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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB12G
GENERAL FORM FOR REGISTRATION OF SECURITIES
SMALL BUSINESS ISSUERS
UNDER SECTION 12 (b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-00000
DSTAGE.COM, INC.
(Name of Small Business Issuer in its charter)
Delaware 52-2195605
(State or other jurisdiction (IRS Employer Identification
of incorporation or Number)
organization)
1675 Broadway (720) 904-0844
Suite 1800 (Issuers Telephone Number)
Denver, Colorado 80202
(Address of principal
executive offices)
Securities to be registered pursuant to section 12 (b) of the Act:
Title of each class to be registered: NONE
Name of each exchange on which each class is to be registered:
NONE
Securities to be registered pursuant to section 12 (g) of the Act:
Title of each class to be registered:
Name of each exchange on which each class is to be registered:
Common stock, $0.001 par value
Dstage.com, Inc., Symbol (TBD)
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Form 10-SB12G
Table of Contents
ALTERNATIVE 3
Item SUB-ITEM DESCRIPTION PAGE
PART 1.
ITEM 1. DESCRIPTION OF BUSINESS 5
1:1 Forward-Looking Statements 5
1:2 Business Development 5
1:3 Business of Issuer 7
1:4 Reports To Security Holders 36
ITEM 2. MANAGEMENT'S DISCUSSION AND 37
ANALYSIS OR PLAN OF OPERATION
2:1 Plan of Operation 37
2:2 Management's Discussion and 42
Analysis of Financial Condition
and Results of Operations
ITEM 3. DESCRIPTION OF PROPERTY 49
3:1 Location and Condition of 49
Property
3:2 Investment Policies 49
3:3 Description of Real Estate and 49
Operating Data
ITEM 4. SECURITY OWNERSHIP OF MANAGEMENT 50
AND CERTAIN SECURITY HOLDERS
4:1 Security Ownership of Certain 50
Beneficial Owners
4:2 Security Ownership of Management 51
4:3 Changes in Control 52
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, 53
PROMOTERS AND CONTROL PERSONS
5:1 Directors and Officers 53
5:2 Significant Employees 55
5:3 Family Relationships 55
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5:4 Involvement in Legal Proceedings 55
ITEM 6. EXECUTIVE COMPENSATION 56
6:1 General 56
6:2 Summary Compensation Table 56
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED 57
TRANSACTIONS
7:1 Previous Two Years 57
7:2 Exempt 57
7:3 Parent Company 57
7:4 Transactions with Promoters 58
ITEM 8. DESCRIPTION OF SECURITIES 58
8:1 Common or Preferred Stock 58
8:2 Debt Securities 58
8:3 Other Securities 58
PART 11. 59
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON 59
THE REGISTRANTS COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
1:1 Market Information 59
1:2 Holders 59
1:3 Dividends 59
ITEM 2. LEGAL PROCEEDINGS 60
2:1 Pending Legal Proceeding 60
2:2 Government Authority 60
Contemplating
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH 60
ACCOUNTANTS
3:1 Accountant Dismissed 60
3:2 Accountant Disclosures 61
3:3 Detail of Subject Matter 61
3:4 Discussions with Board of 61
Directors
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3:5 Accountant Authorized to Issue 61
Subsequent Report
ITEM 4. RECENT SALES OF UNREGISTERED 62
SECURITIES
4:1 Date, Title and Amount Sold 62
4:2 Underwriters 63
4:3 Offering Price 63
4:4 Exemption Applied 63
4:5 Conversion Terms 63
4:6 Report Items 63
ITEM 5. INDEMNIFICATION OF DIRECTORS AND 64
OFFICERS
PART F/S 68
ITEM 1. FINANCIAL STATEMENTS 68
PART 111. 90
ITEM 1. INDEX TO EXHIBITS 90
ITEM 2. DESCRIPTION OF EXHIBITS 90
SIGNATURES 91
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ITEM 1. DESCRIPTION OF BUSINESS
1:1 Forward-looking Statements
Certain statements made in this Registration Statement are
"forward-looking statements" regarding the plans and objectives of management
for future operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, performance or
achievements of Dstage.com, Inc., a Delaware corporation (the "Company") to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. The forward-looking
statements made in this Report are based on current expectations that involve
numerous risks and uncertainties. Our plans and objectives are based, in part,
on assumptions involving the growth and expansion of our business. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond our control.
Although we believe that our assumptions underlying the forward-looking
statements are reasonable, some of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the forward-looking statements made in
this Report will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements made in this Report, particularly in
view of our early stage of operations, inclusion of such information should not
be regarded as a representation by us or any other person that our objectives
and plans will be achieved.
In addition, this Registration Statement includes forward- looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934 (the "Exchange Act"). These statements are based on management's beliefs
and assumptions, and on information currently available to management.
Forward-looking statements include statements in which words such as "expect,"
"anticipate," "intend," "plan," "believe," "estimate," "consider," or similar
expressions are used.
1:2 Business Development
Dstage.com, Inc., a Delaware corporation (the "Company") was
incorporated on October 12, 1999 to provide support, creation and restructuring
services to other development stage companies.
For the period October 12, 1999 (Inception) to April 30, 2000, we have
been in the development stage. Our activities since inception have consisted of
organizing the Company, developing our business plan and raising capital.
Through April 30, 2000, we have expended costs of organizing the Company and
developing the business in the amount of $97,870. Approximately $67,000 of the
total amount spent to date was expended for consulting services, $16,249 was
expended for sales and marketing activities, $804 for Internet access and
hosting, $2,528 for professional fees, $1,895 for rent, $1,269 for telephone
expense, $2,134 for other expenses and $6,183 was expended for travel and
entertainment. We have had no revenues as of April 30, 2000.
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We are dependent on the continued financial support of our largest
stockholder, BulletProof Business Plans, Inc. and the contributions of time from
our sole officer and director Sue Perrault. While we operate independently of
BulletProof Business Plans, Inc., a loss of this support in the near term could
have a detrimental effect on us. BulletProof Business Plans, Inc. has assured us
that only a filing of bankruptcy by us would cause a loss of their support.
In October 1999, we issued 750,000 shares of our common stock valued at
$.02 per share to BulletProof Business Plans, Inc. in exchange for $15,000 cash.
In November 1999, we issued 250,000 shares of our common stock valued at $.02
per share to BulletProof Business Plans, Inc. in exchange for $5,000 cash.
During 1999, we issued 834,569 shares of common stock valued at $16,691
($.02 per share) to BulletProof Business Plans, Inc. as consideration for
administrative expenses paid on our behalf.
At December 31, 1999, BulletProof owned 1,834,569 shares, or 41.37%, of
our outstanding common stock.
Beginning in October 1999 and continuing through April 2000, we issued
3,350,000 shares of common stock valued at $67,000 ($.02 per share) to seven of
our employees as consideration for services provided to us. Sue Perrault was
issued 1,500,000 shares for ongoing organizational assistance, research and
direction. Helen Chen was issued 250,000 shares for research activities used for
the organization of Dstage.com. Kirk LaPoure was issued 750,000 shares for
accounting and finance services. Stacie Perrault was issued 100,000 shares for
research services. Eric Schiffer was issued 250,000 shares for consultation
regarding the launch and organization of the company. Lan Xie was issued 250,000
shares for consultation in developing the company index. Frank Maresca was
issued 250,000 shares for consultation of strategic acquisitions.
In January 2000, we entered into a promissory note with BulletProof,
our largest stockholder. The promissory note provided for us to receive advances
of up to $20,000. Interest was to accrue on the unpaid principal balance at a
rate equal to the prime rate. Outstanding principal and accrued interest were
due and payable on demand by the stockholder. Terms of the promissory note
included conversion provisions, allowing the holder to convert all funds
advanced to common stock at a rate of $0.02 per share. As of April 10, 2000, we
had drawn the entire $20,000 balance allowed under the BulletProof note payable
agreement. On April 10, 2000, BulletProof converted the $20,000 note payable
into one million shares of our common stock as full payment of the note payable
balance outstanding. BulletProof thereby became a 46% stockholder.
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1:3 Business of Issuer
The Company
Dstage.com, Inc. (the "Company") provides incubation services,
research, vertical marketing and market indexes for development stage companies.
We intend to become the leading source for expert support, creation, and
restructuring of development stage companies by implementing four distinctive
methods including utilizing Residual Intellectual Property Mining(TM),
harvesting published intellectual property, focused delivery of expert resources
and the development of a brand name identity. We believe that the expertise and
focus of professional services companies, combined with the communications
efficiencies of publishers with domain expertise, can come together to create an
online destination where venture-shaping decision making is optimally supported.
In analyzing, describing and discussing our business, we will be using
certain terms and phrases that may not be readily understood. The following
definitions are included to assist the reader in understanding our business:
B2B - (Business to Business) - Referring to one business communicating
with or selling to another business.
IT - (Information Technology) - Processing information by computer.
e-commerce - (Electronic Commerce) - Doing business online,
typically via the Web or internet
VC - A person or organization that invests money in startup or small
companies.
Intellectual Property - property that is intangible, intellectual
property includes more than just copyrights, trademarks and patents; for
example, customer databases, mailing lists, trade secrets and other business
information are also included
Residual Intellectual Property Mining(TM) - existing idle or
underperforming technology or intangible property, program code or resources of
a third party that is licensed or purchased by Dstage.com for its development
and use.
Concept Affiliate - A person, an organization, or establishment
associated with Dstage.com to provide expertise to enhance a project, idea or
segment of a development stage company.
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Concept Sponsors - An individual, organization, or establishment that
is presenting a product, or service idea to Dstage.com in exchange for a fee or
royalty of an accepted concept,
Reverse Incubation - seeking formation or later stage business ventures
that have failed or are failing and revitalizing them in hopes of developing
viable business ventures.
Venture - A risky enterprise; an unproven business enterprise involving
risk in expectation of gain
Content - information, education or entertainment on the Internet,
CD-ROMs or other software-based products.
Business Strategy
We are a new type of 21st Century company that combines the best of the
modern Internet incubators, Internet holding companies, index providers,
research companies and vertical marketing entities into a concept known as
Residual Intellectual Property Mining(TM), while building and operating
companies that use the power of real- time interactive communications to satisfy
often previously unidentified market needs. Our unique organizational structure
is designed to enable each affiliate in our business model to achieve focus and
strength in its market as an independent entity, but also allows it to benefit
from our network of companies and the strengths of the centralized services we
provide.
We believe that this structure creates a balance of centralization and
decentralization that enables each affiliate company to execute its business
plan with greater speed and focus. Many of our future affiliates will be
created, developed, staffed and operated internally based on ideas we generate,
although from time to time we may consider ideas brought to us by other
entrepreneurs or acquire interests in existing Internet companies that are
strategically important to our business model. We will provide our affiliate
companies with strategic expertise, operational assistance from our various
in-house departments and third-party service providers, access to our business
relationships both inside and outside our business model and financial support.
By providing these services, we will enable the entrepreneurs managing our
affiliates to concentrate primarily on the rapid execution of their business
plans. In addition, our operating methods are designed to promote commercial
relationships and the exchange of information and best practices among our
affiliates. We plan to use our collective knowledge and resources to create new
business ideas and to actively develop the business models, strategies,
operations and management teams of all our affiliates.
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Business Model
Our business model is a new form of enterprise that creates, builds and
operates businesses that use the power of real-time interactive communications,
including the Internet, telephony, cable and wireless, to satisfy what we
believe are unmet market needs. Specializing in life sciences, information
technology and advanced products and materials, we will generate ideas for new
Internet-related businesses. Each idea will be tested and modeled and, if the
results of the testing suggest that the idea will form the basis for a
successful business, we will form and capitalize a new entity, recruit a
management team, provide space and provide on-going strategic guidance, creative
design, web development, accounting, legal and administrative services to the
newly formed affiliate. We will operate each business as a separate company
rather than as a division. In some cases, due to various circumstances, we may
acquire equity interests in companies started by others.
We intend to become the leading source for expert support, creation,
and restructuring of development stage companies. We believe that the expertise
and focus of professional services companies, combined with the communications
efficiencies of publishers with domain expertise, can come together to create an
online destination where venture-shaping decision making is optimally supported.
Our strategy also involves creating a unique entity that relies on individuals
and organizations to contribute to the development of new entities while still
holding gainful employment at their primary posts and businesses. We intend to
compensate parties that contribute to projects that further the missions of
Dstage primarily with stock. Similarly, we intend to compensate parties that
create or "sponsor" concepts with equity interests in new ventures developed in
conjunction with Dstage with equity interests in the resulting ventures, if any.
In addition to these characteristics, we believe our business model supports a
strategy that is clearly unique in several ways:
1) We regard expert literature, commonly found in marketing
publications and other writings of certain professional services companies, as
Residual Intellectual Property Mining(TM).
2) To gain rights to "mining" this intellectual property, we intend to
prepay license agreements, in stock, granting us rights to harvest published
intellectual property for periods of 2 to 5 years.
3) We believe that focusing the delivery of expert resources, segmented
primarily by industry and secondarily by location, will provide an unparalleled
utility to individuals managing and working for development stage companies,
while creating an unusual means to feed purchase and media opportunities to
highly targeted prospects within a highly specific context.
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4) We intend to develop a brand identity as the definitive source for
development stage resources by delivering highly concentrated content to
development stage companies, helping failed and failing ventures recover, and
developing new ventures for management and principal ownership by outside
parties.
Acquisition Strategy
Our Affiliates
We will create affiliate companies by continually generating ideas for
innovative business models. We will measure each idea against several criteria,
including whether it addresses an unmet market need, its potential to benefit
our business model and its ability to generate increasing efficiencies as the
business grows. Before creating or acquiring a company, we will perform thorough
qualitative and quantitative analyses, create prototypes and conduct extensive
consumer testing.
We will provide our affiliates with operational assistance from our
various in-house departments and third party service providers, access to our
business relationships both inside and outside our business model and financial
support. We will initially house most of our affiliates at our headquarters,
which are designed to foster a collaborative process and a sharing of best
practices among the affiliates. Our managing directors, expert professionals and
operational vice presidents will provide strategic guidance as well as
assistance in sales, marketing and brand management, executive recruiting, web
development and information technology, and legal, finance, accounting and human
resources to our subsidiaries.
We will actively develop the business models, strategies, operations
and management teams of all our affiliates throughout their lifecycles to ensure
that each company benefits fully from our collective experiences. Our senior
executives will serve on the boards of directors of our affiliate companies and
participate in consultation and informal communications that allow us to take an
active, hands-on role in the ongoing oversight and strategic management of our
affiliates. Our operating methods are designed to promote commercial
relationships among our affiliates, which we believe enhance the value of our
overall business model. Our objective is to increase the value of our business
model by continually creating new business ideas and acquiring existing
businesses in markets involving real-time interactive communications that will
complement our existing affiliates. We believe that we can enhance stockholder
value by engaging in business through an integrated network of affiliates in
which we own significant stakes over the long term.
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Industry
The Internet Industry
The Internet has emerged as a global medium, enabling millions of
people worldwide to share information, communicate and conduct business
electronically. International Data Corporation estimates that the number of
Internet users will grow from approximately 256 million worldwide at the end of
2000 to approximately 502 million by the end of 2003. As a result of this
dramatic increase in the number of Internet users, the dollar volume of commerce
conducted over the Internet is expected to continue growing, as is the need for
infrastructure and services to effectively serve this growing population of
Internet users. Forrester Research estimates that the total value of goods and
services purchased on the Internet by businesses and consumers will increase
from approximately $406 billion in 2000 to approximately $2.7 trillion in 2004,
and International Data Corporation estimates that Internet business
infrastructure spending will increase from approximately $190 billion in 1999 to
$917 billion in 2003. At the same time, the proliferation of other real- time
interactive communications technologies such as Internet telephony, cable and
wireless devices has created new opportunities to satisfy unmet market needs.
Internet Opportunities
The Internet's growth into a mass medium has created tremendous
opportunities for new companies that can take advantage of the efficiencies it
provides in order to meet market demands. Online and traditional businesses can
use real-time interactive communications to obtain accurate, real-time
information, create more efficient markets and add a dynamic and collaborative
dimension to their relationships with customers, suppliers and trading partners.
Individuals are also increasingly using the Internet to streamline various
household functions and to reduce their costs for consumer goods and other
expenditures. We believe that there are significant opportunities for companies
that can empower businesses and consumers to realize the efficiencies made
possible by the Internet.
Emerging companies face many challenges in their pursuit of success.
For the reasons described below, we believe that many of these challenges are
greatly intensified for Internet-related businesses: Companies must develop
business models that capitalize on the Internet's unique and rapidly evolving
capabilities to provide solutions demanded by consumers and businesses. This
requires the relevant Internet experience and strategic vision to evaluate the
viability of a given business model, the flexibility to adapt business models to
address emerging opportunities and the ability to quickly establish
relationships with potential suppliers, customers and strategic partners.
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To support rapid growth and achieve a competitive advantage, emerging
Internet companies must quickly develop systems and procedures in a wide range
of functional areas, including sales and marketing, operations, information
technology, accounting, legal, business development, executive recruiting and
human resources. This typically requires key personnel to assume responsibility
for many of these functional areas simultaneously until sufficient expertise can
be brought in-house or suitable service providers identified.
Internet companies require management and technical personnel with
expertise in each functional area, a deep understanding of the opportunities
presented by the Internet, the ability to manage rapid growth and the
flexibility to adapt to the changing Internet marketplace. Competition for
people with the skills required in the Internet marketplace is intense, and the
best employees demand compensation commensurate with their skills.
Intense competition, low barriers to entry and the continual creation
of new technologies and business models characterized the evolution of the
Internet. Individual companies must navigate these risks on their own, often
committing to business models or technology platforms without adequate
information, or without the strategic relationships that would enable them to
rapidly adapt their businesses to changing market conditions.
Growth of Business to Business ("B2B") E-Commerce
The Internet's substantial growth creates tremendous market
opportunities for companies that connect buyers and sellers, and companies that
create applications and systems for traditional businesses wishing to engage in
e- commerce. Historically, B2B e- commerce has occurred through electronic data
interchange over proprietary networks, which are costly and available only to a
limited number of participants. The Internet provides an open platform with
common communication protocols to build efficient, cost-effective networks that
facilitate e-commerce. As Internet- based network reliability, speed and
security have improved in recent years and as more businesses have connected to
the Internet, traditional businesses are beginning to use the Internet to
conduct e-commerce and exchange information with customers, suppliers and
distributors. While the business-to-consumer e-commerce market currently is
significant in size, estimated by IDC to have encompassed $15 billion in goods
and services in 1998, the B2B e- commerce market is larger and is predicted to
grow dramatically. Forrester Research projects that the United States B2B e-
commerce market, which Forrester Research defines as the intercompany trade of
hard goods over the Internet, will grow from $43 billion in 1998 to over $1.3
trillion by 2003. IDC projects that the Western European B2B e-commerce market
will grow from $3.8 billion in 1998 to over $350 billion by 2003.
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We believe that the B2B e-commerce market is beginning a period of
rapid development and growth for the following reasons:
o Expanded Access to New and Existing Customers and
Suppliers. Traditional businesses have relied on their
sales forces and purchasing departments to develop and
maintain customer and supplier relationships. This model
is constrained by the time and cost required to exchange
current information regarding requirements, prices and
product availability, and the difficulty of cost-
effectively locating new customers and suppliers and
managing existing relationships. Traditional businesses
can leverage the Internet to obtain and communicate real-
time, accurate information regarding requirements, prices
and products to a global audience, including suppliers,
customers and business partners. This makes it easier for
businesses to attract new customers and suppliers,
improve service and increase revenue. .
o Increased Efficiency and Reduced Cost. Traditional
businesses can utilize the Internet to automate their
internal operations, including manufacturing, finance,
sales and purchasing functions. The Internet can also be
used to increase information flow and access throughout
an organization. This increases operational efficiency by
reducing the time, costs and resources required to
transact business, lowering inventory levels and
procurement costs, and improving responsiveness to
customers and suppliers.
Principal Products, Services and Markets
Reverse Incubation
We believe the growth of private and public funding of early stage
Internet companies foretells of the inevitable failure for many of these
ventures. Part of our strategy involves creating a fund to acquire technology
from failing Internet companies, or the ventures in their entirety, at
liquidation valuations as more Internet ventures fail. We also intend to use a
growing pool of entrepreneurial executives and technicians to develop and
produce new ventures sponsored by Dstage.com. These ventures will be staffed
temporarily by Dstage affiliates and outside professionals and organizations
involved with their organization and very early stage development. In exchange
for participation, these parties will receive a significant equity interest in
the proposed ventures. These concepts and ventures will then be sold or
otherwise transferred to outside VC firms, organizations, or other institutions
wishing to operate the ventures.
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Professional Services Content
While industry experts have been providing focused consulting for niche
pieces of the development activities since the beginnings of industry, no one
organization has brought together all of the necessary experts into one
centralized online source. We will accomplish this by prepaying industry experts
with stock in the Company. For this ownership consideration, each content
provider will supply Dstage 5 years worth of intellectual property to be updated
at least annually. We realize that while the separate economies of the world are
melding into one global economy, most companies will always have regional needs.
Therefore, as we recruit industry experts, an eye will be placed on ensuring the
pool of experts is not only functionally diverse, but also geographically
diverse.
Dstage Indexes
Our index service will be comprised of the Dstage 100, Dstage Bio
Index, Dstage IT Index and the Dstage Advanced Index.
The Dstage 100 will feature the top 100 public Dstage companies, as
valuated by our executive staff. The Dstage Bio Index will be a proprietary
ranking of selected private biotechnology firms. The Dstage IT Index will list a
proprietary ranking of selected private Information Technology firms, while the
Dstage Advanced Index will include proprietary rankings of selected private
advanced products and materials firms.
Research
We will provide research and advice on Internet commerce. Senior
executives at client companies will utilize our research to make informed
business decisions in a complex and rapidly changing Internet economy. Our
research, which focuses solely on the global Internet economy, provides our
clients with comprehensive views of industry trends, forecasts and best
practices. Our analysis and advice, supported by extensive proprietary data,
will emphasizes specific, actionable findings that enable companies to develop
effective business strategies for Internet commerce, as well as to utilize the
Internet to more effectively operate their business. We will also produce a wide
range of conferences which offer senior executives the opportunity to hear
first-hand the insights of our analysts and the leading decision makers in the
Internet and technology industries.
We will provide our research services primarily through annual
subscriptions to our research web site. The site will be a combination of
proprietary written analysis, supporting data and access to our analysts. Our
Web site will offers clients easy access to our research, products that deliver
customized views of our data and analysis and the ability to efficiently
communicate with our analysts. Our research will be informed and supported by a
dedicated data research group.
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Research Services
We will provide our clients with a wide range of proprietary research,
data and advisory analysis that will be structured as a continuous analytical
service. We will design our Research Services to enable companies to make
intelligent business decisions about Internet commerce and consumer and business
use of the Internet and related technologies. These research products and
services define business and strategic goals, identify revenue opportunities,
evaluate business models, analyze marketing strategies, assess enabling
technologies and provide advice on organizational structures and vendor
selections. The size of our Research Services contracts will vary depending on
the number of Research Services that are purchased and the number and type of
users at the client company.
A key component of our Research Services is access to our research
analysts for discussions and debate related to their research topics. Our
clients will typically seek advice or have questions regarding new business or
marketing initiatives, best practices, new opportunities or competitive threats,
market forecasts and/or the value of mergers and strategic partnerships. To
facilitate the efficiency of this inquiry, clients will submit issues or
questions initially to our dedicated client inquiry staff via telephone or
e-mail. The client inquiry staff, which will consist of trained research
professionals who are familiar with all of our products and services,
coordinates the responses and actively manages access to the analysts.
We will continually evaluate the market demand for additional Research
Services including business-to-business infrastructure, customer service and
content infrastructure issues. We will also seek out and receive input from our
research analysts, our sales representatives who will be in constant contact
with existing and potential clients and our marketing staff as to the demand for
specific research and our ability to provide coverage. We will also examine a
variety of empirical data, including breadth of applicability, uniqueness of the
offering, competitive value and ease of communication.
We will divide our Research Services into Internet Strategies,
which offers broad prescriptive advice relevant to all online
ventures, and Market Strategies, which targets specific industries
and geographic regions. [Analyst Research Product Architecture
Chart]
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We will further classify these Research Services into the following six
categories:
o Marketing & Revenue: Provides analysis and data required to
create business plans for the Internet economy. These services
focus on online distribution dynamics, Internet revenue
opportunities and interactive sales and marketing strategies.
o Operations & Infrastructure: Provides management strategies,
cost metrics, vendor evaluations and best practices to drive
business decisions and improve operating results. These
services will analyze the operations, infrastructure and
personnel investment required of Internet businesses.
o Technology & Platforms: Identifies and predicts critical
developments in consumer, site and business adoption of new
applications, technologies and platforms. These services will
analyze the business need and opportunities surrounding
developments such as wireless Internet access, digital
distribution of music and broadband applications.
o Executive Management: Our Executive Program will be
specifically targeted at chief executive officers and other
senior executives across all industries. This service will
analyze the most important trends in the Internet economy,
providing insight, direction and vision to senior executives
into both major corporations and Internet start-ups. We will
provide analysis and data that will drive major shifts in
corporate strategy resulting from Internet opportunities and
threats.
o Industries: Provides analysis and insights into the particular
issues that companies face as the Internet transforms the
vertical industries in which they operate. These services will
provide the unique perspective, detailed data, industry
forecasts and benchmark studies to make key business decisions
in a particular industry or competitive environment.
o Regions: Provides analysis and data specific to important and
growing regions in the Internet economy. These services will
identify market opportunities, competitive dynamics and
consumer online behavior in various countries and regions. A
critical component of these services will be the consumer
survey data and market forecasts that provide both domestic
and foreign corporations the region-specific analysis required
to make strategic planning decisions.
The Research Services program will be designed to provide business
executives with the most up-to-date research and analysis. We will provide
written reports on a regular basis as well as ongoing access to our research
analysts in order to answer specific questions or clarify information relating
to the practice topic.
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We will also provide other research products and services to clients,
including book-length research reports and customized research. We will also
perform customized, client-focused research projects relating to Internet
commerce on a limited basis. These projects will allow our clients to take
advantage of the knowledge and experience of our research analysts and to
develop structured, detailed responses to specific issues relevant to their
business. Custom studies often form the basis to explore a new Research Service
and, like our book-length studies, are an effective way to expose new companies
and executives to our research products and services.
Key Factors In Our Process
Our Method
Our method is a new form of enterprise designed to focus exclusively on
market growth in the Internet industry and other interactive communications
markets. We will operate each business in our network as a separate company
rather than as a division. As a result, each business retains the adaptability
and entrepreneurialism of a small company while benefitting from the economies
of scale, information sharing and other synergies associated with inclusion in
our business model. In addition, each affiliate will have its own pool of equity
to provide a compelling incentive to recruit and retain top talent. We believe
that we will provide our affiliates with all of the necessary resources to meet
the challenges faced by emerging Internet companies in their formation,
development and growth. Our experience in creating, building and operating
businesses enables us to quickly and efficiently bring innovative new companies
to market and to build our existing companies into market leaders. Our method
consists of idea generation, selection and analysis, company building and
operational support and strategic guidance and direction.
Our Creative Process
We will create most of our ideas for companies internally through
frequent brainstorming sessions. For several reasons, including that we believe
that we are in a unique position to create superior ideas internally, the
creativity of our idea team, our people have accumulated operating experience
throughout their careers by helping to develop ideas into mature companies, our
idea selection process, which both filters and improves ideas by refining the
business model of each affiliate and our continuous process of prototyping and
developing new business concepts. We will also gather ideas externally from
individuals and teams that come to us with passion and industry experience in a
particular field. We believe we are in a strong position to attract high-
quality external ideas because of the entrepreneur-friendly environment we will
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create. Furthermore, we believe that the mentoring and services that we provide
are very attractive to people and teams with passion for creating, building and
operating world-class companies. Our services and infrastructure will provide an
environment that can substantially improve a company's time-to- market and
potential for success. In considering Internet business ideas brought to us by
others and evaluating investments in and acquisitions of Internet companies, we
apply the same strict criteria we would apply to our own ideas, and we consider
whether we could add value to the development of the business by redefining its
business model to create previously unexploited growth opportunities.
We apply a number of criteria in choosing whether to create or acquire
a business. We apply these criteria during our idea selection process, where
each idea is analyzed and weighed against other ideas for prioritization in
advance of company building. Our analysis includes an evaluation of certain
basic questions, including does the business address a large, previously
unidentified market need, or does it have a significantly better solution for an
already identified market need? Also, does the business satisfy the need in a
unique way, with a business model that we believe is superior to the other
solutions? In addition, is the business model scalable, with increasing
operating efficiencies as the business grows? Another criteria is whether there
are there sufficient barriers to entry, and can the business grow fast enough to
benefit from a first-mover advantage? Will the business's customers have an
incentive to refer new customers to the business's offerings? Does the business
have a sustainable competitive advantage, such as network effects that make the
business' offering increasingly valuable as more customers use it? Can the
business provide an attractive value proposition to potential strategic
partners? If an idea or business ranks highly with respect to these criteria, we
evaluate whether the business would contribute to the overall strength of our
business model.
Expert Support
At all stages of an affiliate's growth, our internal management team
will continually communicate the best practices we have learned by providing
management mentoring, market intelligence and operational support. Our
organizational goal is to achieve an optimal balance between centralization and
decentralization. We believe that synergy among our affiliates will be achieved
at many levels. As the corporate network hub, we are able to observe and
encourage relationships between our affiliates. We enable our entrepreneurs to
concentrate primarily on the rapid execution of their business plans by
providing them with operational support and access to our collective resources.
We believe that the support we provide to our affiliates reduces the rate at
which they consume capital, slowing the need for additional dilutive
investments.
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Affiliate Collaboration
Our business model provides an environment for informal and formal
collaboration among our affiliates. Early stage companies in particular will
benefit from the collective experience of our professionals and the other
affiliates who have addressed issues similar to those facing them. The CEO's and
other department heads of our affiliates will gather regularly to share
knowledge and discuss issues of common interest. Personnel from various
functional areas, including marketing, sales, human resources, and technology,
will also meet regularly to exchange ideas and leverage their combined
experience. All our affiliates will have access to our intranet, which will
contain valuable information about web development and management information
systems, accounting and human resources procedures and network-wide marketing
and business development arrangements. Our affiliates will also collaborate
formally with one another.
Marketing Strategy
Market Opportunities for Emerging B2B E-Commerce Companies
We believe that there are significant opportunities for companies that
can assist traditional businesses in using the Internet to create more efficient
markets and enable e-commerce. We call these companies B2B e-commerce companies.
We focus on two types of B2B e-commerce companies: market makers and enabling
service providers. .
Market Makers. Market makers bring buyers and sellers together by
creating Internet-based markets for the exchange of goods, services and
information. Market makers enable more effective and lower cost commerce for
traditional businesses by providing access through the Internet to a broader
range of buyers and sellers. Market makers typically operate in a specific
industry or provide specific goods and services across multiple industries.
Market makers tailor their business models to match a target market's distinct
characteristics.
We refer to market makers operating in a particular industry as
vertical market makers, and to market makers operating across multiple
industries as horizontal market makers. Vertical and horizontal market makers
may:
o Act as principals in transactions;
o Automate business processes so as to make them more
efficient;
o Operate exchanges where buyers and sellers dynamically
negotiate prices; or
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o Facilitate interaction and transactions among businesses and
professionals with common interests by providing an electronic
community.
o Market makers may generate revenue by:
o Selling products and services;
o Charging fees based on the value of the transactions they
facilitate;
o Charging fees for access to their Internet-based
services; or
o Selling advertising on their Web sites.
Enabling Service Providers. Enabling service providers sell software
and services to businesses engaged in e-commerce. Many businesses need
assistance in designing business practices to take advantage of the Internet,
and in building and managing the technological infrastructure needed to support
B2B e-commerce. Enabling service providers help businesses in the following
ways:
o Strategic Consulting and Systems Integration. Strategic
consultants assist traditional businesses in developing
their e-commerce strategies. Systems integrators develop
and implement a technological infrastructure that enables
e-commerce. Systems integrators also integrate e-commerce
applications with existing enterprise applications.
Strategic consultants and systems integrators typically
charge their clients on a project-by-project basis.
o Software Providers. Software providers design and sell
software applications, tools and related services that support
e-commerce and integrate business functions. Software
providers may sell or license their products.
o Outsourced Service Providers. Outsourced service providers
offer software applications, infrastructure and related
services designed to help traditional businesses reduce cost,
improve operational efficiency and decrease time to market.
Outsourced service providers may charge fees on a per-use or
periodic basis.
Sales Strategy
Sales and Marketing
We believe that the marketing expertise and assistance we will offer
our affiliates enables them to establish their brands and draw traffic to their
websites more quickly than many stand-alone competitors. We will provide
guidance to our affiliates' sales, marketing, product positioning and
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advertising efforts through regular meetings attended by the appropriate staff
from each of our affiliates. We will employ a marketing staff to coordinate
marketing resources for all our affiliates. We will also provide our affiliates
with a centralized clearinghouse for marketing- related information, access to
market research, advertising services, public relations functions, including
promotion of our affiliates as members of our business environment, and logo
design and related branding services.
Support Methods for Products and Services
Professional Support
We will employ seasoned legal, finance and accounting professionals who
will provide guidance to our affiliates in areas such as intellectual property
protection, contracts, domain name negotiations, licensing, deal structuring and
negotiating, corporate finance, accounting, treasury functions and financial
reporting. We also will provide administrative and human resources assistance to
our affiliates, including advice and support on tax preparation, payroll,
benefits, hiring, human resource compliance, orientation and termination. We
will host seminars on topics such as recent accounting pronouncements affecting
Internet companies, trademark and domain name protection, employment law issues
and stock option administration for all the relevant employees of our
affiliates. In addition, as a result of the economies of scale provided by our
business model, we will enable our affiliates to obtain favorable rates on
insurance, health benefits and other services. We will also enable our
affiliates to gain access to resources and discounted rates with professional
service providers including accounting firms, law firms and public relations
agencies.
Fiscal Assistance
We will help our companies raise capital from third parties by
introducing them to appropriate investors. Through our affiliated venture
capital funds and the relationships our management team maintains with a broad
range of current and potential investors, we will be able to match providers of
capital with appropriate business opportunities in our business model. We will
also provide direct financial support in the form of early-stage investments and
participation in later financing rounds.
Sharing Knowledge
At inception and throughout their lifecycles, we will provide our
affiliates with the collective knowledge and expertise of our senior management
and the combined power of our business model. We believe that the strategic
guidance and direction we will provide to our affiliates will enhance their
ability to formulate viable business models, manage rapid growth and adapt
quickly to the changing marketplace.
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Growth Strategy
Our objective is to enhance the value of our business model by
continually creating new business ideas and actively developing the strategies,
operations and management teams of our affiliates throughout their lifecycles.
We intend to create and build new Internet businesses and evaluate
potential strategic acquisitions to increase the overall value of our business
model. Before any new business idea becomes a part of our business model, or
before we pursue any strategic acquisition, our internal strategy teams must
first demonstrate that the idea or business has the potential to become a market
leader. Any strategic acquisition or new business idea must add value to our
business model. In addition to creating and acquiring Internet businesses, we
intend to pursue opportunities in other growing markets that involve real-time
interactive communications.
As our business model grows and matures, we intend to expand the
breadth and effectiveness of our future network efficiencies and increase
cooperation and intra-network commercial arrangements. As the Internet matures
and competition among Internet companies increases, we anticipate that our
shared resources and intra- network collaboration will offer our affiliates even
more compelling advantages over companies operating independently.
We believe that we can enhance stockholder value by engaging in
business through an integrated network of affiliates in which we own significant
stakes over the long term. We intend to generate revenues and income primarily
from the operation of our affiliates. On a limited number of occasions, we will
sell interests in our affiliates when we no longer have the ability to
significantly influence their operations, and we may be faced with circumstances
in the future that make it appropriate to sell part or all of our interest in a
particular affiliate.
New Products and Services
Challenges Facing Emerging B2B E-Commerce Companies
We believe that emerging B2B e-commerce companies face certain
challenges, including:
o Developing a Successful Business Model. B2B e-commerce
companies must develop business models that capitalize on the
Internet's capabilities to provide solutions to traditional
companies in target industries. B2B e- commerce companies
require industry expertise because each industry and market
has distinct characteristics including existing distribution
channels, levels of concentration and fragmentation among
buyers and sellers, procurement policies, product information
and customer support requirements. B2B e-commerce companies
also require Internet expertise in order to apply their
capabilities to their target industries.
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o Building Corporate Infrastructure. Many B2B e-commerce
companies have been recently formed and require sales and
marketing, executive recruiting and human resources,
information technology, and finance and business development
assistance. These companies also require capital as
significant resources may be required to build technological
capabilities and internal operations.
o Finding the Best People. Entrants into the B2B e-commerce
market require management with expertise in the
applicable market, an understanding of the Internet's
capabilities, the ability to manage rapid growth and the
flexibility to adapt to the changing Internet
marketplace. We believe that very few people have these
skills, and those that do are highly sought after. To be
successful, companies must attract and retain highly
qualified personnel.
We believe that the most successful B2B e-commerce companies will
rapidly identify market demands and move quickly to satisfy those demands. B2B
e- commerce companies that accomplish this goal may establish new standards,
gain market share, secure critical partnerships and create a brand name, making
competition more difficult for new entrants. In addition, B2B e-commerce
companies must keep abreast of Internet and industry-specific developments and
adapt to a rapidly changing environment.
Competitive Business Conditions
Competition
Competition for Internet products and services is intense. As the
market for B2B e-commerce grows, it is expected that competition will intensify.
Management expects competition to increase both from existing competitors and
new market entrants for various components of its services and products. These
include companies that provide incubation services such as idealab! and
eCompanies, Internet holding companies such as Internet Capital Group and CMGI,
index providers such as Dow Jones and NASDAQ, research firm such as Jupiter
Communications and vertical market companies such as e-Chemicals. Although these
other alternatives exist, none currently offer our ability to "mine" Residual
Intellectual Property Mining, focus the delivery of expert resources to
individuals managing development stage companies, and create a brand identity as
the ultimate source for development state resources by delivering highly
concentrated content to development stage companies. Despite these advantages
incubation companies, Internet holding companies, index providers, research
firms and vertical market companies still pose a threat to us.
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Incubation Companies: Companies such as idealab!, SOFTBANK, and Iron
Street Labs invest in the very early stages of promising Internet startups.
Finding very few barriers to entry it is relatively easy to become an incubator,
although those companies that aren't able to offer unique services to startups
aren't likely to be successful. Full service incubators such as idealab! offer
everything from office space to marketing to seed capital to business
development. When starting a business, 90% of an entrepreneur's time and
resources are typically spent raising money, finding partners, locating office
space and numerous other tasks necessary when forming a company. The remaining
10% is spent on the important issues such as marketing and product development,
the things that will ultimately make or break us in the marketplace. Using an
incubator frees up their time to concentrate on the critical matters at hand
while the other essential ingredients are being skillfully taken care of. These
incubator companies will not be direct competition for us, as we will be more of
a re-incubator, assisting companies with great ideas that failed to succeed in
their initial startup.
Internet Holding Companies: There are numerous companies such as
Internet Capital Group and CMGI that assist and invest in new companies. CMGI
concentrates on content, marketing, advertising and e-commerce. Currently, CMGI
has stakes in over 60 Internet companies including AltaVista, Lycos, Vicinity
and Engage Technologies. CMGI invests in companies through its Ventures funds
and nurtures new companies in-house. It is believed that substantial
opportunities exist for companies such as these that can help conventional
companies use the Internet to develop markets and implement e-commerce. ICG
concentrates on two distinct types of companies: market makers and
infrastructure service providers. Market makers generally operate in a specific
industry, bringing together sellers and buyers for the exchange of services,
information and goods. Infrastructure service providers sell services and
software to companies involved in e-commerce, assisting businesses in developing
business strategies to take advantage of the Internet. While these types of
companies offer satisfactory services they don't provide the breadth and depth
of resources that development stage companies will find at Dstage.com.
Vertical Market Companies: Companies in the vertical market segment
typically operate in a specific market such as auto parts, chemicals or
livestock. Companies such as e-Chemicals, AgProducer Network and AUTOVIA
Corporation providing distribution channels, products and services for their
specific industries. e-Chemicals provides an Internet-based marketplace through
which it sells a variety of industrial chemicals to businesses, eliminating the
conventional distribution channels that overload customers with high
administrative and transaction costs. e-Chemicals offers online support along
with efficient Web-based ordering and logistics systems.
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Research Firms: The Internet has forever changed the way that business
is conducted. The rapid growth of Internet commerce has led to an increase in
groundbreaking services, products and technologies, making it extremely
difficult for the average business to compete against new companies trying to
keep up with the vast number of technological changes. Most of these companies
do not have the resources available in-house to generate the extensive research
on the issues and developments that are taking place daily in the ever-changing
Internet environment. Companies such as Jupiter Communications and Forrester
Research provide timely and trustworthy information analyzing consumer and
market trends, the industry forecast, competitive landscape, and effective
marketing and sales operations. These companies have extensive staff to provide
research in a wide range of industries to help executives make informed business
decisions. Dstage will be providing in-depth research using proprietary
information mined from leading sites, eliminating the need for a large staff of
analysts.
In addition, we face competition from service and capital providers
including publicly traded Internet companies, venture capital companies, large
corporations and Internet holding companies. Many of these competitors have
greater financial resources and brand name recognition than we do. Although we
believe our method and our brand differentiate us from our competitors,
competition from these companies may limit our opportunity to hire quality
entrepreneurs and other personnel to launch and support companies, or to acquire
interests in attractive companies brought to our attention by others. If we are
unable to hire quality entrepreneurs and other personnel to launch and work at
our companies, or to acquire interests in attractive companies, we may not be
able to meet our objective of expanding our business model.
Competition for Internet products, services and personnel is intense.
As the markets for Internet infrastructure, services, commerce and content grow,
we expect that competition will intensify. Barriers to entry are generally low,
and competitors may be able to offer products and services at a relatively low
cost. In addition, our affiliates compete with other Internet companies,
including our other affiliates, to attract and retain talented employees with
relevant experience, and some of them also compete to attract and retain a
critical mass of buyers and sellers. Several companies offer solutions that
compete with those offered by one or more or our affiliates, and we expect that
additional companies will offer competing solutions on a stand-alone or combined
basis in the future. Although we intend to launch and acquire new businesses
that are complementary to the companies in our network, on occasion competition
among our companies has arisen as a result of business combinations or other
developments.
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Sources and Availability of Raw Materials
We provide services that do not require raw materials.
Customer Dependence
As a service provider to a wide range of companies, we do not
anticipate relying on any large single customer for a majority of our business.
Intellectual Properties
Intellectual Property
We have developed various software applications for use within our
network. Our trademarks, patent applications and Internet domain names are an
extremely important part of our business. Likewise, the trademarks, patentable
inventions and domain names used by our affiliates are important parts of their
businesses. From time to time, we also register or acquire domain names that we
believe may be useful to us or our affiliates in the future. Risks regarding our
intellectual property rights and those of our affiliates are described in more
detail under "Risk Factors--Risks facing our affiliates--Claims of intellectual
property infringement by third parties against our affiliates could cause them
to incur expenses or become involved in litigation".
Technology
We will maintain a highly experienced technology team of professionals
dedicated to helping our affiliates with all facets of their initial and
continuing web development process and information systems strategies. Many of
our affiliates will share software tools initially developed by our technology
team, freely exchanging improvements with other affiliates. We will also offer
our affiliates access to common information technology systems that enable them
to cost-effectively manage their electronic mail hosting, website hosting and
other functions. Due in part to the web-related resources we will offer to newly
formed affiliates, we believe that our affiliates will be able to substantially
reduce the costs associated with launching their websites and substantially
shorten their times to launch.
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Government Approval of Products and Services
Government Regulations
There are currently few laws or regulations directed specifically at
Internet businesses. However, because of the Internet's popularity and
increasing use, new laws and regulations may be adopted. These laws and
regulations may cover issues such as the collection and use of data from website
visitors and related privacy issues, pricing, content, copyrights, trademarks,
online gambling, distribution, taxation and the quality of goods and services.
The enactment of any additional laws or regulations may impede the growth of the
Internet and Internet businesses, which could decrease the revenue of our
affiliates and place additional financial burdens on them. Laws and regulations
directly applicable to electronic commerce and Internet communications are
becoming more prevalent. For example, Congress recently enacted laws regarding
online copyright infringement and the protection of information collected online
from children. Although these laws may not have a direct adverse effect on our
business or those of our affiliates, they add to the legal and regulatory burden
faced by Internet commerce and content companies.
To some extent, the rapid growth of the Internet in the United States
has been due to the relative lack of government intervention in the marketplace
for Internet access, which may not continue in the future. For example, several
telecommunications carriers are seeking to have telecommunications over the
Internet regulated by the Federal Communications Commission in the same manner
as other telecommunications services. Additionally, local telephone carriers
have petitioned the Federal Communications Commission to regulate Internet
service providers in a manner similar to long distance telephone carriers and to
impose access fees on these providers. Some Internet service providers are
seeking to have broadband Internet access over cable systems regulated in much
the same manner as telephone services, which could slow the deployment of
broadband Internet access services. Because of these proceedings or others, new
laws or regulations could be enacted which could burden Internet infrastructure
and services companies and slow the rapid expansion of the Internet and its
availability to new users.
The growth of the Internet and electronic commerce may lead to the
enactment of more stringent consumer protection laws. The Federal Trade
Commission may use its existing jurisdiction to police electronic commerce
activities, and it is possible that the Federal Trade Commission will seek
authority from Congress to regulate certain online activities. The Federal Trade
Commission has already issued for public comment proposed regulations governing
the collection of information online from children. Generally applicable laws
may affect us and our affiliates. The exact applicability of many of these laws
to Internet infrastructure and services companies and Internet commerce and
content companies, however, is uncertain.
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Investment Company Act
The Investment Company Act of 1940 provides a set of regulations for
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. A company may become subject to regulation
under the Investment Company Act if it owns "investment securities" with a value
exceeding 40% of the value of its total assets. Although we are in the business
of creating, building and operating new Internet companies, we could become
subject to regulation under the Investment Company Act if enough of our future
interests in our affiliates are considered investment securities under the
Investment Company Act. Regulations applicable to investment companies are
inconsistent with our fundamental business strategy of promoting collaboration
among our affiliates. In order to avoid these regulations, we may have to take
actions that we would not otherwise choose to take.
Cybersquatting
In 1999, Congress enacted anti-cybersquatting legislation to address
the practice of domain name piracy. The legislation is designed to limit the
practice of registering an Internet address of an established trademark with the
hopes of selling the Internet address to the affected company. The legislation
also includes a prohibition on the registration of a domain name that is the
name of another living person, or a name that is confusingly similar to that
name. The scope of this legislation has not been precisely defined. We, or our
affiliates, may be subject to liability based on our or their use of domain
names or trademarks that allegedly infringe the rights of third parties.
Taxes
Congress enacted a three-year moratorium, ending on October 21, 2001,
on the application of "discriminatory" or "special" taxes by the states on
Internet access or on products and services delivered over the Internet.
Congress further declared that there will be no federal taxes on electronic
commence until the end of the moratorium. However, this moratorium does not
prevent states from taxing activities or goods and services that the states
would otherwise have the power to tax. Furthermore, the moratorium does not
apply to certain state taxes that were in place before the moratorium was
enacted.
Recent Tax Developments
A key House committee on May 4, 2000 unexpectedly approved a five-year
extension of the moratorium on new taxes that target the Internet. The highly
controversial measure, attacked by traditional retailers and local tax
authorities, was not even expected to be taken up in 2000. But congressional
leaders have pushed the legislation forward, and an approval by the full House
is widely expected. Under current law, the tax moratorium would end in October
2001. The legislation approved May 4 by the House Judiciary Committee would
extend the exemption until 2006.
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With the projected boom in the Internet, state and local jurisdictions
would lose $8 billion in tax revenues annually by 2004, according to Forrester
Research in Cambridge, Mass. Internet retailers say they are subject to the same
rules applying to mail order firms, which collect sales taxes only in states in
which they have operations. The current legislation would prevent states and
localities from targeting Internet sales for additional taxes. As Internet sales
heat up, the issue is bound to grow in importance. In 1999, consumers spent
about $20.3 billion online, according to Forrester. By 2004, an estimated 7% of
U.S. retail sales will be made using the Net, compared with roughly 2%
currently.
There are currently three Internet bills that congressional leaders are
trying to push through the House as quickly as possible. The others include a
bill to permanently prohibit any tax on Internet access and a second measure
that would repeal the 3% telephone excise tax. The three bills, which could
reach the House floor as early as the middle of May, are aimed at insulating
consumers buying goods on the Internet from the kind of taxes they pay in stores
on Main Street. The measures have met with such little resistance that even
opponents say an extension of the Internet tax moratorium is all but inevitable
in the House.
The advent of long distance calling over the Internet, for instance,
could one day rival the $90-billion market for long- distance dialing over
ordinary telephone lines. A recent University of Tennessee study has forecasted
losses even higher than other estimates. According to their report, by 2003
states could start losing as much as $20 billion annually in all categories of
tax revenue if the Internet remains largely free of taxes.
Privacy Issues
Both Congress and the Federal Trade Commission are considering
regulating the extent to which companies should be able to use and disclose
information they obtain online from consumers. If any regulations are enacted,
Internet companies may find some marketing activities restricted. Also, the
European Union has directed its member nations to enact much more stringent
privacy protection laws than are generally found in the United States and has
threatened to prohibit the export of some personal data to United States
companies if similar measures are not adopted. Such a prohibition could limit
the growth of foreign markets for United States Internet companies. The
Department of Commerce is negotiating with the Federal Trade Commission to
provide exemptions from the European Union regulations, but the outcome of these
negotiations is uncertain.
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Effects of Government Regulations on Business
Government Regulation; Legal Uncertainties
In the United States and most countries in which we will conduct our
major operations, we are not currently subject to direct regulation other than
pursuant to laws applicable to businesses generally. Adverse changes in the
legal or regulatory environment relating to the interactive online services and
Internet industry in the United States, Europe, Japan or elsewhere could have a
material adverse effect on our business, financial condition and operating
results. A number of legislative and regulatory proposals from various
international bodies and foreign and domestic governments in the areas of
telecommunication regulation, access charges, encryption standards, content
regulation, consumer protection, intellectual property, privacy, electronic
commerce, and taxation, among others, are now under consideration. We are unable
at this time to predict which, if any, of such proposals may be adopted and, if
adopted, whether such proposals would have an adverse effect on our business,
financial condition and operating results.
Moreover, the manner in which existing domestic and foreign laws
(including Directive 95/46/EC of the European Parliament and of the European
Council on the protection of individuals with regard to the processing of
personal data and on the free movement of such data, to become effective in the
individual member states by October 24, 1998) will or may be applied to online
service and Internet access providers is uncertain, as is the effect on our
business given different possible applications. Similarly, we are unable to
predict the effect on us from the potential future application of various
domestic and foreign laws governing content, export restrictions, privacy,
consumer protection, export controls on encryption technology, tariffs and other
trade barriers, intellectual property and taxes.
We will rely on Internet services, in part, through data transmissions
over public telephone lines. These transmissions are governed by regulatory
policies establishing charges and terms for wire line communications. We are not
currently subject to direct regulation by the Federal Communications Commission
(the "FCC") or any other governmental agency, other than regulations applicable
to businesses generally. However, in the future we or one of our future partners
could become subject to regulation by the FCC or another regulatory agency as a
provider of basic telecommunications services. For example, a number of long
distance telephone carriers recently filed a petition with the FCC seeking a
declaration that Internet telephone service is a "telecommunications service"
subject to common carrier regulation. Such a declaration, if enacted, would
create substantial barriers to our future entry into the Internet telephone
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market. The FCC has requested comments on this petition, but has not set a
deadline for issuing a final decision. Also, a number of local telephone
companies have asked the FCC to levy access charges on "enhanced service
providers," which may be deemed to include ISPs. Although the Chairman of the
FCC has indicated his opposition to levying service charges against ISPs, local
interconnection charges could be levied in the future. Moreover, the public
service commissions of certain states are exploring the adoption of regulations
that might subject ISPs to state regulation.
The recently enacted Telecommunications Act of 1996 (the
"Telecommunications Act") contains certain provisions that lift, or establish
procedures for lifting, certain restrictions relating to the RBOCs' ability to
engage directly in the Internet access business. The Telecommunications Act also
makes it easier for national long distance carriers such as AT&T to offer local
telephone service and allows RBOCs to provide electronic publishing of
information and databases. Competition from these companies could have a
material adverse effect on some of our future plans.
As Internet commerce continues to grow, the risk that federal, state or
foreign agencies will adopt regulations covering issues such as user privacy,
pricing, content and quality of products and services, increases. It is possible
that legislation could expose companies involved in electronic commerce to
liability, which could limit the growth of electronic commerce generally.
Legislation could dampen the growth in Internet usage and decrease its
acceptance as a communications and commercial medium. If enacted, these laws,
rules or regulations could limit the market for our services.
One or more states may seek to impose sales tax collection obligations
on out-of-state companies potentially like us that may engage in or facilitate
electronic commerce throughout numerous states. These proposals, if adopted,
could substantially impair the growth of electronic commerce and could adversely
affect our opportunity to derive financial benefit from these activities.
Effects of Compliance with Government Regulation
We will be subject to various federal, state and local laws, rules and
regulations affecting our Internet businesses and operations. We and each of our
potential partners may be subject to various licensing regulation and reporting
requirements by numerous governmental authorities which may include Internet
(domestic and worldwide) oversight regulations, production, manufacturing, OSHA,
securities, banking, insurance, building, land use, industrial, environmental
protection, health and safety and fire agencies in the state or municipality in
which each business is located. Difficulties in obtaining or failures to obtain
the necessary approvals, licenses or registrations, and unforeseen changes in
government regulations directly affecting the Internet could delay or prevent
the development or operation of a given business.
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Future Regulation Could Increase Costs
As Internet e-commerce providers, we are not currently directly
regulated by the Federal Communications Commission or any other agency, other
than regulations applicable to businesses and publicly traded companies
generally. In a report to Congress on April 10, 1998, the Federal Communications
Commission reaffirmed that Internet service providers should be classified as
unregulated "information service providers" rather than regulated
telecommunications providers" under the terms of the Federal Telecommunications
Act of 1996.
Nevertheless, Internet-related regulatory policies are continuing to
develop, and it is possible that we could be exposed to regulation in the
future. For example, in the same report to Congress, the Federal Communications
Commission stated its intention to consider whether to regulate voice and fax
telephony services provided over the Internet as "telecommunications" even
though Internet access itself would not be regulated. We cannot predict whether
in the future the Federal Communications Commission will modify its current
policies against regulation of Internet service providers.
We also could be affected by any change in the ability of customers to
reach our network through a dial-up telephone call without any additional
charges. This practice has allowed Internet service providers to offer flat
rate, non-usage sensitive pricing, and has been an important reason for the
growth in Internet use. Recently, the Federal Communications Commission ruled
that connections linking end users to their Internet service providers are
jurisdictionally interstate rather than local, but the Federal Communications
Commission did not subject such calling to the access charges that apply to
traditional telecommunications companies. Local telephone companies assess
access charges to long distance companies for the use of the local telephone
network to originate and terminate long-distance calls, generally on a per-
minute basis. We could be adversely affected by any regulatory change that would
result in application of access charges to Internet service because this would
substantially increase the cost of using the Internet. However, the FCC Chairman
has stated that he opposes Internet-related access charges, and we believe that
this development is unlikely, with one possible exception that is not currently
relevant to our business.
Specifically, there is substantial debate as to whether carrier access
charges should apply to Internet-based telephone services that substitute for
conventional telephony. We have no current plans to install gateway equipment
and other telephony, and so we do not believe we would be directly affected by
these developments were they to occur.
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The law relating to the liability of Internet service providers and
on-line services companies for information carried on, stored on, or
disseminated through their network is unsettled, even with the recent enactment
of the Digital Millennium Copyright Act. While no one has ever filed a claim
against us relating to information carried on, stored on, or disseminated
through our network, someone may file a claim of that type in the future and may
be successful in imposing liability on us. If that happens, we may have to spend
significant amounts of money to defend ourselves against these claims and, if we
are not successful in our defense, the amount of damages that we will have to
pay may be significant. Any costs that we incur as a result of defending these
claims or the amount of liability that we may suffer if our defense is not
successful could materially adversely affect our business, financial condition
and results of operations.
If, as the law in this area develops, we become liable for information
carried on, stored on, or disseminated through our network, we may decide to
take actions to reduce our exposure to this type of liability. This may require
us to spend significant amounts of money for new equipment and may also require
us to discontinue offering some of our products or services.
Due to the increasing popularity and use of the Internet, it is
possible that additional laws and regulations may be adopted with respect to the
Internet, covering issues such as:
Content;
Privacy;
Access to some types of content by minors;
Pricing;
Bulk e-mail or "spam;"
Encryption standards;
Consumer protection;
Electronic commerce;
Taxation;
Copyright infringement; and
Other intellectual property issues.
We cannot predict the impact, if any, that any future regulatory
changes or developments may have on our business, financial condition, and
results of operations. Changes in the regulatory environment relating to the
Internet access industry, including regulatory changes that directly or
indirectly affect telecommunication costs or increase the likelihood or scope of
competition from regional telephone companies or others, could have a material
adverse effect on our business, financial condition and results of operations.
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Research and Development
Our research and development process centers primarily around the
creation of ideas for affiliates internally through frequent management meetings
and discussion sessions. We believe that this research and development approach
will best suit our business model because of the creativity of our management
team, the accumulated operating experience achieved by our management team
throughout their careers by helping to develop ideas into mature companies, our
affiliate selection process, which both filters and improves potential
affiliates by refining the business model of each potential affiliate and our
continuous process of prototyping and developing new business concepts.
We also gather ideas externally from individuals and entities that come
to us with passion and industry experience in a particular field. We believe we
will be in a strong position to attract high-quality external ideas because of
the entrepreneur- friendly environment we are creating. Furthermore, we believe
that the mentoring and services that we provide are very attractive to
individuals and entities with passion for creating, building and operating
world-class companies.
Our services and infrastructure will provide an environment that can
substantially improve a company's time-to-market and potential for success. In
considering Internet business ideas brought to us by others and evaluating
investments in and acquisitions of Internet companies, we apply the same strict
criteria we would apply to our own ideas, and we consider whether we could add
value to the development of the business by redefining its business model to
create previously unexploited growth opportunities.
We apply a number of criteria in choosing whether to create or acquire
an affiliate. We apply these criteria during our idea selection process, where
each idea is analyzed and weighed against other ideas for prioritization in
advance of creating or acquiring the affiliate. Our analysis includes an
evaluation of whether the business address a large, previously unidentified
market need, or whether it has a significantly better solution for an already
identified market need; whether the business satisfies the need in a unique way,
with a business model that we believe is superior to the other solutions;
whether the business model is scalable, with increasing operating efficiencies
as the business grows; whether there are sufficient barriers to entry, and can
the business grow fast enough to benefit from a first-mover advantage; whether
the business's customers have an incentive to refer new customers to the
business's offerings; whether the business has a sustainable competitive
advantage, such as network effects that make the business' offering increasingly
valuable as more customers use it and can the business provide an attractive
value proposition to potential partners in the future.
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Compliance with Environmental Laws
As a provider of incubation, research, vertical marketing and market
index services for development stage businesses, we do not expect any compliance
issues with environmental laws.
Employees
We currently employ a total of 7 full-time employees of whom 5 are
engaged in management and administration. Our business model depends on numerous
administrative, technical, and managerial tasks being performed from remote
locations, with many employees working from their homes or satellite offices. As
of May 1, 2000, 3 Employees are based in Denver, CO, 1 is based in San Jose, CA,
1 is based in Los Angeles, CA, 1 is based in New York, NY and 1 is based in
Massapequa, NY. None of our employees are covered by a collective bargaining
agreement, and we believe that our relationship with our employees is good. All
of our software and product line engineering is contracted out to independent
contractors.
Talent
As an idea advances beyond the prototype stage, we will recruit a
management team to launch and develop the project. Our internal recruiting
department and referral system will identify and place talent in each new
affiliate. Because highly skilled people are a significant factor in each
affiliates success, we believe that our recruiting function will provide us a
strategic advantage in launching new companies and enhancing the success of our
existing affiliates. After developing a new business idea and capitalizing a new
affiliate, we will reserve a significant portion of the affiliate's equity for
distribution to the entrepreneurs and other employees. We will employ
experienced recruiters who coordinate the hiring needs of our affiliates and act
as a central resource for employment. We will also draw qualified candidates
from a range of other sources, including the extensive contacts of our
management team and candidates referred from our other affiliates. In addition,
we will sometimes hire executives at Dstage.com who, after being mentored in our
business model, will then take positions in one of our affiliates. We believe
that this flow of experienced executives allows us to operate our affiliates
with consistent vision and culture and promotes communication across our
business model.
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1:4 Reports to Security Holders
We are currently not required to deliver an annual report to security
holders. We will begin to voluntarily send an annual report, including audited
financial statements, to security holders beginning with the current fiscal
year. In addition, we will begin filing reports and other information required
by the SEC upon initial filing of our registration.
The public may read and copy any materials filed with the SEC at the
SECs Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may also obtain information on the operation of the Public Reference
Room by calling the SEC at 1- 800-SEC-0330.
The SEC maintains and Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC. This information, once we complete our filing, will
be available at http://www.sec.gov. It will also be available in the future on
our web site once it is established.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The statements contained in this initial report on Form 10-SB
concerning our business outlook or future economic performance; anticipated
profitability, gross revenues, commissions and expenses or other financial
items; and statements concerning assumptions made or exceptions as to any future
events, conditions, performance or other matter are "forward-looking statements"
as that term is defined under the Federal Securities Laws. Forward-looking
statements are subject to risks, uncertainties and other factors, which would
cause actual results to differ materially from those stated in such statements.
Such risks, uncertainties and factors include, but are not limited to, adequate
funding, competition, external factors that we cannot control and regulatory
factors.
2:1 Plan of Operation
Our initial plan of operations involves three core elements:
1) Building a network of individuals and organizations participating in
the development of the Dstage.com online resources for development stage
companies;
2) Completing development and testing of our proprietary indexes to
track various types of development stage company activity; and
3) Developing concepts that can be successfully converted into new
development stage ventures.
Our plan of operation includes providing incubation services, research,
vertical marketing and market indexes for development stage companies. We intend
to become the leading source for expert support, creation, and restructuring of
development stage companies by implementing four distinctive methods including
utilizing Residual Intellectual Property Mining, harvesting published
intellectual property, focused delivery of expert resources and the development
of a brand name identity. We believe that the expertise and focus of
professional services companies, combined with the communications efficiencies
of publishers with domain expertise, can come together to create an online
destination where venture-shaping decision making is optimally supported.
We plan to enhance the value of our business model by continually
creating new business ideas and actively developing the strategies, operations
and management teams of our affiliates throughout their lifecycles.
We intend to create and build new Internet businesses and evaluate
potential strategic acquisitions to increase the overall value of our business
model. Before any new business idea becomes a part of our business model, or
before we pursue any strategic acquisition, our internal strategy teams must
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first demonstrate that the idea or business has the potential to become a market
leader. Any strategic acquisition or new business idea must add value to our
business model. In addition to creating and acquiring Internet businesses, we
intend to pursue opportunities in other growing markets that involve real-time
interactive communications.
As our business model grows and matures, we intend to expand the
breadth and effectiveness of our future network efficiencies and increase
cooperation and intra-network commercial arrangements. As the Internet matures
and competition among Internet companies increases, we anticipate that our
shared resources and intra- network collaboration will offer our affiliates even
more compelling advantages over companies operating independently.
We believe that we can enhance stockholder value by engaging in
business through an integrated network of affiliates in which we own significant
stakes over the long term. We intend to generate revenues and income primarily
from the operation of our affiliates. On a limited number of occasions, we will
sell interests in our affiliates when we no longer have the ability to
significantly influence their operations, and we may be faced with circumstances
in the future that make it appropriate to sell part or all of our interest in a
particular affiliate.
We have an integrated management team with diverse experience and
skills as its core strength. Our management team includes people who have
created, built, operated and advised companies across a broad range of sizes and
industries. We will recruit and motivate our team by providing a challenging,
intense, collaborative, rewarding and open atmosphere. The continual creation of
new affiliates and evolution of existing affiliates will provide an ongoing
challenge. The pace of change provides intensity. At every level, we promote
sharing of knowledge across our business model. Our shared incentives, physical
architecture and philosophy foster an open atmosphere that we believe is
attractive to talented people. Our management team will be composed of senior
executive officers, corporate and regional officers, managing directors,
operational vice presidents and entrepreneurs- in-residence. We intend to
continue to expand our management team by attracting top talent, and to
capitalize on its diverse strengths to create, build and operate companies that
enhance the value of our business model.
Brand Name Recognition
We believe that our method, including our collective knowledge and
resources, will significantly differentiate our affiliates from their
competitors. To ensure longer-term success, we must invest in branding the
Dstage.com business model, our affiliates and the value of our overall business
model. We believe that the Dstage.com brand will enjoy significant public
recognition. We intend to enhance public awareness of our brand by increasing
our future marketing efforts and developing successful affiliates.
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Implementing Our Business Model
We will provide strategic direction and market intelligence to our
affiliates concerning topics such as market positioning and competitive trends.
We will do this at several levels within our organization. Our senior executives
will participate in frequent formal and informal communications with executives
at our affiliates. We also provide experienced consulting through our
entrepreneurs-in-residence and other experienced professionals. We will also
employ experienced financial analysts who will be available to help particular
affiliates model their businesses and identify the key drivers of their
financial results. In the future, our internal prototyping staff will be
available to help later- stage businesses evaluate alternative business
solutions by testing new ideas in real-world scenarios. Affiliates will be able
to use the data generated by these tests to evaluate the viability of innovative
approaches.
Active Involvement with Affiliates
Our senior executives will serve on the boards of a substantial
majority of our affiliates, and in many cases more than one of our executives
serves on an affiliates board. Through board representation and ongoing
consultation with our affiliates, we will take an active role in the ongoing
oversight and strategic management of our affiliates.
We strongly encourage cooperation and collaboration among our
affiliates and the sharing of information through both formal and informal
communications. Because we will operate companies that will address different
market needs, our affiliates will frequently look to other affiliates within our
business model to provide necessary goods or services.
Our business model will promote the sharing of knowledge, relationships
and business opportunities among our affiliates. Many of our future executives
will have been involved in Internet business development roles before joining
us. We will assist our affiliates in evaluating, structuring and negotiating
joint ventures, strategic alliances, joint marketing agreements, acquisitions
and other transactions. Business development staff from all of our affiliates
will share information via network-wide electronic mail lists and through
periodic meetings hosted by us.
Cash Flow and The Need To Raise Cash
As of April 30, 2000, we had incurred net operating losses of $97,870,
primarily due to costs associated with organizing the Company, developing the
business plan and raising capital. We will rely totally on the proceeds from our
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initial Private Placement Memorandum for our initial liquidity and capital
resources. The Private Placement Memorandum, dated May 1, 2000, will attempt to
produce approximately $425,000 in net proceeds. Our business is designed to
allow the largest expenses, namely the cost of personnel, consultants, license
and royalties for third-party information use to be paid for with stock in lieu
of cash. We expect that shares issued under these arrangements may be subject to
lockup provisions and certain other restrictions. There can be no assurance that
personnel, consultants or other parties will accept stock in lieu of cash.
However, if they do, we expect our immediate operational cash needs over the
next twelve months will not exceed $250,000. In the event this Private Placement
memorandum is not fully subscribed, we can sustain operations for the next
twelve months, albeit at a much slower rate, with as little as $20,000.
Planned Research and Development
Our research and development process centers primarily around the
creation of ideas for affiliates internally through frequent management meetings
and discussion sessions. We believe that this research and development approach
will best suit our business model because of the creativity of our management
team, the accumulated operating experience achieved by our management team
throughout their careers by helping to develop ideas into mature companies, our
affiliate selection process, which both filters and improves potential
affiliates by refining the business model of each potential affiliate and our
continuous process of prototyping and developing new business concepts.
We also gather ideas externally from individuals and entities that come
to us with passion and industry experience in a particular field. We believe we
will be in a strong position to attract high-quality external ideas because of
the entrepreneur- friendly environment we are creating. Furthermore, we believe
that the mentoring and services that we provide are very attractive to
individuals and entities with passion for creating, building and operating
world-class companies.
Our services and infrastructure will provide an environment that can
substantially improve a company's time-to-market and potential for success. In
considering Internet business ideas brought to us by others and evaluating
investments in and acquisitions of Internet companies, we apply the same strict
criteria we would apply to our own ideas, and we consider whether we could add
value to the development of the business by redefining its business model to
create previously unexploited growth opportunities.
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We apply a number of criteria in choosing whether to create or acquire
an affiliate. We apply these criteria during our idea selection process, where
each idea is analyzed and weighed against other ideas for prioritization in
advance of creating or acquiring the affiliate. Our analysis includes an
evaluation of whether the business addresses a large, previously unidentified
market need, or whether it has a significantly better solution for an already
identified market need; whether the business satisfies the need in a unique way,
with a business model that we believe is superior to the other solutions;
whether the business model is scalable, with increasing operating efficiencies
as the business grows; whether there are sufficient barriers to entry, and can
the business grow fast enough to benefit from a first-mover advantage; whether
the business's customers have an incentive to refer new customers to the
business's offerings; whether the business has a sustainable competitive
advantage, such as network effects that make the business' offering increasingly
valuable as more customers use it and can the business provide an attractive
value proposition to potential partners in the future.
Purchase or Sale of Plant and/or Equipment
We have purchased a limited amount of computer equipment, office
furniture and other office related equipment. We have no current plans to
purchase any additional equipment or a plant in the near future. We have no
current plans to sell any equipment.
Significant Changes in the Number of Employees
We currently have seven employees, five of whom are employed full time
employees who are engaged in management and administration. We intend to add
four employees during the third quarter 2000 and eight additional employees
during the fourth quarter 2000.We expect to have 30 employees by the year end
2001, 69 by year end 2002, 96 by year end 2003 and 135 employees by year end
2004. These employees are expected to be involved with sales & marketing,
general & administrative, operations, support and development.
<TABLE>
<CAPTION>
Department Q1 Q2 Q3 Q4 2000
2000 2000 2000 2000
<S> <C> <C> <C> <C> <C>
Sales & Marketing 2 2 3 7 7
General & Administrative 3 3 5 5 5
Operations, support, development 2 2 3 7 7
Q1 Q2 Q3 Q4 2001
2001 2001 2001 2001
Sales & Marketing 8 8 11 11 11
General & Administrative 6 9 10 10 10
Operations, support, development 8 8 9 9 9
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<PAGE>
Q1 Q2 Q3 Q4 2002
2002 2002 2002 2002
Sales & Marketing 14 14 14 15 15
General & Administrative 16 20 20 24 24
Operations, support, development 18 23 25 30 30
Q1 Q2 Q3 Q4 2003
2003 2003 2003 2003
Sales & Marketing 16 18 18 18 18
General & Administrative 34 34 34 34 34
Operations, support, development 43 43 44 44 44
Q1 Q2 Q3 Q4 2004
2004 2004 2004 2004
Sales & Marketing 22 22 22 22 22
General & Administrative 48 48 48 48 48
Operations, support, development 65 65 65 65 65
</TABLE>
2:2 Managements Discussion and Analysis of Financial Condition and Results of
Operations
Since our inception in October 1999, we have maintained our plan of
operation, which includes providing incubation services, research, vertical
marketing and market indexes for development stage companies. We intend to
become the leading source for expert support, creation, and restructuring of
development stage companies by implementing four distinctive methods including
utilizing Residual Intellectual Property Mining, harvesting published
intellectual property, focused delivery of expert resources and the development
of a brand name identity. We believe that the expertise and focus of
professional services companies, combined with the communications efficiencies
of publishers with domain expertise, can come together to create an online
destination where venture shaping decision making is optimally supported.
Although we have had no revenues as of April 30, 2000, we have
completed our business plan and have begun the steps that will eventually result
in us becoming a publicly traded company. In addition, we have had preliminary
discussions with potential affiliates, including some influential industry
leaders in the Internet marketplace. Our core management team is in place, and
we are in the process of completing our initial Private Placement Memorandum,
from which we expect to receive approximately $850,000 in net proceeds that will
be used for marketing, advertising, sales, site and content development,
administrative and general overhead expenses during our initial stages of
operations.
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Financial Condition
Results of Operations
We began operations on October 12, 1999. As a result of our limited
operating history, our financial statements are not readily comparable and may
not be indicative of future results. As of April 30, 2000, we have had no
revenues.
Selected Statement of Operations Information
For the Period For the Four
October 12, Months Ended
1999 to April 30, 2000
December 31, (Unaudited)
1999 (Audited)
Total Revenues $0 $0
Total Expenses $66,898 $31,164
Income (loss)From Operations ($66,898) ($31,164)
Total Other Expense (Income) $(102) $(75)
Net Profit (Loss) $(66,796) ($31,074)
Net Profits
We have not realized a net profit from operations as of April 30, 2000.
We have an operating loss to date of $97,870. This net operating loss is due in
part to initial general and administrative costs, organizational costs and
initial start up operations.
Revenues
We have not generated any revenues. We are a development stage company
and have been developing our business model since inception. As part of our
business model, we plan to incur expenses for services for which we will pay
stock of our company in lieu of cash. As a result, our ability to generate
initial revenues is subject to our ability to earn management fees by providing
our services to potential clients once we are ready to enter that stage of our
development. We hope to begin generating initial revenues during the third
quarter of 2000.
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Operating Expenses
Our operating expenses from inception to April 30, 2000 were $97,870.
Consulting expenses totaled $67,000 and general and administrative expenses
totaled $30,870. Other expense (income) totaled $(192).General and
Administrative expenses were comprised of sales and marketing, Internet access
and hosting, professional fees, rent, telephone and travel and entertainment. We
had budgeted approximately $100,000 for these initial expenses. As we begin to
enter the next stage of our business model, many of our internal service
requirements will be paid for by issuance of stock in lieu of cash. The services
provided will be valued at their current market value and then converted to our
common stock at $.02 per share as of the date hereof. As we continue to grow and
our common stock increases in value, we will adjust the value of our common
stock to reflect the market price at the time the services are provided. This
approach will enable us to minimize overhead costs while providing both the
company and the employee the maximum benefit for the services being performed.
Income Taxes
There is no current or deferred tax expense for the period from October
12, 1999 to April 30, 2000 due to net losses from operations by the Company.
As of April 30, 2000, we had operating loss carryforwards of
approximately $94,000 (unaudited). The operating loss carryforwards expire
beginning in 2019.
Liquidity and Capital Resources
Our primary source of capital has been our initial capitalization,
private equity sales and a loan from BulletProof Business Plans, Inc. Our
immediate liquidity needs are expected to come from the proceeds of our Private
Placement Memorandum, services provided to us for stock in lieu of cash and our
initial management and indexing fees.
Under our business model, many of our ongoing internal services will be
contributed for stock, thereby reducing our need for cash liquidity. Because the
services provided will for the most part be highly specialized and technical in
nature, executives and management joining our company will primarily be
successful individuals from various industries who are looking for a place where
their expertise will pay dividends over the long term as the stock they receive
hopefully appreciates in value at a far greater rate than they could earn by
continuing solely in their current career path.
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As a result of this business model, a substantial part of our current
operating losses are noncash in nature, as the individuals providing services to
date in many instances have received stock in lieu of cash, thus reducing our
actual cash outlay requirements. This translates into a minimal cash liquidity
requirement going forward and a reduction in the need for extensive capital
resources.
Selected Balance Sheet Information as of December 31, 1999 and April 30, 2000.
December 31, April 30,
1999 2000
(Audited) (Unaudited)
Total Current Assets $18,033 $20,550
Total Property & Equipment $3,555 $4,837
Total Other Assets $379 $923
Total Assets $21,967 $26,310
Total Current Liabilities $72 $489
Total Liabilities $72 $489
Net Shareholder Equity $21,895 $25,821
Net Cash Provided by Operations
Since inception we have not had any revenues to date and operating
activities have consumed cash of $15,181. However, we have had cash provided by
financing activities, primarily from the monies provided by our largest
shareholder, BulletProof Business Plans, Inc. In addition, we have had services
provided to us by our management team for which the consideration was stock in
lieu of cash. As a result, our consumption of cash has been primarily directed
to third party out-of-pocket costs, including consulting, rent, telephone, legal
and audit fees. To date, we have received $20,000 in proceeds from the issuance
of common stock and $16,000 in proceeds from issuance of a note payable to
BulletProof Business Plans, Inc., which has resulted in cash at the end of
period of $18,843. Our cumulative net loss to date is $97,870, all of which is a
direct result of operations. Despite this loss, our current accounts payable is
only $489. The majority of our expenses have been paid for by the issuance of
common stock, greatly reducing our cash dependence.
From October 12, 1999 (inception) through December 31, 1999, the end of
our first fiscal year, we incurred a net operating loss of $66,796. $52,000 of
our operating expenses were paid for by stock issued for consulting services,
while $11,803 was paid for by stock issued for expense reimbursement. We had an
increase in accounts payable of $72 resulting in a negative operating cash flow
of $(2,921). We acquired $393 in fixed assets for cash and received $20,000 in
proceeds from the issuance of common stock for cash. These transactions resulted
in cash at the end of the period of $16,686 on December 31, 1999.
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From January 1, 2000 to April 30, 2000, we incurred a net operating
loss of $31,074. We consumed $12,260 in cash in our operating activities. We
spent $1,583 to acquire computer and office furniture. We received $16,000 in
proceeds from the issuance of a note payable. These transactions resulted in the
addition of net cash for the period of $2,157. All of the cash outlays for this
period were paid to third parties.
As of April 30, 2000, our cash position was $18,843.
Capital Expenditures
For 1999 and the first four months of 2000, our budget was $100,000 for
cash expenditures. We require funding primarily for computer hardware and
software, furniture and fixtures and general working capital needs.
Substantially all of our capital expenditures have been paid for by the issuance
of stock to our shareholders.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," requires two presentations of earnings per share - "basic" and
"diluted." Basic loss per common share is computed using the weighted average
number of shares of common stock outstanding during the period. Diluted loss per
common share is computed using the weighted average number of shares of common
stock outstanding, adjusted for the dilutive effect of potential common shares
consisting of common stock options and warrants and contingently issuable shares
of common stock. Potential common shares outstanding are calculated using the
treasury stock method. There are no stock options, warrants or contingently
issuable shares of common stock outstanding at April 30, 2000.
In the case of a net (loss), the dilutive calculation is equivalent to
the basic earnings per share since including additional potential shares
outstanding would be antidilutive. Additionally, the Company believes that it
has issued all shares to date for nominal consideration and has, accordingly,
included all shares as if outstanding in the calculation of basic and dilutive
earnings per share since inception of the Company.
The Company follows Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") in accounting for
stock based compensation. Under APB 25, the Company recognizes no compensation
expense related to employee or director stock options unless options are granted
with an exercise price below fair value on the day of grant. Subsequently, the
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Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS No. 123") became effective. SFAS No. 123 provides an
alternative method of accounting for stock-based compensation arrangements,
based on fair value of the stock-based compensation utilizing various
assumptions regarding the underlying attributes of the options and stock. Stock
issued to consultants has been recorded at fair value under SFAS No. 123. The
Financial Accounting Standards Board encourages, but does not require, entities
to adopt the fair-value based method. The Company will continue its accounting
under APB No. 25 but uses the disclosure- only provisions of SFAS No. 123 for
any options and warrants issued to employees and directors. No options have been
granted.
Trends on Liquidity
To date we have had no revenues and we have not had to heavily rely on
cash availability since we have been dependent on our management and
shareholders providing services for stock in lieu of cash. In order for our
business model to be successful, this trend will have to continue. We plan to
build up a cash reserve that will be available in the event additional cash is
needed in the future. Nonetheless, our business model is designed to be
functional with minimum cash requirements.
Sources of Liquidity
We will derive most of our cash from revenues generated through the
normal course of business and from the proceeds of our initial Private Placement
Memorandum. A significant factor to preserving our liquidity will be management
and our shareholders, who will preserve cash by providing services for stock in
lieu of cash consideration.
Material Commitments for Capital Expenditures and the Expected Sources of Funds
for These
While we have budgeted approximately $250,000 for working capital and
operating expenditures in 2000, we have no material commitments for those
expenditures. Our expected source of funds for these expenditures will be a
combination of future revenues from management and indexing fees and the
proceeds from our initial Private Placement memorandum. In the event we do not
receive enough proceeds from our Private Placement memorandum and management and
indexing fees, we will reduce our operating activity to coincide with working
capital available.
Trends, Events and Uncertainties that could have an Impact on Net Operating
Results
We believe that the need for the services we provide will continue for
the foreseeable future as more companies enter the B2B and e-commerce
marketplace. In the event that we are unable to continue our business model due
to a major shift in the economy or some other unforseen reason, and as a result
47
<PAGE>
we have to adjust our business model to a more traditional reliance on cash
consideration, this event could have an impact on net operating results by,
among other things, requiring us to obtain various fiscal tools to meet
obligations, which could result in interest payments and other debt expenses.
Significant Amounts of Income/Loss Not From Continuing Operations
We have not experienced any significant amounts of income or loss from
activities not associated with continuing operations.
Seasonal Aspects that Effect Results
As a provider of specific business services, we are not affected by
seasonal aspects at this time. However, in the future our affiliates may
experience certain seasonal effects depending upon the industry they are in,
which at this early stage has not yet been defined.
Impact of Inflation
Due to the fact that we have been in business a very short period of
time, inflation has had a minimal, if any, impact on our business.
Interim Periods
There was no material change in our financial position between December
31, 1999 and April 30, 2000, the current interim period. Accumulated deficit
increased from $66,796 to $97,870. During this period our cash position improved
from $16,686 to $18,843. We received in exchange for notes payable an additional
$16,000 in cash from our largest shareholder, and the majority of our operating
expense was paid for by management's acceptance of our common stock in lieu of
cash consideration.
Discussion on Material Events That Would Cause Reported Information Not to be
Indicative of Future
Since we are in our first full year of operations, there have been no
material events that would be indicative of the future.
48
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY
3:1 Location and Condition of Property
Our corporate headquarters are located at 1675 Broadway, Suite 1800,
Denver, Colorado 80202. We currently occupy a 94 square foot office at a cost of
$379 per month and have determined that additional space is necessary. We will
relocate on July 1, 2000 to a 255 square foot office at a cost of $924 per month
located at 1600 Broadway, 25th floor, Denver, Colorado 80202.The new lease will
be for a period of one year. Our offices are located in modern office buildings
and are in good condition.
Property Titles, Leases
We do not own any real property or have any capital leases. The only
lease we have is an operating lease for office space as described above.
Insurance
We maintain a commercial general liability policy with a general
aggregate amount of $2,000,000 with Union Insurance. The policy is limited to
$1,000,000 upon each occurrence. We have fire damage protection limited to
$50,000 on any one item with medical expenses limited to $5,000 per person per
occurrence.
3:2 Investment Policies
None.
3:3 Description of Real Estate and Operating Data
None.
49
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
4:1 Security Ownership of Certain Beneficial Owners
The following table sets forth information as of the date hereof, based
on information obtained from the persons named below, with respect to the
beneficial ownership of the Common Stock by each person known by us to own
beneficially 5% or more of the Common Stock:
Title of Name and Amount and Percent Name and
Class Address of Nature of of Class Address of
Beneficial Beneficial Beneficial
Owner Owner Owner
Controlling
Shareholders
Common BulletProof 2,834,569 46% Lorenzo
Business Carver, CPA
Plans, Inc. 550 E. 12th
1675 Avenue, #810,
Broadway Denver, CO
Suite 1800 80203 (49%)
Denver CO
80202 Sandra Carver
7680-D Santa
Barbara
Drive,
Indianapolis,
IN 46268
(15%)
Lester and
Vanessa
Carver
1621 W. 76th
Place,
Indianapolis,
IN 46260
(12%)
Sandra and
Todd Welch
6547 Scenic
Court
Indianapolis,
IN 46260
(12%)
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Common Sue Perrault 1,500,000 24% N/A
2261 Blake
2G Denver CO
80205
Common Kirk LaPoure 750,000 12% N/A
30296
Stagecoach
Lane
Evergreen CO
80439
Total 5% 5,084,569 82%
Shareholders
as a group
Note (1) The number of shares of Common Stock owned are those "beneficially
owned" as determined under the rules of the Securities and Exchange Commission,
including any shares of Common Stock as to which a person has sole or shared
voting or investment power and any shares of Common Stock which the person has
the right to acquire within 60 days through the exercise of any option, warrant
or right.
Note (2) All shares are held beneficially and of record and each record
shareholder has sole voting and investment power.
4:2 Securities Ownership of Management
The following table sets forth information as of the date hereof, based
on information obtained from the persons named below, with respect to the
beneficial ownership of the Common Stock by (i) each director and officer of the
Company and (ii) all directors and officers as a group:
Title of Class Name and Amount and Percent of
Address of Nature of Class
Beneficial beneficial
Owner Owner
Common Sue Perrault 1,500,000 24%
Common Helen Chen 250,000 4%
Common Lan Xie 250,000 4%
Common Kirk LaPoure 750,000 12%
Common Frank Maresca 250,000 4%
Common Stacie 100,000 2%
Perrault
Officers & 3,150,000 50%
Directors as a
Group
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<PAGE>
Note (1) The number of shares of Common Stock owned are those "beneficially
owned" as determined under the rules of the Securities and Exchange Commission,
including any shares of Common Stock as to which a person has sole or shared
voting or investment power and any shares of Common Stock which the person has
the right to acquire within 60 days through the exercise of any option, warrant
or right.
Note (2) No officer, director or security holder listed above owns any warrants,
options or rights. {See "Certain Relationships and Related Transactions.
Note (3) All shares are held beneficially and of record and each record
shareholder has sole voting and investment power.
Note (4) These individuals are the Executive Officers and Directors of the
Company and may be deemed to be "parents or founders" of the Company as that
term is defined in the Rules and Regulations promulgated under the 1933 Act. The
address at which each Executive Officer and Director can be reached is the
Company's headquarters, located at 1675 Broadway, Suite 1800, Denver, CO 80202.
Compliance with Section 16(A) of the Exchange Act
Under the securities laws of the United States, our Directors, our
Executive Officers (and certain other officers) and any persons holding more
than 5% of our outstanding voting securities are required to report their
ownership in the Company's securities and any changes in that ownership to the
Securities and Exchange Commission. Based solely upon our reliance upon the
written representations of our Directors and officers, we believe that we are in
compliance with Section 16(a) of the Exchange Act.
4:3 Changes in Control
There have not been, nor are there any plans for, a change in control
of the Company.
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<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
5:1 Directors and Officers
The Director and executive officers of the Company are appointed
annually at the first meeting of the Company's Board of Directors held after
each annual meeting of stockholders. Each executive officer will hold office
until his successor is duly elected and qualified, until his resignation or
until he shall be removed in the manner provided by the Company's By-Laws. The
entire Board of Directors will be up for election at the next annual meeting of
stockholders. Non-executive Directors, which will be appointed, will have a
three year term of the non-executive directorship with the Company. The present
term of office of each Director will expire at the next annual meeting of
stockholders.
The Directors and executive officers of the Company were appointed
between October 12, 1999 and April 30, 2000. As of April 30, 2000, the names,
ages and positions are as follows:
Name Age Position
Sue Perrault 45 President, Director
Kirk LaPoure 31 Secretary/Treasurer, Director
Helen Chen 29 Vice President
Lan Xie 26 Vice President
Frank Maresca 32 Vice President, Director
Stacie Perrault 25 Manager
Note (1): These persons may be deemed "promoters" of the Company as that term is
defined under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
Sue Perrault, President, has extensive experience in marketing, project
management, promotions and sales. Currently, Ms. Perrault serves as Vice
President of Marketing at BulletProof Business Plans, Inc. where she is
responsible for public relations, marketing, sales, research and strategic
campaign development. Previously, through her expert guidance as Promotions
Manager for the National Conference of State Legislatures, the organization's
publication sales increased over 75%. Other responsibilities at the Conference
included creation, production and implementation of targeted direct mail
initiatives which included all printed marketing materials for the
organization's publications, meetings and membership, including brochures,
magazine ads, catalogs and posters. Prior to this, Ms. Perrault owned and
operated a successful specialty glass-blowing business.
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<PAGE>
D. Kirk LaPoure, Chief Financial Officer, brings over 8 years of financial
management experience to the Dstage team. From May 1996 to March 2000, Mr.
LaPoure was the Chief Financial Officer of Mountain Sales and Service, Inc., a
wholesaler of food service equipment. From June 1992 to December 1995, Mr.
LaPoure was the Controller of Evergreen Caissons, Inc., a foundation-drilling
subcontractor in the Rocky Mountain region. Mr. LaPoure received his Bachelor of
Science in Finance from Metropolitan State College of Denver.
Helen Chen, Vice President - Research, also serves as a Vice President for
BulletProof Business Plans, Inc., where she has developed a library of industry
profiles. Prior to joining BulletProof Business Plans, Ms. Chen served in
Taiwan, and later in Silicon Valley, as a research analyst for Crimson Capital,
a US $435 million private equity fund focused on investment opportunities in
U.S. and Asia. Before joining Crimson Ms. Chen was with KPMG Peat Marwick's
Information, Communications and Entertainment practice.
Ms. Chen holds Master of Science and Master of Business Administration degrees
from Northeastern University's Graduate School of Business, Graduate School of
Public Accounting. Ms. Chen received her Bachelor of Arts in Political Science
from Wellesley College, with cross sectional courses at Massachusetts Institute
of Technology, and holds a Diploma from London School of Economics.
Lan Xie, CPA, Vice President of Index Development of Dstage.com, Inc. Ms. Xie is
the Internal Audit Manager of Reuters America, Inc. where she has reviewed and
evaluated global operations in efficiency and productivity. Ms. Xie has directed
management regarding strategic business decisions since August 1998. Ms. Xie's
prior experience includes serving as a Senior Associate with Price Waterhouse
Coopers LLP. from June 1994 to July 1998. Ms. Xie graduated Summa cum Laude from
Boston University with a B.S. in Business Administration.
Frank R. Maresca, Jr., Vice President of Strategic Acquisitions, has held
several key positions in the securities industry over the past decade. In the
course of his career, Mr. Maresca has successfully taken 6 companies public,
effectively led numerous mergers and acquisitions and raised funds for public
and private ventures poised for rapid expansion. From 1995 to 1997 he served as
Head Trader for D. Weckstein, Inc. As CEO of BMV Financial, he oversaw the
operations of Yee, Desmond, Schroeder and Allen, Inc., directing and supporting
all brokerage activity and operations. Prior to joining BMV Financial, he served
as a trader, analyst and broker for Waterhouse Securities and Redstone
Securities, where he effectively developed and used technical analysis for daily
trading and fundamental analysis for long-term positions for Redstone's Gama
Trading. In addition to his responsibilities as a trader at Redstone, Mr.
Maresca successfully completed several private placements for public companies.
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<PAGE>
Mr. Maresca received his Bachelor of Science in Business Administration from
Pace University, New York, New York, in 1992, with concentrations in Accounting,
Finance, and Management. He holds a number of securities licenses and
credentials, including Series 4 Options Principal Registration, Series 24
General Principal Registration, Series 7, 55 and 63 Licenses.
Stacie Perrault, Communications Manager, has experience in management,
scheduling, editing and employee relations. Ms. Perrault currently serves as
Communications Manager for BulletProof Business Plans, Inc. where her
responsibilities include research, writing, project management and devising and
implementing marketing strategies. Previously, she served as Special Project
Research Coordinator for the Screen Actor's Guild where she coordinated and
implemented a national research project in conjunction with SAG, AFTRA and UCLA,
which prompted contract changes within the union. Prior to this, Ms. Perrault
worked as Production Assistant for Picture of Priority Production Company and as
Intern with 9 Wants to Know Investigative Unit with the NBC-TV Affiliate in
Denver, Colorado. Ms. Perrault earned her BA in Communications with a Minor in
Film, and is currently enrolled in the MBA Program, at the University of
Colorado at Denver in Denver, Colorado.
Director Compensation
All authorized out-of-pocket expenses incurred by a Director on our
behalf will be subject to reimbursement upon receipt by us of required
supporting documents of such expenses. Although Directors may be eligible to
participate in our future stock option and / or incentive plan(s), if any,
Directors do not receive any additional compensation or an annual Directors fee
at the present time.
5:2 Significant Employees
We rely on our Board of Directors, our current executive staff and all
of our employees to implement our business plan.
5:3 Family Relationships
Stacie Perrault, Communications Manager, is the daughter of
Company President Sue Perrault. There are no other family
relationships.
5:4 Involvement in Legal Proceedings
None of our management is involved in any type of legal proceedings.
55
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
6:1 General.
None of the executives and/or Directors currently has a compensation
package. We have not entered into any written employment agreements with its
executive officers as of April 30, 2000. All members of management have elected
to postpone negotiations with us regarding salaries, until such time as our
revenue is adequate to pay salaries without causing financial damage to our plan
for business development. When it becomes necessary, more detailed written
employment contracts may be entered into between our key personnel and us.
Our Board of Directors has not adopted any Stock Incentive Plans as of
April 30, 2000. We are considering formulating such a plan in the future to
encourage our Directors, executive officers and employees to bring in better
operation results and to maximize the value of our common stock. Stock options
may be granted to eligible participations in the form of Incentive Stock Options
(ISOs) under the Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") or options which do not qualify as ISOs (non-Qualify Stock Options
or "NQSOs")
There are no annuity, pension or retirement benefits proposed to be
paid to officers, directors, or employees of the corporation in the event of
retirement at normal retirement date pursuant to any presently existing plan
provided or contributed to by the corporation or any of our subsidiaries. No
specific sums of remuneration have as yet been proposed in a Plan, for
respective salaries to be paid in the immediate future, directly or indirectly
by us to our officers and directors.
6:2 Summary Compensation Table
Name and Year Annual Other Total
Principal Salary Compensation Compensation
Position
Sue 1999/ $0 Stock $5,000
Perrault, 2000 $5,000
President
Kirk 1999/ $0 Stock $15,000
LaPoure, 2000 $15,000
Secretary/
Treasurer/
CFO
56
<PAGE>
Eric 1999/ $0 Stock $5,000
Schiffer, 2000 $5,000
Vice
President
Helen Chen, 1999/ $0 Stock $5,000
Vice 2000 $5,000
President
Lan Xie, 1999/ $0 Stock $5,000
Vice 2000 $5,000
President
Frank 1999/ $0 Stock $5,000
Maresca, 2000 $5,000
Vice
President
Stacie 1999/ $0 Stock $2,000
Perrault, 2000 $2,000
Manager
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
7:1 Previous Two Years
BulletProof Business Plans, Inc., our largest shareholder, has
had, and continues to have, certain transactions with us as
described herein.
As of April 30, 2000, BulletProof Business Plans, Inc. owns
2,834,569 shares, or 46%, of our outstanding common stock. Our
President, Sue Perrault, owns 4% of BulletProof Business Plans,
Inc. and performs sales and marketing duties for them. Vice
President Helen Chen performs research for BulletProof Business
Plans, Inc. and owns 1% of their company. Our communications
manager, Stacie Perrault, is the daughter of our President, Sue
Perrault, and she is also part of the BulletProof Business Plans,
Inc. management team. Secretary/Treasurer and CFO Kirk LaPoure also
serves as the CFO for BulletProof Business Plans, Inc.
In addition, we paid BulletProof Business Plans, Inc. $3,000
for our 3 URL's, Dstage.com, Dstage.net and Developmentstage.com.
7:2 Exempt
Not Applicable
7:3 Parent Company
Not Applicable.
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<PAGE>
7:4 Transactions with Promoters
Not applicable.
ITEM 8. DESCRIPTION OF SECURITIES
8:1 Common or Preferred Stock
Common Stock
The Articles of Incorporation authorize the issuance of 50,000,000
shares of common stock, with a par value of $0.001, As of April 30, 2000, we had
6,184,569 shares of common stock issued and outstanding, all fully paid and
non-assessable. Holders of Common Shares of the Company are entitled to share
ratably in all of our assets available for distribution upon winding up of the
affairs of the Company, after payment of all debts and any other liabilities we
may have, and subject to prior rights of any preferred stock then outstanding.
Holders of common stock have no preemptive or conversion rights or subscription
rights and there are no redemption or sinking funds provisions applicable to the
common stock. Holders of our stock do not have cumulative voting rights and are
entitled to one vote for each share held of record on all matters submitted to a
vote of the shareholders, including the election of directors.
Preferred Stock
We do not have any preferred stock authorized or issued.
8:2 Debt Securities
Not Applicable
8:3 Other Securities
Not Applicable
58
<PAGE>
PART 11
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
1:1 Market Information
Our common stock does not currently trade on any exchange at this time.
We do plan to apply to the Over The Counter Bulletin Board ("OTC:BB")upon this
filing becoming effective.
As of the date of this Registration Statement, we have no outstanding
options to purchase shares of our $.001 par value common stock.
As of April 30, 2000, of the 6,184,569 total Common Stock shares issued
and outstanding, 6,184,569 shares were considered to be restricted pursuant to
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act").
No Assurance of Public Trading Market
There has never been a public market for our common stock. As a result,
an investor in the future may find it difficult to dispose of, or to obtain
accurate quotations as to the market value of our securities as there is no
market for our shares at this time. In addition, our common stock could be
subject to the low- priced security or so called "penny stock" rules that impose
additional sales practice requirements on broker-dealers who sell such
securities. The Securities Enforcement and Penny Stock Reform Act of 1990
("Reform Act") requires additional disclosure in connection with any trades
involving a stock defined as a penny stock (generally, according to recent
regulations adopted by the U.S. Securities and Exchange Commission, any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions, including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith. The regulations governing low-priced or penny stocks
sometimes limit the ability of broker-dealers to sell our common stock in the
future and thus, ultimately, the ability of the investors to sell their
securities in any secondary market.
1:2 Holders
As of April 30, 2000, there were 8 holders of record of our Common
Stock, and the number of beneficial holders was 3.
1:3 Dividends
Holders of shares of the Company's Common Stock are entitled to receive
ratably, dividends if any, of cash or stock. Our directors are responsible for
the declaring of dividends, cash or stock. If a cash dividend, it shall be paid
out of funds legally available for dividends. We have not in the past paid
dividends of any type.
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<PAGE>
Possible Anti-Takeover Effects of Authorized but Unissued Stock
Our authorized but unissued common capital stock consists of 43,815,431
Shares of common stock. One effect of the existence of authorized but unissued
capital stock may be to enable the Board of Directors to render more difficult
or to discourage an attempt to obtain control of us by means of a merger, tender
offer, proxy contest, or otherwise, and thereby to protect the continuity of our
management. If, in the due exercise of its fiduciary obligations, for example,
the Board of Directors were to determine that a takeover proposal was not in our
best interests, such shares could be issued by the Board of Directors without
stockholder approval in one or more private placements or other transactions
that might prevent, or render more difficult or costly, completion of the
takeover transaction by diluting the voting or other rights of the proposed
acquirer or insurgent stockholder or stockholder group, by creating a
substantial voting block in institutional or other hands that might undertake to
support the position of the incumbent Board of Directors, by effecting an
acquisition that might complicate or preclude the takeover, or otherwise.
ITEM 2. LEGAL PROCEEDINGS
2:1 Pending Legal Proceeding
We are not a party to any material pending legal proceedings and, to
the best of our knowledge, no such action by or against us has been threatened.
2:2 Government Authority Contemplating
Not Applicable.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Since our inception in 1999 and up to the present time, our principal
independent accountant has neither resigned (or declined to stand for
reelection) nor been dismissed. Our independent accountant is Gordon, Hughes &
Banks, LLP, 6851 South Holly Circle, Suite 125, Englewood, Colorado 80112. There
are no changes in and disagreements with accountants on accounting and financial
disclosure.
3:1 Accountant Dismissed
Not Applicable
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3:2 Accountant Disclosures
Not Applicable
3:3 Detail of Subject Matter
Not Applicable
3:4 Discussions with Board of Directors
Not Applicable
3:5 Accountant Authorized to Issue Subsequent Report
Not Applicable
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ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
4:1 Date, Title, and Amount Sold
As of April 30, 2000, we had 6,184,569 shares of our $.001 par value
common stock issued and outstanding of which 6,184,569 shares were issued in
transactions exempt by reason of Section 4(2) of the Securities Act of 1933, as
amended, and 0 shares were issued in transactions exempt by reasons of Rule 504
of Regulation D promulgated pursuant to Section 3(b) of the Securities Act of
1933, as amended, as our Private Placement memorandum dated May 1, 2000 has not
yet been subscribed.
<TABLE>
<CAPTION>
Date Class Shares Price Consideration Issued To:
---- ----- ------ ----- ------------- ----------
<S> <C> <C> <C> <C> <C>
10/29/99 Common 500,000 $0.02 Cash/$10,000 BulletProof
10/29/99 Common 250,000 $0.02 Cash/$5,000 BulletProof
10/30/99 Common 363,288 $0.02 Expense BulletProof
Reimbursement
/$7,266
11/22/99 Common 250,000 $0.02 Cash/$5,000 BulletProof
11/22/99 Common 229,217 $0.02 Expense BulletProof
Reimbursement
/$4,584
11/29/99 Common 250,000 $0.02 Svcs/$5,000 Workforce
11/29/99 Common 250,000 $0.02 Svcs/$5,000 Chen
11/29/99 Common 250,000 $0.02 Svcs/$5,000 LaPoure
11/29/99 Common 250,000 $0.02 Svcs/$5,000 Xie
11/29/99 Common 100,000 $0.02 Svcs/$2,000 Perrault (1)
11/29/99 Common 500,000 $0.02 Svcs/$10,000 Perrault (2)
11/29/99 Common 500,000 $0.02 Svcs/$10,000 Perrault (2)
11/29/99 Common 500,000 $0.02 Svcs/$10,000 Perrault (2)
12/27/99 Common 200,000 $0.02 Expense BulletProof
Reimbursement
/$4,000
12/27/99 Common 42,064 $0.02 Expense BulletProof
Reimbursement
/$841
3/13/00 Common 500,000 $0.02 Svcs/$10,000 LaPoure
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4/10/00 Common 250,000 $0.02 Svcs/$5,000 Maresca
4/10/00 Common 1,000,000 $0.02 Repayment of BulletProof
Debt/$20,000
Total 6,184,569 $0.02 $123,691
</TABLE>
Between October 12, 1999 and April 30, 2000, we issued to 8 individuals
and entities an aggregate 6,184,569 shares of our $.001 par value common stock
at $0.02 each issued in transactions exempt by reason of Section 4(2) of the
Securities Act of 1933, as amended, for a total consideration of $123,691 in
cash and services. Of the 6,184,569 shares issued, all 6,184,569 were
restricted.
4:2 Underwriters
Not Applicable
4:3 Offering Price
Not Applicable
4:4 Exemption Applied
Not Applicable
4:5 Conversion Terms
Not Applicable
4:6 Report Items
Not Applicable
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ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware code authorizes a corporation to indemnify
any officer or director who is sued in his capacity as an officer or director of
the corporation. In addition, the section authorized the corporation to purchase
officer and director indemnity insurance to help fund this obligation of the
corporation.
The corporation, in Article VII of its by-laws, has agreed to provide
this type of indemnification. A similar provision for indemnification will be
included in the employment agreements of our officers. We will be applying for
Officers and Director Liability Insurance and expects to have this coverage in
effect by third quarter 2000.
Section 145 of the Delaware General Corporation Law. Indemnification of
Officers, Directors, Employees and Agents; Insurance:
(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent or another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees); judgment, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such actions, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
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expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this Section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsection of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement or expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
65
<PAGE>
(g) A corporation shall power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Section, references to "other enterprises"
shall include employee benefit plans, references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
Section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
66
<PAGE>
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or indemnification
brought under this Section or under any bylaw, agreement, vote or stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
Article VII of the Bylaws of the Corporation states the following:
The following indemnification provision will be contained in any future
Employment Agreements of executive officers.
"Indemnity: The corporation shall indemnify its directors, officers and
employees to the fullest extent allowed by the law, provided, however, that it
shall be within the discretion of the Board of Directors whether to advance any
funds in advance of disposition of any action, suit, or proceeding, and provided
further that nothing in this section 7.4 shall be deemed to obviate the
necessity of the Board of Directors to make any determination that
indemnification of the director, officer or employee is proper under the
circumstances because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of Section 145 of the Delaware General Corporation Law."
It should also be noted that the Securities and Exchange Commission
believes that this indemnification may not be given for violations of the
Securities Act of 1933, as amended, and the Securities Act of 1934, as amended,
inasmuch as such indemnification is against the public policy as expressed in
the Securities Acts and is therefore unenforceable.
67
<PAGE>
PART F/S
ITEM 1. FINANCIAL STATEMENTS
Exhibit A.
Issuers Audited Financial Statements as of December 31, 1999.
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report................................................. 70
Balance Sheet................................................................ 71
Statement of Operations...................................................... 72
Statement of Shareholders' Equity............................................ 73
Statement of Cash Flows...................................................... 74
Notes to Financial Statements........................................... 75 - 81
68
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Dstage.com, Inc. (A Development Stage Company)
Denver, Colorado
We have audited the accompanying balance sheet of Dstage.com, Inc. (A
Development Stage Company) as of December 31, 1999 and the related statements of
operations, stockholders' equity and cash flows for the period October 12, 1999
(Inception) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dstage.com, Inc. (A Development
Stage Company) as of December 31, 1999 and the results of its operations and
cash flows for the period October 12, 1999 (Inception) to December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ Gordon, Hughes & Banks, LLP
April 10, 2000
Englewood, Colorado
69
<PAGE>
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
Assets
Current Assets
Cash $ 16,686
Prepaid Rent 1,347
-----------
Total Current Assets 18,033
Computer Equipment and Software 2,449
Office Furniture and Equipment 1,106
Deposits 379
-----------
Total Assets $ 21,967
===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 72
-----------
Total Current Liabilities 72
Stockholders' Equity
Common Stock, $0.001 par value, 4,435
50,000,000 shares authorized,
4,434,569 shares issued and
outstanding
Additional Paid-In Capital 84,256
(Deficit) Accumulated During (66,796)
-----------
Development Stage
Total Stockholders' Equity 21,895
-----------
Total Liabilities and Stockholders' Equity $ 21,967
===========
See accompanying summary of accounting policies and notes to
financial statements
70
<PAGE>
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 12, 1999 (INCEPTION) TO DECEMBER 31, 1999
Operating Expenses:
Consulting $ (52,000)
General and (14,796)
Administrative
Total Operating Expenses $ (66,796)
Net (Loss) $ (66,796)
===========
Net (Loss) per $ (0.02)
===========
Common Share Basic
and Dilutive
Basic and Dilutive 4,434,569
===========
Weighted Average
Shares Outstanding
See accompanying summary of accounting policies and notes to
financial statements
71
<PAGE>
<TABLE>
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD OCTOBER 12, 1999 (INCEPTION) TO DECEMBER 31, 1999
<CAPTION>
Common Common Additional Accumulated Total
Stock Stock Paid-In (Deficit)
Shares Amount Capital During the
Development
Stage
<S> <C> <C> <C> <C> <C>
Balance, 0 $ - $ - $ - $ -
October 12,
1999
(Inception)
Issuance of 1,000,000 1,000 19,000 - 20,000
Shares for
Cash at $0.02
per Share
Issuance of 834,569 835 15,856 - 16,691
Shares for
Expense
Reimbursement
at $0.02 per
share
Issuance of 2,600,000 2,600 49,400 - 52,000
Shares for
Services at
$0.02 per
share
Net (Loss) - - - (66,796) (66,796)
Balance, 4,434,569 $4,435 $ 84,256 $ (66,796) $21,895
December 31,
1999
</TABLE>
See accompanying summary of accounting policies and notes to
financial statements
72
<PAGE>
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD OCTOBER 12, 1999 (INCEPTION) TO DECEMBER 31, 1999
Cash Flows from Operating Activities:
Net (Loss) $ (66,796)
Adjustments to reconcile net (loss) to cash
provided (used) by operating activities:
Issuance of stock for services 52,000
Issuance of stock for expense reimbursement 11,803
Increase in accounts payable 72
----------
Net cash (used) by operating activities (2,921)
Cash Flows from investing activities:
Acquisition of fixed assets (393)
----------
Net cash (used) by investing activities (393)
Cash flows from financing activities:
Proceeds from issuance of common stock 20,000
----------
Net cash provided by financing activities 20,000
----------
Net increase in cash 16,686
Cash, beginning of period -
Cash, end of period $ 16,686
==========
Non-cash transactions
Purchase of equipment by issuance of stock $ 3,162
==========
Payment of prepaid and other assets by $ 1,726
issuance of stock ==========
See accompanying summary of accounting policies and notes to
financial statements
73
<PAGE>
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND ORGANIZATION
Dstage.com, Inc., a Delaware corporation (the "Company") was incorporated on
October 12, 1999 to provide support, creation and restructuring services to
other development stage companies.
For the period October 12, 1999 (Inception) to December 31, 1999, the Company
has been in the development stage itself. The Company's activities since
inception have consisted of organizing the Company, developing the business plan
and raising capital. Through December 31, 1999, the Company has expended costs
of organizing the Company and developing the business in the amount of $66,898.
The Company is dependent on the continued financial support of its largest
stockholder and the contributions of time from its officers and directors. While
the Company operates independently of its largest stockholder, a loss of this
support in the near term could have a detrimental effect on the Company.
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.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less at the time of purchase to be cash and cash equivalents.
Cash and cash equivalents are carried at cost plus accrued interest which
approximates market.
CONCENTRATION OF CREDIT RISK AND FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 105, "Disclosure of
Information About Financial Instruments with Off- Balance Sheet Risk and
Financial Instruments with Concentrations of Credit Risk", requires disclosure
of significant concentrations of credit risk regardless of the degree of such
risk. Financial instruments with significant credit risk include cash. The
Company transacts its business with one financial institution. The amount on
deposit in that financial institution did not exceed the $100,000 federally
insured limit at December 31, 1999. Management believes that the financial
institution is financially sound.
74
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment, which consists of office computers, furniture, and
purchased software, is stated at cost, less accumulated depreciation. The cost
of additions and improvements are capitalized, while maintenance and repairs are
charged to expense when incurred. Depreciation is provided on the straight-line
basis over estimated useful life of the equipment. The Company recognizes gains
or losses on the sale or disposal of equipment in the period of disposal.
Long-lived assets held and utilized by the Company are reviewed for impairment
whenever changes in circumstances indicate the carrying value of such assets may
not be recoverable. No depreciation expense has been recorded for period October
12, 1999 (Inception) through December 31, 1999 since the Company's assets were
placed in service in late December 1999 and depreciation would be immaterial.
ORGANIZATION COSTS
The Company accounts for organization costs under the provisions of Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities" which requires
that all organization costs be expended as incurred.
INCOME TAXES
The Company accounts for income taxes in accordance with the liability method.
Deferred income taxes are recognized for the tax consequences in future years
for differences between the tax bases of assets and liabilities and their
financial reporting amounts at the end of each period, based on enacted laws and
statutory rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the expected realizable amount. The provision
(benefit) for income taxes consists of the current tax provision (benefit) and
the change during the period in deferred tax assets and liabilities.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company adheres to the provisions of 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." The Company reviews the carrying
value of its long- lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Any long-lived assets to be
disposed of are reported at the lower of the carrying amount or fair value less
estimated costs to sell.
75
<PAGE>
LOSS PER COMMON SHARE
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
requires two presentations of earnings per share - "basic" and "diluted." Basic
loss per common share is computed using the weighted average number of shares of
common stock outstanding during the period. Diluted loss per common share is
computed using the weighted average number of shares of common stock
outstanding, adjusted for the dilutive effect of potential common shares
consisting of common stock options and warrants and contingently issuable shares
of common stock. Potential common shares outstanding are calculated using the
treasury stock method. There are no stock options, warrants or contingently
issuable shares of common stock outstanding at December 31, 1999.
In the case of a net (loss), the dilutive calculation is equivalent to the basic
earnings per share since including additional potential shares outstanding would
be antidilutive. Additionally, the Company believes that it has issued all
shares to date for nominal consideration and has, accordingly, included all
shares as if outstanding in the calculation of basic and dilutive earnings per
share since inception of the Company.
STOCK BASED COMPENSATION
The Company follows Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25") in accounting for stock based
compensation. Under APB 25, the Company recognizes no compensation expense
related to employee or director stock options unless options are granted with an
exercise price below fair value on the day of grant. Subsequently, the Statement
of Financial Accounting Standards No. 123, "Accounting for Stock- Based
Compensation" ("SFAS No. 123") became effective. SFAS No. 123 provides an
alternative method of accounting for stock-based compensation arrangements,
based on fair value of the stock-based compensation utilizing various
assumptions regarding the underlying attributes of the options and stock. Stock
issued to consultants has been recorded at fair value under SFAS No. 123. The
Financial Accounting Standards Board encourages, but does not require, entities
to adopt the fair-value based method. The Company will continue its accounting
under APB No. 25 but uses the disclosure- only provisions of SFAS No. 123 for
any options and warrants issued to employees and directors. No options have been
granted.
CAPITAL STRUCTURE
The Company utilizes Statement of Financial Accounting Standards No. 129,
"Disclosure of Information about Capital Structure" ("SFAS No. 129"), which
requires companies to disclose all relevant information regarding their capital
structure.
76
<PAGE>
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" requires the presentation and disclosure of all changes in equity from
non-owner sources as "Comprehensive Income". The Company had no items of
comprehensive income in the period from the date of inception through December
31, 1999.
DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131") replaces the industry
segment approach under previously issued pronouncements with the management
approach. The management approach designates the internal organization that is
used by management for allocating resources and assessing performance as the
source of the Company's reportable segments. SFAS 131 also requires disclosures
about products and services, geographic areas and major customers. At present,
the Company only operates in one segment.
EMPLOYERS' DISCLOSURES ABOUT PENSION AND OTHER POST RETIREMENT
BENEFITS
The Statement of Financial Accounting Standards No. 132, Employers' Disclosures
about Pension and Other Post Retirement Benefits" requires certain disclosures
about employers' pension and other post retirement benefit plans and specifies
the accounting and measurement or recognition of those plans. SFAS No. 132
requires disclosure of information on changes in the benefit obligations and
fair values of the plan assets that facilitates financial analysis. This
standard currently has no impact on the Company.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging. SFAS 133 is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999.
Currently, as the Company has no derivative instruments, the adoption of SFAS
133 would have no impact on the Company's financial condition or results of
operations.
MORTGAGE BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF
MORTGAGE LOANS BY MORTGAGE BANKING ENTERPRISES
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 134, "Accounting for Mortgage Backed Securities
Retained after the Securitization of Mortgage Loans Held by Mortgage Banking
Enterprises" ("SFAS No. 134"). SFAS No. 134 establishes new reporting standards
for certain activities of mortgage banking enterprises. The Company believes
this statement has no impact on its financial statements.
77
<PAGE>
NOTE 2 - LEASE COMMITMENTS
As of December 31, 1999, the Company had a single 1-year, non- cancelable
operating lease for office space expiring on September 30, 2000 with an
automatic extension to October 31, 2000. The lease provides for monthly payments
of $379. Rent expense was $1,137 for the period October 12, 1999 (Inception)
through December 31, 1999. Subsequent to year-end, the lease was terminated
effective June 30, 2000. The Company entered into a different 1- year,
non-cancelable operating lease for office space expiring on June 30, 2001 with
an automatic extension to July 31, 2001. The new lease provides for monthly
payments of $924.
The minimum future rental commitments over the next five years under the
Company's operating leases at December 31, 1999 are as follows:
2000 $6,894
2001 5,544
Thereafter -
-------
Total $12,438
=======
NOTE 3 - STOCKHOLDERS' EQUITY
In October 1999, the Company issued 750,000 shares of its common stock valued at
$.02 per share to BulletProof Business Plans, Inc. ("BulletProof"), the
Company's largest stockholder, in exchange for $15,000 cash. In November 1999,
the Company issued 250,000 shares of its common stock valued at $.02 per share
to BulletProof in exchange for $5,000 cash.
During 1999, the Company issued 834,569 shares of common stock valued at $16,691
($.02 per share) to BulletProof as consideration for administrative expenses
paid on behalf of the Company.
At December 31, 1999, BulletProof owns 1,834,569 shares, or 41.37%, of the
Company's outstanding common stock.
In October 1999, the Company issued 2,600,000 shares of common stock valued at
$52,000 ($.02 per share) to six employees of the Company as consideration for
services provided to the Company.
78
<PAGE>
NOTE 4 - RELATED PARTY TRANSACTIONS
During 1999, the Company purchased the domain names "Dstage.com", "Dstage.net",
and "Developmentstage.com" from BulletProof for $3,000. The Company recorded the
expenditure as compensation expense.
During 1999, the Company issued 1,500,000 shares of common stock to the
Company's then sole director and president. In addition, the president is an
officer and 4% owner of BulletProof.
During 1999, the Company issued 250,000 shares of common stock to an officer of
the Company. In addition, this officer is an officer and 1% owner of
BulletProof.
During 1999, the Company issued 100,000 shares of common stock to a family
member of the president, who also is part of the management team of BulletProof.
During 1999, BulletProof paid $16,691 for assets and various expenses incurred
on behalf of the Company. As stated in Note 3, the Company issued 834,569 shares
of stock as consideration for the payments. As of December 31, 1999, there were
no outstanding amounts due to the largest stockholder.
NOTE 5 - INCOME TAXES
There is no current or deferred tax expense for the period from October 12, 1999
to December 31, 1999 due to net losses from operations by the Company.
Deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end. Deferred income tax assets are
recorded to reflect the tax consequences on future years of income tax
carry-forward benefits, reduced by benefit amounts not expected to be realized
by the Company.
The net deferred tax asset is comprised of the following at December 31, 1999:
1999
Net operating loss benefit $13,668
carry forward
Valuation allowance for (13,668)
deferred tax asets
Net deferred tax asset $ -
79
<PAGE>
As of December 31, 1999, the Company had operating loss carryforwards of
$63,000. The operating loss carryforwards expire beginning in 2019.
NOTE 6 - SUBSEQUENT EVENTS
In January 2000, the Company entered into a promissory note with BulletProof,
the Company's largest stockholder. The promissory note provided for the Company
to receive advances of up to $20,000. Interest was to accrue on the unpaid
principal balance at a rate equal to the prime rate. Outstanding principal and
accrued interest was due and payable on demand by the stockholder. Terms of the
promissory note included conversion provisions, allowing the holder to convert
all funds advanced to common stock at a rate of $0.02 per share. As of April 10,
2000, the Company had drawn the entire $20,000 balance allowed under the
BulletProof note payable agreement. On April 10, 2000, BulletProof converted the
$20,000 note payable into one million shares of the Company's common stock as
full payment of the note payable balance outstanding. BulletProof thereby became
a 45.83% stockholder.
In March 2000, the Company issued 500,000 shares of stock to one of its officers
in consideration of services provided to the Company.
In April 2000, the Company issued 250,000 shares of common stock to an officer
for services rendered on behalf of the Company.
80
<PAGE>
EXHIBIT B
Issuers Unaudited Financial Statements as of April 30, 2000
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
Balance Sheet................................................................ 82
Statement of Operations...................................................... 83
Statement of Shareholders' Equity............................................ 84
Statement of Cash Flows...................................................... 85
Notes to Financial Statements........................................... 87 - 88
81
<PAGE>
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
APRIL 30, 2000
(UNAUDITED)
Assets As of April 30,
2000 (Unaudited)
Current Assets
Cash $ 18,843
Prepaid Expenses 1,707
----------
Total Current Assets 20,550
Computer Equipment and Software 3,851
Office Furniture and Equipment 1,288
Less accumulated depreciation (302)
Deposits 923
----------
Total Assets $ 26,310
==========
82
<PAGE>
Liabilities and As of April 30,
Stockholders' 2000 (Unaudited)
Equity
Current Liabilities
Accounts Payable $ 489
Shareholder loans payable 0
----------
Total Current Liabilities $ 489
Stockholders' Equity
Common Stock, $0.001 6,184
par value, 50,000,000
shares authorized,
6,184,569 shares
issued and outstanding
Additional Paid-In Capital 117,507
(Deficit) Accumulated (97,870)
During Development Stage
----------
Total Stockholders' Equity 25,821
----------
Total Liabilities and Stockholders' Equity $ 26,310
==========
83
<PAGE>
<TABLE>
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 2000
AND THE PERIOD OCTOBER 12, 1999 (INCEPTION) TO APRIL 30, 2000
(UNAUDITED)
<CAPTION>
For the Four For the period
Months Ended October 12,
April 30, 2000 1999
(Unaudited) (Inception) to
April 30, 2000
(Unaudited)
<S> <C> <C>
Revenue: $0 $0
Operating Expenses:
Consulting $(15,000) $(67,000)
General and Administrative (16,074) $(30,870)
Total Operating Expenses $(31,074) $(97,870)
Net (Loss) $(31,074) $(97,870)
========= =========
Net (Loss) per Common Share $ (0.005) $(0.0158)
======== =========
Basic and Dilutive
Basic and Dilutive Weighted 6,184,569 6,184,569
========= =========
Average Shares Outstanding
</TABLE>
84
<PAGE>
<TABLE>
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE FOUR MONTHS ENDED APRIL 30, 2000
(UNAUDITED)
<CAPTION>
Common Common Additional Accumulated Total
Stock Stock Paid-In (Deficit)
Shares Amount Capital During the
Development
Stage
<S> <C> <C> <C> <C> <C>
Balance, 4,434,569 $ 4,435 $ 84,256 $ (66,796) $ 21,895
December 31,
1999
Issuance of 1,000,000 1,000 19,000 20,000
Shares for
Notes Payable
at $.02 per
share
Issuance of 750,000 750 14,250 15,000
Shares for
Services at
$0.02 per
share
Net (Loss) - - - (31,074) (31,074)
Balance, 6,184,569 6,185 $117,506 $(97,870) $ 25,821
April 30,
2000
</TABLE>
85
<PAGE>
<TABLE>
DSTAGE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDED APRIL 30, 2000
AND THE PERIOD OCTOBER 12, 1999 (INCEPTION) TO APRIL 30, 2000
(UNAUDITED)
<CAPTION>
For the For the
Four Months period
Ended April October 12,
30, 2000 1999
(Unaudited) (Inception)
to April
30, 2000
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net (Loss) $(31,074) $(97,870)
Adjustments to reconcile net (loss)
to cash provided (used) by operating activities:
Depreciation 302 302
Increase in prepaid expenses (360) (360)
Increase in deposits (544) (544)
Increase in accounts payable 416 488
Issuance of stock for services 15,000 67,000
Issuance of stock for expense reimbursement 4,000 15,803
Net cash (used) by operating activities (12,260) (15,181)
Cash Flows from investing activities:
Acquisition of fixed assets (1,583) (1,976)
--------- ---------
Net cash (used) by investing activities (1,583) (1,976)
Cash flows from financing activities:
Proceeds from issuance of note payable 16,000 16,000
Proceeds from issuance of common stock 0 20,000
--------- ---------
Net cash provided by financing activities 16,000 36,000
--------- ---------
Net increase in cash 2,157 18,843
Cash, beginning of period $ 16,686 $ 0
========= ==========
Cash, end of period $ 18,843 $ 18,843
========= ==========
</TABLE>
86
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Notes to Unaudited Financial Statements
Note 1 - Basis of Presentation
The accompanying financial statements have been prepared by management in
accordance with basic rules established by the Securities and Exchange
Commission for Form 10-SB. Not all financial disclosures required to present the
financial position and results of operations in accordance with generally
accepted accounting principles are included herein. The reader is referred to
the Company's Audited Financial Statements included within this Form 10-SB as
Exhibit A of Part F/S. In the opinion of management, all accruals and
adjustments (each of which is of a normal recurring nature) necessary for a fair
presentation of the financial position as of April 30, 2000 and the results of
operations for the four-month period then ended have been made. Significant
accounting policies have been consistently applied in the interim unaudited
financial statements and the audited financial statements.
Note 2 - Nature of Business and Organization
Dstage.com, Inc., a Delaware corporation (the "Company") was incorporated on
October 12, 1999 to provide support, creation and restructuring services to
other development stage companies.
For the period October 12, 1999 (Inception) to April 30, 2000, the Company has
been in the development stage itself. The Company's activities since inception
have consisted of organizing the Company, developing the business plan and
raising capital. Through April 30, 2000, the Company has expended costs of
organizing the Company and developing the business in the amount of $97,882. The
Company has not generated any revenues as of April 30, 2000.
The Company is dependent on the continued financial support of its largest
stockholder and the contributions of time from its officers and directors. While
the Company operates independently of its largest stockholder, a loss of this
support in the near term could have a detrimental effect on the Company.
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Note 3 - Stockholders' Equity
In October 1999, the Company issued 750,000 shares of its common stock valued at
$.02 per share to BulletProof Business Plans, Inc. ("BulletProof"), the
Company's largest stockholder, in exchange for $15,000 cash. In November 1999,
the Company issued 250,000 shares of its common stock valued at $.02 per share
to BulletProof in exchange for $5,000 cash.
During 1999, the Company issued 834,569 shares of common stock valued at $16,691
($.02 per share) to BulletProof as consideration for administrative expenses
paid on behalf of the Company.
At December 31, 1999, BulletProof owned 1,834,569 shares, or 41.37%, of the
Company's outstanding common stock.
In October 1999, the Company issued 2,600,000 shares of common stock valued at
$52,000 ($.02 per share) to six employees of the Company as consideration for
services provided to the Company.
In January 2000, the Company entered into a promissory note with BulletProof,
the Company's largest stockholder. The promissory note provided for the Company
to receive advances of up to $20,000. Interest was to accrue on the unpaid
principal balance at a rate equal to the prime rate. Outstanding principal and
accrued interest was due and payable on demand by the stockholder. Terms of the
promissory note included conversion provisions, allowing the holder to convert
all funds advanced to common stock at a rate of $0.02 per share. As of April 10,
2000, the Company had drawn the entire $20,000 balance allowed under the
BulletProof note payable agreement. On April 10, 2000, BulletProof converted the
$20,000 note payable into one million shares of the Company's common stock as
full payment of the note payable balance outstanding.
At April 30, 2000, BulletProof owned 2,834,569 shares, or 46%, of the Company's
outstanding common stock.
In March 2000, the Company issued 500,000 shares of common stock valued at
$10,000 ($.02 per share) to one employee of the Company as consideration for
services provided to the Company.
In April 2000, the Company issued 250,000 shares of common stock valued at
$5,000 ($.02 per share) to one employee of the Company as consideration for
services provided to the Company.
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Note 4 - Subsequent Events
On May 1, 2000, the Company issued a Private Placement Memorandum promulgated
under Regulation D, Rule 504 of the Securities and Exchange Act of 1933, as
amended, for the purpose of raising $500,000 for audit and legal fees, marketing
advertising and sales costs, site and content development, administrative and
occupancy costs, capital expenditures and the establishment of a reserve. The
Company has filed its Form D with the Securities and Exchange Commission, and
has also filed in the states of New York and New Jersey. In addition, the
Company plans to file in the states of Colorado, Nevada and Washington. As of
the date of this filing, the Company has yet to receive any proceeds from its
private Placement Memorandum.
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PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit Description of Document
2 Charter and By-Laws
2.1 Articles of Incorporation Dstage.com, Inc.
2.2 By-Laws Dstage.com, Inc.
3 Instruments Defining the Rights of Security Holders
3.1 See Exhibit 2.1 "Articles of Incorporation"
5 Voting Trust Agreement
5.1 None
6 Material Contracts
6.1 Lease Agreement
7 Material Foreign Patents
7.1 None
12 Sales Materials
12.1 None
15 Additional Exhibits
15.1 Auditor's Letter of Consent
27 Financial Data Schedule
27.1 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
DSTAGE.COM, INC. CORPORATION
Date: June 9, 2000 By: /s/ Sue Perrault, President
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