03) $ (0.07)
--------------------- ============== ================ ===================
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
GLOBAL E TUTOR, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON DECEMBER 10, 1999 THROUGH JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid In Deferred Accumulated Stockholders'
-----------------------------
Shares Amount Capital Compensation Deficit Equity
-------------- ------------- ------------ --------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 10, 1999 9,640,000 9,640 15,360 - - 25,000
Compensation for options and
warrants issued at below
market value - - - - - -
Net loss for the period ended
December 31, 1999 - - - (183,663) (183,663)
-------------- ------------- ------------ --------------- ---------------- -------------
Balance, December 10, 1999 9,640,000 9,640 15,360 - (183,663) (158,663)
Shares issued for cash at $.25
per share 5,000,000 5,000 1,245,000 - - 1,250,000
Effect of recapitalization of the
subsidiary January 21, 2000 12,827,747 12,828 537,173 - 550,001
Share issued to purchase
Kilimanjaro Group.com,Inc. at
$.50 per share 50,000 50 24,950 - 25,000
Shares issued for services
at $2.68 per share 49,520 50 132,560 132,610
Compensation for options and
warrants issued at below
market value - - 528,942 (474,422) - 54,520
Net loss for the period ended
December 31, 1999 - - - (1,688,243) (1,688,243)
-------------- ------------- ------------ --------------- ---------------- -------------
Balance, June 30, 2000 27,567,267 27,568 2,483,985 (474,422) (1,871,906) 165,225
============== ============= ============ =============== ================ =============
</TABLE>
See notes to unaudited condensed financial statements
<PAGE>
GLOBAL E TUTOR, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) IN CASH
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
For the Six From inception
Months Ended on December 10,
June 30, 1999 Through
2000 June 30, 2000
------------ -------------
<S> <C> <C>
Cash flows from operating activities
------------------------------------
Net loss $(1,688,243) $ (1,871,906)
Adjustments to reconcile net loss to
net cash (used) by operating activities
Depreciation and amortization 32,916 33,002
Deferred compensation 54,520 54,521
Non-cash expense 132,610 132,610
Changes in assets and liabilities -
Deposits (18,078) (18,078)
Pre-paid expenses 13,974 (6,026)
Accounts payable/accrued expenses 179,526 214,632
------------ -------------
Total adjustments 395,468 410,661
------------ -------------
Net cash (used) by operating activities (1,292,775) (1,461,245)
------------ -------------
Cash flows from investing activities
------------------------------------
Employee advances (169,999) (169,999)
(Acquisition) of fixed assets (449,399) (454,768)
(Acquisition) of subsidiary (75,000) (75,000)
(Acquisition) of intangible assets (3,737) (3,877)
------------ -------------
Net cash (used) by investing activities (698,135) (703,644)
------------ -------------
Cash flows from financing activities
------------------------------------
Proceeds from related parties advances 165,239 1,089,129
Proceeds from sale of common stock 1,125,000 1,150,000
------------ -------------
Net cash provided by financing activities 1,290,239 2,239,129
------------ -------------
Net increase (decrease) in cash (700,671) 74,240
Cash, beginning of period 774,911 -
------------ -------------
Cash, end of period $ 74,240 $ 74,240
============ =============
</TABLE>
NON-CASH TRANSACTIONS
---------------------
The Company paid $75,000 in cash, assumed $1,200 in liabilities and issued
50,000 shares of common stock to purchase all the outstanding common shares of
Kilimanjaro Group.Com, Inc., resulting in the Company recording goodwill of
$101,200
The Company issued 49,520 restricted common shares, 36,782 non-qualified
options, and 156,208 warrants during the months of February through June, 2000,
in exchange for services, totaling $132,610, $26,391 and $502,552 respectively.
In accordance with the merger and plan of reorganization, on January 21, 2000,
9,640,000 common shares of GlobalETutor, Inc. (formerly Digital Launch, Inc.)
were exchanged for all of the outstanding common shares, 4,820,000, of
GlobaleTutor.com, Inc.
In accordance with an Agreement and Plan of Merger, on May 23, 2000, 50,000
common shares of GlobaleTutor, Inc. and $75,000 cash were exchanged for all of
the outstanding shares of Kilimanjaro Group.com, Inc.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
-------------------------------------------------
June 30,
2000
---------
Cash paid during the periods for
Interest $ -
Income Taxes $ -
See notes to unaudited condensed consolidated financial statements
<PAGE>
GLOBAL E TUTOR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIODS ENDING JUNE 30, 2000 and DECEMBER 31, 1999
Note A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION:
---------------------------------------------------
The December 31, 1999 condensed financial statements include the accounts of
GlobalETutor.Com, Inc. a Nevada corporation incorporated on December 10, 1999.
On January 21, 2000 the GlobalETutor.Com completed the merger with Global e
Tutor, Inc. ("Parent")(formerly known as Digital Launch, Inc./Veronique,
Inc./EssexEnterprises, Inc.) that was organized under the laws of the State of
Delaware on May 9, 1995. The merger was accounted for as a recapitalization of
the Parent Company, wherein GlobalETutor.Com, Inc. ("Subsidiary") became a
wholly owned subsidiary of the Parent.
Effective May 25, 2000 the Parent entered into an Agreement and Plan of Merger
with Kilimanjaro Group.com, Inc.("Kilimanjaro"), a Nevada corporation, wherein,
Kilimanjaro merged into Parent with the Parent being the surviving entity and
assuming Kilimanjaro's reporting obligations as its successor pursuant to
Section 12(g)(3) of the Securities Exchange Act.
The Consolidated condensed financial statements as of June 30, 2000, for the
six and three months ended June 30, 2000, and from inception of December 10
through June 30, 2000 include the accounts of the Parent and its wholly-owned
subsidiary after giving effect to the recapitalization and the merger. 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 grades 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 to 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.
The accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
result of operations and cash flows at June 30, 2000 and for the periods then
ended have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statement be read in conjunction with the financial statements. The results of
operations for the periods ended June 30, 2000 are not necessarily indicative of
the operating results for the full year.
<PAGE>
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 are
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
Leasehold improvements 5 years
Web site development costs 3 years
INTERNAL USE SOFTWARE:
----------------------
The Company accounts for the costs of software and development cost in
accordance with Statement of Position 98-1, "ACCOUNTING FOR COMPUTER SOFTWARE
DEVELOPED FOR OR OBTAINED FOR INTERNAL USE". The SOP requires the capitalization
of certain costs incurred in connection with developing or obtaining software
for internal use.
RESEARCH AND DEVELOPMENT:
-------------------------
The Company expenses the cost of research and development for new products and
components as the costs are incurred.
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.
<PAGE>
CASH IN EXCESS OF FEDERALLY INSURED LIMITS:
-------------------------------------------
As of June 30, 2000 the Company had deposits with a financial institution in the
amounts of $35,918 in excess of federally insured limits.
INTANGIBLE ASSETS:
------------------
Intangible assets for the Company, consist of domain name registrations and
goodwill. Domain name registrations are amortized on a straight-line basis over
two years. Goodwill is amortized on a straight-line basis over five years.
Amortization expense for the six and three months ended June 30, 2000 totaled
$2,731 and $2,579 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:
--------------------
The Company has earned no revenue to date.
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 June 30, 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. Advertising expense for the six and three
months ended June 30, 2000 totaled approximately $147,104 and $74,023,
respectively
<PAGE>
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." The Company has 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. 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 for the six and three months ended 30, 2000 and from
inception on December 10, 1999 through June 30, 2000 is the same as net loss
presented in the accompanying statement of operations for the periods then
ended.
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. The parent sold to outside investors in a
private placement transaction, an additional 3,000,000 shares of stock at $.25
per share , and 500,000 shares of stock at $.20 per share, totaling $850,000.
On January 21, 2000 the Company completed the merger with GlobalETutor.com, Inc.
through the issuance of 9,640,000 common shares of the Company for
GlobalETutor.com, Inc. 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.
On May 25, 2000, the Company merger with Kilimanjaro Group.com, Inc.
("Kilimanjaro"), a Nevada corporation became effective. The agreement provided
that Kilimanjaro would merge into GLOBAL E TUTOR, INC. It also provided that
GLOBAL E TUTOR, INC. would issue 50,000 common shares pro rata to the three
shareholders of Kilimanjaro and pay $75,000 pro rata to these shareholders in
exchange for all of the outstanding shares of Kilimanjaro. As a result,
Kilimanjaro was merged into GLOBAL E TUTOR, Inc. GLOBAL E TUTOR, Inc. was the
surviving entity and assumed Kilimanjaro's reporting obligations as its
successor pursuant to Section 12(g)(3) of the Securities Exchange Act. Prior to
the merger, GLOBAL E TUTOR, Inc. had an aggregate of 27,467,747 shares of common
stock issued and outstanding. As a result of the merger, the Company had a
total of 27,517,747 shares outstanding. The officers, directors, bylaws, and
<PAGE>
the certificate of incorporation of GLOBAL E TUTOR, Inc. remain unchanged as a
result of the merger, and the control of the successor entity rests with GLOBAL
E TUTOR, Inc.
NOTE C - RELATED PARTY TRANSACTIONS
EMPLOYEE ADVANCES:
------------------
The Company has made employee advances totaling $169,999 during the first and
second quarter 2000. The majority of the advance, $168,099 is due on demand from
the Vice-Chairman of the Board of the Company.
DUE TO RELATED PARTIES:
-----------------------
As of June 30, 2000, due to related parties consists of an unsecured, interest
bearing, due on demand note payable to an affiliate in the amount of $339,129.
Interest on the note to the affiliate is 10% per annum. Accrued interest on the
affiliate note totaled $10,595 as of June 30, 2000 and is included in accrued
expenses.
NOTE D - STOCKHOLDERS' EQUITY
Common Stock - The Company is authorized to issue 50,000,000 shares of $.001 par
value common stock. As of June 30, 2000, 27,567,267 shares were issued and
outstanding. During the six months ended June 30, 2000 the Company issued 49,520
shares of common stock for professional services rendered valued at $132,610.
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 June 30, 2000.
Warrants - At June 30, 2000, the Company had 216,208 warrants to purchase common
stock outstanding at prices from $.25 to $1.00 per share, and expiring from 2002
to 2005. The warrants were issued prior to the recapitalization in connection
with the Parent 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:
CURRENT TAXES:
Federal income taxes $ -
State income taxes -
---------------
DEFERRED TAXES:
Federal income taxes -
State income taxes -
---------------
---------------
$ -
---------------
<PAGE>
OPERATING LOSS CARRY FORWARDS - The company had available for carry forward net
operating losses totaling $2,117,715 at June 30, 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 June 30, 2000 are presented
below:
NON-CURRENT:
<TABLE>
<S> <C>
Deferred tax asset
Net operating loss carryforward $ 720,023
Accumulated Depreciation 8,107
Accumulated Amortization 737
Deferred Tax Amortization 63,624
Research and Development Tax Credits 35,838
---------
Deferred tax asset 828,329
Less valuation allowance (828,329)
---------
Net non-current deferred tax asset $ -0-
----------
</TABLE>
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 June
30, 2000 and December 31, 1999, respectively. A summary of the status of the
options granted under the Company's stock option plan and other agreements at
June 30, 2000 and changes during the period then ended are presented below:
<PAGE>
<TABLE>
<CAPTION>
June 30, 2000
---------------------------
Weighted Average
Shares Exercise Price
--------- ----------------
<S> <C> <C>
Outstanding at
Beginning of period 4,407,674 $ .25
Granted 36,782 .68
Exercised -- --
Forfeited 266,667 .25
Expired -- --
--------- ----
Outstanding at end
Of period 4,177,789 $ .25
--------- -----
Weighted average fair
Value of options granted
During the six months ended
June 30, 2000 36,782 $1.41
--------- -----
</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 June 30, 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 June 30, 2000 is presented below:
Options
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- ---------------------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Prices Outstanding Contractual Life Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$.25-$.275 4,113,507 2.6 years $0.25 1,648,502 $0.25
$0.50 23,687 2.9 years $0.50 7,896 $0.50
$0.75 27,500 3.0 years $0.75 27,500 $0.75
$1.00 13,095 3.0 years $1.00 4,365 $1.00
----------- ---------
4,177,789 1,688,263
</TABLE>
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 Six For the Three From Inception
Months Ended Months Ended on December 10
June 30, June 30, 1999 through
2000 2000 June 30, 2000
------------ ------------- -------------
<S> <C> <C> <C>
Loss from operations
Available to common
Shareholders
(numerator) 1,688,243 939,097 1,871,906
---------- ---------- -----------
Weighted average
Number of common shares
Outstanding used in
Loss per share for the
period (denominator) 26,900,714 27,487,747 26,442,131
========== ========== ===========
</TABLE>
The Company had outstanding at June 30, 2000, options to purchase 4,177,789
common shares at prices ranging from $.001 to $3.50 and warrants to purchase
216,208 common shares that were not included in the computation of loss per
share because their effect is anti-dilutive.
Note H - 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 has incurred losses since its
inception, and has not yet been successful in establishing profitable
operations. These factors raise substantial doubt about the ability of the
Company to continue as a going concern. In this regards management is proposing
to raise any necessary additional funds not provided by operations through loans
and/or through additional sales of its common stock. There is no assurance that
the Company will be successful in raising this additional capital or in
achieving profitable operations. These financial statements do not include any
adjustments that might result from the outcome on these uncertainties.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
<PAGE>
Overview
--------
The following discussion and analysis should be read in conjunction with the
balance sheets as of June 30, 2000 and December 31, 1999 and the statements of
operations for the six months and the three months ended June 30, 2000 and for
the period from inception through June 30, 2000 included with this Form 10-QSB.
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:
- We may not be able to raise money to continue operating.
- Our personal sanctuary databases may not be as secure or meeting the minimum
requirements of COPA, which could subject our information to Internet
hackers.
- 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
- 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
statement 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.
Mission Statement
-----------------
Our mission is to provide web-based access to educational services and tutorials
that will personalize and focus the one-on-one virtual learning experience,
create a personal database sanctuary for students within tutorials, and support
parental and teacher involvement in the process. It is our goal to extend the
reach of education to children outside the traditional education community and
provide a multi-lingual, multi-cultural learning environment to children K-12
globally.
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
<PAGE>
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 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.
An Agreement and Plan of Merger with Kilimanjaro Group.com, Inc.
("Kilimanjaro"), a Nevada corporation became effective on May 25, 2000. The
agreement provided that Kilimanjaro would merge into GLOBAL E TUTOR, INC. It
also provided that GLOBAL E TUTOR, INC. would issue 50,000 common shares pro
rata to the three shareholders of Kilimanjaro and pay $75,000 pro rata to these
shareholders in exchange for all of the outstanding shares of Kilimanjaro. As a
result, Kilimanjaro was merged into GLOBAL E TUTOR, Inc. GLOBAL E TUTOR, Inc.
was the surviving entity and assumed Kilimanjaro's reporting obligations as its
successor pursuant to Section 12(g)(3) of the Securities Exchange Act. Prior to
the merger, GLOBAL E TUTOR, Inc. had an aggregate of 27,467,747 shares of common
stock issued and outstanding. As a result of the merger, the Company had a total
of 27,517,747 shares outstanding. The officers, directors, bylaws, and the
certificate of incorporation of GLOBAL E TUTOR, Inc. remain unchanged as a
result of the merger, and the control of the successor entity rests with GLOBAL
E TUTOR, Inc.
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
<PAGE>
community for children; our top ten tutorials; a global educational broadcast
network; a global 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.
- 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
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.
<PAGE>
- 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
May 15, 2000. The 501-(c)3 determination status is scheduled to be filed with
the Internal Revenue Service by the end of 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 are 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/October 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.
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. We are
currently re-evaluating this relationship.
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 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 $517,500, 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 June 30, 2000. The money has been spent on our web based educational
content distribution. This
<PAGE>
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. We do not
expect our customers to bear the cost of our research and development.
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 service
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.
The Company has chosen to focus on the development of distribution channels that
would utilize other providers' content. It is our opinion that potential
competitors are developing content and are now searching for distribution
channels. 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:
- 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.
<PAGE>
- 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 during 2000. We anticipate that Dr. Nobel will tour
the country in a specially designed bus and will speak at schools.
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 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.
<PAGE>
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 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 August 9, 2000, we employed 14 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 and availability of funds.
Description of Property
-----------------------
On July 1, 2000 we moved our offices to 3565 Piedmont Road, Suites 715 and 707,
Atlanta, GA 30305. The total square footage for both suites is 5,165. Our
mailing address is still 3340 Peachtree Road, Suite 1800, Atlanta, GA 30326. The
space is sublet until November 2000. We intend to continue the lease after that
time. The monthly lease payments total $6,025.83.
Plan of Operation
-----------------
In September- October 2000, our launch is planned with the opening of our
website including "edutainment" offerings and a catalog offering education
related products. Also at this time, we will begin a roll out of interactive
tutoring modules that include collaborative learning and tutoring sessions for
grades 4-8. During the initial launch phase (developing throughout the final
quarter of 2000), the Company will incorporate virtual ISP elements into the
site, some examples of which are email, chatrooms, and a calendar. Initial
revenues will be generated through subscription sales of online course
curriculums, corporate sponsorships, and government funding.
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
<PAGE>
We expect marketing, product development and our information technology
infrastructure will make up the largest portion of our operational expenses.
Capital Requirements
--------------------
We have been out of cash for approximately two months and are being funded by a
related party entity. We do not have cash to continue operations. We are
currently negotiating the terms of an equity financing which will satisfy a
substantial portion of our cash requirements through the end of 2000. We are
seeking a bridge loan of one million dollars from a current investor. 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.
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 filtered virtual ISP and premium services;
- personalized tutorials and assessment;
- content and technology development;
- affiliated products and services; and
- licensing and promotions.
If we are able to raise capital we expect that the number of employees will
increase from the current fourteen to approximately thirty persons over the next
twelve months.
Directors, Executive Officers, Promoters and Control Persons
------------------------------------------------------------
The following table sets forth as of August 9, 2000, the name, age, and position
of each of our executive officers and directors:
Name Age Position(s)
-----------------------------------------------------------
Thomas E. McMurrai 32 Founder, Vice Chairman
Claes Nobel 70 Senior Chairman, Senior
Jerry Barton 62 CEO, President, Director
Leslie Ennis 44 Vice-President
Shawn Cartmill 36 Treasurer
Robert Willisn 46 Director of Corporate Finance, Chief
Financial Officer
Lara Stegman 28 Secretary, Director of Operations
<PAGE>
James Lewis 45 Board Member
Directors are elected for a term of one year or 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 or until
his successor is chosen and qualified. Set forth below is certain biographical
information regarding our executive officers and directors:
THOMAS E. MCMURRAIN is currently the Founder and Vice-Chairman of GLOBAL E
TUTOR, INC. He was the president, CEO, and co-chairman of GLOBALETUTOR.COM, INC.
from December 1999 to July 7, 2000. 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.
Mr. McMurrain's Company, Emergency Cash Card One, Inc., is currently funding the
day-to-day operations of GLOBAL E TUTOR, INC.
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.
JERRY BARTON is the new CEO and President of GLOBAL E TUTOR, INC. He was voted
in on July 7, 2000. Mr. Barton was self-employed from May 1995, prior to
becoming President of GET in July 2000. He became a board member of GLOBAL E
TUTOR on June 2, 2000. From January 1994 to May 1995, Barton served as President
of Parts Central, Inc., an automotive parts and retail distribution company in
Macon, Georgia. Barton is a member of the Board of Directors of Parts Central,
Macon, Georgia.
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 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 for a food retailer. 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.
<PAGE>
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.
JAMES W. LEWIS is the founder and Executive Director of Golden Key National
Honor Society, a non-profit organization located in Atlanta, Georgia honoring
academic achievement in universities worldwide. He has held this position for
the past 23 years. He currently serves on the Board of Directors of Friend's
Health Connection, a not for profit organization based in New York City, New
York, and the non-profit Advisory Board of the Georgia State University Alumni
Association based in Atlanta, Georgia. Lewis became a member of the Board of
Directors of Global e Tutor on June 2, 2000.
The table below sets forth as of August 9, 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.
Name Age Position
----------------------------------------------------------
Dr. Barry Morris 44 Chief Knowledge Officer
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 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
six months ended June 30, 2000 and the fiscal years ended December 31, 1999,
1998, and 1997:
Terrence O. McGrath, CEO 1999 $120,000
1998 $120,000 1,000,000 options (2)
1997 $105,000
Thomas E. McMurrain, CEO 1999 $ 3,123 62,174 options
2000 $ 30,000
(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
<PAGE>
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. 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 June 30, 2000, there were no outstanding options granted under this plan and
29,225 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. 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.
2000 STOCK OPTION PLAN
Subsequent to June 30, 2000 we adopted the 2000 Stock Option Plan pursuant to
which we are authorized to issue 2,000,000 shares 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.
<PAGE>
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. 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 June 30, 2000, we had a total of 3,697,507 options which remained
outstanding under our 1999 stock option plan and 480,282 options which were
outstanding outside of our 1999 stock option plan, for a total of 4,177,789
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 Securities Percent of Total
Name Underlying Options Outstanding Options Exercise Price Expiration Date
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas E. McMurrain 62,174 0.027837 $ 0.275 1/31/03
Claus Nobel 482,000 0.215804 $ 0.25 1/31/03
Vincent A. Riggio 133,333 0.059697 $ 0.25 1/31/03
Leslie Ennis 185,000 0.082829 $ 0.25 1/31/03
Shawn Cartmill 185,000 0.082829 $ 0.25 1/31/03
Robert Willison 816,000 (1) 0.365345 $ 0.25 1/31/03
Lara Stegman 185,000 0.082829 $ 0.25 1/31/03
Dr. Barry Morris 185,000 0.082829 $ 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
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:
Name Annual Base Salary
---------------------------------------------------
Thomas E. McMurrain $ 60,000
Claes Nobel $150,000
Leslie Ennis $ 60,000
Shawn Cartmill $ 24,000
Robert V. Willison $ 24,000
<PAGE>
Lara Stegman $ 24,000
Dr. Barry Morris $ 60,000
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.
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. The principal balance of
this note at June 30, 2000 is $339,129.
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.
<PAGE>
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 $168,000 as of June 30, 2000, for
an employee loan. The loan is due on demand and accrues 10% interest per annum.
Description of Securities
-------------------------
Common Stock
We are authorized to issue 50,000,000 shares of common stock, par value $.001
per share. As of June 30, 2000, we had outstanding 27,567,267 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 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 June 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.
<PAGE>
Quarter High Low
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
Second $2.5469 $1.0625
Outstanding Options, Warrants, and Convertible Instruments
At June 30, 2000, we had outstanding options to purchase 4,177,789 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, of which 266,667 were forfeited when an officer left the Board by
mutual consent on June 28, 2000. 416,000 were granted during first quarter and
36,782 were granted during second quarter 2000, outside of our 1999 stock option
plan.
At June 30, 2000, we had outstanding warrants to purchase 60,000 shares. In
addition, pursuant to an agreement with Habif, Arogeti & Wynne, LLP, we have
agreed to issue 49,520 shares and warrants to purchase 156,208 shares for work
performed during February through June 2000. The warrants will be exercisable at
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 27,567,267 shares of our common stock outstanding at June 30, 2000. Of
these shares, 19,649,675 are believed to be restricted securities pursuant to
Rule 144 promulgated by the Securities and Exchange Commission. Management
believes that as of June 30, 2000, approximately 1,165,833 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 970,000 which are held by affiliates may be eligible for immediate
sale under Rule 144.
Record Holders of Stock; Transfer Agent
At June 30, 2000, we had approximately 119 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
<PAGE>
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.
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.
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.
Risks
-----
As with any new venture, there are risks associated with Global e Tutor's plans.
Recognition of these risks, evaluation of their severity and proper contingency
planning of outcomes must be considered. The following are a list of potential
risks, although not all inclusive:
Slower than predicted subscription rates; the Global e Tutor Personal Sanctuary
Databases are not viewed as secure or meeting the minimum requirements of COPA;
eroding value of click-through rates; scalability of IT structure; potential
competitors impart an interest in the market prior to Global e Tutor reaching
its critical mass; delays in website or database development; our youth
foundation may be unable to secure funding for its ongoing operations.
Results of Operations
---------------------
For the six and three months ended June 30, 2000 we did not generate any
operating revenues and incurred a cumulative net loss of $1,688,243 and $939,097
respectively. Our operating expense consisted of general and administrative
costs, depreciation, sales and marketing expenses and research and development.
General and administrative costs consist primarily of payroll totaling $279,273
and $137,474 respectively, professional fees totaling $521,477 and $405,051
respectively, travel and entertainment totaling $117,302 and $54,156
respectively and other general and administrative expense totaling $163,239 and
$92,447 respectively.
Depreciation and amortization expense for the six and three months ended June
30, 2000 totaled $220,044 and $50,969, respectively.
<PAGE>
Research and development costs totaled $43,073 and $6,773 respectively. These
costs are discussed above.
Sales and marketing expenses consist primarily of advertising totaling $147,104
and $74,023, public relations totaling $120,000 and $60,000 and other selling
expenses totaling $88,415 and $64,192.
The results of operations for the six and three months ended June 30, 2000 are
not necessarily indicative of the results for any future interim periods or for
the year ending December 31, 2000. We expect to expand our personnel, continue
research and development and continue to develop content, which will result in
increasing expenses.
Liquidity and Capital Resources
Our operating and capital requirements have exceeded our cash flow from
operations as we have been building our business. Operating activities during
the six months ended June 30, 2000 created a net cash use of $700,671, which has
primarily been funded by cash on hand, a related party loan, and sales of common
stock. At June 30, 2000 we had cash and cash equivalents of $74,240. 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.
The related party loan is payable upon demand and accrues 10% interest annually.
During the six months ended June 30, 2000, GLOBAL E TUTOR, INC. increased this
payable by $165,238.
Subsequent Event
----------------
On July 27, 2000 GLOBAL E TUTOR, INC. entered into an Affiliate Agreement with
Phoenix Multimedia, Inc. The Agreement is for a term of twelve months and is
renewable on an annual basis thereafter. It may be terminated by written notice
after the initial twelve months. GLOBAL E TUTOR, INC. will participate in
Phoenix Multimedia, Inc.'s E-learning program "e-Mapp" in order to link to the
Phoenix world wide web. Phoenix will pay a 20% commission on the retail sale of
courses or course modules, based on sales of Products and Services through
GLOBAL's web link to Phoenix's web site.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk - Not
Applicable
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
<PAGE>
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 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.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit Title
------ -------------
2.1 Appointment of Thomas E. McMurrain to be Vice Chairman and Founder and
Appointment of Jerry L. Barton to be Chief Executive Officer and
President.
2.2 Affiliate Agreement, dated as of July 27, 2000, by and among Global e
Tutor, Inc. and Phoenix Multimedia, Inc.
2.3 Consent Action of the Board of Directors of Global E Tutor, Inc.,
Effective July 24, 2000
2.4 Global E Tutor, Inc. 2000 Stock Incentive Plan
2.5 Form of Sample Award Certificates Under 2000 Stock Option Plan
2.6 Form of Terms and Conditions to the Incentive Stock Option Award
Pursuant to the Global E Tutor, Inc. 2000 Stock Incentive Plan
2.7 Form of Terms and Conditions to the NonQualified Stock Option Award
Pursuant to the Global E Tutor, Inc. 2000 Stock Incentive Plan
(b) Reports on Form 8-K.
1. Current Report on Form 8-K, dated March 31, 2000, filed May 23, 2000,
disclosing the acquisition of Kilimanjaro Group.com, Inc.
<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
thereunto duly authorized.
GLOBAL E TUTOR, INC.
Date: August 14, 2000 /s/ Jerry Barton President and CEO
Date: August 14, 2000 /s/ Robbie Willison Chief Financial Officer
