As filed with the Securities and Exchange Commission on March 30, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ending December 31, 1999 Commission File No. 001-15627
eieiHome.com Inc.
(Exact name of registrant as specified in charter)
Delaware 13-4103407
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
67 Wall Street , Suite 2411 212-344-0351
New York, New York 10005 (Registrant's Telephone No.
(Address of Principal Executive Offices) incl. area code)
Securities registered pursuant to None
Section 12(b) of the Act:
Securities registered pursuant to Common Stock, par value $0.001
Section 12(g) of the Act:
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes ( ) No (X)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation SB is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-K SB(X).
For the fiscal year ended December 31, 1999, the Company's revenues were
$59,759.
Based on the closing high bid price on March 24, 2000 of $2.75 per share of
common stock, as reported by the National Quotation Bureau on the "pink sheets",
the aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant was approximately $50,046,618.
On March 24, 2000, the number of shares outstanding of the registrant's
Common Stock was 18,198,770.
Transitional Small Business Disclosure Format (Check One): Yes No X
<PAGE>
Part I
Item 1. Description of Business.
eieiHome.com Inc. ("eieiHome or the "Company") operates an Internet
service, information and e-commerce web site, providing information and related
products and services for homeowners, home buyers, and home service providers.
This Internet service was introduced by the Company's wholly owned Canadian
subsidiary, also called eieiHome.com Inc. ("eieiHome (Canada)"), in two Canadian
test markets, Vancouver and Toronto, in June 1999 with the intent of expanding
to additional metropolitan markets in Canada and the United States over the next
year. The Company sells advertising space to national and local home service
providers and manufacturers of home-related products. For local and national
accounts, the Company also provides Internet web hosting, web page design,
e-commerce solutions, and e-mail services.
Prior to February 2000, eieiHome (Canada) was a wholly owned subsidiary
of the Company (then called HyComp, Inc.), which was incorporated in the
Commonwealth of Massachusetts in 1969. On February 29, 2000 a special meeting of
the shareholders of the Company was held in Boston, Massachusetts. At the
meeting, the Company's shareholders approved its reincorporation as a Delaware
company by merging it with a Delaware company called eieiHome.com Inc. formed on
February 25, 2000. As a result of the reincorporation, the Company's name
changed from HyComp, Inc. to eieiHome.com Inc., the par value of its common
stock changed and the number of shares which the Company is authorized to issue
increased from 20,000,0000 shares of common stock, par value $0.01, to
75,000,000 shares of common stock, par value $0.001, the 2000 stock option plan
was adopted, and all of the Company's directors were re-elected. Accordingly, as
of February 29, 2000 eieiHome.com Inc., an Ontario (Canada) company, is the
wholly owned subsidiary of eieiHome.com Inc., a Delaware company.
Through March 31, 1999, the Company (then called HyComp, Inc.) was a
designer, manufacturer and distributor of thin film hybrid circuits, thin film
resistor networks and various thin film components mainly used for military
purposes. In March 1999, HyComp, Inc. sold all of its assets, excluding cash and
receivables. The buyer assumed all liabilities other than commercial and
inter-company debt.
On October 14, 1999, HyComp, Inc. acquired all of the issued and
outstanding common stock of eieiHome (Canada) from Simmonds Capital Limited
("SCL"). Following the transaction, eieiHome (Canada) was considered the
acquiring party and the surviving accounting entity because the former
stockholders of eieiHome (Canada) received an amount of voting shares of the
combined company which constituted an effective controlling interest in the
combined company. Accordingly, the transaction was accounted for as a reverse
acquisition and the discussion in "Item 6. Management's Discussion and Analysis
or Plan of Operation" and the financial statements contained in this Form 10-KSB
present the historical financial position and results of operations of eieiHome
(Canada) rather than the historical financial position and results of operations
of HyComp, Inc. The acquisition of eieiHome (Canada) formally closed on October
14, 1999.
eieiHome (Canada) was incorporated as Chargnet Inc. in June 1998 in the
province of Ontario, Canada. It operated as Chargnet until June 20,1999 when it
was acquired by SCL and its name was changed to eieiHome.com Inc. eieiHome
(Canada) is now a wholly owned subsidiary of eieiHome and continues to operate
the Company's Internet web site in Canada.
1. Products and Markets
eieiHome operates an Internet web site providing information for
homeowners with local references for home products and services. eieiHome
distinguishes itself from other web sites by being both category-specific in its
information, and local in its directory references. Other Internet web sites
tend to be either broad in subject scope with little, if any, local content.
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The Company expects to receive revenue from the following sources:
o national advertising accounts, which purchase advertising and
exclusive sponsorship in one or more categories or
sub-categories of home service or home products;
o local advertising accounts, which pay monthly listing fees,
monthly advertising fees as well as fees for the design of
customized web pages or for customized e-commerce solutions.
o banner advertising, which pay monthly fees appropriate for the
prevailing level of visits per day or month;
o design projects, which pay a substantial up-front fee and
monthly maintenance fees; and
o e-commerce capability, which the Company anticipates will
provide additional revenue from the sale of home-related
products.
The Company currently has a direct sales force in Canada, which targets
national accounts for sponsorship and e-commerce programs. A local commission
sales force is used to solicit listing and advertising revenue for local
accounts. While the eieiHome web site design and database is national in scope,
the service is being introduced on a market-by-market basis. Promotion of the
eieiHome web site to Canadian consumers began in June 1999 in Toronto, Ontario
and Vancouver, British Columbia, with a radio and billboard advertising
campaign. eieiHome plans to expand its service to additional Canadian markets
and to introduce its services into selected US cities within the next year.
These plans are subject to both the successful completion of financing and the
firm commitments of national advertisers in each target market. It is not
certain that either will be available.
The eieiHome web site has been developed with a number of proprietary
designs and systems including the local mapping system, the user interface
designed by ColdFusion, and the database. Approximately one-half of the web site
is devoted to home-related information, including home tips and do-it-yourself
information, while the other half lists directory information for local service
providers and retail outlets of interest to homeowners. The site is divided into
160 distinct home-related categories. These categories are organized under five
main sections: Real Estate, Renovation, Decorating, Maintenance, and
Electronics. For advertisers, each category is currently offered on an exclusive
basis, limited to one national advertiser plus three local account references
per category per market. In addition to information and directory service, the
eieiHome web site offers a number of other features to promote user loyalty to
increase the frequency of visits by consumers and advertisers. These include:
e-mail service for local accounts, group purchasing discount benefits for local
accounts to purchase business products or services from third party providers,
discussion sites for consumers and service or product providers and a free local
classified advertising section for consumers.
2. Competition
In broad terms, eieiHome competes with all other web sites with
revenues based on advertising for the attention of consumers and available
Internet advertising spending. Distinct from other Internet information or
reference web sites, eieiHome is both category specific in its information,
home-related products and services, and local in its directory references. Other
Internet web sites tend to be either broader in subject scope, as a general
directory, or vertically narrower in subject scope with little if any local
content. The following are some of eieiHome's principal competitors:
o Homestore.com: Homestore.com is a real estate focused Internet web
site which provides information and references on a variety of
related topics including real estate listings, remodeling and home
improvement, home builders, and information for people relocating.
There is no third party advertising offered on the site, which
acts as a referral service.
o Improvenet: The Improvenet Internet web site provides information
and solicits quotes for home improvement and renovation projects.
<PAGE>
o Ourhouse.com: Ourhouse.com is a new home-related predominantly
e-commerce based Internet web site. Its most significant feature
is their partnership with ACE Hardware. Ourhouse.com primarily
promotes the ACE Hardware inventory.
o Home Depot: The Home Depot Internet web site provides value added
information on home-related products and is focused on the
do-it-yourself homeowner. The site primarily promotes the sale of
home building or hardware products through the local Home Depot
retail outlet.
o Sears: The Sears Internet web site provides home product and
service information. The focus is on selling products through
Sears retail outlets providing a telephone reference for Sears
home service products. Some products can be purchased on-line for
delivery in the continental U.S.
o Canadian Home Builders Association (CHBA): CHBA operates an
Internet web site which provides useful tips on how to secure a
contractor and negotiate a construction contract. The service is
provided free to consumers.
o Housenet: The Housenet Internet web site provides information on
12 home-related categories with an emphasis on gardening. It does
not offer local referrals for contractors or service providers.
o Service Directories: A number of companies such as Yellow Pages,
GE Bigfoot and AT&T provide on-line business directories. These
Internet web sites are similar to a telephone directory on-line,
with a broad listing of categories and limited value added
information for the consumer. There is no category exclusivity
offered to advertisers.
o City Guides: Most major metropolitan markets have established city
guide Internet web sites, in many cases owned by or affiliated
with a local newspaper. These sites typically provide a broad base
of local information, including weather and entertainment, as well
as lists of local merchants. They are not focused on home product
information or references.
Several of the Company's competitors have greater financial and marketing
resources. The competitors all have a market lead in the United States and
Canada, with an established or developing Internet web site and customer base.
The Company will depend for its competitive success on eieiHome's
ability to attract national and local advertiser support and to attract and
retain a consumer audience for its Internet web site. The Company hopes that the
potential size of the consumer base will interest advertisers and that the size
and relevance of the directory listing will attract consumers. Consequently,
when launching in a local market, the Company plans to explore a variety of
incentives, including free trial listings, to attract advertisers. The Company
intends to use local market mass media advertising plus strategic Internet
relationships to build consumer traffic to the site.
In 1999, the Company was dependent upon national account advertising
for approximately 69% of its revenue and its top three national accounts
represented approximately 54% of overall revenues. Most of the national accounts
have their own Internet web sites to promote their own brands and most also
advertise on other informational Internet web sites. As the Company's business
develops in each market, the Company anticipates that the proportion of its
revenue represented by local accounts and e-commerce will increase, and the
proportion of its revenue by advertising will also increase.
3. Suppliers
Employees on staff and consultants under contract design and maintain
the eieiHome Internet web site and database. The software used by eieiHome is
all from a single source by vendors who are recognized in the computer software
industry. The Company uses a variety of different vendors for its computers and
server platforms. Similarly, the Company has a variety of choices regarding its
web hosting. The company is in the process of transferring all server usage, for
e-mail, database and advertising, from outsource to in house.
<PAGE>
To the Company's knowledge all of the proprietary and third party
software that it uses is Year 2000 compliant. As of March 30, 2000, the Company
was not aware of any Year 2000 problems that had materially affected its systems
or operations. However, there remains some minimal risk that the Company may
still discover or experience serious unanticipated negative consequences or
material costs caused by undetected errors or defects in the technology used in
our internal systems or by Year 2000 deficiencies in the products from third
party suppliers. (see Item 6 - Year 2000 disclosure in the Management's
Discussion and Analysis or Plan of Operations.-
4. Patents and Trademarks
The Company holds a Canadian trademark for eieiHome. The US trademark
application is pending. Additional US trademark applications, for slogans, are
pending. The Company currently holds no patents for its intellectual property or
designs.
5. Employees
The Company currently has seventeen full time employees.
Item 2. Description of Property.
The Company occupies approximately 5,660 square feet of office space in Toronto,
Ontario, Canada under the terms of a three year lease with an option to renew
for an additional five year period. This is the location for web site and
database design and maintenance, national account sales, and customer service.
The Company currently maintains a temporary office in New York, New York and
intends to lease executive office premises in the United States during the next
year from which it will direct its North American operations.
Item 3. Legal Proceedings.
To the knowledge of the Company, there are no current or pending legal
proceedings to which the Company is a party other than the following.
The Company has been advised by MicroTel that a claim is being made
against MicroTel by SatCon for warranty reimbursement in connection with the
Asset Purchase Agreement by and between HyComp and HyComp Acquisition Corp.
dated March 31, 1999 (the "SatCon Sale").
Prior to the SatCon Sale, the Company, then a subsidiary of MicroTel,
manufactured products for sale to Honeywell International, Inc.
("Honeywell") in November and December of 1998 under purchase orders in the
amount of $157,859.80. The Company is advised that, after the consummation
of the SatCon Sale, MicroTel became aware of a claim by Honeywell that some
of the products were defective. On September 30, 1999, SatCon invoiced
MicroTel for $185,660.76 for costs it alleges it incurred in repairing the
defective products sold to Honeywell. MicroTel has agreed to accept
responsibility for this claim and to indemnify the Company should it be
found to be liable in any respect. The Company is advised that SatCon and
MicroTel are attempting to negotiate a settlement.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Board of Directors held a Special Meeting of Stockholders
on February 29, 2000 at the Marriott Boston, Copley Square, Boston Massachusetts
02116. The Company delivered to its stockholders a proxy statement, dated
February 7, 2000, detailing the Board of Directors' proposals, which is attached
as Exhibit 22.1 to this Form 10-KSB (the "Proxy Statement"). The shareholders
approved, in each case by the required number of affirmative votes, five
proposals. The proposals were:
(1) to change the jurisdiction of incorporation of the Company
from the Commonwealth of Massachusetts to the State of
Delaware by merging the Company with eieiHome.com Inc., a
company incorporated in Delaware and to
<PAGE>
be a wholly-owned subsidiary of the Company and, in connection
with the move, to adopt the Agreement and Plan of Merger
attached to the Proxy Statement as Appendix A (passed with
14,493,666 votes for, 2,251 votes against and 109,670
non-votes);
(2) to change the Company's name from HyComp, Inc. to eieiHome.com
Inc. (passed with 14,600,136 votes for and 5,451 votes
against);
(3) to increase the number of shares that the Company is
authorized to issue from 20,000,000 shares of common stock,
par value $0.01, to 75,000,000 shares of common stock, par
value $0.001 (passed with 14,490,616 votes for, 5,301 votes
against and 109,670 non-votes);
(4) to adopt the 2000 Stock Option Plan, as described in the Proxy
Statement (passed with 14,490,816 votes for, 5,101 votes
against and 109,670 non-votes);
(5) to re-elect the current directors of HyComp, Inc. (passed with
14,003,387 votes for, 2,200 votes against and 600,000
abstaining).
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The price per share of Company Common Stock was quoted on the NASD's OTC
Bulletin Board under the symbol "HYCP" prior to December 15, 1999 when the new
OTC Bulletin Board Eligibility Rule went into effect. This rule eliminates
listing of companies that were not previously subject to the reporting
requirements of the United States Securities and Exchange Commission. On January
19, 2000, the Company filed a registration statement on Form 10SB in order to
comply with the new reporting requirements. As the registration statement was
not effective prior to December 15, 1999, trading in shares of Company Common
Stock is currently being quoted in the "pink sheets" published by the National
Quotation Bureau, Inc. under its new name "eieiHome.com Inc." and its new
trading symbol, "EIEI". The Securities and Exchange Commission did not review
the Company's registration statement on Form 10SB and the Company anticipates
that it will be eligible for quotation on the NASD's OTC Bulletin Board shortly.
The following table sets forth for the periods indicated the high and low bid
prices for the Common Shares in U.S. Dollars. These quotations reflect only
inter-dealer prices, without retail mark-up, mark-down or commissions and may
not represent actual transactions.
Quarter Ended High Low
- ------------- ---- ---
March 31, 1998 $0.09375 $0.09375
June 30, 1998 $0.09375 $0.09375
September 30, 1998 $0.09375 $0.0625
December 31, 1998 $0.0625 $0.03125
March 31, 1999 $0.0500 $0.0300
June 30, 1999 $0.0500 $0.0400
September 30, 1999 $1.4375 $0.0400
December 31, 1999(1) $1.2500 $0.2500
March 24, 2000 $3.0000 $0.7500
(1) On December 15, 1999, the last date on which the Company Common Stock was
quoted on the NASD's OTC Bulletin Board, the closing sale price was
$1.2500. The high bid price reflected in the "pink sheets" between December
15, 1999 and December 31, 1999 was also $1.2500.
On March 24, 2000, the Company had approximately 330 shareholders of record. The
Company believes it has approximately 530 shareholders including holders whose
securities are held in street name or nominee accounts.
The Company does not expect to pay a cash dividend on its common stock in the
foreseeable future. Payment of dividends in the future will depend on the
Company's earnings and its cash requirements at that time.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
Overview
The Company is in its first stage of development and operates an
Internet web site for consumers seeking home-related information, products and
services.
The Company's business was originally conducted through its wholly
owned subsidiary, eieiHome (Canada), which launched the original Internet web
site in June, 1998 and re-launched an improved eieiHome.com Internet web site in
June, 1999. On June 21, 1999 eieiHome (Canada) launched a Canadian radio and
billboard advertising campaign in the Toronto and Vancouver markets.
On March 31, 1999, the Company (then known as HyComp, Inc.) determined
that it could no longer run its previous business at a profit and sold
substantially all of its assets and select liabilities to SatCon Technology
Corporation ("SatCon"). On October 14, 1999, HyComp, Inc. bought all of the
issued and outstanding shares of the capital stock of eieiHome (Canada) and a
$500,000 inter-company loan from SCL in exchange for 7.5 million newly issued
shares of the common stock of the HyComp, Inc., par value $0.01 ("Company Common
Stock") (1,125,000 of which were issued to each of Paul Dutton and Max Hahne,
the founders of eieiHome (Canada), in consideration for the cancellation of
their options to repurchase up to 30% of eieiHome (Canada)), a $500,000 demand
promissory note, a $2,000,000 convertible debenture and warrants to purchase up
to five million shares of Company Common Stock. The Company is now in the
process of raising the necessary funding to introduce the eieiHome.com Internet
web site in additional North American markets.
Results of Operations
Twelve months ended December 31, 1999
During the twelve month period ended December 31, 1999, the Company's
primary operations were conducted through its wholly owned subsidiary, eieiHome
(Canada). On June 21, 1999, eieiHome (Canada) (then known as Chargnet Inc.)
launched the Company's current Internet web site and on July 14, 1999 it changed
its name from Chargnet Inc. to eieiHome.com Inc. During the period from January
1, 1999 to June 21, 1999, Management concentrated on organizing and implementing
the advertising strategy and reconfiguring the design of the Internet web site.
On June 24, 1999, eieiHome (Canada) launched an innovative radio and billboard
advertising campaigns in the Canadian markets of Toronto, Ontario and Vancouver,
British Columbia capitalizing on the name change. These advertising campaigns
were considered by eieiHome (Canada) to be a pilot program in order to assess
the impact of advertising on the results of the business.
On February 1, 1999, eieiHome (Canada) moved to new office space
located at 590 King Street West in Toronto.
In May 1999, eieiHome (Canada) recruited a National Sales Manager to
begin organizing the local account sales force in Canada.
Revenues for the twelve month period ended December 31, 1999 were
$59,759, consisting of $41,301 from national advertising accounts, $14,679 from
local advertising accounts and $3,779 from web site design for third parties.
Operating expenses for the twelve month period ended December 31, 1999
were $1,148,389 consisting of employment and consulting costs and the initial
advertising campaign.
Depreciation of property and equipment and interest for the twelve
month period ended December 31, 1999 was $9,961 and $42,592, respectively.
The net loss for the twelve month period ended December 31, 1999 was
$1,141,183. The net loss per common share was $0.11.
<PAGE>
Period from June 25, 1998 (Inception) to December 31, 1998
For the period June 25, 1998 to December 31, 1998, management was
focused on constructing an improved Internet web site, building strategic
relationships with key national accounts and refining the business plan prior to
the relaunch of the Internet web site. The construction of the web site was
primarily technical in nature involving mapping systems and code structure.
Management required a minimum number of key national accounts present on the
Internet web site in order to build its reputation and was able to sign Coldwell
Banker, a national real estate business, during October 1998.
Revenues for the period June 25, 1998 to December 31, 1998 were $2,501
consisting primarily of a small group of paying national accounts. Most national
accounts were allowed to advertise on the Internet web site without charge on
the understanding that once a media advertising campaign was launched and
minimum levels of traffic on the Internet web site were achieved that monthly
advertising fees would start to be payable.
Operating expenses for the six month period ended December 31, 1998
were $120,182 with the bulk of these expenses allocated to the employment and
consulting costs of a small group of technicians required to build and make
improvements to the Internet web site.
The net loss for the period June 25, 1998 to December 31, 1998 was
$117,681.
Financial Condition
As at December 31, 1999
After launching the eieiHome Internet web site during the summer of
1999, the Company's balance sheet reflected a minimum level of operating assets
on December 31, 1999.
Total assets grew from $299 on December 31, 1998 to $51,086 on December
31, 1999. Current assets totaled $17,785 consisting primarily of account
receivable and cash. As at December 31, 1999 the Company possessed $33,301 in
capital assets consisting of furniture and computer equipment.
Current liabilities totaled $1,101,949 as at December 31, 1999 and
consisted primarily of a note for $500,000 payable to SCL, accounts payable and
accrued liabilities of $339,158 and deferred revenue of $2,696. Amounts due to
related parties consisted of $260,095 payable to SCL and its subsidiaries.
Senior subordinated convertible debentures totaled $110,500 as at
December 31, 1999.
The stockholders' equity deficit increased from $20,180 at December 31,
1998 to $3,161,363 as of December 31, 1999. This deficit increase is
attributable to operating losses by the Company during the year of $1,141,183
and the Company's issuance of a $2 million convertible debenture to SCL as part
of the eieiHome transaction, which was accounted for as a dividend.
The working capital deficit, excluding related party liabilities, at
December 31, 1999, was $324,069 indicating that additional funding will be
required by the Company in order to continue to operate and grow the business.
As at December 31, 1998
Due to the Company's operation of the original Chargnet Internet web
site and the concomitant lack of significant revenue to December 31, 1998, the
Company's balance sheet, as of that date, did not contain any capital assets.
Total assets as at December 31, 1998 were $299, total liabilities were
$20,479 and stockholders' equity consisted of a deficit of $20,180.
Total assets consisted of cash as of December 31, 1998. Liabilities
represented all accounts payable and accrued liabilities.
<PAGE>
Liquidity and Capital Resources
The significant losses and working capital deficit at December 31, 1999
have called into question the Company's ability to continue to operate as a
going concern. The Company's ability to fund losses arising from costs and
expenses exceeding revenue is connected to its ability to raise external
financing prior to achieving a break-even level of operations. The Company's
only internal source of funding is from its Internet web site, which has
currently only been introduced in two Canadian markets. At this time neither of
those markets has reached full maturity.
eieiHome (Canada) was historically funded by the initial capitalization
in June 1998 and thereafter by SCL until October 1999 when it became a
subsidiary of the Company.
Each new market entered by the Company will require substantial media
advertising prior to generating revenue. The Company will have to raise
sufficient financing to meet its advertising needs. Pilot advertising programs
carried out in Toronto and Vancouver have indicated that the perception of value
by local and national accounts is heightened with high-profile radio advertising
preceding the launch.
At December 31, 1999 the Company had raised long term financing of
$110,500 in connection with five year senior subordinated convertible
debentures. The debentures will be convertible into common stock of the Company
at the rate of $0.25 per share, and upon conversion each share will be
accompanied by a warrant to purchase one share of common stock of the Company
for $0.50 per share at any time over the next 3 years. The debentures will be
subordinate to any senior debt the Company may raise in the future. As of March
28, 2000, the Board of Directors had approved the issuance of debentures up to a
maximum of $2,500,000, of which $1,614,500 has been received.
As at March 28, 2000 the Due to Related Party indebtedness and $300,000
of the $500,000 note payable owed to SCL had been repaid from funds received
since January 1, 2000 in connection with the five year senior subordinated
convertible debentures. Under the terms of the note payable the full amount owed
to SCL was due and payable after the company had raised $1 million in new
financing.
The Company is in the process of organizing additional new financing
through either the issuance of equity securities or convertible debentures.
There can be no assurance that the Company will be successful in obtaining
funding as and when required.
Year 2000
Many older installed computer systems and software products are coded
to accept only two digit entries in the date code field and cannot distinguish
21st century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. If Year 2000 requirements
are not met, our software products and those of our suppliers could malfunction,
which could prevent or limit access to our online Internet site and could be
costly to remedy.
Year 2000 Assessment
The Company's principal operations are relatively new. so it does not
have the same level of exposure to Year 2000 issues as many older companies. As
a matter of strategic direction, the Company attempts to use only the most
recently released versions or models of in-house and third-party computer and
software products. As of March 30, 2000, the Company was not aware of any
material Year 2000 problems and, as a result of our internal testing, we believe
that our systems are Year 2000 compliant in all material respects. We have not
incurred material costs to date in our assessment of the Year 2000 issue, and
currently do not believe that the cost of additional actions will have a
material effect on our results of operations or financial condition. Although we
are not aware of any material operational issues or costs associated with
preparing our internal systems for the Year 2000, we may experience serious
unanticipated negative consequences or material costs caused by undetected
errors or defects in the technology used in our internal systems.
<PAGE>
Third Party Equipment and Software
In addition, we currently use third-party equipment, software and
content. While we believe that this equipment and the third party suppliers are
Year 2000 compliant and, as of March 31, 2000, the Company was not aware of any
material Year 2000 problems, failure of such third-party equipment, software or
content to operate properly with regard to the Year 2000 and thereafter could
require us to incur unanticipated expenses to remedy any problems. We are also
subject to external forces that might generally affect industry and commerce,
such as utility or telecommunications company Year 2000 failures and related
service interruptions.
Possible Consequences of Year 2000 Malfunctions
Despite efforts to address the Year 2000 risks, our business operations
could be adversely affected by Year 2000 problems. Any such Year 2000 problems
could result in:
o significant downtime for, or inaccuracies in, the Company's
Internet site or database, which could result in a loss of
users and sponsorship;
o an increase in the allocation of resources to address Year
2000 issues, which could result in decreased productivity in
our core operations; or
o an inability for consumers to access the Internet, which would
result in a loss of users and a corresponding reduction in
advertising revenue.
The occurrence of one or more of the foregoing could have a material adverse
effect on our business, results of operations, and financial condition. We do
not have a formal Year 2000 contingency plan in place, since we believe that the
most significant area of exposure is from third party vendors and suppliers, on
whose contingency plans we must rely. However, such contingency plans may not
adequately address Year 2000 risks.
<PAGE>
Item 7. Financial Statements
The following financial statements are filed as part of this Annual Report:
Independent Auditors' Report
Balance Sheet
Statement of Operations
Statement of Changes in Stockholders' (Deficit)
Statement of Cash Flows
Notes to Financial Statements
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Paul Hickey, 68, has been a Director of the Company since July, 1979. He was
appointed Chairman of the Company effective September 15, 1999. Mr. Hickey has
been an investment banker for over thirty-five years specializing in providing
financial and advisory services to middle market public and private companies.
Mr. Hickey also serves as a director on the boards of Gregory and Howe
Incorporated, American Homeowners Association and Diopsys, Inc. He has a BA
Degree from the College of William and Mary 1954.
Angelo G. MacDonald, 41, was appointed Chief Executive Officer and a Director of
the Company effective November 1, 1999. Mr. MacDonald holds a J.D. degree from
Villanova University School of Law. He is member of the bar in New York and New
Jersey, the Southern and Eastern federal districts of New York, the United
States Tax Court, the United States Court of International Trade, and the Court
of Appeals for the Armed Services. From 1986 to November 1999, Mr. MacDonald was
a Senior Trial Assistant District Attorney with the Office of the District
Attorney, Bronx County , New York City.
David C. O'Kell, 48, was appointed secretary and a Director of the Company
effective November 1, 1999. Mr. O'Kell is the Executive Vice President and
Secretary and a Director of SCL, a Toronto Stock Exchange listed company . Mr.
O'Kell joined SCL in July 1991 as Vice President Business Development. Prior to
joining SCL, Mr. O'Kell was the Vice President and Director of Business
Development with the Canadian head office of a multinational advertising agency.
Between September 1995 and November 1997, Mr. O'Kell served as the president and
a Director of Ventel, Inc., a Vancouver Stock Exchange listed venture capital
company. Mr. O'Kell resigned as a Director upon the acquisition by Ventel of
Fifty-Plus.net in June, 1999.
Lawrence Fox, 34, has been a Director of the Company since September 15, 1999.
Mr. Fox is an active private investor. He has provided merger and acquisition
advisory services, including structuring acquisitions and venture capital
investments to a number of public and private companies.
John G. Simmonds, 49, has been a Director of the Company since October 15, 1999.
Mr. Simmonds is the founder of SCL. Since 1991, Mr. Simmonds has served as
Chairman, President and Chief Executive Officer of SCL. SCL is a diversified
management company with strategic investments in contract manufacturing,
electronics distribution, wireless communications, and internet service markets
including both equity investments and wholly owned operations. From 1994 to
1996, Mr. John Simmonds served as Director and Chief Executive Officer of INTEK
Global Corporation (formerly Intek Diversified Corp.), a Nasdaq-listed
(Small-Cap) company. Intek is involved in the US Specialized Mobile Radio market
which owns and manages SMR licenses in the 200 MHz frequency. Between September
1995 and November 1997, Mr. Simmonds served as the Chairman and a Director of
Ventel Inc., a Vancouver Stock Exchange listed company. Ventel provides secured
loans to developing companies in the US SMR market. Mr. Simmonds resigned from
the Board of Directors of Intek during 1998 and resigned from the Board of
Directors of Ventel, upon the acquisition by Ventel of Fifty-Plus.net in June,
1999.
Gary N. Hokkanen, 44, was appointed Chief Financial Officer of the Company
effective November 1, 1999. Mr. Hokkanen's principal occupation is an accountant
and he holds a Certified Management Accountant ("CMA") designation from Society
of Management Accountants of Ontario. Mr. Hokkanen also is Vice President,
Finance/Chief Financial Officer of SCL. He has held this position since July
1997. For the period April 1996 to July 1997, Mr. Hokkanen was Treasurer of SCL.
For the period June 1994 to April 1996 he was Manager, Finance & Treasury. Prior
to June 1994, Mr. Hokkanen was Manager, Financial Planning & Analysis, with CUC
Broadcasting Limited ("CUC"). CUC, prior to being acquired by Shaw
Communications Inc., was a privately owned Canadian cable TV multiple system
operator.
<PAGE>
Item 10. Executive Compensation.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
Awards
Other Annual All Other
Name and Principal Year Salary Bonus Compensation Compensation
Position ($) ($) ($) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George Riley, President 1999 --- --- --- ---
and Chief Executive 1998 110,000 --- --- ---
Officer(1) 1997 110,000 --- --- ---
-
- -------------------------------------------------------------------------------------------------------------------
Gary N. Hokkanen, Chief 1999 --- --- ---
Financial Officer(2) 1998 --- --- ---
1997 --- --- ---
(-)
- -------------------------------------------------------------------------------------------------------------------
David C. O'Kell, 1999 --- --- ---
Secretary(2) 1998 --- --- ---
1997 --- --- ---
(-)
- -------------------------------------------------------------------------------------------------------------------
John G. Simmonds(2) 1999 --- --- ---
1998 --- --- ---
1997 --- --- ---
- -------------------------------------------------------------------------------------------------------------------
Angelo G. MacDonald, 1999 14,250 --- --- ---
Chief Executive Officer(3) 1998 --- --- --- ---
1997 --- --- --- ---
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Riley resigned from HyComp effective March 31,1999. The Company
operated without the services of a full time CEO until Mr. Angelo
MacDonald was appointed effective November 1, 1999. Mr. Hickey served
as interim CEO from August 10, 1999 to October 15, 1999. Mr. Simmonds
served as interim CEO from October 15 to November 15, 1999.
(2) Effective October 15, 1999, Mr. David O'Kell was appointed Secretary of
the Company and Mr. Gary Hokkanen was appointed Chief Financial Officer
of the Company. The services of Mr. Hokkanen, Mr. O'Kell and Mr.
Simmonds are provided to the Company as part of the services pursuant
to the management services contract with SCL pursuant to which the
Company pays SCL a fee of $15,000 per month for certain management
services including the part time services of Mr. Hokkanen, Mr. O'Kell,
and Mr. Simmonds. Mr. Hokkanen, Mr. O'Kell and Mr. Simmonds are all
officers of SCL.
(3) Effective November 1, 1999 Mr. MacDonald was appointed C.E.O. of the
Company with an annual salary of $114,000.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) As of March 24, 2000 there were 18,198,770 shares of Company Common
Stock, par value, $.001, issued and outstanding. To the knowledge of the
Company, the following persons are the beneficial owners of more than five
percent of the Company's voting securities:
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Amount and Nature of Percent of
Owner Beneficial Ownership Class
<S> <C> <C> <C>
Company common stock, Simmonds Capital Limited 8,401,700(1) 39.6%(2)
par value $0.001 580 Granite Court
Pickering, ON L1W-3Z4
CANADA
Company common stock, Paul Dutton 1,375,000 7.6%
par value $0.001 590 King St., Suite 403
Toronto, ON M5V 1M3
CANADA
Company common stock, Max Hahne 1,375,000 7.6%
par value $0.001 590 King St., Suite 403
Toronto, ON M5V 1M3
CANADA
Company common stock, John G. Simmonds 950,000(3) 5.1%
par value $0.001 13980 Jane St.
King City, ON L7B 1A3
CANADA
</TABLE>
(1) This number includes 5,401,700 shares of Company Common Stock, the right to
receive 2,000,000 shares of Company Common Stock upon conversion of a
convertible debenture, and the exercise of warrants to purchase 1,000,000 shares
of Company Common Stock, not all of which may be converted or exercised, as the
case may be, until after the shareholders of the Company have approved an
increase in the Company's authorized capital stock. It is anticipated that a
meeting of shareholders will be held to consider this matter on or before March
1, 2000. See "Certain Relationships and Related Transactions".
(2) The beneficial ownership percent is based upon a total of 21,198,770 shares
of Company Common Stock assuming the conversion of the debenture and the
exercise of the warrants. .
(3) This number includes 100,000 shares of Company Common Stock held by Deborah
Simmonds, to which he disclaims beneficial ownership, and 50,000 shares of
Company Common Stock held in trust for Jack Simmonds and options to purchase
300,000 shares of Company Common Stock at $0.25 per share.
<PAGE>
(b) As of March 24, 2000, Directors and Officers of the Company had the
following beneficial interest in the shares of Company Common Stock:
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Amount and Nature of Percent of
Owner Beneficial Ownership Class
<S> <C> <C> <C>
Company common stock, Angelo G. MacDonald 751,000(1) 4.0%
par value $0.001 Director and Chief Executive
Officer
124 West 60th Suite 42H
New York, NY 10023
Company common stock, David C. O'Kell 4.3%
par value $0.001 Director and Secretary 800,000(2)
185 Glencairn Ave.
Toronto, ON M4R 1N3
CANADA
Company common stock, Paul K. Hickey 550,000(3) 2.9%
par value $0.001 Director and Chairman
888 7th Avenue
New York, NY 10106
Company common stock, Lawrence Fox 4.3%
par value $0.001 Director 800,000(4)
212 Crystal Court
Bluebell, PA 19422
Company common stock, John G. Simmonds 5.1%
par value $0.001 Director 950,000(5)
13980 Jane St.
King City, ON L7B 1A3
CANADA
Total Directors and Officers (8 7,251,000 35.4%
persons)
</TABLE>
(1) This number includes options to purchase 700,000 shares of Company
Common Stock at $0.25 per share.
(2) This number includes options to purchase 300,000 shares of Company
Common Stock at $0.25 per share.
(3) This number includes options to purchase 250,000 shares of Company
Common Stock at $0.013 per share and 300,000 shares of Company Common
Stock at $0.25 per share.
(4) This number includes options to purchase 300,000 shares of Company
Common Stock at $0.25 per share.
(5) This number includes 100,000 shares of Company Common Stock held by
Deborah Simmonds, to which he disclaims beneficial ownership, and
50,000 shares of Company Common Stock held in trust for Jack Simmonds
and options to purchase 300,000 shares of Company Common Stock at $0.25
per share.
<PAGE>
Item 12. Certain Relationships and Related Transactions
During the past three fiscal years and through December 31, 1999, there
have been no material transactions in which the Company or any of its
subsidiaries was a party, and in which any director or officer of the Company
had a direct or indirect material interest, except as set forth below.
On October 13, 1999, a group of investors, which included SCL and
certain officers and directors both of the Company and of SCL entered into a
Stock Purchase Agreement with MicroTel International, Inc.("MicroTel") and XIT
Corporation (formerly known as XCEL Corporation), a wholly owned subsidiary of
MicroTel, pursuant to which the investors listed on Schedule I thereto (the
"Investors") purchased 9,041,498 shares of Company Common Stock (representing
approximately 90% of the then outstanding shares of Company Common Stock) for
US$150,000, with John G. Simmonds acting as representative of the Buyers. Each
of the Investors acquired the shares of Company Common Stock for his or her own
account and there are no contracts, agreements or understandings with respect to
the holding , disposition or voting of any of such shares among the Investors.
On October 14, 1999, SCL entered into a Stock Purchase Agreement with
the Company (then known as HyComp, Inc.) for the purchase of 120,000 shares of
common stock, no par value, of eieiHome (Canada), which constituted all of the
issued and outstanding shares of capital stock of eieiHome (Canada) and a
$500,000 inter-company loan made by SCL to eieiHome (Canada), in exchange for:
(a) 5,250,000 shares of Company Common Stock;
(b) A demand promissory note in the amount of U.S. $500,000;
(c) A convertible debenture in the principal amount of U.S.
$2,000,000, convertible into shares of Company Common Stock at
a conversion price of $1.00 per share (subject to adjustment
as provided therein); and
(d) Five year warrants for the purchase of an aggregate of
5,000,000 shares of Company Common Stock (subject to
adjustment as provided therein), as follows: (i) 1,000,000
shares of Company Common Stock at an exercise price of $1.00
per share exercisable immediately after the Closing; (ii)
1,000,000 shares of Company Common Stock at an exercise price
of $1.50 per share exercisable after one year from the
Closing; (iii) 1,000,000 shares of Company Common Stock at an
exercise price of $2.00 per share exercisable after two years
after the Closing; (iv) 1,000,000 shares of Company Common
Stock at an exercise price of $2.50 per share exercisable
after three years after the Closing; and (v) 1,000,000 shares
of Company Common Stock at an exercise price of $3.00 per
share exercisable after four years after the Closing.
In addition, the Company issued 1,125,000 million shares of Company Common Stock
to each of the two founding shareholders of eieiHome (Canada), Paul Dutton and
Max Hahne, as consideration for the cancellation of their option to repurchase
up to 30% of eieiHome (Canada). The 1,125,000 shares of Company Common Stock
held by each of Mr. Dutton and Mr. Hahn constitute approximately 6.2% of the
outstanding Company Common Stock. In connection with the sale of eieiHome
(Canada) to the Company, the Company also issued 500,000 restricted shares of
Company Common Stock to Lawrence Fox for services rendered in connection with
the sale.
The 12,250,000 shares of Company Common Stock acquired by SCL in this
transaction, together with the 151,700 shares of Company Common Stock they
acquired in the transaction with MicroTel, constitute approximately 48% of the
outstanding shares of Company Common Stock, assuming the conversion of the
debenture and the exercise of all of the warrants.
HyComp entered into a Management Services Agreement with SCL as of
October 14, 1999 to pay $15,000 per month for certain management services
including the part time services of Mr. Hokkanen, Mr. O'Kell, and Mr. Simmonds.
During the past three years, no relatives, spouses or relatives of
spouses of officers or directors were involved in material transactions with
HyComp, and no such transaction is currently proposed.
During the past three fiscal years and the current fiscal year, no
officer or director and no associate of any officer or director, has been
indebted to HyComp.
<PAGE>
Item 13. Exhibits, List and Reports on Form 8-K.
(a) Exhibits.
Exhibit 3.1 Articles of Organization as currently in effect.(1)
Exhibit 3.2 By-Laws as currently in effect. (1)
Exhibit 4.1 Specimen Certificate for Company Common Stock. (1)
Exhibit 4.2 U.S. $2,000,000 8% Convertible Debenture due April
15, 2003 issued by HyComp, Inc. to Simmonds Capital
Limited. (1)
Exhibit 4.3 U.S. $500,000 Demand Promissory Note issued by
HyComp, Inc. to Simmonds Capital Limited. (1)
Exhibit 4.4 Warrants for the purchase of up to 1,000,000 shares
of Common Stock of HyComp, Inc. issued by HyComp,
Inc. to Simmonds Capital Limited as of October 14,
1999 for $.01 per share. (1)
Exhibit 4.5 Warrants for the purchase of up to 1,000,000 shares
of Common Stock of HyComp, Inc. issued by HyComp,
Inc. to Simmonds Capital Limited as of October 14,
2000 for $.01 per share. (1)
Exhibit 4.6 Warrants for the purchase of up to 1,000,000 shares
of Common Stock of HyComp, Inc. issued by HyComp,
Inc. to Simmonds Capital Limited as of October 14,
2001 for $.01 per share. (1)
Exhibit 4.7 Warrants for the purchase of up to 1,000,000 shares
of Common Stock of HyComp, Inc. issued by HyComp,
Inc. to Simmonds Capital Limited as of October 14,
2002 for $.01 per share. (1)
Exhibit 4.8 Warrants for the purchase of up to 1,000,000 shares
of Common Stock of HyComp, Inc. issued by HyComp,
Inc. to Simmonds Capital Limited as of October 14,
2003 for $.01 per share. (1)
Exhibit 10.1 Stock Purchase Agreement, dated as of October 14,
1999, by and between Simmonds Capital Limited and
HyComp, Inc. (1)
Exhibit 10.2 Management Services Agreement dated as of October
14, 1999, by and between Simmonds Capital Limited
and HyComp, Inc. (1)
Exhibit 10.3 Stock Purchase Agreement, dated as of October 13,
1999, by and among MicroTel International, Inc., XIT
Corporation (formerly known as XCEL Corporation), a
wholly owned subsidiary of MicroTel International,
Inc. as Seller, each of the persons listed in
Schedule I thereto as Buyers and John G. Simmonds,
as representative of the Buyers. (1)
Exhibit 10.4 Assignment, Assumption and Indemnification Agreement
dated as of October 13, 1999, by and between
MicroTel International, Inc., XIT Corporation and
HyComp, Inc. (1)
Exhibit 10.5 Lease for 590 King Street West, Toronto, dated as of
February 1, 1999, by and between Match Pair Inc. and
Chargnet Inc. (1)
Exhibit 21.1 Subsidiaries of the registrant. (1)
<PAGE>
Exhibit 22.1 Proxy Statement, dated February 7, 2000, in respect
of the Special Meeting of Stockholders. (1)
Exhibit 27.1 Financial Data Schedule.
(1) Incorporated by reference to the Company's Registration
Statement on Form 10-SB, filed on January 19, 2000, as amended
by the 1st and 2nd Amendments to the Form 10-SB filed on
February 17, 2000 (File no. 1-15627).
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 30, 2000
HYCOMP, INC.
By: /s/ Angelo MacDonald
------------------------
Name: Angelo MacDonald
Title: Director and Chief
Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Angelo MacDonald Chief Executive Officer March 30, 2000
- ----------------------- and Director
Angelo MacDonald
/s/ Gary Hokkanen Chief Financial Officer March 30, 2000
- -----------------------
Gary Hokkanen
/s/ Paul Hickey Chairman and Director March 30, 2000
- -----------------------
Paul Hickey
/s/ David O'Kell Secretary and Director March 30, 2000
- -----------------------
David O'Kell
/s/Larry Fox Director March 30, 2000
- -----------------------
Larry Fox
/s/ John Simmonds Director March 30, 2000
- -----------------------
John Simmonds
<PAGE>
eieiHome.com Inc.
1998/99 Financial Statements
Contents
Page
Independent Auditors' Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Changes in Stockholders' (Deficit) 4
Statement of Cash Flows 5
Notes to Financial Statements 6 - 11
<PAGE>
Independent Auditors' Report
To the Directors of
eieiHome.com Inc.
We have audited the balance sheet of eieiHome.com Inc. (formerly Hycomp, Inc.,
see note 10) as of December 31, 1999 and 1998 and the related statements of
operations, changes in stockholders' (deficit) and cash flows for the year ended
December 31, 1999 and the period June 25, 1998 (inception) to December 31, 1998.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in both Canada and the United States. Those standards require that we plan and
perform the 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. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of eieiHome.com Inc., at December
31, 1999 and 1998 and the results of its operations and its cash flows for the
year ended December 31, 1999 and the period June 25, 1998 (inception) to
December 31, 1998 in accordance with accounting principles generally accepted in
the United States.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in note 1, the company
has incurred significant losses since inception and at December 31, 1999 the
company has a working capital deficit of $1,084,164 and a stockholders'
(deficit) of $3,161,363. These conditions raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Management plans in regard to these matters are also described in note 1.
PKF Hill LLP
Toronto, Canada
February 24, 2000 except
for note 10 which is as
of February 29, 2000
<PAGE>
eieiHome.com Inc.
Balance Sheet as at December 31
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS
Current assets
<S> <C> <C>
Cash $ 2,188 $ 299
Accounts receivable 15,597 -
- ------------------------------------------------------------------------------------------------------
Total current assets 17,785 299
- ------------------------------------------------------------------------------------------------------
Property and equipment (note 1)
Furniture and equipment 22,304 -
Data processing equipment 20,958 -
- ------------------------------------------------------------------------------------------------------
43,262 -
Less: accumulated depreciation (9,961) -
- ------------------------------------------------------------------------------------------------------
33,301 -
- ------------------------------------------------------------------------------------------------------
Total assets $ 51,086 $ 299
- ------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities
Accounts payable $ 204,686 $ -
Accrued expenses - other 58,747 20,479
Accrued expenses - legal 75,725 -
Deferred revenue (note 1) 2,696 -
Note payable - shareholder (note 2) 500,000 -
Due to related parties (note 3) 260,095 -
- ------------------------------------------------------------------------------------------------------
Total current liabilities 1,101,949 20,479
Long term debt
Convertible debenture (note 4) 2,000,000 -
Senior subordinated convertible debenture (note 5) 110,500 -
- ------------------------------------------------------------------------------------------------------
3,212,449 20,479
- ------------------------------------------------------------------------------------------------------
Stockholders' (deficit)
Common stock, $.01 par value, 20,000,000 shares authorized,
8,000,000 and 18,198,770 shares issued and outstanding
at December 31, 1998 and 1999, respectively (note 10) 181,988 80,000
Preferred stock, $100 par value, 8%, non-voting, convertible,
redeemable, 2,000 shares authorized, No shares issued and
outstanding at December 31, 1998 and 1999, respectively - -
Additional paid-in capital - 17,501
Accumulated (deficit) (3,343,351) (117,681)
- ------------------------------------------------------------------------------------------------------
Total stockholders' (deficit) (3,161,363) (20,180)
- ------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' (deficit) $ 51,086 $ 299
- ------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE>
eieiHome.com Inc.
Statement of Operations
<TABLE>
<CAPTION>
Period from
June 25, 1998
Year ended (inception) to
December 31, December 31,
1999 1998
<S> <C> <C>
Revenue $ 59,759 2,501
- ------------------------------------------------------------------------------------------------------
Expenses
Selling, general and administrative 1,098,654 117,571
Occupancy 49,735 2,611
Interest 42,592 -
Depreciation - property and equipment 9,961 -
- ------------------------------------------------------------------------------------------------------
1,200,942 120,182
- ------------------------------------------------------------------------------------------------------
Net loss $ (1,141,183) $ (117,681)
- ------------------------------------------------------------------------------------------------------
Basic net loss per share of common stock (note 1) $ (0.11) $ (0.01)
- ------------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding (note 1) 10,549,693 8,000,000
- ------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE>
eieiHome.com Inc.
Statement of Changes in Stockholders' (Deficit) For the Period
from June 25, 1998 (inception) to December 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Total
Paid-In Accumulated Stockholders'
Shares Amount Capital (Deficit) (Deficit)
------ ------ ------- --------- ---------
Balances at June 25, 1998
<S> <C> <C> <C> <C> <C>
(inception) (note 1) 8,000,000 $ 80,000 $ 17,501 $ - $ 97,501
Net loss for the period - - - (117,681) (117,681)
- ------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 8,000,000 80,000 17,501 (117,681) (20,180)
Issuance of common stock in
connection with reverse
acquisition (note 1) 10,198,770 101,988 (17,501) (2,084,487) (2,000,000)
Net loss for year ended
December 31, 1999 - - - (1,141,183) (1,141,183)
- ------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 18,198,770 $ 181,988 $ - $ (3,343,351) $ (3,161,363)
- ------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
<PAGE>
eieiHome.com Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
Period from
June 25, 1998
Year ended (inception) to
December 31, December 31,
1999 1998
Cash flows used in operating activities
<S> <C> <C>
Net loss $ (1,141,183) $ (117,681)
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation - property and equipment 9,961 -
- -----------------------------------------------------------------------------------------------------
(1,131,222) (117,681)
- -----------------------------------------------------------------------------------------------------
Changes in operating assets and liabilities
Accounts receivable (15,597) -
Accounts payable 204,686 -
Accrued expenses - other 38,268 20,479
Accrued expenses - legal 75,725 -
Deferred revenue 2,696 -
- -----------------------------------------------------------------------------------------------------
305,778 20,479
- -----------------------------------------------------------------------------------------------------
Net cash flows used in operating activities (825,444) (97,202)
- -----------------------------------------------------------------------------------------------------
Cash flows used in investing activities
Purchase of property and equipment (43,262) -
- -----------------------------------------------------------------------------------------------------
Cash flows used in investing activities (43,262) -
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities -
Proceeds from senior secured convertible debentures 110,500
Proceeds from issuance of common stock - 97,501
Proceeds from note payable - shareholder 500,000 -
Net increase in due to related parties 260,095 -
- -----------------------------------------------------------------------------------------------------
Cash flows provided by financing activities 870,595 97,501
- -----------------------------------------------------------------------------------------------------
Net increase in cash 1,889 299
Cash, beginning of year 299 -
- -----------------------------------------------------------------------------------------------------
Cash, end of year $ 2,188 $ 299
- -----------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid for interest $ 108 $ -
- -----------------------------------------------------------------------------------------------------
</TABLE>
Supplemental disclosure of non-cash financing activities:
Common stock and a convertible debenture were issued
as part of the 1999 reverse acquisition (refer note 1)
See accompanying notes
<PAGE>
eieiHome.com Inc.
Notes to Financial Statements
December 31, 1999 and 1998
1. Summary of significant accounting policies
Description of business
In February, 2000, in connection with Hycomp, Inc.'s (Hycomp)
reincorporation into a Deleware Company (see note 10) its name was changed
to eieiHome.com Inc. (the company).
The principal business of the company is conducted through its wholly owned
subsidiary eieiHome.com Inc., a Canadian company (eieiHome Canada), which
operates an Internet service, information and e-commerce web site. The web
site provides information and related products and services for homeowners,
home buyers, and home service providers. This Internet service was
introduced in two Canadian test markets, Vancouver and Toronto, in June
1999 with the intent of expanding to additional metropolitan markets in
Canada and the United States over the next year. Operations, while
currently in Canada will be rolled out into the United States beginning in
spring 2000. The business plan calls for 40 U.S. cities within three years.
The Company sells advertising space to national and local home service
providers and manufacturers of home-related products. For local and
national accounts, the Company also provides Internet web hosting, web page
design, and e-mail services.
Basis of presentation
On October 14, 1999, a Massachusetts corporation then known as HyComp
acquired all of the issued and outstanding common stock of eieiHome Canada
(formerly Chargnet Inc.) in exchange for 5,250,000 common shares of HyComp,
a $2,000,000 convertible debenture (note 4), and five year warrants (note
6). At the time of the 1999 acquisition, HyComp had no significant assets
or operations. In addition, HyComp issued 1,125,000 common shares to each
of the two founding shareholders of eieiHome Canada in consideration for
the cancellation of their option to repurchase up to 30% of eieiHome Canada
in the event that eieiHome Canada was sold to another party. In connection
with this acquisition, HyComp issued 500,000 common shares to a non-related
party as a finders fee.
eieiHome Canada is accounted for as the acquiring party and the surviving
accounting entity because the former stockholders of eieiHome Canada
received an amount of voting shares which constitutes an effective
controlling interest in the combined corporation. The shares issued by
HyComp pursuant to the 1999 acquisition have been accounted for as if those
shares had been issued upon the organization of eieiHome Canada. The
outstanding capital stock of HyComp immediately prior to the 1999
acquisition has been accounted for as shares issued by eieiHome Canada to
effect the reverse acquisition.
Because eieiHome Canada is the accounting survivor, the financial
statements presented for all periods are those of eieiHome Canada. All
inter-company accounts and transactions are eliminated on consolidation.
All financial statements are in the currency of the United States.
At December 31, 1999 additional paid-in capital ($17,501) and accumulated
deficit ($84,487) have been adjusted to effect the difference in par value
of common stock of HyComp and eieiHome Canada. Additionally, the $2,000,000
convertible debenture (note 4) has been recorded as a distribution to
shareholders in 1999.
The outstanding common stock of 10,198,770 common shares at the time of the
1999 acquisition was held principally by officers of the combined
corporation.
The financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the liquidation of liabilities
in the ordinary course of business. As shown in the accompanying financial
statements, the company has a working capital deficit of $1,084,164 and a
stockholders' (deficit) of $3,161,363 at December 31, 1999. As a result,
doubt exists about the company's ability to continue to fund future
operations using its existing resources.
<PAGE>
eieiHome.com Inc.
Notes to Financial Statements
December 31, 1999 and 1998
1. Summary of significant accounting policies - continued
Management plans to begin executing an expanded business plan during the
year ending December 31, 2000. In order to do so the company will have to
raise substantial financing to provide the necessary funding for a media
advertising campaign in each new market.
The Board of directors has authorized a new issue of Senior subordinated
convertible debentures to a maximum of $250,000, of which $110,500 has been
received by the company prior to December 31, 1999 (note 5). Management is
confident that the debenture will be fully subscribed for. It is
anticipated that the proceeds of this financing will provide the necessary
funding to operate the business for approximately sixty days, after which
additional third party financing will be required. Management is in
discussions with several parties on a substantial permanent financing,
which will provide funding to begin executing the business plan. Although
management expects to be successful in raising the required funds, there is
no assurance that the required funds will be raised.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the period. Actual results could differ from these
estimates, and such differences could be material.
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
the declining balance method, ranging from 20% to 30% per annum, over the
estimated useful lives of the related assets.
Advertising and marketing costs
The Company expenses the costs of advertising and marketing as incurred.
The company incurred $385,000 of advertising and marketing expenses for the
year ended December 31, 1999 which are included in selling, general and
administrative expenses.
Income taxes
The company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
Under SFAS No. 109, deferred tax assets and liabilities are determined
based on temporary differences between the financial statement and tax
bases of assets and liabilities and net operating loss and credit
carryforwards using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized. A provision for income tax expense is recognized for income taxes
payable for the current period, plus the net changes in deferred tax
amounts. eieiHome.com Inc. files U.S. income tax returns; while eieiHome
Canada files Canadian income tax returns.
Revenue recognition and deferred revenue
The company earns revenue from corporate advertisers by charging fees for
banner advertisements on the web site in addition to charging fees for
merchants to advertise their home renovations expertise on the web site.
The company recognizes revenues when the earning activities take place and
the revenue is measurable and collectable. Monies paid in advance are
recorded as deferred revenue and recognized when earned.
<PAGE>
eieiHome.com Inc.
Notes to Financial Statements
December 31, 1999 and 1998
1. Summary of significant accounting policies - continued
Business risk
The company has a limited operating history and its prospects are subject
to the risks, expenses and uncertainties frequently encountered by
companies in new and rapidly evolving markets for internet products and
services. These risks include the failure to develop and extend the
company's online data base, the rejection of the company's services by web
consumers and/or advertisers and the inability of the company to maintain
and increase the levels of traffic on its online services, as well as other
risks and uncertainties. Failure to address these risks successfully may
have a material adverse impact on the company's operations and financial
position.
Financial instruments
The fair values of the financial assets and liabilities are indicated by
their carrying value.
Net loss per share
Net loss per share has been computed using the net loss for the period
divided by the weighted average shares outstanding. For the purpose of
computing loss per share, the number of shares outstanding for the period
from the beginning of the year to the date of the reverse acquisition (note
1) is deemed to be the number of shares issued by the legal parent
(HyComp). For the period from the date of acquisition to the end of the
fiscal year, the number of shares used in the calculations of loss per
share is the actual number of HyComp shares outstanding during that period.
Diluted loss per share is not presented as the effects of convertible
debentures, warrants and options are anti-dilutive.
Foreign currency
The functional currency of the company is the Canadian dollar.
For reporting purposes, the financial statements are presented in United
States dollars and in accordance with Statement of Financial Accounting
Standard No. 52, "Foreign Currency Translation". The balance sheets are
translated into United States dollars at the exchange rates prevailing at
the balance sheet dates and the statements of operations and cash flows at
the average rates for the relevant periods. Gains and losses resulting from
translation will be included as a component of accumulated other
comprehensive income (loss). To date such transactions have not been
material.
2. Note Payable - shareholder
Note payable - shareholder consists of an unsecured demand note to a
shareholder in the amount of $500,000, bearing interest at 8% per annum and
repayable in full upon the completion of a debt or equity financing of not
less than $1,000,000. As at December 31, 1999, interest of $8,462 had been
accrued on the note payable.
3. Due to related parties and related party transactions
Due to related parties consists of amounts due to companies under common
control and are non-interest bearing with no specific terms for repayment.
<PAGE>
eieiHome.com Inc.
Notes to Financial Statements
December 31, 1999 and 1998
4. Convertible debenture
The convertible debenture was issued as part of the reverse acquisition
(note 1) and consists of an unsecured debenture to a shareholder in the
amount of $2,000,000, bearing interest at 8% per annum, repayable in
principal payments of $200,000 plus interest in quarterly instalments
commencing October 15, 2000 until the maturity date of April 15, 2003. This
debenture is convertible at the option of the holder at $1 per share for
all or any part of the outstanding part of the principal plus accrued and
unpaid interest. Management has determined that the value attached to the
conversion feature was insignificant and therefore an adjustment to the
carrying value of the note has not been recorded in the accounts. As at
December 31, 1999, interest of $33,849 had been accrued on this convertible
debenture.
5. Senior subordinated convertible debentures
The senior subordinated convertible debentures totalling $110,500, are
subordinated to all other indebtedness, and bear interest at 8% payable in
arrears annually commencing March 6, 2001. The principal portions mature on
March 6, 2005. Each U.S.$.25 of principal is convertible into one share of
common stock and one three year warrant to purchase an additional share of
common stock at an exercise price of U.S.$.50 per share. Management has
determined that the value attached to the conversion feature and the
related warrants is insignificant and, therefore, has not made an
adjustment to the debentures' carrying amount for these features. As at
December 31, 1999, interest of $173 had been accrued on these senior
subordinated convertible debentures.
6. Warrants
Included as consideration for the 1999 reverse acquisition (note 1),
5,000,000 five year warrants to purchase an aggregate of 5,000,000 common
shares, at exercise prices of between $1 per share and $3 per share, were
issued to a shareholder as follows:
Number of Exercise
Exercise date Expiration date shares price
------------- --------------- ------ -----
October 14, 1999 October 14, 2004 1,000,000 $ 1.00
October 14, 2000 October 14, 2005 1,000,000 1.50
October 14, 2001 October 14, 2006 1,000,000 2.00
October 14, 2002 October 14, 2007 1,000,000 2.50
October 14, 2003 October 14, 2008 1,000,000 3.00
Management has determined that the value attached to the warrants is
insignificant and therefore no amount has been recorded in the accounts.
7. Capital structure
Liquidation preference
In the event of liquidation, dissolution or winding up of the company,
after payment of all outstanding debts, the remaining assets of the company
available for distribution will be distributed to the holders of common
stock.
Voting rights
The holders of shares of common stock are entitled to receive notice of,
attend and vote at all meetings of the shareholders. Each share of common
stock carries one vote at such meetings.
<PAGE>
eieiHome.com Inc.
Notes to Financial Statements
December 31, 1999 and 1998
7. Capital structure - continued
Stock options
The company has established a Compensatory Stock Option Plan (CSO) for
employees, directors and consultants or other advisors. Prior to September
30, 1995, the company had issued options to purchase 1,100,000 common
shares granted under the CSO plan to former directors and officers of the
company. Prior to 1998, 250,000 options had been exercised, 100,000 options
had been cancelled and accordingly as of December 31, 1999, 750,000 options
remain outstanding. The expiration date for exercising these options is
April 15, 2000 with an exercise price of $.013 per share. The weighted
average remaining contracted life as at December 31, 1999, of the remaining
750,000 options is 3 1/2 months. Options granted under the plan prior to
fiscal 1995 were accounted for under Accounting Principles Board No 25
"Accounting for stock issued to Employees." Options have been granted at a
price equal to the fair value of the company's common stock at the date of
the grant, and accordingly no compensation expense had been recognized.
8. Income taxes
Deferred tax assets result from net operating loss carryforwards of
$1,132,000, as of December 31, 1999 and net operating loss carryforwards of
$115,000 as of December 31, 1998. These operating loss carryforwards expire
in 2006 and 2005, respectively.
The deferred tax assets and valuation allowances are as follows:
Period from
June 25, 1998
Year ended (inception) to
December 31, December 31,
1999 1998
Deferred tax assets resulting from
Canadian loss carryforwards $ 498,000 $ 51,000
Valuation allowance (498,000) (51,000)
- ------------------------------------------------------------------------------
$ - $ -
- ------------------------------------------------------------------------------
The company has recorded a 100% valuation allowance against the deferred
tax assets due to uncertainties surrounding their realization.
9. Commitments and contingencies
Commitments
The company is committed under an operating lease for rental of premises to
May 30, 2002. Future minimum annual payments required over the next three
years are as follows:
2000 $ 49,000
2001 49,000
2002 20,000
- -------------------------------------------------------------------------------
$ 118,000
- -------------------------------------------------------------------------------
As part of the reverse acquisition (note 1), the company entered into a
management services agreement with Simmonds Capital Limited (SCL), a
controlling shareholder, with the company paying SCL $15,000 per month for
certain management services.
<PAGE>
eieiHome.com Inc.
Notes to Financial Statements
December 31, 1999 and 1998
9. Commitments and contingencies - continued
Legal contingency
The company has been advised by MicroTel International, Inc. (MicroTel),
their former parent company, that a claim is being made against MicroTel
for warranty reimbursement for defective products produced by the company
in the amount of $185,661. MicroTel has agreed to accept responsibility for
this claim and to indemnify the company should it be found to be liable in
any respect. The company is advised that the third party and MicroTel are
attempting to negotiate a settlement. Management believes that the outcome
of such actions or proceedings is not expected to have any material adverse
effect on the financial position or results of operations of the company
and accordingly, no provision has been made in these financial statements.
10. Subsequent event
On February 29, 2000 a special meeting of the shareholders of Hycomp, Inc.
was held in Boston, Massachusetts. At the meeting, the shareholders of
HyComp, Inc. approved the company's reincorporation as a Delaware company
by merging it with eieHome.com Inc., a company incorporated in the State of
Delaware on February 25, 2000. The reincorporation merger also changed the
company's name from HyComp, Inc. to eieiHome.com Inc., changed the par
value of the common stock and increased the number of shares which the
company is authorized to issue from 20,000,000 shares of common stock, par
value $0.01, to 75,000,000 shares of common stock, par value $0.001,
adopted the 2000 stock option plan, and re- elected the company's
directors.
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