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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
AIRBOMB.COM INC.
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(Name of Small Business Issuer in its Charter)
DELAWARE 51-0401121
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
505 - 1155 Robson Street, Vancouver, British Columbia V6E 1B5
(Address of Principal Executive Offices) (Zip Code)
(604) 689-1659
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Common Stock, $.001 par value NASDAQ (NASD OTC)
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of Class)
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PART I
The Company is filing this Form 10-SB on a voluntary basis to: (1) provide
current, public information to the investment community, (2) to expand the
availability of secondary trading exemptions under the Blue Sky laws and thereby
expand the trading market in the Company's securities, and (3) to comply with
prerequisites for listing of the Company's securities on the NASD OTC Bulletin
Board. In the event the Company's obligation to file periodic reports under the
Exchange Act is suspended, the Company reserves the right to reevaluate whether
to continue filing periodic reports on a voluntary basis.
ITEM 1 (Item 6, SEC Form 1-A, Model B)
DESCRIPTION OF BUSINESS
FORWARD LOOKING STATEMENTS
This registration statement contains forward-looking statements. The words
anticipate, believe, expect, plan, intend, estimate, project, could, may,
foresee, and similar expressions are intended to identify forward-looking
statements. These statements include information regarding expected development
of the Company's business, lending activities, relationship with clients, and
development of the industry in which the Company will focus its marketing
efforts. Such statements reflect the Company's current views with respect to
future events and financial performance and involve risks and uncertainties,
including without limitation, the risks described in Risk Factors. Should one or
more of these risks or uncertainties occur, or should underlying assumptions
prove incorrect, actual results may vary materially and adversely from those
anticipated, believed, estimated or otherwise indicated.
GENERAL
airbomb.com Inc. ("Airbomb" or the "Company") was originally incorporated on
January 22, 1987 in British Columbia, Canada, and was formerly known as
Manhattan Mineral Corp., Safety-Ject Medical Products Ltd., Specialty Medical
Products Inc., Fedora Industries Inc., and Airbomb.com Marketing Ltd. From its
inception through 1997, the Company was mainly engaged in the development and
marketing of products for the medical industry. These endeavors did not prove to
be particularly successful. In October 1997, the Company changed its name to
"Fedora Industries Inc." and sought a new business direction.
In late 1999, the Company acquired Sportslink Direct Marketing Ltd.
("Sportslink"), a private company engaged in the business of retailing sporting
goods, specifically bicycles and outdoor sporting goods, through the Internet
via its web site located at www.airbomb.com. Sportslink was incorporated on June
19, 1997 and has a short operating history. Sportslink had sales of U.S.
$346,647 in its first full fiscal year of operation ended March 31, 1999.
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All of the Company's resources are now devoted to the operation and development
of the Sportslink business. The following discussion pertains to that business.
On February 16, 2000, the Company's shareholders approved a "continuance"
(re-incorporation) from the Province of British Columbia to the State of
Delaware and a change of the Company's name to more accurately reflect the
business in which it is now engaged. The Company changed its name to Airbomb.com
Marketing Ltd. on February 21, 2000. The filing of a certificate of
domestication and a certificate of incorporation with the Delaware Secretary of
State was completed on May 9, 2000, and the Company is now a Delaware
corporation called AIRBOMB.COM INC.
Airbomb's executive offices are located at 505 - 1155 Robson Street, Vancouver,
British Columbia, V6E 1B5; telephone number (604) 689-1659 or 1-800-639-0544.
Airbomb also has offices located at 145 Tyee Drive, Point Roberts, Washington
98281.
Airbomb's fiscal year end is March 31.
Airbomb is a public company currently trading on the Canadian Venture Exchange
(CDNX SYMBOL: AIR).
Airbomb markets products, specifically bicycles and related equipment acquired
from a variety of suppliers at discount prices. The Company also distributes its
own "Airbomb" line of products, which are products acquired at a significant
discount from established manufacturers and labeled with the Company's "Airbomb"
private label or co-branded. In addition, the Company has recently commenced
Internet sales of premium sunglasses through its www.airbomb.com web site, and
has opened a second related e-commerce store at www.sunbomb.com exclusively
devoted to the sale of these products. Airbomb has also opened a secure,
password-operated web site for business to business ("B2B") e-commerce, catering
to sporting goods retailers and other e-commerce sites.
PRINCIPAL PRODUCTS & SERVICES
Airbomb's products are comprised of high-end bicycles and bicycle components,
together with a limited line of outdoor sporting goods. The Company offers
weekly "specials" comprised of manufacturers' overruns, end-of-season clearance,
inventory clearance, or other special deals the Company has arranged with
suppliers. Items are sold as a stand-alone special or "bundled" with another
item. For example, the Company might offer a 50% discount on a product when
purchased concurrently with another product. The specials and bundled offers
provide the customer with a buying opportunity not available elsewhere and
motivate the customer to consult the Company's web site on a regular basis.
The Company's "Airbomb" line is a private label of standard components supplied
by established supply lines and one-off suppliers. The Airbomb label enables
established manufacturers to distribute product at price levels not always
available through their normal distribution channels and without revealing the
component source. The Company's private label also opens a channel of
distribution not readily available to small manufacturers.
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The Company has commenced marketing over 35 top brands of sunglasses, offering
over 800 models at competitive prices. The size of the premium sunglass market
is in excess of US $1.5 billion per year, and the Company believes that its
on-line sales of sunglasses may result in a significant increase in its revenues
in the year 2000.
All sales are made through the Company's web sites, and the majority of its
sales are made in the United States. The Company provides telephone support for
all of its sales, which the Company believes is key to attracting first-time
buyers and establishing credibility with its customers. Much of the Company's
success to-date has come from its "Tell-A-Friend" customer referral program,
which enables existing customers to earn credits toward future purchases by
referring new customers to the Company. The referring customer receives a credit
equal to 5% of the value of the new customer's purchase, with the credit applied
toward the referring customer's next purchase from the Company.
The Company sponsors three individuals engaged in demonstration mountain bike
riding. The Company also has forty unsponsored associates engaged primarily as
marketing team members. The associates are paid a cash commission of 3% on
referral sales. They also participate in "B" level competitions and are
strategically located in select geographic areas.
The Company's bicycle components are supplied by various suppliers, including:
Asama Enterprises Inc. of Richmond, British Columbia; Wilderness Trail Bikes
Inc. of Mill Valley, California; Columbia Nuke Proof Industries Inc. of Grand
Rapids, Michigan; Raceface Performance Bicycle Components of New Westminster,
British Columbia; and Aeon Bicycles of Ramona, California. Except for Asama, the
suppliers are small manufacturers of high-end bicycle components who normally
sell to a distributor or retailer. The Company offers these suppliers a
distribution channel not otherwise readily available to them.
EMPLOYEES
As of June 30, 2000 the Company had ten full-time employees and five contract or
part-time employees. The employees are not represented by a collective
bargaining agreement and the Company considers its relationship with its
employees to be good.
STRATEGIC ALLIANCES
The Company has strategic alliances with the following key sources of supply:
ASAMA ENTERPRISES CORPORATION ("Asama"), Richmond, British Columbia. Asama,
which has been in business since 1985, is a distributor to independent bicycle
retailers across Canada. Asama's market focus is bicycles for all age groups and
includes brand names such as: "Asama", "Rockline", and "DBR - Diamondback
Racing". Asama stocks some 1,500 component parts imported primarily from a
shareholder-related company, Yuh Jiun Industrial Co. Limited.
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YUH JIUN INDUSTRIAL CO. LIMITED ("YJ"), Taipei, Taiwan. YJ is reported to be the
third largest bicycle manufacturer in Asia and has been in business since 1952.
YJ distributes throughout Asia and to mass merchandise accounts in North
America. Toys-R-Us is reportedly this company's largest U.S. account. Canada is
supplied through Asama.
YJ manufactures approximately 600,000 units per annum and has plants in Taipei,
Taiwan and Tokyo, Japan. Brand names include: "Asama"; "DBR - Diamondback
Racing"; and "Rockline". Beginning in the year 2000, YJ will distribute
"Kuwahara", a Japanese bike line. YJ is more of an assembly company rather than
a pure manufacturer, as components are purchased and bikes assembled to order.
Major component suppliers include Shimano, Titec, Tioga, Mavic and USE.
ELLSWORTH BICYCLES, ("Ellsworth") Ramona, California. Ellsworth is a U.S.
manufacturer of high performance bicycles and a major supplier of the company's
products. Ellsworth and Airbomb have entered into a joint venture arrangement to
supply custom built complete bikes into the U.S. market.
The Company is in the process of negotiating a strategic alliance with the
following company:
WILDERNESS TRAIL BIKES ("WTB"), Mill Valley, California. WTB is a component
marketing company based in California. WTB's products represent approximately
20% of the Company's current gross sales.
The Company is not single-sourced to one supplier and has the option of
arranging alliances with companies other than those listed above.
INTELLECTUAL PROPERTY
The Company has applied for trademark protection in Canada for the brand name
"Airbomb", and anticipates filing for trademark protection in the United States
for the same brand name. The Company has four web sites. The primary marketing
of bicycles, bicycle components and outdoor sporting equipment is conducted at
www.airbomb.com; sunglass sales are conducted at www.sunbomb.com; and cycling
products are marketed in Canada at http://store.airbomb.com/Can. The fourth web
site is a secure, password-protected site for wholesale transactions.
OPERATIONS
The Company operates as a distributor of products, either as components or
value-added components after assembly. For example, the Company assembles
bicycle wheels and markets them as "Airbomb" wheels. Where applicable, on-line
buyers are linked directly to the supplier's web site for product review and
then asked to place an order with the Company. The only difference between the
Company and a traditional retailer or distributor is that the Company's sales
are all Internet generated. There are no proprietary processes or products that
can be patented.
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Until July of 1999, on-line buy orders were processed by telephone. Management
has replaced this method with a semi-automated real-time Internet packaged
"on-line store" provided by SunCommerce Corporation's Secure Merchant Pro
Software. SunCommerce is an e-commerce service company based in Vancouver,
British Columbia, and provides web hosting and secure commerce services.
The Company ships orders to its U.S. customers from its Point Roberts,
Washington premises and to its Canadian customers from its Delta, British
Columbia location. Shipments are made daily on a twenty-four-hour turnaround
basis.
In February 2000, the Company conducted a private offering to raise Cdn
$600,000. Proceeds from the offering were used for the acquisition of
inventory, financing the Company's marketing expansion efforts, upgrading the
Company's web sites to include more automation and functionality, repaying
loans and providing for general working capital.
In July 2000, the Company conducted a private offering to raise Cdn $500,000.
Proceeds from that offering will be used for the expansion of the airbomb.com
business and to augment working capital.
WEB SITE DEVELOPMENT AND FEATURES
The Company uses commercially available software for development and support of
its web sites. Costs are primarily incurred to develop the unique content, look,
feel and features of the sites. The Company anticipates that in the near term,
costs for ongoing development of the sites may increase as a percentage of
sales.
Airbomb believes that the functionality of its web sites is key to maintaining
its existing customers and to improve the shopping experience of first-time
customers, thereby encouraging them to become repeat customers. To this end,
Airbomb intends to upgrade the functionality of its existing web sites to
include more automation, functionality and sales enhancing features.
SunCommerce Corporation of Vancouver, British Columbia, provides the Company
with its "storefront" secure credit card data capability and statistical data
on site use. The storefront provides the Company with "shopping cart" point and
click purchase capability, and facilitates a customer's on-line purchases and
payment by credit card.
SunCommerce's comprehensive statistical data related to site activity over a
period of time is useful in tracking the source of sales and sales trends.
Examples of tracked activity include site visits, source of hits, search engines
used, and number of page views. The Company's credit card processing is
facilitated by CIBC Visa Sales for Canadian Customers and Card Payment Systems
for U.S. transactions.
The Company's web site and e-mail service are hosted by Avanti Agencies, who
manage banks of servers in an alliance with CBI Systems Integrators of
Vancouver, British Columbia. Avanti
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Agencies is an Internet systems integrator that custom designs and manages
integrated on-line retail systems for e-commerce retailers.
The Company has an Internet Service Provider account with SOHO Skyway of Roberts
Creek, British Columbia.
Airbomb is primarily a sales and marketing organization. While it does maintain
staff with knowledge concerning the goods it sells, research and development of
products is not a primary focus or purpose of the Company. The only material
research and development expenditures being made by the Company are those
related to development of the Company's web sites as described immediately
above.
MARKET
OVERVIEW
Airbomb is an on-line retailer in the global sporting goods industry. The
Company's current target market niches are high-end bicycles and components and
high-end outdoor sporting equipment. To date, approximately 92% of the Company's
revenues have been from the United States.
According to the U.S. Sporting Goods Manufacturers' Association (SGMA), total
U.S. SGMA industry sales in 1998 were estimated at USD $45.6 billion, of which
sporting goods equipment totaled USD $17.4 billion. The industry was projected
to grow 2.3% by 1999. SGMA has concluded that Internet sales will be a new
channel of distribution for the industry.
BICYCLE MARKET
According to the World Market Report International Bicycle Statistics, 1999
Interbike Directory, the United States retail market for bicycles and related
parts and accessories in 1997 was approximately USD $5.4 billion and USD $25
billion globally. At the retail level, the United States had 7,016 bike shops
and an estimated 59.2 million bicycle riders.
The U.S. market grew less than 1.5% between 1997 and 1998, and on a global
basis, consumption as measured in select countries dropped from 18.0 billion
units in 1994 to 14.9 billion units in 1997. An estimated 10.8 million units
were sold in the U.S. in 1997 for an estimated retail value of USD $2.03
billion. This is down from a 1993 high of 13 million units (retail value USD
$4.3 billion) and 10.9 million units in 1996 (retail value USD $5.2 billion).
The channels for bicycle distribution consist of mass merchants who comprise 62%
of total industry retail sales, special bicycle retailers who sold 30%, and
related sporting goods retailers who sold 8%; the mass merchant and the
specialty independent dealer are the predominant distributors. The specialty
dealer market share is growing, controlling almost 100% of the repair market and
dominating sales on bikes of USD $250 and up. There are an estimated 2,000
companies involved in manufacturing and distributing products to retailers, and
approximately 100 different bicycle brand names.
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While manufacturers host web sites, little or no sales take place since they
support their retail dealers. An estimated 35% of U.S. retailers offer web
service to customers, but as an information source only and not for on-line
sales.
OUTLOOK FOR INTERNET SALES
Virtually all surveys project that worldwide Internet use and e-commerce will
grow significantly over the next decade. E-commerce is comprised of
business-to-business transactions and consumer on-line purchases. According to a
May 1999 U.S. Small Business Internet Survey by Cyber Dialogue, approximately
427,000 small businesses in the U.S. went on-line between the first quarters of
1998 and 1999.
The size of the North American market for e-commerce varies by research company,
as conclusions are dependent upon methodology employed. International Data Corp.
of Framingham, Massachusetts, projects that by 2002 there will be 320 million
Internet users and worldwide e-commerce will be valued at $425 billion. A May
1999 study by the University of Texas (funded by Cisco Systems Inc.) estimated
1998 total e-commerce at USD $102 billion for U.S.-based companies. The U.S.
Department of Commerce predicts e-commerce to reach over $300 billion by the
year 2002.
In February of 1999, International Data Corporation released a report entitled
"IDC PREDICTIONS '99: THE "REAL" INTERNET EMERGES". The report's predictions
included:
- The number of Internet users will increase 28%, to 147 million.
- Internet commerce will more than double, to USD $69 billion.
- Small businesses will thrive as a key on-line business community.
- Personalization and customization will be key for successful Internet
sites.
MARKETING PLANS AND STRATEGIES
The Company's marketing plans and strategies include:
- Expanding the product base and linking on-line buyers to suppliers' web
sites.
- Developing brand names that link on-line customers to the Company.
- Using the Company's web search engine to link to key search words, often
brand names, to bring on-line shoppers to the Company web site.
- Managing the customer database by matching client demographic information
to products, and conducting target e-mail campaigns.
- Working with suppliers to match customers to a supplier's target market.
- Offering a "weekly specials sheet" to attract buyers to special deals and
clear-out sales. This is attractive to both suppliers, who use the feature
to move inventory, and on-line buyers looking for special prices.
- Offering competitive prices.
- Continuing the "Tell-A-Friend" referral program.
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- Continuing to sponsor a professional bike racing team.
- Publishing bi-monthly brochures and mailing to customer base.
- Continuing telephone customer service.
- Enter new markets via new online storefronts.
COMPETITION
Evans & Evans, Inc., an independent chartered business valuation firm, conducted
an Internet search using the key words - "bicycle" and "bikes". The search was
conducted using search engines MetaCrawler and Yahoo Canada. MetaCrawler
identified 43 bicycle-related web sites and Yahoo Canada identified 16
categories and 1,219 sites.
The following is a sample of competing web sites:
BIKEWORLD.COM, SAN ANTONIO, TEXAS. This company has six product categories: MTB
components (44 items); accessories (24 items); suspension (8 items); Shimano (9
items); road (13 items); wheelsets (7 items); weather tools "cool" electronic
stuff (11 items). The site also included current weather conditions - bike world
weather station. Major supplier - Shimano. Product was available for purchase
on-line and facilitated customer order tracking.
CAMBRIA BICYCLE OUTFITTER, CAMBRIA, CA. AND AUBURN, CA. This company operates
two retail stores and specializes in bikes priced from $1,000 to $12,000. Target
clientele is local area residents. Major suppliers appear to be Shimano and CBO.
On-line focus appears to be dissemination of information versus product sales.
SUPERGO BIKE SHOPS, SANTA MONICA, CA. AND FOUNTAIN VALLEY, CA. This company
operates two retail centers and has been in operation since 1971. Products are
categorized into some 62 departments and include bicycles, clothes, shoes and
all bike accessories. The site advertises sales and on-line shopping.
NASHBAR.COM. Lists 288 suppliers including Raceface and Wilderness Trail bike.
Product line includes bicycles and sportswear.
EXCELSPORTS. Lists approximately 400 items at discounted "blowout" sales
prices.
A February 14, 2000 search for "bicycle vendors" via Infoseek found twenty sites
including Nashbar and Excelsports.
The foregoing were the most prominent on-line competitor sites identified. There
are undoubtedly numerous other web sites that are competitors of the Company,
and it is reasonable to assume that many more competitors may enter the market.
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RESULTS OF OPERATIONS
(All amounts are in U.S. dollars unless otherwise stated)
FISCAL YEARS ENDED MARCH 31, 2000 AND MARCH 31,1999.
Sales increased by 19.5% or $67,565 to $414,212 during the fiscal year ended
March 31 2000 ("FY 2000"), compared to $346,647 for the fiscal year ended March
31, 1999 ("FY 1999"). This increase was due to a higher level of sales through
the Company's web site. Sales in FY 2000 were approximately 92% U.S. customers,
with the balance being Canadian and the rest of the world.
Cost of goods sold increased by 76% or $221,445 to $511,031 for FY 2000,
compared to $289,586 in FY 1999. As part of its sales strategy, the Company used
low prices as a means to attract new customers to the web site. As a
consequence, the cost of goods increased by a greater percentage than sales
revenue.
Inventory increased by 159% or $86,638 to $141,106 at the end of FY 2000,
compared to $54,468 at the end of FY 1999. An increase in inventory was
necessary to support growing sales and maintain twenty-four hour turn-around
times as much as possible. Also, a large container of product was just received
into inventory prior to the year ending March 2000.
General and administrative expenses increased by 623% or $346,397 to $402,439
for FY 2000, compared to $56,042 for FY 1999. The Company incurred higher costs
in every category primarily due to the acquisition of Sportslink Direct
Marketing Ltd.
Advertising and Promotion costs rose by $28,215.
Amortization costs rose $8,868 and relates to the amount of goodwill created as
a result of the Sportslink acquisition. Interest and foreign exchange rose
$29,261 as a result of higher interest rates paid on short-term working capital
loans and advances as well as the loss on conversion from Canadian to U.S.
dollars advanced to fund the operations of Sportslink.
Investor relations is a new expense category now that the Company is a
publicly-traded company.
Office and Sundry costs increased by $22,554 to support the increased costs of
being a public company and expansion of the business operations.
Professional fees increased $60,885 as a result of additional costs related
to special warrant financings.
Wages and contract labor increased $67,380 due primarily to the increase of
staff to support the Company's expansion.
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FISCAL YEARS ENDED MARCH 31, 1999 AND 1998
In Fiscal Year 1999, sales increased by 330% or $265,948 to $346,647 from
$80,699 in 1998. The Airbomb business started up during Fiscal Year 1998. The
increase in revenue was due to growing sales as the Company established its
presence on the Internet.
The cost of goods sold in fiscal year 1998 was $79,220, leaving a gross profit
of $1,479. All other expenses of the Company totaled $29,173, resulting in a net
loss of $27,694 in Fiscal 1998 compared to a small net income of $1,019 in
Fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has been dependent on investment capital as its
primary source of funding. During the twelve months ended March 31, 2000, the
Company's net loss was $499,258.
Sales are made through credit card transactions, so accounts receivable are
minimal.
In order to finance growing inventory, daily operations and other corporate
activities, the Company completed two Canadian private offerings of Special
Warrants and raised $665,049 (Cdn $975,000) for working capital. Subsequent to
the year end, in July 2000, the Company completed another Canadian private
offering of Special Warrants and raised approximately $340,000 (Cdn $500,000)
for working capital. In addition, the Company raised a further $116,061 (Cdn
$162,940) from the exercise of incentive stock options and share purchase
warrants. For further information on outstanding warrants, see Part II, Recent
Sales of Unregistered Securities, below.
As of March 31, 2000, the Company had approximately $277,979 in working capital.
As of March 31, 1999, the Company had a working capital deficiency of $32,259
and for March 31, 1998, the Company had a working capital deficiency of $32,287.
The Company anticipates seeking additional equity investment in the Company from
time to time to fund growth that cannot be funded through other means.
INFLATION
The Company does not believe that inflation has had a significant impact on its
consolidated results of operations or financial condition.
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RISK FACTORS
LIMITED OPERATING HISTORY; NEGATIVE CASH FLOW; NEED FOR ADDITIONAL FINANCING;
DILUTION
The success of the Company cannot be guaranteed or accurately predicted. There
is no assurance that the Company will be able to operate profitably. Such
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered in the establishment of new product lines and retail
sales outlets in an emerging e-commerce market.
The Company has a limited operating history. There is no assurance that the
Company will be able to operate and manage on a profitable basis or that cash
flow from operations will be sufficient to pay the operating costs of the
Company. The Company anticipates that it will need to raise additional capital
to finance growth of its operations. The Company may seek additional financing
through debt or equity financings. There is no assurance that additional
financing will be available to the Company, or that, if available, the financing
will be on terms acceptable to the Company. There is no assurance that the
Company's estimate of its reasonably anticipated liquidity needs is accurate or
that new business developments or other unforeseen events will not occur that
will result in the need to raise additional funds. In the event that the Company
cannot raise needed capital, it will have a material adverse effect on the
Company.
Although the Company has based its web site upon commercially available software
and hardware, the Company will need to do substantial additional development in
order to offer the goods, services and user-friendly interfaces the Company
believes are needed to attract and retain customers.
The Company may incur significant operating losses and generate negative cash
flow from operating activities during the next several years while it develops
its web sites and services, and builds a customer and subscriber base. There is
no assurance that the Company will achieve or sustain profitability or positive
cash flow from operating activities in the future or that it will generate
sufficient cash flow to service any debt requirements.
To the extent that any financing involves the sale of the Company's equity
securities, the interests of the Company's then-existing shareholders could be
substantially diluted.
TECHNOLOGICAL RISK; RISK OF OBSOLESCENCE
Technology is constantly changing. The Company's technology could become
obsolete at any time. The Internet is constantly changing as well, and it could
become obsolete or no longer popular. The current online commerce market is
rapidly evolving and intensely competitive. Competitors can launch new web sites
at a relatively low cost. Other e-commerce businesses as well as established
sporting goods retailers are developing or have developed competing web sites
that may dilute the success of the Company. Our competitors could develop
technology, services or products similar to or better than ours, or finish
development before us, or be better marketers, any of which could hurt our
success. In order for us to compete, we will have to develop our web site,
services and products, improve our web site, services and products, and
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create new web site features, services and products before our competitors.
The Company cannot promise, however, that it will be able to do so, or do so
successfully.
Deployment progress and pitfalls for a complex and rapidly developed web site
are difficult to estimate with precision, given the rapidly changing nature of
the available tools and technologies and the shortage of experienced labor with
the requisite skill set. The Company runs the risk of late deployment,
technology challenges, and cost overruns when rapidly developing a large
commercial web site and distribution system.
In addition, there is no assurance that the Company will be able to keep pace
with technological developments or that its services will not become obsolete.
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET
The Company's future success is dependent upon continued growth in the use of
the Internet. Rapid growth in the use of and interest in the Internet is a
recent phenomenon. There is no assurance that commerce over the Internet will
become widespread or that extensive content will continue to be provided over
the Internet. In addition, to the extent that the Internet continues to
experience significant growth in the number of users and level of use, there is
no assurance that the Internet infrastructure will continue to be able to
support the demands placed upon it by such potential growth. If use of the
Internet does not continue to grow, or if the Internet infrastructure does not
effectively support growth that may occur, the Company's business, results of
operations and financial condition would be materially and adversely affected.
UNPROVEN ACCEPTANCE OF THE COMPANY'S PRODUCTS AND SERVICES
As is typical in the case of a new and rapidly evolving industry, demand and
market acceptance for recently introduced products and services are subject to a
high level of uncertainty and risk. The Company does not know the extent to
which additional customers will use its products and services. It is difficult
to predict the future growth rate, if any, and size of this market via Internet
sales. In order to sustain rapid growth rates, the Company will need to continue
increasing its share of the bicycle and other sporting goods markets. There is
no assurance either that the market for the Company's products and services will
grow or that the Company can successfully and rapidly expand its market share.
If the market fails to grow, grows more slowly than expected, or becomes
saturated with competitors, or if the Company's products and services do not
achieve or sustain market acceptance and expanded market share, the Company's
business, results of operations and financial condition will be materially and
adversely affected.
NEED FOR COMPLEX MARKETING AND SALES
To be successful, the Company will have to develop marketing, brand development
and sales on a rapidly expanding basis. There is no guarantee that the Company
will be successful in managing such a complex strategy of marketing and sales or
that the Company will be able to do so soon enough to be successful.
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RELIANCE ON PRODUCT SALES REVENUES
The Company intends to derive substantially all of its revenues from the sale of
goods on the Internet. The Company's ability to generate revenues will depend
upon, among other factors, consumers' acceptance of the Web as an attractive and
sustainable medium, and development of a large base of repeat customers for the
Company's products. In addition, there is intense competition in the sale of
goods and services on the Internet, which makes it difficult to project the
future levels of Internet revenues that will be realized generally or by any
specific company. The future success of the Company is highly dependent on the
development of the Internet as a commercial medium.
NEED FOR FUTURE STRATEGIC PARTNERSHIPS
To be successful, the Company plans to continue entering into strategic
partnerships with other local, national and international businesses to help in
a focused marketing effort and to provide operational support. The Company
cannot guarantee that it will be able to find strategic partners who will be
available and who are suitable for the Company's needs, or if enough strategic
partners can be found to market the Company's products and support its
operations.
SUBSTANTIAL DEPENDENCE UPON THIRD PARTIES
The Company is in an early stage of development and has yet to establish
complete internal management, personnel and other resources. The Company depends
substantially upon third parties for several critical elements of its business
including, among others, promotion and marketing, technology and infrastructure
development, and distribution activities. Although the Company is developing
internal sales personnel, the Company expects that it will be dependent upon
third-party sales efforts for the foreseeable future. There is no assurance that
the Company's representatives will achieve the Company's sales objectives.
INTELLECTUAL PROPERTY PROTECTION
The Company will rely on a combination of common law, copyright and trademark
law, and nondisclosure agreements to establish and protect its proprietary
rights in its products and the content of its web sites. Others, however, might
successfully challenge these protections.
The Company has applied for trademark protection in Canada for the brand name
"Airbomb", and anticipates filing for trademark protection in the United States
for the same brand name. The Company is the owner of the web site domain names
HTTP://WWW.AIRBOMB.COM and HTTP://WWW.SUNBOMB.COM and maintenance fees for the
domain names have been paid and are up to date. The Company may file
applications for trademark protection of other intellectual property. No
assurance can be given that such trademark applications will be accepted for
registration. Furthermore, the possibility exists that the Company could be
found to infringe on patents, service marks, trademarks or copyrights held by
others. The Company's use of trademarks, service marks, trade names, slogans,
phrases and other expressions in the course of its business may be the subject
of dispute and possible litigation. Given the growth of business being conducted
on the Internet, electronic commerce and the use of domain names, there can be
15
<PAGE>
no assurance that the Company will be able to continue to use its current trade
name, domain name and Internet and business identification. Such changes could
result in confusion to potential customers and negatively affect the Company's
business.
DEPENDENCE UPON KEY PERSONNEL; SENIOR MANAGEMENT'S LIMITED HISTORY OF EXPERIENCE
IN ELECTRONIC COMMERCE
The success of the Company initially will be largely dependent upon the personal
efforts of a few key personnel. The Company anticipates entering into employment
and/or consulting agreements with its key personnel. Competition among Internet
companies for qualified employees is intense, and the loss of key personnel or
the inability to attract and retain the additional highly skilled employees
required for the Company's activities could adversely affect its business. There
can be no assurance that the Company will be able to hire or retain such
necessary personnel.
DILUTION DUE TO ISSUANCE OF STOCK OPTIONS
In order to attract and retain skilled and dedicated personnel, directors and
consultants, and to obtain the services and support of other third parties, it
is anticipated that the Company will need to grant stock options. The Company
has options for 900,000 shares of its common stock outstanding as of June 15,
2000. The Company anticipates that it will continue the issuance of stock
options. It is possible that stock bonuses and/or other stock acquisition or
stock appreciation rights could also be granted. The dilutions that will occur
as a result of the granting of such options, bonuses and/or other rights may be
substantial.
FINANCIAL INFORMATION
The Company has no significant operating history to help investors evaluate the
Company's prospects.
To the extent that this document makes any forward-looking statements or
forecasts, such statements and forecasts are necessarily based upon a number of
estimates and assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
beyond the control of the Company, and upon assumptions with respect to future
business decisions which are subject to change. The success of the Company is
subject to numerous uncertainties and contingencies, many of which are beyond
the Company's control. Accordingly, there can be no assurance that any
forecasted results will be realized. The inclusion of any forward looking
statements or forecasts herein should not be regarded as a representation by the
Company or any other person that the forward-looking statements or forecasts
will be achieved.
COMPETITION
The online commerce market is new, rapidly evolving and intensely competitive.
There are no substantial barriers to entry, and the Company expects that
competition will continue to intensify. Currently, competitors can launch new
web sites at a relatively low cost. The
16
<PAGE>
Company anticipates competition on two fronts -- from e-commerce businesses
and from traditional sports equipment and general retailers. Increased
competition could require the Company to respond to competitive pressures by
establishing pricing, marketing and other programs, or seeking out additional
strategic alliances or acquisitions, any of which could have a material
adverse effect on the business, prospects, financial condition and results of
operations of the Company.
The Company believes that the principal competitive factors in its market are
brand recognition, focused niche markets, selection, customer service, variety
of value-added services, ease of use, site content fulfillment, reliable quality
of search tools, price, and technical expertise. Some potential competitors have
longer operating histories, larger customer bases, greater brand recognition,
and significantly greater financial, marketing and other resources than the
Company. In addition, online retailers may be acquired by, receive investments
from, or enter into other commercial relationships with larger, well-established
companies as use of the Internet and other online services increases. Increased
competition may result in reduced operating margins, loss of market share, and a
diminished brand franchise, any of which would have a material adverse effect on
the Company. Moreover, companies that control access to transactions through
network access or web browsers currently promote, and will likely continue to
promote, competitors of the Company. There is no assurance that the Company will
be able to compete successfully.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct regulation by any government
agency in the United States, other than regulations applicable to businesses
generally, and there are currently few laws or regulations directly applicable
to access to or commerce on the Internet. The Company, however, may become
subject to regulation by the Federal Trade Commission (FTC), state consumer
protection agencies, or other government agencies. Additionally, due to the
increasing popularity and use of the Internet, it is possible that a number of
laws and regulations may be adopted with respect to the Internet covering issues
such as user privacy, pricing, taxation/tariffs and characteristics and quality
of products and services. The adoption of such laws or regulations may decrease
the growth of the Internet, which could in turn decrease the demand for the
Company's products and services, and increase the Company's cost of doing
business or otherwise have an adverse effect on the Company's business, results
of operations and financial condition. Moreover, the applicability to the
Internet of the existing laws governing property, ownership, libel and personal
privacy is uncertain. Any new legislation or regulation or the application of
existing laws and regulations to the Internet could have a material adverse
effect on the Company's business, results of operations and financial condition.
The Internet industry also is subject to continually evolving regulation. There
are a number of issues on which regulation has been or in the future may be
suggested. As new regulations are promulgated on these subjects or other
subjects, the Company may be required to modify its business plans or operations
in order to comply with any such regulations. There can be no assurance that the
Company will be able to do so in a cost-effective manner, if at all.
17
<PAGE>
ABSENCE OF DIVIDENDS; DIVIDEND POLICY
The Company has never paid dividends on its Common Stock and does not anticipate
paying any dividends on its Common Stock in the foreseeable future. The
declaration and payment of dividends by the Company are subject to the
discretion of the Company's Board of Directors. Any determination as to the
payment of dividends in the future will depend upon results of operations,
capital requirements, restrictions in loan agreements, if any, and such other
factors as the Board of Directors may deem relevant.
LIMITED PUBLIC MARKET FOR STOCK; PRICE VOLATILITY; LACK OF LIQUIDITY OF
INVESTMENT
The Company is a public company currently trading on the Canadian Venture
Exchange (CDNX Symbol: AIR). The stock is not heavily traded. Any significant
sales or purchases of stock may have a material effect upon the trading price
for the stock and cause significant volatility in the trading price of the
stock. At any particular time, shareholders may find it difficult or may be
unable to liquidate an investment in the Company's stock. The Company intends to
qualify for the trading of its stock through the NASD OTC Bulletin Board system.
However, there can be no assurance that such a market will develop for the
stock, or that if developed, such a market can be maintained. Purchasers of the
Company's stock should be aware that they will be required to bear the financial
risks of their investment for an indefinite period of time.
CONFLICTS OF INTEREST
Certain directors and officers of the Issuer are also directors and/or officers
of other companies whose principal business is similar to that of the Issuer. It
is possible, therefore, that a conflict may arise between their duties as
directors or officers of the Company and their duties as directors or officers
of such other companies. All such conflicts will be disclosed by them in
accordance with applicable law, and they will govern themselves in respect
thereof to the best of their abilities in accordance with the obligations
imposed upon them by law.
DILUTION
At June 30, 2000, the Company had a total of 11,143,462 shares outstanding. In
addition, there were options and warrants outstanding for the acquisition of
over three million additional shares. In order to attract and hold quality
employees and consultants, to raise additional capital and to acquire assets, or
for other corporate purposes deemed appropriate by the Company's management,
significant additional shares and/or rights to acquire shares may be issued in
the future.
18
<PAGE>
ITEM 2 (Item 7, SEC Form 1-A, Model B)
DESCRIPTION OF PROPERTY
PROPERTY
The Company's operations are conducted from three locations, one in Canada and
two in the United States. In Canada, its operations are located at 11 - 1835
56th Street, Delta, British Columbia V4L 1R3, and in the United States, at 145
Tyee Drive, Point Roberts, Washington 98281, and at 1347 Gulf Road, Point
Roberts, Washington, 98281. The Company's executive offices are located at Suite
505 - 1155 Robson Street, Vancouver, British Columbia, V6E 1B5.
The Canadian operations location is rented from Century Group, Tsawwassen,
British Columbia, and consists of approximately 2,300 square feet of ground
level office/warehouse space. The location is in a newly built industrial strata
complex easily accessible to the main highway leading into Tsawwassen. The rent
is Cdn $2,183.00 (approximately US $1,600) per month. The lease term ends
October 31, 2000 with an option to renew for three years.
The Company ships orders to its U.S. customers from its Point Roberts,
Washington premises. The Tyee Drive premises are housed in the same building as
the U.S. Postal Service, FedEx, and UPS courier services, and consist of 700
square feet of warehouse area, which the Company intends to partially convert
into an office area for U.S. order entry and credit card reconciliation. The
rent is $750.00 per month. The rent is payable on a monthly basis only. There is
no lease. The Company also has an option on upstairs office space should
management decide to expand its operations in the United States.
The Gulf Road premises consist of approximately 1000 square feet at a
monthly rental of $375. This warehouse space is rented on a month-to-month
basis.
The Company subleases office space from Senate Capital Group Inc. ("Senate"), a
private company 100% owned by Dennis Higgs, a Director and Corporate Secretary
of the Company. The office space consists of approximately 1,000 square feet
located in an office building in downtown Vancouver, British Columbia. Senate
charges a monthly fee for office rent, telephone, management, secretarial and
miscellaneous office supplies. The rent is Cdn $ 1,800 per month, on a
month-to-month basis.
Twenty-four-hour turnaround for deliveries is a competitive advantage, and
management has recognized that warehousing select inventory in high-volume
geographic regions will assist in this regard. To that end, the Company has
arranged its first distribution center with Great Northwest Bicycle Supply in
Portland, Oregon, which also is a supplier to the Company. There is no formal
agreement in place.
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<PAGE>
ITEM 3 (Item 8, SEC Form 1-A, Model B)
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The Directors, executive officers, and significant employees of the Company or
its wholly-owned subsidiary, Sportslink Direct Marketing Ltd., are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
David Houston Director (since October, 1999) and
President (since December, 1999)
Dennis Higgs Director (since 1987) and Secretary (since
December, 1999). Served as President
from 1987 to December, 1999
Cecil Spearman Director (since February, 1989)
John McCutcheon Director (since April, 1994)
Ronald Erickson Director (since January, 2000)
David Grossman Chief Financial Officer (since March 1, 2000)
Don Shaw Vice President Operations (since November 1, 1999)
</TABLE>
David Houston - Age 41. Mr. Houston was appointed a Director of the Company in
October, 1999 and became President in December 1999 upon the acquisition of
Sportslink by the Company. He founded Sportslink in 1997 and served as its
President since July 1997.
During the period from 1995 to September 1996, Mr. Houston served at various
times in the capacities of Vice President, Executive Director, Sales and
Marketing, and Director of International Telepresence Corp. where he was
responsible for worldwide sales and marketing of that company's proprietary 3-D
camera system. In that role, he developed the company's marketing plan, hired
and trained sales staff in Europe, USA and Canada, set up a distributor network
in eight countries, established the company's presence in the medical field, and
negotiated key strategic relationships with both teaching hospitals and
high-tech manufacturers. Mr. Houston was a key part of the management team
during three major fundraising campaigns.
During the period from 1992 to 1995, Mr. Houston worked as a Medical Sales
Representative for two medical product sales companies, Arrow Medical and
Sherwood Medical. From 1990 to 1992, Mr. Houston owned and operated an outdoor
adventure resort, developed marketing plans, oversaw the sales office, and
managed day-to-day activities. From 1981 to 1992, Mr. Houston
20
<PAGE>
was responsible for the western Canadian office and sales team of a company
involved in fiber optic medical products.
Mr. Houston has a Bachelor of Physical Education (Honors) degree from McMaster
University, Hamilton, Ontario (1981), and has taken post-graduate courses for a
Masters of Business Administration degree from City University, Vancouver,
British Columbia.
Dennis L. Higgs - Age 42. Mr. Higgs has served as a Director of the Company
since 1987 and as Secretary since December, 1999. He also served as President
of the Company from 1987 to December, 1999. Mr. Higgs is President of Miranda
Industries Inc., a public mineral exploration company (from May 1993 to
present). He is President, Senate Capital Group Inc., a private venture
capital and management consulting company (since July 1990) and is President,
Ubex Capital Inc., a private venture capital and management company (since
February 1984). Mr. Higgs has founded and/or funded several successful public
companies since 1984, including Arizona Star Resource Corp. (AZS-CDNX),
Bioject Medical (BJCT-NASDAQ), and BioSource International (BIOI - NASDAQ).
Mr. Higgs has his Bachelor of Commerce degree from the University of British
Columbia and has completed the Canadian Securities Course, the Registered
Representatives Exam, and the Canadian Options Course, all conducted by the
Canadian Securities Institute in Toronto, Ontario.
Cecil Spearman - Age 68. Mr. Spearman, a Director of the Company, is a resident
of California, USA. He has a 30-year career that spans every aspect of the
health care industries. He was with American Hospital Supply for 16 years.
Starting in sales, he rose to VP General Manager of American Hospital Supply's
largest profit center. He joined Bergen Brunswig as President of the Hospital
Supply Division in 1973, and led a major turnaround for this third-largest
hospital supply dealer, which enable him to retire and pursue other interests.
In 1980, he started his own company, Spearman Industries Inc., and currently
owns and operates several fitness clubs and tennis clubs as well as running a
consulting practice in the health care industry.
Mr. Spearman is the past Chairman of the International Health, Racquet and
Sports Club (IHRSA) and is current Chairman of IHRSA's Advisory Board. He
received the distinguished service award March 22, 2000 at the annual IHRSA
convention. He is a Director of American Club Management since 1984. Mr.
Spearman is an Honors Graduate and Fraternity Officer of Duke University and was
an Artillery Officer FMF U.S. Marine Corp.
John McCutcheon - Age 75. Mr. McCutcheon has served as a Director of the Company
since April, 1994. He is President and CEO of Meta Health Services
Inc. (MHS-CDNX), a manufacturer and/or distributor of health care services,
pharmaceuticals and medical devices. Mr. McCutcheon founded and is Chairman and
a director of Zargon Oil and Gas (ZAR-TSE), an oil and gas exploration and
production company, a director of Miranda Industries Inc. (MAD-CDNX) and a
former director of Weldwood, Canada. Previously, Mr. McCutcheon was the
Executive Vice President of Cemp Investments, the holding company of the
Bronfman family of Montreal, with a net worth of over $3 billion.
21
<PAGE>
Mr. McCutcheon attended Dalhousie University in Halifax (Economics - Investment
Banking) and McGill University, Montreal, where he was a gold medallist and
received his Bachelor of Engineering and Master of Engineering degrees. Mr.
McCutcheon is a member of and has held office in a number of professional and
technical societies in Economics and Engineering, Canadian and International. He
is the author and co-author of approximately 45 papers in recognized journals
published in Canada, the United States and abroad. His major outside activities
are in education and art. He was a recipient of the Canadian Centennial Medal.
Ronald Erickson - Age 56. Mr. Erickson joined the Company as a Director in
January, 2000. Mr. Erickson is currently the Chairman of the Board of eCharge
Corporation, a global leader in next generation convenient and secure online
payments, headquartered in Seattle with offices in Vancouver, London and Tokyo.
Prior to joining eCharge, Mr. Erickson was the Chairman, Vice Chairman,
President and CEO of Egghead Software Inc. He was the co-founder, Chairman and
CEO of GlobalTel Inc., an international provider of telecommunications services.
He was the co-founder of Microrim Inc., a relational database development and
systems integration company, and was also the Chairman and CEO of NBI, Inc., a
software development and systems integration company.
Mr. Erickson has also served as a director and investor in a number of other
technology companies. Currently, Mr. Erickson sits on the Board of Directors of
Upgrade International Corp. (UPGD-OTCBB), a hardware and software information
technology company, Freei.net, a free Internet service provider, IBNet, a
business-to-business Internet company, and Newsgrade.com, an Internet financial
information company.
Mr. Erickson has worked extensively with the U.S. investment banking community
and has been directly involved in the financing and listing of numerous
companies on the NASDAQ stock exchange. He is a principal and partner in
Meydenbauer Capital, his own venture capital fund.
He is active in community affairs and charitable organizations, having sat on
the Board of the Seattle Kingdome, and the Advisory Board of the University of
California at Davis, Law School. He served in Washington, D.C. as a White House
staff member as well as in New York with the Rockefeller Commission on Critical
Choices.
Mr. Erickson holds a JD (Juris Doctor) from the University of California, an MA
from the University of Wyoming, and a BA from Central Washington University.
Admitted to practice law in Washington State and the District of Columbia, he
did so from 1975 until the late 1980s.
David Grossman - Age 45, Chief Financial Officer. Prior to joining Airbomb.com,
Mr. Grossman served as Executive Vice President of The Executive Conversation,
Inc. ("TEC"), providing strategic consulting and training to senior sales,
consulting and marketing executives of the largest high technology businesses in
the world, including Cisco, Oracle, Sun Microsystems, Intel, Nortel, EDS, IBM,
and Commerce One. TEC's primary mission is to provide sales teams with the
financial and business acumen to build value propositions and presentation
skills sets to effectively communicate value and impact to the senior executives
of their customers, driving significantly increased revenues and profits for
those corporations.
22
<PAGE>
Prior to his tenure at TEC, Mr. Grossman served as Chief Financial Officer of
Connext, Inc., a high technology and software application company serving the
utility industry. Previously, Mr. Grossman was a Director of Cascadia Merchant
Group and Chief Financial Officer of Seattle Chocolate Company, manufacturing
confectionery products for national retailers including Starbucks, Nordstrom's,
Wal-Mart, and Costco, among other national retail customers. Prior to Cascadia,
Mr. Grossman was a Partner of BDO Seidman, the seventh largest accounting and
consulting firm in the world.
Mr. Grossman was also a Principal in Ernst & Young's Merger and Acquisition
Group in New York City, providing services to Ron Perleman's MacAndrew's and
Forbes Holding Group, and worked on the acquisitions of Revlon, Max Factor and
Consolidated Cigar. Mr. Grossman also provided services to the Bass Group, BT
Capital, Warburg Pincus as well as other major investment firms. Prior to Ernst
& Young, Mr. Grossman was a Vice President of Solomon Group Ltd., a venture
capital firm. He was a principal in Grossman, Weinberg & Lawson, a CPA firm in
New Jersey and Florida. Mr. Grossman started his career in 1977 with Coopers &
Lybrand in Miami and served as a Senior Manager in Stamford, Connecticut.
CHIEF OFFICER OF SPORTSLINK, THE COMPANY'S WHOLLY-OWNED SUBSIDIARY:
Don Shaw - Age 44. Mr. Shaw is Vice-President of Operations. Mr. Shaw attended
the University of Western Ontario from 1976 to 1979, pursuing a course of
studies in Chemistry. He did not obtain a degree. From 1997 to present, Mr. Shaw
has worked with Sportslink and provided services under contract to Pugach and
Associates, a surveying and consulting firm.
From 1995 to 1996, Mr. Shaw provided quality assurance services under contract
with Plastic Engineering of Delta, British Columbia, and from 1994 to 1995 he
was the Owner/Manager of Banners Up, a Vancouver, British Columbia business
which specialized in aluminum displays for banner advertisements.
From 1991 to 1994, Mr. Shaw was employed as General Manager of F2 America,
Vancouver, British Columbia, a subsidiary of F2 Austria, where he was employed
as a sales agent and importer for snowboards and wind surfing equipment. From
1987 to 1991, he was the Vice-President and co-owner of Windsurfing Hawaii,
Canada, a company that specialized in importing and selling windsurfing
products.
Directors of the Company are elected at the annual meeting of the shareholders
and serve until their successors are elected and qualified. Officers are elected
by the Board of Directors and serve at the discretion of the Board of Directors
or until their earlier resignation or removal. There are no family relationships
between any director or executive officer of the Company. David Houston,
President of the Company, has an employment contract with the Company. SEE
"Remuneration of Directors and Officers."
23
<PAGE>
ITEM 4 (Item 9, SEC Form 1-A, Model B)
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth all compensation earned during the fiscal year
ended March 31, 2000 by the Company's three highest compensated Officers and
Directors and all Officers and Directors as a group. The following amounts
include all remuneration paid by either the Company or by Sportslink.
SUMMARY COMPENSATION TABLE (All funds in Canadian dollars)
Annual Compensation
--------------------
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------
Restricted
Stock Securities
Name and Fiscal ----- Underlying
Position Year Salary Bonus Awards Options
-------- ---- ------ ----- ------ -------
($) (#)
<S> <C> <C> <C> <C> <C>
David Houston, 2000 $ 42,961.74 $ Nil $ Nil 170,000 (1)
President and Director
Don Shaw 2000 $ 35,191.51 Nil Nil 80,000 (2)
Vice-President of
Operations
Dennis Higgs 2000 $ 30,000.00 Nil Nil 125,000 (3)
Corporate Secretary (5)
All Officers and 2000 $108,153.25 $ Nil 600,000 (4)
Directors as a Group
(7 individuals)
</TABLE>
No other officer or Director of the Company (including Sportslink) received any
direct remuneration during the most recently completed fiscal year of the
Company. Ubex Capital Inc., a company owned 33-1/3% by Dennis Higgs, a director
and officer of the Company, and his two sisters each as to 33-1/3%, received Cdn
$30,000 for providing management services to the Company. (See Note 5 below).
NOTES:
(1) During fiscal year ended March 31, 2000, Mr. Houston was issued
options for 170,000 shares of airbomb.com common stock at an average
price of $0.49 per share.
24
<PAGE>
(2) During fiscal year ended March 31, 2000, Mr. Shaw was issued options
for 80,000 shares of airbomb.com common stock at an average price of
$0.80 per share.
(3) During fiscal year ended March 31, 2000, Mr. Higgs was issued options
for 125,000 shares of airbomb.com common stock at an average price of
$0.61 per share.
(4) 600,000 options are all stock options granted to officers and
directors of the Company during fiscal year ended March 31, 2000.
(5) Paid as a consulting fee to Ubex Capital Inc., a private company
owned by Dennis Higgs and his two sisters, each as to 33 1/3%.
The Company had an independent valuation done of Sportslink in preparation for
its acquisition that estimated the value of Sportslink to be in the range of
Cdn $900,000 (approximately US $625,000) as of July 30, 1999. This valuation is
used for purposes of this compensation disclosure only. David Houston, the
founder and President of Sportslink Direct Marketing Ltd. and President of
the Company, acquired 1,202,858 common shares of the Company in December 1999
as part of the acquisition of Sportslink by the Company. Dividends have not
been declared on any stock nor are any dividends planned for stock.
Compensation of Directors
The directors of the Company do not receive salaries or fees for serving as
directors of the Company, nor do they receive any compensation for attending
meetings of the Board of Directors or serving on committees of the Board of
Directors. The Company may, however, determine to compensate its directors in
the future. Directors are entitled to reimbursement of expenses incurred in
attending meetings. In addition, the directors of the Company are granted
incentive stock options in the Company.
Employment Agreements
The Company has entered into an employment agreement with Mr. David Houston made
effective August 1, 1999, in which the Company has retained Mr. Houston as
President and Chief Executive Officer at an annual salary of Cdn $60,000. The
agreement has a three-year term expiring July 31, 2002. The contract will be
automatically renewed for successive terms on a year-to-year basis unless notice
of non-renewal is effected by either party by delivery of written notice of
non-renewal at least 90 days prior to the expiration of the applicable term of
the agreement, in which case the agreement will expire on the last day of the
term.
The agreement contains customary confidentiality and non-competition provisions.
The Company retains Ubex Capital Inc. ("Ubex") to provide management services
under a Management Services Agreement dated October 1, 1991. Under the
agreement, Ubex has received the sum of Cdn $2,500 per month since October 1,
1991, which amount may be increased by agreement between the parties, subject to
the approval of the Canadian Venture Exchange. The term of the agreement is
month-to-month and may be terminated by either party on 30 days' written notice.
Ubex is wholly owned by Dennis L. Higgs, a director and officer of the Company,
and his two
25
<PAGE>
sisters, each as to 33-1/3%.
Incentive Stock Options
Under Canadian Venture Exchange regulations, the Company is authorized to issue
incentive stock options at any one time up to 10% of the issued and outstanding
share capital. There are currently stock option agreements between airbomb.com
and certain of its directors and employees with respect to options on a total of
900,000 shares of the Company.
The policy of the Canadian Venture Exchange requires that the approval of stock
options be received by shareholders prior to the exercise of any stock options
granted by the Company to its directors and employees. Management of the Company
seeks the general approval of the shareholders to the granting of stock options
at its Annual General Meeting every year, in accordance with the policy of the
Canadian Venture Exchange.
There are incentive stock options held by Directors and Officers of the Company
or its subsidiary, as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
NAME OF OPTIONEE NO. OF SHARES EXERCISE PRICE EXPIRY DATE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dennis Higgs 100,000 $0.73 01/27/05
--------------------------------------------------------------------------------------------------------------------
Dennis Higgs 25,000 $0.49 06/08/05
--------------------------------------------------------------------------------------------------------------------
John McCutcheon 40,000 $0.73 01/27/05
--------------------------------------------------------------------------------------------------------------------
Cecil Spearman 10,000 $0.29 04/08/04
--------------------------------------------------------------------------------------------------------------------
David Houston 38,000 $0.28 12/20/04
--------------------------------------------------------------------------------------------------------------------
David Houston 30,000 $0.73 01/27/05
--------------------------------------------------------------------------------------------------------------------
David Grossman 75,000 $1.31 03/01/05
--------------------------------------------------------------------------------------------------------------------
Don Shaw 30,000 $1.31 03/01/05
--------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 5 (Item 10, SEC Form 1-A, Model B)
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the common shares of the Company as of June 30, 2000 by (1) each of
the three highest paid persons who are officers and directors of the Company;
(2) all officers and directors as group; and (3) each shareholder who is known
by the Company to beneficially own more than 10% of the issued and outstanding
common shares of the Company. Unless otherwise indicated, the persons named
below have sole voting and investment power with respect to all shares
beneficially owned by them subject to community property law where applicable.
As of June 30, 2000, there were 11,143,462 common shares of the Company issued
and outstanding. Each common share entitles the holder thereof to one vote in
respect of any matters that may properly come before the shareholders of the
Company. To the best of the knowledge
26
<PAGE>
of the Company, there exist no arrangements that could cause a change in
voting control of the Company.
On July 17, 2000, the Company closed a private placement consisting of 1,000,000
special warrants. Each special warrant is exercisable without additional
consideration into one common share and one warrant. Each whole warrant entitles
the holder to acquire a further common share of the Company at Cdn. $0.55 for a
period of two years. Two Directors and Officers of the Company participated in
this private placement. The table below showing the security ownership of
management considers their positions as if these special warrants were converted
to common shares with a warrant, and the warrants were exercised.
There are no other voting securities outstanding. Other than the options and
warrants described below and elsewhere in this document, there are no other
non-voting securities outstanding.
<TABLE>
<CAPTION>
Name and Address of Shares Beneficially Percent of
Title Of Class Beneficial Owner Owned(1) Class
-------------- ------------------- ------------------- ----------
<S> <C> <C> <C>
Common Stock David Houston 1,393,261 (1) 12.37%
Common Stock Dennis Higgs 1,946,825 (2) 15.13%
Common Stock Don Shaw 30,000 (3) 0.27%
Common Stock Officers and Directors as a
group (7 individuals) 3,595,086 (4) 28%
</TABLE>
----------------------
(1) 68,000 of these shares represent currently exercisable stock options
(including any exercisable within 60 days of July 20, 2000) and
60,000 of these shares represent exercisable warrants (including any
exercisable within 60 days of July 20, 2000).
(2) 125,000 of these shares represent currently exercisable stock options
(including any exercisable within 60 days of July 20, 2000); 430,000
represent currently exercisable warrants (including any exercisable
within 60 days of July 20, 2000); 524,500 of these shares are held by
Ubex Capital Inc. of which Dennis Higgs owns 33-1/3% of the shares of
Ubex Capital Inc. and his two sisters each as to 33-1/3%; 653,000 of
these shares represent exercisable warrants held by Ubex Capital Inc.
(3) 30,000 of these shares represent currently exercisable stock options
(including any exercisable within 60 days of July 20, 2000).
27
<PAGE>
(4) 255,000 of these shares represent currently exercisable stock options
(including any exercisable within 60 days of July 20, 2000).
ITEM 6 (Item 11, SEC Form 1-A, Model B)
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than as previously disclosed in this Form 10-SB or as set out in the
following, no insider and no associate or affiliate of an insider has any
material interest, direct or indirect, in any material transaction since the
commencement of the Company's last completed financial year or in any proposed
transaction, which, in either case, has materially affected or will materially
affect the Company.
ACQUISITION OF SPORTSLINK DIRECT MARKETING LTD.
Pursuant to an agreement dated September 3, 1999, the Company acquired 100% of
the issued shares of Sportslink Direct Marketing Ltd. ("Sportslink") from David
Houston, now the President of the Company, Andrew Doyle, the Secretary of
Sportslink, and one other person who is not an insider of the Company. Based on
an independent valuation which ascribed to Sportslink a fair market value of Cdn
$900,000, the Company paid the following consideration for the Sportslink
shares:
a) cash in the sum of Cdn $56,000;
b) 2,300,000 fully paid shares of the Company issued at a deemed price of
Cdn $0.28 per share;
c) 500,000 share purchase warrants of the Company issued at a deemed price
of Cdn $0.28 per warrant, exercisable without additional consideration
to acquire 500,000 shares of the Company; and
d) the issuance of stock options to the vendors and their qualified
nominees for the purchase of 400,000 shares of the Company exercisable
for five years at Cdn $0.28 per share.
The securities issued pursuant to clauses b) and c) above are subject to a
one-year hold period under applicable securities law.
Of the total consideration, David Houston received Cdn $16,000 in cash,
1,202,858 shares of the Company and a stock option for the purchase of 100,000
shares of the Company exercisable at Cdn $0.28 per share on or before December
20, 2004, and Andrew Doyle received 540,000 shares of the Company. Don Shaw is
the Vice-President of Sportslink and, immediately following the closing of the
transaction, Michael Edwards was appointed to the Board of the Company. Of the
400,000 stock options forming part of the consideration for Sportslink, Mr. Shaw
and Mr. Edwards received options on 50,000 shares and 30,000 shares,
respectively, exercisable at Cdn $0.28 per share on or before December 20, 2004.
See "Remuneration of Directors and Officers -Incentive Stock Options."
28
<PAGE>
Sportslink is in the business of retailing sporting goods through the Internet,
via its web site located at www.airbomb.com and also distributes its own line of
private label products under the "Airbomb" brand name.
PRIVATE PLACEMENT
In September 1999, the Company conducted a private placement of 1,500,000
special warrants at Cdn $0.25 per special warrant. Each special warrant is
convertible, without further consideration, into one unit, each unit comprising
one common share and one non-transferable share purchase warrant entitling the
holder thereof to purchase an additional share of the Company at a price of Cdn
$0.50 per share if exercised in the first year and at a price of Cdn $0.75 if
exercised in the second year. The following insiders and/or affiliated persons
purchased special warrants under the private placement:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Name and Address Number of Units
(Special Warrants)
-------------------------------------------------------------------------------
<S> <C>
Dennis Higgs (1)
4520 West 5th Avenue 240,000
Vancouver, B.C.
V6R 1S7
-------------------------------------------------------------------------------
Ubex Capital Inc. (2)
Suite 505 - 1155 Robson Street 208,000
Vancouver, B.C.
V6E 1B5
-------------------------------------------------------------------------------
Darcy Higgs (3)
4554 West 2nd Ave. 60,000
Vancouver, B.C.
V6R 1K8
-------------------------------------------------------------------------------
Monaco Investment Corporation
Suite 400 - 1100 Burrard Street 388,000
Vancouver, B.C.
V6C 3A6
-------------------------------------------------------------------------------
Nancy Coles (4)
1343 Duncan Drive 40,000
Delta, B.C.
V4L 1R3
-------------------------------------------------------------------------------
</TABLE>
(1) Director of the Company
(2) Company wholly owned by Dennis Higgs and his two sisters, each as
to 33-1/3%.
(3) The combined shareholdings of Darcy Higgs and Monaco Investment Corp. at
the time of the
29
<PAGE>
private placement exceeded 10% of the issued shares of the Company.
Monaco Investment Corp. is wholly owned by Darcy Higgs.
(4) Spouse of a director and officer of the Company.
PRIVATE PLACEMENT
In February 2000, the Company conducted a private placement of 1,200,000 special
warrants at Cdn $0.50 per special warrant. Each special warrant is convertible,
without further consideration, into one unit, each unit comprising one common
share and one non-transferable share purchase warrant entitling the holder
thereof to purchase an additional share of the Company at a price of Cdn $0.50
per share if exercised in the first year and at a price of Cdn $0.65 if
exercised in the second year. The following insiders and/or affiliated persons
purchased special warrants under the private placement:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Name and Address Number of Units
(Special Warrants)
-------------------------------------------------------------------------------
<S> <C>
Ubex Capital Inc.
Suite 505 - 1155 Robson Street 150,000
Vancouver, B.C.
V6E 1B5
-------------------------------------------------------------------------------
</TABLE>
(1) Company wholly owned by Dennis Higgs and his two sisters each as to 33-1/3%.
PRIVATE PLACEMENT
In July 2000, the Company conducted a private placement of 1,000,000 special
warrants at a price of Cdn $0.50 per special warrant. Each special warrant is
convertible, without further consideration, into one unit, each unit comprising
one common share and one non-transferable share purchase warrant entitling the
holder thereof to purchase an additional share of the Company at a price of
Cdn $0.55 per share for two years. The following insiders and/or affiliated
persons purchased special warrants under the private placement:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Name & Address Number of Special Warrants
--------------------------------------------------------------------------------------------
<S> <C>
David Houston (1)
1343 Duncan Drive 30,000 special warrants
Delta, BC
V4L 1R3
--------------------------------------------------------------------------------------------
Dennis Higgs (2)
4520 West 5th Avenue 190,000 special warrants
Vancouver, B.C.
V6R 1S7
--------------------------------------------------------------------------------------------
Ubex Capital Inc. (3)
505 - 1155 Robson Street 295,000 special warrants
Vancouver, B.C.
V6E 1B5
--------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
(1) President and Director of the Company.
(2) Director and officer of the Company.
(3) Company wholly-owned by Dennis Higgs and his two sisters each as to 33-1/3%.
LOAN TRANSACTIONS
Pursuant to loan agreements dated June 29, 1999, Ubex Capital Inc. ("Ubex") and
Monaco Investment Corp. ("Monaco") each loaned to the Company the sum of Cdn
$25,000, such loans bearing interest at the rate of 18% per annum. Pursuant to
loan agreements dated September 17, 1999, Ubex and Monaco each loaned the
Company a further Cdn $25,000, such loans bearing interest at the rate of 12%
per annum. In connection with the September 17, 1999 loans, the Company issued,
as a bonus, 20,000 fully paid shares of the Company to each of Ubex and Monaco.
All of the loans have now been repaid.
Ubex is wholly owned by Dennis Higgs, a Director and the Secretary of the
Company, and his two sisters, each as to 33-1/3%. Monaco is wholly owned by
Darcy Higgs, who was an insider of the Company at the time of the loans by
virtue of owning greater than 10% of the issued shares of the Company.
OFFICE AND OFFICE SERVICES
The Company subleases office space from Senate Capital Group Inc. ("Senate"), a
private company 100% owned by Dennis Higgs, a Director and Corporate Secretary
of the Company. Senate charges a monthly fee for office rent, telephone,
management, secretarial and miscellaneous office supplies.
There have been no other material related transactions or contracts with a value
of over $60,000.
ITEM 7 (Item 12, SEC Form 1-A, Model B)
DESCRIPTION OF CAPITAL STOCK
Set forth below is a summary of the material provisions of the Company's capital
stock. This summary does not purport to be complete. For a more detailed
description, see the Company's amended and restated certificate of incorporation
and by-laws, copies of which have been filed as exhibits to this Form 10-SB and
are hereby incorporated by reference, and the applicable provisions of Delaware
law.
COMMON STOCK
General
All outstanding shares of common stock are duly authorized, validly issued,
fully paid and nonassessable. Upon liquidation, dissolution or winding up of the
Company, the holders of common stock are entitled to share ratably in all net
assets available for distribution to
31
<PAGE>
stockholders after payment to creditors. The common stock is not convertible
or redeemable and has no preemptive, subscription or conversion rights.
Voting Rights
Each outstanding share of Common Stock is entitled to one vote on all matters
submitted to a vote of shareholders. There are no cumulative voting rights.
Dividends
The holders of outstanding shares of common stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board may from time to time determine. Holders of common stock
will share equally on a per share basis in any dividend declared by the Board of
Directors. The Company has not paid any dividends on its common stock and does
not anticipate paying any cash dividends on such stock in the foreseeable
future.
Merger or Consolidation
In the event of a merger or consolidation, the holders of common stock will be
entitled to receive the same per share consideration.
Anti-takeover Effects of Provisions of the Company's Certificate of
Incorporation and Bylaws
The Company's Certificate of Incorporation and the Bylaws contain certain
provisions that may be deemed to have an anti-takeover effect and may delay,
deter or prevent a tender offer or takeover attempt that a shareholder might
consider in its best interest, including those attempts that might result in a
premium over the market price for the shares held by shareholders.
The Bylaws establish an advance notice procedure for the nomination, other than
by or at the direction of the Board, of candidates for election as directors as
well as for other shareholder proposals to be considered at annual meetings of
shareholders.
The foregoing summary is qualified in its entirety by the provisions of the
Company's Certificate of Incorporation, as amended, and Bylaws.
Certain Effects of Authorized But Unissued Stock
Approximately 88.8 million common shares are authorized but unissued as of June
30, 2000. All of such authorized but unissued shares will be available for
future issuance by the Board of Directors without additional shareholder
approval. These additional shares may be used for a variety of purposes,
including future offerings to raise additional capital or to facilitate
acquisitions.
One of the effects of the existence of unissued and unreserved common stock may
be to enable the Board of Directors to issue shares to persons friendly to
current management, which could render more difficult or discourage an attempt
to obtain control of the Company by means of a
32
<PAGE>
merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of management. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of the Company.
PART II
ITEM 1
MARKET FOR THE COMPANY'S COMMON STOCK
The Company's common stock is traded on the Canadian Venture Exchange market
under the symbol "AIR". Prior to February 22, 2000, the common stock had traded
under the symbol "FED". The Company's shares were halted from trading from
September 3, 1999, the date the Share Purchase Agreement to acquire Sportslink
was signed, until October 28, 1999. The acquisition of Sportslink closed on
December 20, 1999. The following comprises the high and low closing prices for
the Company's common stock (in Cdn $'s) during each month since the Company's
shares started trading after the Share Purchase Agreement was signed:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
MONTH ENDING, HIGH LOW CLOSE VOLUME
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October,31, 1999 $0.50 $0.25 $0.38 1,976,483
----------------------------------------------------------------------------------------------------------------------
November 30, 1999 $0.64 $0.40 $0.59 1,367,425
----------------------------------------------------------------------------------------------------------------------
December 31, 1999 $0.67 $0.50 $0.51 940,764
----------------------------------------------------------------------------------------------------------------------
January 31, 2000 $1.55 $0.50 $1.13 2,160,000
----------------------------------------------------------------------------------------------------------------------
February 29, 2000 $1.80 $1.06 $1.64 1,851,456
----------------------------------------------------------------------------------------------------------------------
March 31, 2000 $2.05 $0.90 $1.15 1,349,905
----------------------------------------------------------------------------------------------------------------------
April 30, 2000 $1.20 $0.60 $0.70 332,300
----------------------------------------------------------------------------------------------------------------------
May 31, 2000 $0.85 $0.50 $0.58 626,562
----------------------------------------------------------------------------------------------------------------------
June 30, 2000 $0.69 $0.46 $0.47 1,852,074
------------------------------ ----------------- ----------------------- ---------------------- ----------------------
</TABLE>
As of June 30, 2000 there were approximately 229 registered shareholders of
record of the Company's common stock, of which 1 is a clearing house for the
brokerage firms. There are 46 registered Canadian stockholders and 169
registered U.S. stockholders.
ITEM 2 -
LEGAL PROCEEDINGS
The Company is not currently a party to any material pending or threatened legal
proceedings.
ITEM 3 -
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
33
<PAGE>
ITEM 4 -
RECENT SALES OF UNREGISTERED SECURITIES
Prior to May 9, 2000, the Company was a corporation organized under the laws of
British Columbia, Canada. Sales of securities by the Company prior to that date
outside the United States were made in accord with applicable laws and
regulations in Canada and British Columbia, including the requirements of the
Canadian Venture Exchange (formerly known as the Vancouver Stock Exchange).
Incentive Stock Options. To date, employees, all based outside the United
States, have exercised incentive stock options issued in accord with Canadian
law for a total of 540,000 shares of common stock. Subsequent to May 9, 2000,
such options are to be exercised in reliance upon Regulation S under the
Securities Act of 1933 (the "Act") (unless an effective registration statement
is in effect).
In September 1999, the Company conducted a private placement of 1,500,000
special warrants at Cdn $0.25 per special warrant (involving no known U.S.
residents). Each special warrant was convertible, without further consideration,
into one unit, each unit comprising one common share and one non-transferable
share purchase warrant entitling the holder thereof to purchase an additional
share of the Company at a price of Cdn $0.50 per share if exercised in the first
year and at a price of Cdn $0.75 if exercised in the second year. These special
warrants were exercised April 20, 2000, resulting in the issuance of 1,500,000
common shares of the Company and 1,500,000 stock purchase warrants. Shares to be
issued upon the exercise of the outstanding warrants will be issued in reliance
upon Regulation S or other available exemption from registration (unless an
effective registration statement is in effect).
Sportslink Acquisition. As described in greater detail under "Certain
Relationships and Related Transactions" above, the Company acquired Sportslink
Direct Marketing Ltd. ("Sportslink"). In consideration for all of the equity in
Sportslink, the Company issued 2,300,000 shares of common stock, warrants to
acquire an additional 500,000 shares of common stock (exercisable without
additional consideration) and options for an additional 400,000 shares of common
stock, exercisable for five years at Cdn $0.28 per share. The transaction
involved no known U.S. residents. The acquisition agreement was entered into as
of September 3, 1999. The transaction closed on December 20, 1999. Shares to be
issued upon the exercise of the outstanding warrants and options will be issued
in reliance upon Regulation S or other available exemption from registration
(unless an effective registration statement is in effect).
In connection with the Sportslink acquisition, the Company also issued 120,000
special warrants as a finder's fee (to a Canadian resident) in November 1999.
These special warrants entitle the holder to acquire, upon exercise, 120,000
common shares for no additional consideration. The special warrants were
exercised April 20, 2000, resulting in the issuance of 120,000 common shares.
In February 2000, the Company conducted a private placement of 1,200,000 special
warrants at Cdn $0.50 per special warrant (involving one known U.S. resident).
Each special warrant was
34
<PAGE>
convertible, without further consideration, into one unit, each unit
comprising one common share and one non-transferable share purchase warrant
entitling the holder thereof to purchase an additional share of the Company
at a price of Cdn $0.50 per share if exercised in the first year and at a
price of Cdn $0.65 if exercised in the second year. These special warrants
were exercised April 20, 2000, resulting in the issuance of 1,200,000 common
shares of the Company and 1,200,000 stock purchase warrants. One purchaser of
the special warrants was a U.S. resident. The sale to that resident was made
in reliance upon Regulation D. Shares to be issued upon the exercise of the
outstanding warrants will be issued in reliance upon Regulation S and/or
Regulation D or other available exemption from registration (unless an
effective registration statement is in effect).
In July 2000, the Company conducted a private placement of 1,000,000 special
warrants at a price of Cdn $0.50 per special warrant (involving no known U.S.
residents). Each special warrant is convertible, without further consideration,
into one unit, each unit comprising one common share and one non-transferable
share purchase warrant entitling the holder to acquire one further common share
of the Company at a price of $0.55 per share for two years. The special
warrants, the share purchase warrants and the common stock issuable upon
exercise of the warrants are being and will be issued in reliance upon
Regulation S or other available exemption from registration (unless an effective
registration statement is in effect).
ITEM 5 -
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-laws provide that directors and officers shall be indemnified
by the Company to the fullest extent authorized by Delaware law, as it now
exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with services for or on behalf of the Company.
The By-laws also authorize the Company to enter into one or more agreements with
any person that provide for indemnification greater or different from that
provided in the By-laws. To the extent that indemnification for liabilities
arising under the Securities Act may be permitted for directors, officers and
controlling persons of the Company, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
PART F/S
CONSOLIDATED FINANCIAL STATEMENTS
Filed as Part F/S of this registration statement on Form 10-SB are the following
financial statements:
Consolidated balance sheet of Airbomb.com Inc. (formerly Airbomb.com Marketing
Ltd.; formerly Fedora Industries Inc.) as of March 31, 1999 and 2000;
35
<PAGE>
Related consolidated statements of operations and deficit, stockholder' equity
(deficit) and cash flows for the fiscal years ended March 31, 1999 and 2000, and
for the period June 19, 1997 (inception) through March 31, 1998; and
The Independent Auditors' Report of Morgan and Company, dated June 16, 2000
relating to the foregoing financial statements.
PART III
ITEM 1.
INDEX TO EXHIBITS
Charter and By-Laws
2.1 Certificate of Incorporation filed with the State of Delaware on
May 9, 2000.
2.2 By-Laws of the Company
Instruments Defining the Rights of Security Holders
3.1 Form of Special Warrants issued for 1,500,000 shares in September 1999.
3.2 Form of Special Warrants issued for 1,200,000 shares in February 2000.
3.3 Form of Special Warrants issued for 1,000,000 shares in July 2000.
Material Contracts
6.1 Form of Incentive Stock Option Agreement.
6.2 Acquisition Agreement (Share Purchase Agreement) for Sportslink Direct
Marketing Ltd. dated September 3, 1999.
6.3 Amendment Agreement to Share Purchase Agreement for Sportslink Direct
Marketing Ltd. dated December 9, 1999.
6.4 Employment Agreement with David Houston dated August 1, 1999.
Additional Exhibits
12.1 Notice of Extraordinary General Meeting, Information Circular for an
Extraordinary General Meeting and Minutes of Meeting held February 16,
2000.
ITEM 2.
36
<PAGE>
DESCRIPTION OF EXHIBITS
See the descriptions provided above.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
AIRBOMB.COM INC.
Date: July 24, 2000 By: /s/ David Houston
-------------------------------------------
Title: President
37
<PAGE>
AIRBOMB.COM MARKETING LTD.
(FORMERLY FEDORA INDUSTRIES INC.)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(STATED IN U.S. DOLLARS)
38
<PAGE>
AUDITORS' REPORT
To the Shareholders
Airbomb.com Marketing Ltd.
We have audited the consolidated balance sheets of Airbomb.com Marketing Ltd.
as at March 31, 2000 and 1999, and the consolidated statements of operations
and deficit, stockholders' equity, and cash flows for the years ended March
31, 2000 and 1999, and for the period ended March 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at March 31, 2000
and 1999, and the results of its operations and cash flows for the years ended
March 31, 2000 and 1999, and for the period ended March 31, 1998, in accordance
with U.S. generally accepted accounting principles applied on a consistent
basis.
Vancouver, Canada. /s/ Morgan & Company
June 16, 2000 Chartered Accountants
COMMENTS BY INDEPENDENT AUDITORS FOR U.S. READERS ON
CANADA - U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by significant uncertainties such as those described in
Note 1 of the consolidated financial statements. Our report to the shareholders,
dated June 16, 2000, is expressed in accordance with Canadian reporting
standards which do not permit a reference to such an uncertainty in the
auditors' report when the uncertainty is adequately disclosed in the financial
statements.
Vancouver, Canada. /s/ Morgan & Company
June 16, 2000 Chartered Accountants
39
<PAGE>
AIRBOMB.COM MARKETING LTD.
(FORMERLY FEDORA INDUSTRIES INC.)
CONSOLIDATED BALANCE SHEET
(STATED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
MARCH 31
2000 1999
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 267,050 $ 3,987
Accounts receivable 32,154 6,563
Inventory 141,106 54,468
Prepaid expenses and deposits 11,566 -
---------------------------------
451,876 65,018
CAPITAL ASSETS (Note 4) 93,745 5,765
---------------------------------
$ 545,621 $ 70,783
--------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 103,247 $ 64,837
Current portion of loans and advances payable 70,650 32,551
---------------------------------
173,897 97,388
LOANS AND ADVANCES PAYABLE (Note 5) 17,149 -
---------------------------------
191,046 97,388
---------------------------------
SHAREHOLDERS' EQUITY (DEFICIENCY)
SHARE CAPITAL (Note 6)
Authorized:
March 31, 2000
100,000,000 common shares without par value
March 31, 1999
10,000,000 Class A voting common shares without par
value
10,000,000 Class B non-voting common shares without
par value
10,000,000 Class C non-voting common shares without
par value
Issued and Outstanding:
8,315,462 common shares at March 31, 2000 and
100 Class A voting common shares at March 31, 1999 179,610 70
40
<PAGE>
SPECIAL WARRANTS (Note 7) 700,898 -
DEFICIT (525,933) (26,675)
---------------------------------
354,575 (26,605)
---------------------------------
$ 545,621 $ 70,783
====================================================================================================================
Approved by the Directors:
/s/ David Houston /s/ Dennis Higgs
-------------------------------------------------------- --------------------------------------------------
</TABLE>
41
<PAGE>
AIRBOMB.COM MARKETING LTD.
(FORMERLY FEDORA INDUSTRIES INC.)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(STATED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
MARCH 31 MARCH 31 MARCH 31
2000 1999 1998
--------------------------------------------------------------------------------------------------------------------
(Note 10)
<S> <C> <C> <C>
Sales $ 414,212 $ 346,647 $ 80,699
---------------------------------------------------
Cost Of Sales
OPENING INVENTORY 54,468 11,794 -
PURCHASES 597,669 332,260 91,014
LESS: ENDING INVENTORY (141,106) (54,468) (11,794)
---------------------------------------------------
COST OF SALES 511,031 289,586 79,220
---------------------------------------------------
Gross Profit (Loss) (96,819) 57,061 1,479
---------------------------------------------------
Expenses
ADVERTISING AND PROMOTION 31,462 3,247 2,495
AMORTIZATION 11,604 2,736 1,191
AUTO AND TRAVEL 16,208 2,414 1,286
BANK CHARGES, INTEREST AND FOREIGN EXCHANGE 30,168 907 588
CONSULTING 20,652 12,900 4,339
INVESTOR RELATIONS 28,716 - -
MANAGEMENT FEES 5,160 4,500 714
OFFICE AND SUNDRY 25,400 2,846 8,338
PROFESSIONAL FEES 62,860 1,975 3,082
REGULATORY AND TRANSFER AGENT 5,335 - -
RENT AND UTILITIES 18,687 4,643 1,321
TELEPHONE AND INTERNET 20,052 11,119 5,819
WAGES AND CONTRACT LABOR 126,135 58,755 -
---------------------------------------------------
402,439 56,042 29,173
---------------------------------------------------
Net Income (Loss) For The Period (499,258) 1,019 (27,694)
Deficit, Beginning Of Period (26,675) (27,694) -
---------------------------------------------------
Deficit, End Of Period $ (525,933) $ (26,675) $ (27,694)
====================================================================================================================
Loss Per Share $ (0.06) $ 0.01 $ (0.01)
====================================================================================================================
Weighted Average Shares Outstanding 8,014,212 100 100
====================================================================================================================
</TABLE>
42
<PAGE>
AIRBOMB.COM MARKETING LTD.
(FORMERLY FEDORA INDUSTRIES INC.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
MARCH 31, 2000
(STATED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
COMMON SHARES SPECIAL WARRANTS
----------------------------------------------------------
NUMBER AMOUNT NUMBER AMOUNT DEFICIT TOTAL
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issue of common shares 100 $ 70 - $ - $ - $ 70
Loss for the period - - - - (27,694) (27,694)
-------------------------------------------------------------------------------------------
Balance, March 31, 1998 100 70 - - (27,694) (27,624)
Net income for the year - - - - 1,019 1,019
-------------------------------------------------------------------------------------------
Balance, March 31, 1999 100 70 - - (26,675) (26,605)
Adjustment to number of common
shares issued and
outstanding as a result of
the reverse take-over
transaction
Sports Link Direct
Marketing Ltd. (100) - - - - -
Airbomb.com Marketing Ltd. 5,412,962 - - - - -
Ascribed value of common shares
and special warrants issued
in connection with the
acquisition of
Sports Link Direct
Marketing Ltd. 2,300,000 63,479 620,000 35,849 - 99,328
Issue of common shares 602,500 116,061 - - - 116,061
Issue of special warrants - - 2,700,000 665,049 - 665,049
43
<PAGE>
Loss for the year - - - - (499,258) (499,258)
-------------------------------------------------------------------------------------------
Balance, March 31, 2000 8,315,462 $ 179,610 3,320,000 $ 700,898 $ (525,933) $ 354,575
===========================================================================================
</TABLE>
44
<PAGE>
AIRBOMB.COM MARKETING LTD.
(FORMERLY FEDORA INDUSTRIES INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(STATED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
MARCH 31 MARCH 31 MARCH 31
2000 1999 1998
--------------------------------------------------------------------------------------------------------------------
(Note 10)
<S> <C> <C> <C>
Cash Flows From Operating Activities
NET INCOME (LOSS) FOR THE PERIOD $ (499,258) $ 1,019 $ (27,694)
ADJUSTMENT FOR:
AMORTIZATION 11,604 2,736 1,191
--------------------------------------------------
(487,654) 3,755 (26,503)
CHANGES IN NON-CASH WORKING CAPITAL
Increase in accounts receivable (19,462) (6,563) -
INCREASE IN INVENTORY (86,638) (42,674) (11,794)
INCREASE (DECREASE) IN PREPAID EXPENSES AND DEPOSITS 60,817 - -
INCREASE (DECREASE) IN ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES (25,460) 30,790 34,047
--------------------------------------------------
(558,397) (14,692) (4,250)
--------------------------------------------------
Cash Flows From Investing Activities
PURCHASE OF CAPITAL ASSETS (24,089) (2,866) (6,826)
ACQUISITION OF SUBSIDIARY, NET OF CASH ACQUIRED
(NOTE A) (52,076) - -
--------------------------------------------------
(76,165) (2,866) (6,826)
--------------------------------------------------
Cash Flows From Financing Activities
Issue of common shares 116,131 - 70
ISSUE OF SPECIAL WARRANTS 665,049 -
LOANS PAYABLE 116,445 21,545 11,006
--------------------------------------------------
897,625 21,545 11,076
--------------------------------------------------
Net Increase In Cash 263,063 3,987 -
Cash, Beginning Of Period 3,987 - -
--------------------------------------------------
Cash, End Of Period $ 267,050 $ 3,987 $ -
====================================================================================================================
</TABLE>
45
<PAGE>
AIRBOMB.COM MARKETING LTD.
(FORMERLY FEDORA INDUSTRIES INC.)
NOTE TO CONSOLIDATED STATEMENT OF CASH FLOWS
(STATED IN U.S. DOLLARS)
A. ACQUISITION OF SUBSIDIARY
During the year ended March 31, 2000, the Company acquired 100% of the
issued and outstanding shares of Sportslink Direct Marketing Ltd. (see Note
3). The fair values of assets acquired and liabilities assumed were as
follows:
<TABLE>
<S> <C>
Cash $ 47,708
Total assets other than cash 335,016
Total liabilities (183,612)
----------------
Total purchase price 199,112
Less: Cash of subsidiary (47,708)
----------------
151,404
Less: Portion of purchase price paid by issuing
common shares and special warrants (99,328)
----------------
Cash paid net of cash acquired $ 52,076
================
</TABLE>
46
<PAGE>
AIRBOMB.COM MARKETING LTD.
(FORMERLY FEDORA INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(STATED IN U.S. DOLLARS)
1. NATURE OF OPERATIONS
Airbomb.com Marketing Ltd., through its subsidiary, Sportslink Direct
Marketing Ltd., is in the business of retailing sporting goods, specifically
bicycles, through the Internet. Sportslink Direct Marketing Ltd. markets
products acquired from a variety of suppliers, and also distributes its own
"Airbomb" line of products, which are acquired from established manufacturers
and labelled with the Company's "Airbomb label".
These financial statements have been prepared on the basis of accounting
principles applicable to a going concern which assumes the realization of assets
and discharge of liabilities in the normal course of business. During the year
ended March 31, 2000, the Company incurred a loss of $499,258. The Company's
ability to continue its operations on a going concern basis is dependent upon
obtaining additional financing and the support of creditors. There is no
assurance that the Company will be successful in achieving any, or all, of these
objectives over the coming year. These financial statements do not give effect
to any adjustments that would be necessary should the Company be unable to
continue as a going concern.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Consolidation
These financial statements include the accounts of the Company and its wholly
owned Canadian subsidiary, Sportslink Direct Marketing Ltd.
b) Inventory
Inventory is stated at the lower of cost or net realizable value.
c) Revenue Recognition
Revenue from sale of products is recognized at the time of shipment.
d) Amortization of Capital Assets
Computers and office furniture and equipment are stated at cost, amortization is
provided at the following rates:
Computer equipment 30% on the declining balance method
Computer software 100% on the declining balance method
Furniture and equipment 20% on the declining balance method
Goodwill related to the acquisition of Sportslink Direct Marketing Ltd. is
recorded at cost and will be amortized in a straight line basis over three
years.
47
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
e) Foreign Currency Translation
The Company's functional currency is the U.S. dollar. Transactions in foreign
currencies are translated at the exchange rates in effect on the transaction
dates. Monetary assets and liabilities resulting from such transactions are
adjusted to reflect the exchange rates in effect at the balance sheet date and
the resulting gain or loss is recognized in the statement of earnings.
f) Non-Monetary Transactions
Shares of common stock of the Company issued for non-monetary consideration are
valued at the quoted market price per share at the close of trading on the date
of completion of the transaction except for those circumstances where, in the
opinion of the Company and due to the nature of the transaction, the trading
price does not fairly represent the value of the transaction. In such
circumstances, the value of the shares is determined based on the estimated fair
value of the consideration received.
g) Income Taxes
The Company has adopted Statement of Financial Accounting Standards No. 109 -
"Accounting for Income Taxes" (SFAS 109). This standard requires the use of an
asset and liability approach for financial accounting and reporting on income
taxes. If it is more likely than not that some portion, or all, of a deferred
tax asset will not be realized, a valuation allowance is recognized.
h) Financial Instruments
The Company's financial instruments consist of cash and accounts payable.
Unless otherwise noted, it is management's opinion that this Company is not
exposed to significant interest or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate their
carrying values, unless otherwise noted.
i) Use of Estimates
The preparation of the 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 at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting
48
<PAGE>
period. By their nature, these estimates are subject to measurement
uncertainty, and the effect on the financial statements of changes in such
estimates in future periods could be significant.
j) Stock Based Compensation
The Company measures compensation cost for stock based compensation using the
intrinsic value method of accounting as prescribed by A.P.B. Opinion No. 25 -
"Accounting for Stock Issued to Employees". The Company has adopted those
provisions of Statement of Financial Accounting Standards No. 123 - "Accounting
for Stock Based Compensation", which requires disclosure of the pro-forma effect
on net earnings and earnings per share as if compensation cost had been
recognized based upon the estimated fair value at the date of grant for options
awarded.
k) Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding during the period plus common share equivalents, such as options,
warrants and certain convertible securities. This method requires primary
earnings per share to be computed as if the common share equivalents were
exercised at the beginning of the period or at the date of issue, and as if the
funds obtained thereby were used to purchase common shares of the Company at its
average market value during the period.
3. ACQUISITION OF SUBSIDIARY
Effective December 20, 1999, Airbomb.com Marketing Ltd. (Airbomb) acquired
all of the issued and outstanding shares of Sportslink Direct Marketing Ltd.
(Sportslink) for a cash payment of $36,523, and the issuance of 2,300,000
common shares and 620,000 special warrants exercisable without additional
consideration. The transaction, which is referred to as a "reverse
take-over", has been treated for accounting purposes as an acquisition by
Sportslink of the net assets and liabilities of Airbomb.
Control of the net assets and liabilities of Airbomb was acquired for total
consideration of $199,112, representing the fair value of the net assets of
Airbomb. Sportslink is deemed to be the purchaser for accounting purposes and
accordingly its net assets and liabilities are included in the balance sheet at
their previously recorded amounts.
49
<PAGE>
3. ACQUISITION OF SUBSIDIARY (Continued)
The acquisition is summarized as follows:
<TABLE>
<S> <C> <C>
Current assets (including cash of $47,708) $ 307,229
Current liabilities $ 85,784
Share subscriptions received 97,828 183,612
--------------------------------
123,617
Excess of cost of shares over assigned values of net assets
and liabilities acquired 75,495
----------------
$ 199,112
================
Consideration given at fair value
Cash and acquisition costs $ 99,784
Issue of common shares and special warrants 99,328
----------------
$ 199,112
================
</TABLE>
4. CAPITAL ASSETS
Capital assets and related accumulated amortization consist of the
following:
<TABLE>
<CAPTION>
2000 1999
--------------------------------------------------- --------------
ACCUMULATED NET BOOK Net Book
COST AMORTIZATION VALUE Value
---------------------------------------------------- --------------
<S> <C> <C> <C> <C>
Computer equipment $ 24,865 $ 5,733 $ 19,132 $ 4,061
Computer software 2,475 2,219 256 274
Furniture and equipment 6,355 1,202 5,153 1,430
---------------------------------------------------- --------------
33,695 9,154 24,541 5,765
Goodwill 75,495 6,291 69,204 -
---------------------------------------------------- --------------
$ 109,190 $ 15,445 $ 93,745 $ 5,765
==================================================== ==============
</TABLE>
50
<PAGE>
5. LOANS AND ADVANCES PAYABLE
<TABLE>
<CAPTION>
2000 1999
-----------------------------
<S> <C> <C>
Loans payable due May 8, 2001, with interest at 12% per
annum commencing November 8, 1999 $ 17,149 $ -
Loans and advances payable to a director, with no specified
terms of repayment 70,650 32,551
-----------------------------
87,799 32,551
Less: Current portion 70,650 32,551
-----------------------------
$ 17,149 $ -
=============================
</TABLE>
6. SHARE CAPITAL
As at March 31, 2000, there were outstanding incentive stock options for
the purchase of:
170,000 common shares at $0.73 CDN to January 27, 2005
105,000 common shares at $0.81 CDN to January 28, 2005
167,000 common shares at $0.45 CDN to November 11, 2004
166,000 common shares at $0.28 CDN to December 20, 2004
125,000 common shares at $1.31 CDN to March 1, 2005
100,000 common shares at $0.59 CDN to January 25, 2005
25,000 common shares at $1.43 CDN to February 18, 2005
10,000 common shares at $0.29 CDN per share to April 8, 2004
The Company's pro forma information pursuant to SFAS 123 is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-----------------------------------------------
<S> <C> <C> <C>
Pro forma net income (loss) $ (934,342) $ 1,019 $ (27,694)
Pro forma net income (loss) per common share $ (0.12) $ 0.01 $ (0.01)
</TABLE>
51
<PAGE>
6. SHARE CAPITAL (Continued)
Transactions involving stock options are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
STOCK PRICE
OPTIONS OF OPTIONS
OUTSTANDING OUTSTANDING
----------------------------------
<S> <C> <C>
Adjustment to stock options outstanding as a result of the reverse
take-over transaction 483,000 $ 0.34 CDN
Granted 925,000 0.63 CDN
Exercised (540,000) 0.28 CDN
----------------------------------
Balance, March 31, 2000 868,000 $ 0.62 CDN
==================================
</TABLE>
Information concerning currently outstanding and exercisable stock options:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March
31, $0.28 - $1.43 868,000 4.77 years $0.62 868,000 $0.62
2000 CDN CDN CDN
</TABLE>
7. SPECIAL WARRANTS
a) As a result of private placements, the Company has, at March 31, 2000,
the following special warrants outstanding:
52
<PAGE>
i) 1,500,000 special warrants issued at a price of $0.25 CDN per
special warrant. Each special warrant is exercisable without
additional consideration into one common share and one share
purchase warrant entitling the holder to purchase an additional
common share at $0.50 CDN per share to January 5, 2001, or at
$0.75 CDN per share to January 5, 2002.
ii) 1,200,000 special warrants issued at a price of $0.50 CDN per
special warrant. Each special warrant is exercisable without
additional consideration into one common share and one share
purchase warrant entitling the holder to purchase an additional
common share at $0.50 CDN per share to February 21, 2001, or at
$0.75 CDN per share to February 21, 2002.
b) 620,000 special warrants issued in connection with the Sportslink
Direct Marketing Ltd. acquisition (Note 3).
8. FINANCIAL INSTRUMENTS
The carrying amounts for cash, accounts receivable, prepaid expenses and
deposits, accounts payable and accrued liabilities, and loans payable
approximate their respective fair values due to their short term maturity or
capacity of prompt liquidation.
9. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect the entity, including
those related to customers, suppliers, or other third parties, have been fully
resolved.
10. COMPARATIVE FIGURES
Sportslink Direct Marketing Ltd. was incorporated and commenced operations on
June 19, 1997. The comparative figures for March 31, 1998 are for the period
from commencement of operations, June 19, 1997 to March 31, 1998.
11. SUBSEQUENT EVENTS
Subsequent to March 31, 2000:
a) The Company issued 2,820,000 common shares on the exercise of the
special warrants described in Note 6.
b) The Company issued 8,000 common shares for cash proceeds of $1,514
($2,240 CDN) on the exercise of incentive stock options.
53
<PAGE>
11. SUBSEQUENT EVENTS (Continued)
c) The Company granted incentive stock options for the purchase up to
40,000 common shares at $0.49 CDN per share to June 8, 2002 as to
15,000 common shares and June 8, 2005 as to 25,000 common shares.
d) The Company has arranged, subject to regulatory approval, the private
placement of 1,000,000 special warrants at a price of $0.50 CDN per
special warrant. Each special warrant is exercisable without
additional consideration into one common share and one share purchase
warrant entitling the holder to purchase an additional common share
at $0.55 CDN per share for a two year period.
e) The Company's name was changed to Airbomb.com Inc., the authorized
share capital was changed to 100,000,000 shares with a par value of
$0.001 U.S., and the Company became domesticated as a Delaware
Corporation.
54
