<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File No. 33-2150-LA
PHANTOMFILM.COM
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(Name of Small Business Issuer in its Charter)
NEVADA 95-3932052
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(State or Other Jurisdiction of (I.R.S. Employer I.D.
No.)
incorporation or organization)
Suite 400, 1111 West Georgia Street
Vancouver, British Columbia V6E 4M3
Canada
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (604) 689-5377
Panther Resources Ltd.
2nd Floor, 1111 West Hastings Street
Vancouver, British Columbia V6E 2J3
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(Former Name or Former Address, if changed since last Report)
Securities Registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange on Which Registered: None
Securities Registered under Section 12(g) of the Exchange Act: $0.001
par value common stock
Check whether the Issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
(1) Yes X No (2) Yes X No
--- --- --- ---
Check if there is no disclosure of delinquent files in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Company's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: March
31, 1999 - $0.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was
sold, or the average bid and asked prices of such stock, as of a
specified date within the past 60 days.
July 1, 1999 - $25,626.10. There are approximately 25,626,100
shares of common voting stock of the Company held by non-affiliates.
During the past two years, there has been no "established trading
market" for the Company's common stock; management has arbitrarily
valued these shares at par value of one mill ($0.001) per share.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Not Applicable.
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's
classes of common equity, as of the latest practicable date:
March 31, 1999
48,071,600
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is
contained in Item 13 of this report.
Transitional Small Business Issuer Format Yes X No ___
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ITEM 1.
DESCRIPTION OF BUSINESS
INTRODUCTION
During the fiscal year ended March 31, 1999, the Company was
engaged in the business of mineral resource exploration and development.
As discussed under the caption "Management's Discussion and Analysis or
Plan of Operation," Part II, Item 6 of this Report, these operations
were not successful. Management made the decision to change the
Company's business direction and on June 11, 1999, which is subsequent
to the period covered by this Report, the Company's stockholders voted,
among other things, to change its name to "PhantomFilm.com."
On June 29, 1999, which is subsequent to the period covered by this
Report, the Company executed a Licensing Agreement with AlphaTrade.com,
a Nevada corporation ("AlphaTrade"), whereby AlphaTrade granted to the
Company a non-exclusive licenseto toto to use, produce, distribute and
commercialize a streaming audio and video technology developed by
AlphaTrade (the "Technology"). A copy of the Licensing Agreement is
attached hereto and incorporated herein by reference. See the Exhibit
Index, Part III, Item 13 of this Report.
The Licensing Agreement provides for an initial license period of one
year and the issuance of 250,000 "unregistered" and "restricted" shares of
the Company's common stock to AlphaTrade upon the execution of the
Licensing Agreement. Management anticipates that these shares will be
issued shortly after the filing of this Report; unless otherwise
indicated, the share figures in this Report do not include the issuance of
these shares. The Licensing Agreement also provides for the payment to
AlphaTrade of $25,000 per month, commencing upon the date of execution of
an expanded version of the Licensing Agreement for a period of 12 months.
As of the date of this Report, the parties have not executed an expanded
Licensing Agreement and the Company has not made any cash payments to
AlphaTrade.
The Company has the option to extend the Licensing Agreement beyond
its initial one-year term by issuing the following numbers of shares of
"unregistered" and "restricted" common stock to AlphaTrade on the dates
indicated. All anniversary dates are from June 29, 1999, the date of
execution of the Licensing Agreement.
Anniversary No. of Shares
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First 90,000
Second 80,000
Third 70,000
Fourth 60,000
Fifth 50,000
Sixth 50,000
and every anniversary
thereafter
The Technology consists of source code with base level encoding and
compression technology that is intended to provide high quality audio
and video access over the internet. Using the Technology, the Company
plans to provide branded products that enable the creation and real-time
delivery of streaming media on the Web. Potential business applications
include turnkey production of press conferences, investor conferences,
trade shows, stockholder meetings, training sessions, media events, rock
concerts, late breaking news, movie trailers, new product introductions,
and numerous other media events.
The Company's business plan calls for it to derive revenues from
licensing the Technology to other companies and from the sale of
advertising on its own Web sites, including gateway ads with guaranteed
"click-throughs," channel and event sponsorships, and traditional banner
advertisements. Management believes that streaming media technology is
essential to the evolution of the World Wide Web as a mass communication
medium since it provides a more compelling user experience.
Although the Company is not one of the early entrants into the
internet video market, it plans to establish strong brand recognition
for its streaming video Technology.
INDUSTRY BACKGROUND
The internet has grown rapidly in recent years, spurred by
developments such as easy-to-use Web browsers, the availability of
inexpensive multimedia PCs and internet access, the adoption of more
robust network architectures, and the emergence of compelling Web-based
content and commerce applications. The broad acceptance of the Internet
Protocol ("IP") standard has also led to the emergence of intranets
(i.e., local computer networks) and the development of a wide range of
non-PC devices that enable users to easily access the internet and
intranets. As an interactive, searchable, user-controlled medium, the
Web provides for a highly engaging experience and allows users to access
an almost unlimited variety and supply of content at their convenience.
The Web also enables content providers and advertisers to establish
personalized experiences for and communications with consumers.
Streaming media technology has enhanced the graphical capabilities of
the internet and intranets.
Much of the internet's rapid evolution can be attributed to the
accelerated pace of technological innovation, which has expanded the
Web's capabilities and improved users' experiences. Most notably,
the internet has evolved from a mass of static, text-oriented Web pages
and email services to a much richer environment, capable of delivering
graphical, interactive and multimedia content. Prior to the development
of streaming media technologies, users could not play back audio and
video clips until the content was downloaded in its entirety. As a
result, live internet broadcasts were not possible and archived clips
were cumbersome to download and use. The development of streaming media
products by companies like PhantomFilm enables the simultaneous
transmission and playback (i.e., the internet broadcast) of continuous
"streams" of audio and video content over the internet and intranets.
These technologies have evolved to deliver audio and video over widely
used 28.8 kilobits per second ("kbps") narrow bandwidth modems, yet can
scale in quality to take advantage of higher speed access that is
expected to be provided by xDSL, cable modems and other emerging
broadband technologies. Thousands of content providers are now
providing media over the internet, and millions of new streaming media
users are now accessing streaming media. As the audience for streaming
media has grown substantially, many new business models have emerged.
Companies are generating revenue by aggregating streaming media,
developing streaming media authoring tools, offering turnkey services,
and offering media hosting services. Businesses are generating revenue
from incorporating streaming media into their Web sites and advertising
in new and interesting ways.
Streaming audio and video content on the internet offers certain
opportunities that are not generally available from traditional media.
Currently available analog technology and government regulations limit
the ability of radio and television stations to broadcast beyond certain
geographic areas. Radios and televisions are not widely used in office
buildings and other workplaces, where internet access has become
commonplace. Traditional business communication tools such as audio
conferencing and videoconferencing can be costly, non-targeted and
inconvenient. In addition, traditional videocasts are limited in their
ability to measure or identify in real time the listeners or viewers of
a program. By using the internet, streaming media content can be
targeted to a geographically dispersed audience of customers, suppliers,
employees and stockholders at relatively low costs and with television-
like quality. Internet users can interact with the streaming content by
responding to online surveys, voting in polls or obtaining additional
information. In addition, internet videos provide highly specific
information about an audience to content providers, advertisers and
users of internet business services. The convergence of the internet's
capabilities and attributes has accelerated its acceptance as a business
tool, leading to rapidly growing economic opportunities in Web-based
advertising and business service offerings.
Management believes that the Company's planned products and
services will promote the transmission of real-time streaming media
content over the internet and intranets. The Company will attempt to
establish a significant brand for its streaming video Technology, which
is designed to address the technological and market development
challenges that confront streaming media content providers and users.
BROWSER BASED STREAMING MEDIA TECHNOLOGY
The Company's streaming video uses advanced compression,
decompression, transmission and error-correction technologies to permit
better delivery of streamed content even in low bandwidth constrained
environments. Because the Company's streaming video requires no
downloads or software purchases, it is easier for users to take
advantage of its superb display characteristics.
The Company plans to provide access to its streaming video to
individual users for no cost as part of its strategy to build brand
loyalty and increase consumer demand for its products. Management
believes that streaming video will grow to be the preferred method of
listening to and viewing content over the internet. The Company also
plans to implement a business services model that will enable customers
to conduct cost-effective internet or intranet videocasts of live and
on-demand business and educational programming, including press
conferences, conference calls, trade shows, stockholder meetings, new
product introductions, training sessions, distance learning seminars,
customized corporate TV programs and media events, each custom tailored
to meet the needs of our customers. The Company believes that these
extra services will differentiate its content and broaden its revenue
base.
The simplicity of the Company's streaming video will permit it to
provide streaming media programming to virtually any computer regardless
of the underlying bandwidth. The Company believes that streaming media
usage will surge once the process has been simplified so the end user
experience is enhanced.
The Company's business plan also calls for it to develop its own
Web sites. The Company intends to drive traffic to its sites and enhance
brand awareness through strategic relationships with key internet
companies. As of the date of this Report, the Company has not entered
into any such relationship with any internet company and there can be no
assurance that it will be successful in this regard.
The Company plans to offer exclusive and comprehensive audio and
video programming that can be targeted to specific audiences and
demographics. Additionally, unlike Web sites that offer only text-based
banner ads, the Company's Technology will allow it to offer multimedia
packages incorporating custom audio and video applications such as
gateway ads with guaranteed "click-throughs," channel and event
sponsorships.
The Company's objective is to be the leading streaming media
company, providing streaming browser based applications and services
that enable the creation, delivery and playback of, and easy access to,
multimedia content over the internet, intranets and through hardware
devices, thereby facilitating the internet's evolution into the broadest
and most powerful mass communication and commerce medium. To achieve
this objective, the Company's strategy includes the following key
elements:
CREATE TECHNOLOGY LEADERSHIP. The Company will work to establish a
reputation as the leader in streaming media technology and intends to
maintain this reputation for leadership, quality and innovation in
streaming media technology by offering new applications and services on
a continual basis. By the fall of 1999, management believes that the
Web streaming media delivery will be commercially available. Streaming
video is designed to allow users to view rich multimedia presentations
on the Web and to more reliably deliver the best user multimedia
experience across a host of different bandwidths.
MAXIMIZE MARKET PENETRATION AND DEVELOP STRONG BRAND NAME
RECOGNITION. The Company believes that it can become the recognized
leader in streaming media technology. It will seek to achieve rapid and
broad adoption of its Technology in order to create strong brand
recognition. This strategy can be achieved through various means such
as offering the Company's basic streaming video free of charge over the
internet, bundling its products with those of other major vendors and
distributing its products through multiple distribution channels.
DEVELOP MARKET POSITION. The Company believes that it can leverage
its technology leadership to create a strong market position and brand
name loyalty to create its market share and diversify its revenue base.
It plans to utilize these strategies to accomplish that goal:
GROW STREAMING MEDIA BUSINESS. The Company intends to
capitalize on the increasing demand for streaming media by developing,
marketing and supporting industry-leading products and services. It
also plans to strengthen its marketing, sales and customer support
efforts as the size of the market and customer base increases.
TARGET LARGE CUSTOMER BASE. The Company plans to expand its
electronic commerce activities and revenue potential by marketing its
own steaming media products and services to its customer base.
EXPAND ELECTRONIC COMMERCE BUSINESS. The Company plans to
build Web sites that will provide product information and resources and
will promote the sale of its products. The Company plans to expand its
own and other companies' product and service offerings through these Web
sites by marketing to an ever increasing base of users.
CONNECT CONSUMERS TO STREAMING MEDIA CONTENT. The Company plans to
build a network of Web sites that will link to third-party streaming
media programming, making it easy for consumers to quickly find and link
to streaming media that interests them. The Company plans to build Web
site traffic through innovative aggregation strategies, to increase Web-
site advertising revenues, strengthen its electronic commerce platform
and promote streaming media content on the internet and intranets.
DEVELOP AND MARKET STREAMING MEDIA SOLUTIONS FOR A VARIETY OF
PLATFORMS AND BANDWIDTHS. The Company's streaming video is designed to
run on a broad range of operating systems and hardware platforms,
enabling content providers to reach a broad audience and businesses to
deliver intranet content in heterogeneous computing environments.
Management believes that the Company's the already wide acceptance of
currently available streaming media technology is an indication of
future acceptance of its own Technology. Currently, personal computers
("PC's") in low-bandwidth environments can access streaming video in a
limited way. Significant efforts continue, however, to make access to
the internet available on a wider range of platforms, including non-PC
internet appliances and set-top boxes, and over higher-speed
connections, including ISDN, ASDL and cable modems, which offer high
speed connections that the Company believes will eventually be more
widely available in homes. As a result, the Company continues to design
its streaming video applications to operate better in a range of
bandwidth environments and to be flexible enough to easily port to new
platforms. Management believes that improvements in infrastructure
technologies, such as caching and splitting, will enable content
providers to access greater bandwidth more cost effectively. The
Company believes it is well positioned to capitalize on possible
significant platform and bandwidth changes.
CREATE AND DEVELOP STRATEGIC RELATIONSHIPS. The Company plans
to establish strategic relationships with a variety of companies,
including software and hardware vendors, entertainment companies,
content publishers and broadcast media companies. Management believes
that by strongly pursuing these relationships it will help to ensure
rapid adoption of its streaming video Technology; to speed development
of compelling streaming media content to accommodate enhanced consumer
demand; to expand the range of commercial activities based on its
streaming video; and foster the development of industry standard
protocols..
RESEARCH AND DEVELOPMENT
The Licensing Agreement between the Company and AlphaTrade provides
for the parties to enter into an expanded licensing agreement containing
additional terms. The parties expect that one of these terms will
provide for AlphaTrade to devote a substantial portion of its resources
to developing new products and product features, expanding and improving
its fundamental streaming technology, and strengthening its
technological expertise. The Company plans to engage in the marketing
and commercial exploitation of the Technology, with AlphaTrade
responsible for technological matters.
SALES, MARKETING AND DISTRIBUTION
Management believes that any individual or company that desires to
send or receive streaming media content over the internet or intranets
is a potential customer. To reach as many of these potential customers
as possible, the Company plans to market its streaming video products
and services through several direct and indirect distribution channels
including over the internet, through a direct sales force and
distributors.
ELECTRONIC COMMERCE. The Company plans to license the streaming
video Technology on its web site, which will provide a low-cost,
globally accessible, 24-hour sales tool.
DIRECT SALES FORCE. Subject to receipt of sufficient revenues, the
Company plans to build a direct sales force to market its products and
services.
SALES THROUGH CONTENT AGGREGATORS AND HOSTING PARTNERS. The
Company plans to sell its streaming applications and services to content
aggregators, internet service providers and other hosting providers who
will redistribute or provide end users access to the Company's streaming
technology from their Web sites and systems.
ADVERTISING SALES. The Company's planned sales force will market
and sell advertising on its Web sites and within media streams that the
Company hosts on behalf of its corporate customers.
INTERNATIONAL SALES. In the event that its planned business
operations are successful, the Company will seek to establish
subsidiaries throughout the world that will market and sell its products
outside the continental United States and Canada. This would be
achieved through the development of a multi-lingual sales force and
distribution arrangements to assist in international sales.
MARKETING PROGRAMS. The Company intends to participate in trade
shows, conferences and seminars, product information platforms, and
generally promote and co-promote special events that will emphasize its
streaming video Technology.
CUSTOMERS
The Company's intended customers will consist primarily of
businesses and individuals located throughout the world. Sales to
customers outside the U.S., primarily in Asia and Europe, will be
minimal initially, as the focus will be in the continental United
States.
COMPETITION
As streaming media evolves into a central and necessary component
of the internet experience, more companies are entering the market for,
and expending ever increasing resources to develop, streaming media
software and services. Competition for the standard streaming video is
intense and is intensifying. Management believes there is currently no
competition in the browser-based streaming video sector; however, major
competitors in the development and distribution of downloadable
streaming media solutions include Microsoft Corporation, Apple Computer,
Inc. and RealNetworks. Competitive factors include the quality and
reliability of software; features for creating, editing and adapting
content, ease of use and interactive user features; scalability and cost
per user; pricing and licensing terms; and compatibility with the user's
existing network components and software systems.
No clear standards have emerged with respect to non-PC, wireless,
cable-based systems. Likewise, no one company has gained a dominant
position in the mobile device market because such devices are not yet
able to handle media. Another company or standard may emerge in any of
these areas to surpass the Company's Technology. In addition, there is
competition to a lesser degree from non-streaming audio and video
delivery technologies such as AVI, QuickTime, and MP3. MP3, a current
phenomenon in IP-based media delivery that the Company is not now
participating in, is emerging as a popular distribution mechanism for
"fast download" of audio content that does not require streaming. Other
fast download, or non-streaming IP-based content distribution methods,
are likely to emerge.
Neither AlphaTrade nor the Company has secured any patent or other
intellectual property protection with respect to the Technology. The
possibility exists that a competitor could develop a similar technology
that would substantially decrease or destroy what management believes is
the Company's competitive advantage in this area.
Key elements of the Company's strategy include the following:
ENTERTAIN AND DEVELOP EXCLUSIVE CONTENT OFFERINGS
The Company will seek to provide the most comprehensive audio and
video programming on the internet. To this end, the Company's objective
is to acquire exclusive, long-term internet rights to streaming media
content.
PENETRATE THE BUSINESS SERVICES MARKET
Management believes that the Company's streaming video services
will enable businesses, consumers and other organizations to improve
communication with, and dissemination of information to, customers,
suppliers, employees and the investment community. The Company believes
that the combination of its unique streaming video and the local and
global reach of the internet will provide corporate businesses with a
state-of-the-art method of multimedia presentation.
EXPAND INTERNET BUSINESS-TO-BUSINESS SALES FORCE
In the event that its initial operations are successful, the
Company plans to develop a dedicated, experienced internet sales force
in order to increase its presence. The Company currently employs a
limited sales force which it intends to increase substantially as the
video technology becomes commercially viable in approximately the fall
of 1999. See the heading "Employees" of this caption.
CAPTURE AND DEVELOP EMERGING REVENUE OPPORTUNITIES
The Company intends to capture strategic revenue growth
opportunities as user demand increases and the Company's technological
developments become more widely adopted. Such opportunities are expected
to include pay-per-listen/view applications, fee-based sharing of the
Company's exclusive content on other Web sites, insertion of commercials
within programming and electronic commerce opportunities.
BUSINESS SERVICES
The Company plans to provide cost-effective internet and intranet
streaming video services to businesses and other organizations. These
business services will include turnkey production of press conferences,
conference calls, investor conferences, tradeshows, stockholder
meetings, product introductions, training sessions, distance learning
seminars, customized corporate TV channels and media events.
The Company's streaming video services will be designed to enable
these businesses and other organizations to improve communication with
customers, suppliers, employees and the investment community by:
COST-EFFECTIVELY REACHING THE IN-OFFICE USER
The proliferation of multimedia enabled networked personal
computers and other internet-attached devices in the workplace has
created the opportunity for businesses to use the internet and intranet
to cost-effectively broadcast streaming media communications to both
large and small targeted audiences. The Company will be able to
broadcast events to users who can view and listen to such broadcasts
uninterrupted while continuing to perform other tasks on their
computers.
BUSINESS SERVICES
Initially, the Company will focus its business services marketing
efforts on larger companies in varied industries. The Company believes
it can successfully market its services to medium-sized and smaller
businesses as well. The Company will also utilize reseller
arrangements, whereby partners will have the right to sell the Company's
business services packages to their established customer bases.
ADVERTISING
The Company's wide flexibility offers advertisers the ability to
sell advertising packages targeted to specific audiences and
demographics. Additionally, unlike Web sites that can offer only text-
based banner advertisements, the Company can offer a multimedia package
that will incorporate the latest in custom audio and video applications
such as gateway ads with guaranteed "click-throughs," and channel and
event sponsorships, as well as icon advertising and viewer choice
advertising.
Gateway Ads with Guaranteed Click-Throughs. The Company's
Technology can provide advertisers with the opportunity to incorporate
gateway ads directly into their internet advertising packages. Gateway
ads are audio or video clips that are inserted at the lead of selected
programming, lasting from 15 to 30 seconds, that play prior to the audio
or video content that has been selected by the user. A guaranteed click-
through is a pop-down browser window that automatically launches at the
beginning of the gateway ad displaying an advertiser's Web site or other
targeted information. Gateway ads are also available without guaranteed
click-throughs. The industry standard is to sell these advertisements at
a higher CPM than traditional banner ads because of their unique nature.
Channel and Event Sponsorships. The Company can offer advertisers
the ability to sponsor special events enabling advertisers to brand
entire events. An event sponsorship would involve the rotating and
permanent placement of buttons, logos and Web site links. Event
sponsorships are common with such companies as Pepsi, Intel and
Microsoft.
In-Stream Ads and In-Player Banner Ads. As streaming media
technology advances, the Company will be able to capitalize on new
opportunities to differentiate its advertising solutions.
MARKETING
The Company's marketing efforts will be aimed at promoting the
PhantomFilm.com brand and the Company's audio and video programming and
business services. The Company will utilize both traditional and
innovative media vehicles for marketing and promotional purposes,
including radio, television and print advertisements, as well as
creating marketing arrangements with other leading Web sites, gateway
ads with guaranteed click-throughs and in-player banner ads on the
Company's Web sites and email newsletters.
Online Marketing. The Company plans to exchange video and banner
ads with other high traffic and targeted Web sites and to use these
opportunities to highlight its video presentations of high profile live
events and drive traffic to revenue generating Web sites. The video ads
will also be used to promote business services customers' events in
order to attract larger audiences.
STRATEGIC RELATIONSHIPS
The Company plans to enter into strategic relationships with
content providers and other key companies in order to enhance the
Company's competitive advantages. The Company believes that licensing
content from third parties is preferable to creating content because
such licensed content has existing demand and is self-replenishing.
The Company will seek to leverage its content aggregation and
internet broadcast network through strategic relationships with key
companies to increase traffic and brand awareness.
Competition among Web sites that provide compelling content,
including streaming media content, is intense and is expected to
increase significantly in the future. The Company will be competing
against a variety of businesses that provide content through one or more
media, such as print, radio, television, cable television and the
internet. Traditional media companies have not established a significant
streaming media presence on the internet and may expend resources to
establish a more significant presence in the future. These companies
have significantly greater brand recognition and financial, technical,
marketing and other resources than the Company. The Company will be
competing generally with other content providers for the time and
attention of users and for advertising revenues. To compete
successfully, the Company must license and then provide sufficiently
compelling and popular content to generate users, support advertising
intended to reach such users and attract business and other
organizations seeking internet streaming video distribution. The
Company will be competing with other internet streaming video companies
and Web sites to acquire internet broadcasting rights to compelling
content. The Company believes that the principal competitive factors in
attracting internet users include the quality of service and the
relevance, timeliness, depth and breadth of content and services
offered. The Company will also compete for the time and attention of
internet users with thousands of Web sites operated by businesses and
other organizations, individuals, governmental agencies and educational
institutions. For example, certain Web sites provide a collection of
links to other Web sites with streaming media content. The Company
expects competition to intensify and the number of competitors to
increase significantly in the future. In addition, as the Company
expands the scope of its content and services, it will compete directly
with a greater number of Web sites and other media companies. Because
the operations and strategic plans of existing and future competitors
are undergoing rapid change, it is extremely difficult for the Company
to anticipate which companies are likely to offer competitive services
in the future.
The Company will also compete with online services, other Web site
operators and advertising networks, as well as traditional media such as
television, radio and print for a share of advertisers' total
advertising budgets. The Company believes that the principal competitive
factors for attracting advertisers include the number of users accessing
the Company's Web sites, the demographics of the Company's users, the
Company's ability to deliver focused advertising and interactivity
through its Web sites and the overall cost-effectiveness and value of
advertising offered by the Company. There is intense competition for the
sale of advertising on high-traffic Web sites, which has resulted in a
wide range of rates quoted by different vendors for a variety of
advertising services, making it difficult to project levels of internet
advertising that will be realized generally or by any specific company.
Any competition for advertisers among present and future Web sites, as
well as competition with other traditional media for advertising
placements, could result in significant price competition. The Company
believes that the number of companies selling Web-based advertising and
the available inventory of advertising space have recently increased
substantially. Accordingly, the Company may face increased pricing
pressure for the sale of advertisements. There can be no assurance that
the Company will be able to compete effectively in its chosen field.
GOVERNMENTAL REGULATION
Although there are currently few laws and regulations directly
applicable to the internet, it is likely that new laws and regulations
will be adopted in the United States and elsewhere covering issues such
as privacy, pricing, sales taxes and characteristics and quality of
internet services. It is possible that governments will enact
legislation that may be applicable to the Company in areas such as
content, network security, encryption and the use of key escrow,
data and privacy protection, electronic authentication or "digital"
signatures, illegal and harmful content, access charges and
retransmission activities. Moreover, the applicability to the internet
of existing laws governing issues such as property ownership, content,
taxation, defamation and personal privacy is uncertain. The majority of
such laws were adopted before the widespread use and commercialization
of the internet and, as a result, do not contemplate or address the
unique issues of the internet and related technologies. Any such
export or import restrictions, new legislation or regulation or
governmental enforcement of existing regulations may limit the growth of
the internet, increase the Company's cost of doing business or increase
the Company's legal exposure, which could have a material adverse effect
on the its business, financial condition and results of operations.
On October 28, 1998, the "Digital Millennium Copyright Act"
("DMCA") affecting the performance of sound recordings by certain
subscription and nonsubscription transmission services was enacted. The
DMCA permits statutory licenses for the performance of sound recordings
and for the making of ephemeral recordings to facilitate transmissions.
Under these statutory licenses, the Company will be required to pay
licensing fees for the performance of sound recordings by the Company in
original and archived programming and through retransmissions of radio
broadcasts. The DMCA does not specify the rate and terms of the
statutory licenses, which will be determined either through voluntary
inter-industry negotiations or arbitration. By distributing content
over the internet, the Company also faces potential liability for claims
based on the nature and content of the materials that it distributes,
including claims for defamation, negligence or copyright, patent or
trademark infringement, which claims have been brought, and sometimes
successfully litigated, against internet companies. While the current
law generally states that entities like the Company, which provide
interactive computer services, shall not be treated as the publisher or
speaker with respect to third party content they distribute, the scope
of the law's definition and limitations on liability have not been
widely tested in court. Accordingly, the Company may be subject to such
claims. The Company does not maintain media liability insurance or
general liability insurance. Any liability in this regard could have a
significant adverse effect the Company's business.
INTELLECTUAL PROPERTY
The Company regards its intellectual property as important to its
success, and the Company relies on a combination of confidentiality and
non-disclosure agreements and contractual provisions with its employees
and with third parties to establish and protect its proprietary rights.
There can be no assurance that these steps will be adequate.
Neither the Company nor AlphaTrade has secured any copyright,
trademark, patent or other intellectual property protections with
respect to the Technology. Therefore, there is nothing to prevent a
competitor from developing and commercializing a product using the same
or a substantially similar technology. Such an event would likely have
a substantial negative impact on the Company's operations, particularly
in the event that a large, well-established entity such as Microsoft
enters into such competition with the Company.
The Company may also be subject to litigation to defend against
claims of infringement of the rights of others or to determine the scope
and validity of the intellectual property rights of others. If third
parties hold trademark, copyright or patent rights that conflict with
the business of the Company, then the Company may be forced to litigate
infringement claims that could result in substantial costs to the
Company. In addition, if the Company was unsuccessful in defending such
a claim, it could adversely affect the Company's business.
If third parties prepare and file applications in the United States
that claim trademarks that may be used or registered by the Company in
the future, the Company may oppose those applications and be required to
participate in proceedings before the United States Patent and Trademark
Office to determine priority of rights to the trademark, which could
result in substantial costs to the Company. An adverse outcome in
litigation or privity proceedings could require the Company to license
disputed rights from third parties or to cease using such rights. Any
litigation regarding the Company's proprietary rights could be costly
and divert management's attention, result in the loss of certain of the
Company's proprietary rights, require the Company to seek licenses from
third parties and prevent the Company from selling its services. In
addition, inasmuch as the Company plans to licenses a substantial
portion of its content from third parties, its exposure to copyright
infringement actions may increase because the Company must rely upon
such third parties for information as to the origin and ownership of
such licensed content. The Company will generally obtain representations
as to the origins and ownership of such licensed content and will
generally seek indemnification to cover any breach of any such
representations; however, there can be no assurance that such
representations will be accurate or given, or that such indemnification
will adequately protect the Company.
As part of its confidentiality procedures, the Company generally
enters into agreements with its employees and consultants and limits
access to and distribution of its documentation and other proprietary
information. However, there can be no assurance that the steps taken by
the Company will prevent misappropriation of its proprietary information
or that agreements entered into for that purpose would be enforceable.
Notwithstanding the precautions taken by the Company, it might be
possible for a third party to copy or otherwise obtain and use the
Company's proprietary information without authorization. The laws of
some countries may afford the Company little or no effective protection
of its intellectual property.
EMPLOYEES
As of June 30,1999, the Company had 8 full-time employees. None of
the Company's employees is subject to a collective bargaining agreement
and the Company believes that its relations with its employees are good.
COMPANY RISK FACTORS
In addition to the risks set forth above, the Company's proposed
operations will be subject to the following risk factors:
LIMITED OPERATING HISTORY
The Company has not yet started its planned operations of streaming
video and audio. We have a limited operating history on which to base an
evaluation of the business and prospects, and our only prior history has
been in the unrelated mining industry. Our prospects must be considered
in light of the risks, difficulties and uncertainties frequently
encountered by companies in an early stage of development, particularly
companies in new and rapidly evolving markets such as the market for
internet content, business services and advertising. These risks include
our ability to:
- provide compelling and unique content to internet users;
- successfully market and sell our business services;
- effectively develop new relationships with advertisers, content
providers, business customers and advertising agencies;
- continue to develop and upgrade our technology and network
infrastructure;
- respond to competitive developments; and
- attract, retain and motivate qualified personnel.
Our operating results will be dependent on factors outside of our
control, such as the availability of compelling content and the
development of broadband networks that support multimedia streaming.
There can be no assurance that we will be successful in addressing these
risks, and failure to do so could have an adverse effect on our
business.
POSSIBILITY OF CONTINUING LOSSES
We fully expect to continue to incur operating losses for the
foreseeable future.
Although the Company expects to begin receiving revenues during the
fiscal year commencing April 1, 1999, we cannot assure investors that we
will achieve sufficient revenues for profitability. Even if we do
achieve profitability, there can be no assurances that the company can
sustain or increase profitability on a quarterly or annual basis in the
future. If revenues grow slower than anticipated, or if operating
expenses exceed expectations or cannot be adjusted accordingly, the
business will be materially and adversely affected.
QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS
Quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside
our control. Factors that may affect our quarterly operating results
include:
- the cost of acquiring and the availability of content;
- the demand for our business services;
- demand for internet advertising;
- seasonal trends in internet advertising placements;
- the advertising cycles for, or the addition or loss of, individual
advertisers;
- the level of traffic on our Web sites;
- the amount and timing of capital expenditures and other costs
relating to the expansion of operations;
- price competition or pricing changes in Internet streaming video
services;
- the seasonality of the content of certain types of broadcasts,
such as sporting and other events;
- the level of and seasonal trends in the use of the internet;
- technical difficulties or system downtime;
- the introduction of new products or services by us or our
competitors,
- our ability to successfully integrate operations and technologies
from acquisitions; and
- general economic conditions and economic conditions specific to
the internet, such as electronic commerce and online media.
Any one of these factors could cause our revenues and operating
results to vary significantly in the future. In addition, as a strategic
response to changes in the competitive environment, we may from time to
time make certain pricing, service or marketing decisions or
acquisitions that could cause significant declines in our quarterly
operating results.
DEPENDENCE ON THIRD PARTY CONTENT PROVIDERS
Our future success depends upon our ability to aggregate and
deliver compelling content over the internet. We can create our own
content; however, we will rely heavily on third party content providers,
such as television stations and cable networks, businesses and other
organizations, universities, film producers and distributors, and record
labels for compelling and entertaining content. Our ability to maintain
and build relationships with content providers is critical to our future
success. Although many agreements with third party content providers may
be for initial terms of more than two years, such agreements may not be
renewed or may be terminated prior to the expiration of their terms if
we do not fulfill our contractual obligations. Our inability to secure
licenses from content providers or performance rights societies or the
termination of a significant number of content provider agreements would
decrease the availability of content that we can offer users. Such
inability or termination may result in decreased traffic on our Web
sites and, as a result, decreased advertising revenue, which could
adversely affect our business.
Many agreements with content providers will be nonexclusive, and
many of our competitors offer, or could offer, content that is similar
to or the same as that obtained by us from such nonexclusive content
providers. Such direct competition could adversely affect our business.
LICENSE FEES PAYABLE TO CONTENT PROVIDERS MAY INCREASE
License fees payable to content providers and performance rights
societies and other licensing agencies may increase as competition for
such content increases. There can be no assurance that content
providers, performance rights societies or other licensing agencies will
enter into prospective agreements with the Company on the same or
similar terms as those currently in effect with competitors. If we are
required to pay increased licensing fees, such increased payments could
adversely affect our business.
We will be operating at a very early stage of development while our
competitors have been rapidly evolving. Demand and market acceptance
for recently introduced services are subject to a high level of
uncertainty and risk. Sales of our business services may require an
extended sales effort in certain cases and, depending upon its early
revenue stream, the Company may be not be able to afford to pay a sales
staff. In addition, potential customers must accept streaming video
services as a viable alternative to face-to-face meetings, television or
radio, audio teleconferences and video conferencing. Because the market
for the Company's proposed specialized business services is new and
evolving, it is difficult to predict the size of this market and its
growth rate, if any. If the market fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if our
Web sites do not achieve or sustain market acceptance, our business
could be adversely affected.
WE ARE DEPENDENT ON THE ACCEPTANCE OF STREAMING MEDIA TECHNOLOGY
Our success depends on the market acceptance of streaming media
technology provided by companies such as the Company, RealNetworks, GMV
Network, Broadcast.com and Microsoft. Early streaming media technology
suffered from poor audio quality, and video streaming at 28.8
kbps(thousands of bits per second) currently is of lower quality than
television or radio broadcasts. In addition, congestion over the
internet and packet loss may interrupt audio and video streams,
resulting in unsatisfying user experiences. In order to receive streamed
media adequately, users generally must have multimedia PCs with certain
microprocessor requirements and at least 28.8 kbps internet access and
streaming media software. Typically, users have had to electronically
download such software and install it on their PCs. Such installation
may require technical expertise that some users do not possess.
Furthermore, in order for users to receive most streaming media over
corporate intranets, information systems managers may need to
reconfigure such intranets. Because of bandwidth constraints on
corporate intranets, some information systems managers may block
reception of streamed media. Management believes that any widespread
adoption of the Company's streaming media technology in the future may
be due in part to the obstacles faced by users in viewing our
competitors' videos.
DEPENDENCE ON THE CONTINUED ACCEPTANCE OF THE INTERNET AS AN
ADVERTISING MEDIUM
Both the amount of any future advertising revenues and demand and
market acceptance for internet advertising solutions are uncertain.
There are currently no set standards for the measurement of the
effectiveness of internet advertising, and the industry may need to
develop standard measurements to support and promote internet
advertising as a significant advertising medium. If such standards do
not develop, existing advertisers may not continue their current levels
of internet advertising. Furthermore, advertisers that have
traditionally relied upon other advertising media may be reluctant to
advertise on the internet. Our business would be adversely affected if
the market for internet advertising fails to develop or develops more
slowly than expected.
Different pricing models are used to sell advertising on the
internet. It is difficult to predict which, if any, will emerge as the
industry standard. This makes it difficult to project future advertising
rates and revenues. Our advertising revenues could be adversely affected
if we are unable to adapt to new forms of internet advertising.
Moreover, software programs that limit or prevent advertising from being
delivered to an internet user's computer are available. Widespread
adoption of this software could adversely affect the commercial
viability of any internet advertising.
GROWTH MAY BE A DETERENT TO SUCCESS
If we are unable to grow effectively, our business could become
unmanageable. Our anticipated future growth could place a significant
strain on our resources. As part of any such growth, we will have to
implement new operational and financial systems, procedures and
controls.
Services based on sophisticated software and computer systems often
encounter development delays and the underlying software may contain
undetected errors that could cause system failures when introduced. Any
system error or failure that causes interruption in availability of
content or an increase in response time could result in a loss of
potential or existing business services customers, users, advertisers or
content providers and, if sustained or repeated, could reduce the
attractiveness of our Web sites to such entities or individuals. In
addition, because our Web advertising revenues will be directly related
to the number of advertisements delivered by users, system interruptions
that result in the unavailability of our Web sites or slower response
times for users would reduce the number of advertisements delivered and
reduce revenues.
A sudden and significant increase in traffic on our Web sites could
strain the capacity of our hardware and telecommunications systems,
which could lead to slower response times or system failures. Our
planned operations will also be dependent upon receipt of timely feeds
from our content providers, and any failure or delay in the transmission
or receipt of such feeds could disrupt our operations.
We will be dependent upon Web browsers, Internet Service Providers
("ISPs") and online service providers ("OSPs") to provide internet users
access to our Web sites. Many of these providers have experienced
significant outages in the past, and could experience outages, delays
and other difficulties due to system failures unrelated to our systems.
NETWORK IS SUBJECT TO SECURITY RISKS
The Company's networks may be vulnerable to unauthorized access,
computer viruses and other disruptive problems. A party who is able to
circumvent security measures could misappropriate proprietary
information or cause interruptions in our internet operations. ISPs and
OSPs have in the past experienced, and may in the future experience,
interruptions in service as a result of the accidental or intentional
actions of internet users, current and former employees or others. We
may be required to expend significant capital or other resources to
protect against the threat of security breaches or to alleviate problems
caused by such breaches.
DEPENDENCE ON SHORT-TERM ADVERTISING CONTRACTS
A substantial portion of our future Web advertising revenues will
be derived from short-term contracts. There can be no assurance that
advertisers will purchase advertisements or that we will be able to
secure advertising contracts at attractive rates or at all.
INTENSE COMPETITION FOR INTERNET STREAMING MEDIA CONTENT
The number of Web sites competing for the attention and spending of
members, users and advertisers has increased and we expect it to
continue to increase.
We will compete for members, users and advertisers with the
following types of companies:
- other Web sites, Internet portals and Internet broadcasters to
acquire and provide content to attract users;
- videoconferencing companies, audio conferencing companies and
internet business services broadcasters;
- online services, other Web site operators and advertising
networks, as well as traditional media such as television, radio
and print, for a share of advertisers' total advertising budgets;
and
- local radio and television stations and national radio and
television networks for sales of advertising spots.
Increased competition could result in price reductions, reduced
margins or loss of market share, any of which could adversely affect our
business.
DEPENDENCE ON CONTINUED GROWTH IN THE USE OF THE INTERNET AND
STREAMING MEDIA CONTENT
Our market is new and rapidly evolving. Our business would be
adversely affected if internet usage does not continue to grow,
particularly usage for multimedia information and entertainment and as a
vehicle for commerce in goods and services. The internet may not be
accepted as a viable commercial medium for "no-download required"
streaming multimedia content for a number of reasons, including:
- potentially inadequate development of the necessary
infrastructure;
- inadequate development of enabling technologies;
- lack of acceptance of the internet as a medium for distributing
streaming media content; and
- inadequate commercial support for Web-based advertising.
If internet usage grows, the internet infrastructure may not be
able to support the demands placed on it by this growth, specifically
the demands of delivering high quality video content and its performance
and reliability may decline. In addition, many Web sites have
experienced interruptions in their service as a result of outages and
other delays occurring throughout the internet network infrastructure.
If these outages or delays frequently occur in the future, internet
usage, as well as the usage of our Web sites, could grow more slowly or
decline.
RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY
Our market is characterized by rapid technological developments,
frequent new product introductions and evolving industry standards. A
failure by us to rapidly respond to technological developments could
adversely affect our business. The emerging character of these products
and services and their rapid evolution will require us to:
- effectively use leading technologies;
- continue to develop our technological expertise; and
- enhance our current services and continue to improve the
performance, features and reliability of our network
infrastructure.
Changes in network infrastructure, transmission and content
delivery methods and underlying software platforms and the emergence of
new broadband technologies, such as xDSL and cable modems, could
dramatically change the structure and competitive dynamic of the market
for streaming media solutions. In particular, technological
developments or strategic partnerships that accelerate the adoption of
broadband access technologies or advancements in streaming and
compression technologies may require us to expend resources to
address these developments. In addition, the widespread adoption of new
internet technologies or standards could require substantial
expenditures to modify or adapt our Web sites and services.
OUR BUSINESS IS DEPENDENT ON OUR KEY PERSONNEL
Our future success depends to a significant extent on the continued
services of our senior management and other key personnel, particularly,
Penny Perfect and Gordon Muir. The loss of the services of these people
or certain other key employees, would likely have a significantly
detrimental effect on our business.
We do not maintain "key person" life insurance for any of our
personnel. Our future success also depends on our continuing to attract,
retain and motivate highly skilled employees.
COMPETITION FOR PERSONNEL IN OUR INDUSTRY IS INTENSE
We may be unable to retain our key employees or attract, assimilate
or retain other highly qualified employees in the future. We have from
time to time in the past experienced, and we expect to continue to
experience in the future, difficulty in hiring and retaining highly
skilled employees with appropriate qualifications. If we do not succeed
in attracting new personnel or retaining and motivating our current
personnel, our business will be adversely affected.
FAILURE OF COMPUTER SYSTEMS AND SOFTWARE PRODUCTS TO BE YEAR 2000
READY COULD NEGATIVELY IMPACT OUR BUSINESS
Many currently installed computer systems and software products
only accept two digits to identify the year in any date. Thus, the year
2000 will appear as "00," which the system might consider to be the year
1900 rather than the year 2000. This could result in system failures,
delays or miscalculations causing disruptions to our operations.
With the assistance of an independent consultant, we have evaluated
the Year 2000 readiness of the hardware and software utilized in our
operations, including non-information technology operations, such as
building security, voice mail and other systems. Our evaluation
included:
- the identification of internally utilized products;
- checking of products' Year 2000 readiness; and
- assessment of repair or replacement.
Based on this assessment, we have determined that there are no
material Year 2000 issues within our systems and services.
Since third parties developed and currently support many of the
systems that we use, a significant part of this effort will be to ensure
that these third-party systems are Year 2000 ready. We plan to confirm
this readiness through a combination of the representation by these
third parties of their products' Year 2000 readiness, as well as
specific testing of these systems. The failure of systems maintained by
third parties to be Year 2000 ready could cause us to incur significant
expense to remedy any problems, reduce our revenues from such third
parties or otherwise seriously damage our business. A significant
Year 2000-related disruption of the network services or equipment that
third-party vendors provide to us could also cause our users to consider
seeking alternate providers or cause an unmanageable burden on our
technical support.
Additionally, we rely upon various governmental agencies, utility
companies, telecommunications service companies, delivery service
companies and other service providers. There is no assurance that such
parties will not suffer a year 2000 business disruption, which could
adversely affect our ability to conduct our business.
Our failure to correct a material Year 2000 problem could result in
an interruption in, or a failure of, some of our normal business
activities or operations.
OUR STOCK PRICE MAY CONTINUE TO BE SUBJECT TO SIGNIFICANT
VOLATILITY
The trading price of our common stock has been and may continue to
be subject to wide fluctuations. Trading prices of the common stock may
fluctuate in response to a number of factors, many of which are beyond
our control. In addition, the stock market in general, and the market
for internet-related and technology companies in particular, has
experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of such
companies. The trading prices of many technology companies' stocks are
at or near historical highs and reflect price earnings ratios
substantially above historical levels. There can be no assurance that
these trading prices and price earnings ratios will be sustained. These
broad market and industry factors may adversely affect the market price
of the Company's common stock, regardless of our operating performance.
SHARES ELIGIBLE FOR PUBLIC SALE COULD ADVERSELY AFFECT OUR STOCK
PRICE
As of March 31, 1999, there were outstanding 48,071,600 shares of
our common stock. As of March 31, 1999, 14,195,000 of these shares were
held by existing stockholders as "restricted securities" and will become
eligible for sale only if registered or if they qualify for an exemption
from registration under Rules 144 or 701 under the Securities Act. Sales
of a large number of shares could have an adverse effect on the market
price of our common stock.
The stockholders have no restrictions on selling any of our
securities held by them, other than as provided under applicable
securities laws. In addition, certain stockholders can require us to
register our securities they own for public sale. Any sales by these
stockholders could adversely affect the trading price of our common
stock.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive offices are located in Vancouver, B.C.,
Canada in a 4,000 square foot facility that we sub-lease at a current
monthly rent of $5,000. The sub-lease is verbal. The master lease is
for a term of five years, and the lessee has an option to renew the
lease for an additional five years. Approximately 4-1/2 years remain on
the first term of the master lease. The Company does not own any real
estate.
ITEM 3. LEGAL PROCEEDINGS
The Company is neither a party to nor does it have any property
which is subject to any material pending legal proceedings. Nor, to the
knowledge of management, is any governmental authority contemplating any
legal proceeding against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 11, 1999, which is after the period covered by this Report,
the Company held an Annual Meeting of Shareholders at its head office in
Vancouver, British Columbia, Canada to approve: (1) a reverse split of
the issued and outstanding shares of the Company's common stock in the
ratio of one share for 10, with fractional shares rounded up to the
nearest whole share and with appropriate adjustments in the stated
capital and additional paid-in capital accounts of the Company; (2) the
amendment of the Company's Articles of Incorporation to change its name
from "Panther Resources Ltd." to "PhantomFilm.com"; and (3) the
amendment of the Company's Articles of Incorporation to decrease the par
value of its preferred shares from one dime ($0.10) per share to one
mill ($0.001) per share.
Each of the foregoing proposals was approved by the holders of a
majority of the voting power of the Company's outstanding securities.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
Shareholders
At March 31, 1999 there were 1158 shareholders of record of the
Company's common stock.
Market Information
Currently, the Company's common stock is traded over-the-counter
and quoted on the OTC Bulletin Board of the NASD (the "Bulletin Board")
under the symbol "PHLM". The high and low bid prices for the common
stock as reported by the Bulletin Board since April 1, 1997 are listed
below. The prices in the table reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.
Unless otherwise indicated, the reported bid prices have been adjusted to
reflect the 1 for 10 stock split that occurred on March 1, 1997; the 1 for
20 reverse stock split that occurred on March 22, 1997; and the 1 for 10
reverse stock split that occurred on June 15, 1999, which is subsequent to
the period covered by this report.
Fiscal Year Quarter High Low
1997 April - June 3.28 0.25
July - Sept. 2.05 0.15
Oct. - Dec. 1.75 0.40625
1998 Jan. - March 0.01 0.001
Fiscal Year Quarter High Low
1998 April - June 0.93 0.22
July - Sept. 0.27 0.06
Oct. - Dec. 0.26 0.05
1999 Jan. - March 0.24 0.09
April - June 1.625* 0.05
* This figure does not reflect the reverse stock split that
occurred on June 15, 1999.
Dividends
The Company has never declared any cash dividends and does not
anticipate paying such dividends in the near future. The Company
anticipates all earnings, if any, over the next twelve (12) to twenty
(20) months will be retained for future investments in business. Any
future determination to pay cash dividends will be at the discretion of
the Board of Directors and will be dependent upon the Company's results
of operations, financial conditions, contractual restrictions, and other
factors deemed relevant by the Board of Directors. The Company is under
no contractual restrictions in declaring or paying dividends to its
shareholders.
The future sale of presently outstanding "unregistered" and
"restricted" common stock of the Company by present members of
management and persons who own more than five percent of the outstanding
voting securities of the Company may have an adverse effect on any
market that may develop in the shares of the common stock of the
Company.
Recent Sales of "Unregistered" Securities
The following unregistered securities have been issued since April
1, 1998:
Offering Exemp-
Date No. of Shares Title Price tion Reason
Apr. 13/98 2,035,160 Common $0.25 4(2) Private
Placement
Apr. 13/98 400,000 Common $0.50 4(2) Private
Placement
May 6/98 30,000 Common $0.30 4(2) Staff
Compen-
sation
July 17/98 50,000 Common $0.30 4(2) Private
Placement
July 17/98 1,857,000 Common $0.20 4(2) Private
Placement
Aug. 25/98 2,000,000 Common $0.08 4(2) Private
Placement
Oct. 3/98 2,000,000 Common $0.10 4(2) Private
Placement
Feb. 15/99 5,000,000 Common $0.15 4(2) Private
Placement
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following Item contains forward-looking statements within the
meaning of Federal securities law. You can identify these statements
because they use forward-looking terminology such as "may," "will,"
"expect," "anticipate," "estimate," "continue," "believe," "intend," or
other similar words. These words, however, are not the exclusive means
by which you can identify these statements. You can also identify
forward-looking statements because they discuss future expectations,
contain projections of results of operations or of financial conditions,
characterize future events or circumstances or state other forward-
looking information. We have based all forward-looking statements
included in this Item on information currently available to us, and we
assume no obligation to update any such forward-looking statements.
Although we believe that the expectations reflected in such forward-
looking statements are based on reasonable assumptions, actual results
could differ materially from those projected in the forward-looking
statements. Factors that might cause or contribute to such differences
include, among others:
- our limited operating history;
- our dependence on third party providers of content;
- our dependence on the acceptance of streaming media technology;
- our dependence on the continuing acceptance of the internet as an
advertising medium;
- our potential inability to manage our growth; and
- intense competition for internet broadcasting and services.
In evaluating our business, investors should carefully consider the
information set forth under the heading "Company Risk Factors," above.
We caution investors that our business and financial performance are
subject to substantial risks and uncertainties. The following Item
should be read in conjunction with the Consolidated Financial
Statements. See Part II, Item 7 of this Report.
INTRODUCTION
In this Item, we explain the general financial condition and the
results of operations for the Company and its subsidiaries including:
- what factors affect our business;
- how all of the above affects our overall financial condition; and
- where cash will come from to provide working capital and to pay
for future capital expenditures.
RESULTS OF OPERATIONS
From our inception through March 31, 1999, we have had no revenues
and our operating activities consisted primarily of investing in mineral
properties. During the fiscal quarter ended June 30, 1999, the Company
has taken certain actions to change its business focus from mining
exploration and development to the commercial development and
exploitation of streaming video and audio technology for internet use.
These actions have included the execution of the Licensing Agreement
with AlphaTrade.com and the amendment of the Company's Articles of
Incorporation to change its name to "PhantomFilm.com."
Future sales of business services related to streaming media
content and advertising are projected to be the main sources of our
revenues.
We have incurred significant losses since inception on November 10,
1995. From inception to March 31, 1999, the Company has incurred a net
comprehensive loss of $10,909,730, with a net comprehensive loss of
$6,299,246 during the fiscal year ended March 31, 1999. Of this amount,
$6,031,215 stems from the Company's decision to discontinue its mining
operations due to a lack of funding and low precious metals prices.
We believe that our success will depend largely on our ability to
compete as a source for streaming media programming and business
services on the Web. Accordingly, we intend to invest heavily in order
to:
- develop our sales and marketing;
- acquire media content and hosting services; and
- continue the development of our streaming video.
The Company is currently preparing a limited offering of up to
500,000 "unregistered" and "restricted" shares of its common stock at a
price of $0.50 per share, to a small number of accredited investors. It
is expected that this financing will be completed in approximately the
middle of July, 1999. Management believes that this funding will be
sufficient to allow the Company to commence operations. However, the
long-term success of the Company's operations will depend entirely upon
its success in developing and maintaining a market for its Technology.
The Company expects to continue to incur operating losses for the
foreseeable future.
MINERAL PROPERTIES
The Company's Board of Directors has determined to change the
direction of the Company's business from mining to technology for the
following reasons:
- the Company was unable to complete a financing that was
necessary to allow it to conduct mining exploration and
development activities on the La Verde property located in the
State of Sinaloa, Mexico; and
- weakness in the mineral resources industry and prices of metals.
PLAN OF OPERATIONS
Although management presently intends to maintain its current
interests in mineral properties and to resume the acquisition,
exploration and development of mineral properties in the future, to the
extent that it is economically feasible, the Company will pursue the
commercial exploitation of its Technology as its principal business
focus for the foreseeable future.
The Company believes that its streaming video Technology is better
than any other internet video on the market. The Technology allows the
delivery of movies and live interactive video through the browser
without plugins or download, like most of competitor's technologies
require. Nor is there any lengthy wait for the Technology to initialize
and start. The Company's Web video has a larger screen (frame) and a
greater frame rate than the competitions'. In addition, the Technology
adjusts its bandwidth requirements intelligently and dynamically and its
codec (compression-decompression code) avoids the pixelization that
plagues other web video products. Management believes that the Company's
is the first Web video product to coordinate and control actions within
the rest (the non-video portion) of the browser with the frame number of
the video stream, a multimedia slide show in synch with the video.
The Company's revenue model is to license the technology to web TV
and radio stations and other sites which might have an interest and to
sell infomercial space using the Technology on its home page and to
actually produce video content.
The Company's Technology consists of a compression and stream
server sitting at the licensee's site, and a lightweight display applet
which executes on the client browser.
The Company is still in the development stage and management
believes that it is approximately 60 days away from a working proto-type
of its Stage 1 technology. However, unforeseen difficulties may occur
and the Company can provide no assurance that this timeline will be met.
The Company's development plan is scheduled to be completed in two
stages. The goals of Stage One are to "clean up" and improve its
existing alpha applet/server code. In Stage One, the Company intends to
achieve instant download of the applet and good quality at a 320 x 240
pixel frame size and 10 fps (frames per second). To date, management is
pleased with the progress toward instant download. However, the quality
of the video at 56 kbps is still insufficient and will require a large
amount of additional work. The principal reason for this insufficiency
is a lack of server bandwidth, which the Company believes it can solve
by buying more bandwidth and servers. The Company believes that it will
need about 40 kbps per concurrent user in order to overcome this
problem.
Another quality problem is the high CPU/video card load. Although
the video applet does not overload the central processing unit ("CPU")
on a high end PC, on an old non-MMX 200 mhz (megahertz) PC it runs very
slowly. On PC's with old, less expensive video cards it does not run at
all. The solution to this is for AlphaTrade's development team to apply
profilers such as JProbe and OptimizeIt to the applet to determine what
method calls are pegging the CPU. Once this has been done, developers
will have to redesign to keep CPU utilization to a minimum. The code is
currently over-reliant on the MMX integer graphics extensions and also
makes graphics calls at too high a level. The development team will have
to move some of the frame composition and triple buffering into the
applet and not rely on the CPU and the graphics card to do it
automatically.
Yet another problem with the current pre-release applet/server team
is dynamically variable client-side bandwidth. The Company's current
applet assumes that on a 56k line the client can get a steady 40k of
bandwidth. This is not actually the case because client bandwidth varies
significantly during a session. Bandwidth often drops below 5 kbps for
tens of seconds at a time. When this happens the buffer is emptied and
the video pauses or becomes slow and jerky. Currently, the Company
caches at least the first eight seconds of video to start off and also
starts all videos with easily compressible shots so that the cache can
fill with more that eight seconds of video in less than eight seconds.
The developement team is currently adding a second buffer so that every
video can be started out with a pre-cached 30 second PhantomFilm (or one
of its clients) advertisement. While the advertisement runs, the first
30 seconds of the video can be buffered instead of only eight seconds.
Management believes that this will help significantly, but for a long
video (e.g., a movie or live sports event) it will not be enough. The
solution will be to monitor the bandwidth and optimally reduce the frame
rate when the buffer gets low. This requires the server, based on
information about the buffer and its rate of depletion collected on the
client, to reduce the number of frames being sent (and to change the
frame rate hints telling the client how fast to play it) in times of low
bandwidth. This raises certain technological difficulties with the
server. AlphaTrade's development team will set up the Company's server-
side component to mathematically optimally feed frames to the client so
that there are no bandwidth induced pauses or slowness or choppiness.
Voice/video synchronization problems in the current applet are a
final problem to be address in Stage One of the development plan. This
problem is due entirely to the separation of the audio and video
buffers. Management believes that this separation is for the best as it
allows the Company to market a net radio product and also to apply an
audio optimal codec to the audio instead of just using the video codec.
In order to resolve this problem the development team will need to add
frame number markers to the audio stream to keep it in synch.
In Stage Two of the development process, the development team
will rewrite codec and take other steps to increase the display size to
full screen and 30 frames per second. Work on rewriting the codec is
already far advanced. The research team will replace the current cyclic
compression/decompression algorythm with an ad hoc collection of
fractal, wavelet, pct and vector quantization methods. This, along with
adding buffers and separating each video into z-index layers (using the
optimal codec on each layer), should improve the applet to full screen,
hi resolution at 10 fps.
Additionally as part of Stage Two, the development team will add
code in the applet to interpolate between frames using a compact
distortion metric to achieve 30 fps. Management believes that this is a
fairly easy way to achieve high frame rates.
Within six months, the Company believes that it will be able to
deliver hi resolution, full screen, full motion video in the browser
with no delay, no jerkiness, no plug-in, no installation and no
download. However, unforeseen complications may arise that may
significantly delay the Company's development schedule.
ITEM 7. FINANCIAL STATEMENTS
Consolidated Financial Statements for the fiscal year ended March 31,
1999
Independent Auditors' Report
Consolidated Balance Sheet
Consolidated Statements of Operations
Consolidated Statements of Stockholders Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None; not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Identification of Directors and Executive Officers. The following
information is as of March 31, 1999, and is provided with respect to
each director and executive officer. The term of office for each
director is specified and noted in the table below. The executive
officers serve at the discretion of the Board of Directors.
Directors of the Company receive no cash compensation for their
services as directors, other than reimbursement for certain expenses in
connection with attendance at board meetings.
The following individuals were elected as Directors at the Company
Annual General Meeting held September 26, 1997 with the exception of
Victor Cardenas who was elected as a Director on September 29, 1998.
Name, Age and Positions
Held with the Company Five Year Employment History
GORDON J. MUIR CEO/Director of Panther Resources
Chief Executive Officer Ltd.; From 1994 - 1997 Director and later
Chairman of the Board Chief Executive Officer of Urban Resource;
Technologies Inc.
Age: 45
Term of Office: 3 years
PENNY PERFECT President/Director of Panther Resources
President Ltd.
Vice-Chairman of the Board From 1996-1997 Director and later
President of Urban Resource Technologies
Inc.
Age: 45
Term of Office: 3 years
KATHARINE JOHNSTON Director of Panther Resources Ltd.
Executive Vice-President, From November, 1996 to August, 1997
Legal & Finance Director and Vice-President of Urban
Resource Technologies Inc.
Age: 45
Term of Office: 3 years
VICTOR CARDENAS Utilities Industry Executive with IBM for the
Vice-President, last 27 years; President of AlphaTrade.com
Mexican Operations since 1998.
Age: 48
Term of Office: 2 years
Family Relationships.
Gordon Muir and Penny Perfect are married. There are no other
family relationships between any other Directors or executive Officers
of the Company either by blood or marriage.
Involvement in Certain Legal Proceedings.
To the knowledge of management, during the past five years, no
present or former director or an executive officer of the Company:
Filed a petition under the federal bankruptcy laws or any state
insolvency law, nor had a receiver, fiscal agent or similar officer
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years
before the time of such filing, or any corporation or business
association of which he was an executive officer at or within two years
before the time of such filing;
Was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offences);
Was the subject of any order, judgement or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him or her from or otherwise
limiting his involvement in any type of business, securities or banking
activities (except as previously noted);
Was found by a court of competent jurisdiction in a civil action by
the Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated any federal or state securities law, and the
judgement in such civil action or finding by the Securities and Exchange
Commission has not been subsequently reversed, suspended, or vacated.
Compliance with Section 16 of the Exchange Act.
During the fiscal year ended March 31, 1999, to the knowledge of
management, no director, executive officer, or beneficial owner of more
than ten percent of the Company's outstanding common stock failed to
file on a timely basis reports required by Section 16(a) of the
Securities Exchange Act of 1934.
ITEM 10. EXECUTIVE COMPENSATION
Cash Compensation.
The following table sets forth the aggregate compensation paid
by the Company for services rendered during the periods indicated.
With the exception of Mr. Cardenas, the current directors and executive
officers of the Company have served in those capacities since the fiscal
year ended Marcy 31, 1998. Mr. Cardenas has served as an executive officer
of the Company only since the third quarter of the fiscal year ended March
31, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year or Other Rest- Under- LTIP Other
Principal Period Salary Bonus Annual rictedlying Pay- Comp-
Position Ended ($) ($) Compen-Stock Options outs ensat'n
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gordon
Muir, 3/31/97(1) 0 0 0 0 0 0 0
CEO and 3/31/98 262500 100000 0 200000 400000 0 0
Director 3/31/99 537500 85000 0 300000 400000 0 250000
(2)
Penny 3/31/97(1) 0 0 0 0 0 0 0
Perfect, 3/31/98 262500 100000 0 200000 400000 0 0
Pres. and 3/31/99 537500 85000 0 300000 400000 0 250000
Director (2)
Katharine
Johnston, 3/31/97(1) 0 0 0 0 0 0 0
Vice Pres., 3/31/98 51000 25000 0 100000 100000 0 0
Legal and 3/31/99 52500 0 0 150000 300000 0 0
Finance
and Director
Victor
Cardenas, 3/31/97 0 0 0 0 0 0 0
Vice Pres., 3/31/98 0 0 0 0 0 0 0
Mexican 3/31/99 0 0 0 0 0 0 0
Operations
and Director
(1) None of these individuals became a director or executive officer
of the Company until the end of the March 31, 1997 fiscal year.
(2) Shares issued to Mr. Muir and Ms. Perfect to release
management contracts with the Company.
Employment Contracts were all voluntarily canceled by Mr. Muir on
behalf of Micro-American, Inc., Ms. Perfect on behalf of Jupiter
Consultants, Inc. and Mrs. Johnston on behalf of Mandarin Enterprises
Inc. on April 1, 1999, which is subsequent to the period covered by this
Report.
Bonuses and Deferred Compensation.
The Board of Directors granted bonuses to the individuals noted
above in consideration of their not exercising their right pursuant to
their management contracts to eight weeks paid annual vacation.
Neither Mr. Muir nor Ms. Perfect took any vacation time during the past
fiscal year.
Compensation Pursuant to Plans.
Stock Incentive Plans were adopted in 1997 and 1998 authorizing the
issuance of the following shares to Directors, Executive Officers,
Employees and Consultants of which the currently outstanding balances are
as follows:
Exercise Number Number
Price Authorized Outstanding
1997 Plan $0.20 2,222,000 nil
1997 Plan $0.50 1,328,000 nil
1998 Plan $0.08 800,000 nil
1998 Plan $0.08 1,100,000 nil
1998 Plan $0.30 1,260,000 58,500
1998 Plan $0.50 200,000 200,000
1998 Plan $0.70 240,000 240,000
1998 Plan $0.75 200,000 200,000
The Company has not adopted a stock option plan for 1999.
Pension Table.
None; not applicable.
Other Compensation.
None of the Directors receive a fee for serving as Directors of the
Company. Directors are reimbursed for direct out-of-pocket expenses for
attendance at meetings of the Board of Directors and for expenses
incurred for and on behalf of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners.
The following table sets forth the share holdings of those persons
who own more than five percent of the Company's common stock as of March
31, 1999. These figures do not reflect the reverse split of the Company's
common stock in the ratio of one share for 10, which became effective on
or about June 15, 1999, after the end of the period covered by this
Report.
</TABLE>
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
---------------- ---------------------------- --------
<S> <C> <C>
Gordon J. Muir 11,134,000(1) 23%
23B - 1500 Alberni St.
Vancouver, BC V6G 3C9
Canada
Penny Perfect 11,134,000(1) 23%
23B - 1500 Alberni St.
Vancouver, BC V6G 3C9
Canada
--------- -----
TOTALS 22,268,000 46%
</TABLE>
(1) Mr. Muir and Ms Perfect are husband and wife; accordingly,
the shares held of record by each spouse may be deemed to be
beneficially owned by the other.
Security Ownership of Management.
The following table sets forth the share holdings of the Company's
directors and executive officers as of March 31, 1999. These figures do
not reflect the reverse split of the Company's common stock in the ratio
of one share for 10, which became effective on or about June 15, 1999,
after the end of the period covered by this Report.
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
---------------- ---------------------------- ----------
<S> <C> <C>
Gordon J. Muir 11,134,000(1) 23%
23B - 1500 Alberni St.
Vancouver, BC V6G 3C9
Canada
Penny Perfect 11,134,000(1) 23%
23B - 1500 Alberni St.
Vancouver, BC V6G 3C9
Canada
Katharine Johnston 175,000 0.004%
5661 Covey Place
North Vancouver, BC V6E 4T8
Victor Cardenas 0 -0-
365 Southbourough Dr.
West Vancouver, BC V7S 1C9
--------- -----
All directors and executive 22,443,000 46.004%
officers as a group
(4 persons)
</TABLE>
(1) Mr. Muir and Ms Perfect are husband and wife; accordingly,
the shares held of record by each spouse may be deemed to be
beneficially owned by the other.
In addition, the Company has authorized 10,000,000 shares of
preferred stock with a par value of $0.001 per share. A total of
2,000,000 shares of the preferred stock have been designated as Class A
Preferred Shares. Each share is convertible into 5 shares of common
stock at $0.10 per share and is entitled to five votes on each matter
submitted to a vote of the Company's stockholders. As a result, the
holders of the Company's Class A Preferred Stock have the ability to
approve any matter submitted to a vote of its stockholders.
The Company's directors and executive officers beneficially own the
following shares of its Class A Preferred Stock:
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
---------------- ---------------------------- ----------
<S> <C> <C>
Gordon J. Muir 875,000(1) 44%
23B - 1500 Alberni St.
Vancouver, BC V6G 3C9
Canada
Penny Perfect 875,000(1) 44%
23B - 1500 Alberni St.
Vancouver, BC V6G 3C9
Canada
Katharine Johnston 100,000 0.05%
5661 Covey Place
North Vancouver, BC V6E 4T8
Victor Cardenas
--------- -----
All directors and executive
officers as a group
(4 persons)
</TABLE>
(1) Mr. Muir and Ms Perfect are husband and wife; accordingly,
the shares held of record by each spouse may be deemed to be
beneficially owned by the other.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transaction with Management and Others.
During the past two years, there have been no material
transactions, series of similar transactions or currently proposed
transactions, to which the Company or any of its subsidiaries was or is
to be a party, in which the amount involved exceeds $60,000 and in which
any director or executive officer, or any security holder who is known
to the Company to own of record or beneficially more than five percent
of the Company's common stock, or any member of the immediate family of
any of the foregoing persons, had a material interest.
On June 29, 1999, the Company entered into a Licensing Agreement
with AlphaTrade with respect to the streaming video Technology. Victor
Cardenas is the President and a director of AlphaTrade and is an
executive officer of the Company.
Certain Business Relationships.
During the past two years, there have been no material
transactions, series of similar transactions, currently proposed
transactions, or series of similar transactions, currently proposed
transactions, or series of similar transactions, to which the Company or
any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 an in which any promoter or founder, or any
member of the immediate family of any of the foregoing persons, had a
material interest.
On June 29, 1999, the Company entered into a Licensing Agreement
with AlphaTrade with respect to the streaming video Technology. Victor
Cardenas is the President and a director of AlphaTrade and is a an
executive officer of the Company.
Indebtedness of Management.
During the past two years, there have been no material
transactions, series of similar transactions or currently proposed
transactions, to which the Company or any of its subsidiaries was or is
to be a party, in which the amount involved exceeds $60,000 and in which
any director or executive officer, or any security holder who is known
to the Company to own of record or beneficially more than five percent
of the Company's common stock, or any member of the immediate family of
any of the foregoing persons, had a material interest.
Parents of the Issuer.
Except and to the extent that Gordon Muir and Penny Perfect may be
deemed to be a parent of the company by virtue of their substantial
stock ownership, the Company has no parents.
Transactions with Promoters.
During the past two years, there have been no material
transactions, series of similar transactions, currently proposed
transactions, or series of similar transactions, currently proposed
transactions, or series of similar transactions, to which the Company or
any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 an in which any promoter or founder, or any
member of the immediate family of any of the foregoing persons, had a
material interest.
On June 29, 1999, the Company entered into a Licensing Agreement
with AlphaTrade with respect to the streaming video Technology. Victor
Cardenas is the President and a director of AlphaTrade and is an
executive officer of the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Number Description of Exhibits
10 Licensing Agreement dated June 29, 1999
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 19034, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PHANTOMFILM.COM
Dated July 12, 1999 By: /s/ Gordon J. Muir
----------------------------
Gordon J. Muir
CEO and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed by the following persons on behalf of
the Registrant, in the capacities, and on the dates, indicated.
Dated July 12, 1999 By: /s/ Gordon J. Muir
----------------------------
Gordon J. Muir
CEO and Chairman of the Board
Dated July 12, 1999 By: /s/ Penny Perfect
----------------------------
Penny Perfect
President and Director
Dated July 12, 1999 By: /s/ Katharine Johnston
----------------------------
Katharine Johnston
Vice President and Director
Dated July 12, 1999 By: /s/ Victor Cardenas
----------------------------
Victor Cardenas
Vice President and Director
<PAGE>
PANTHER RESOURCES LTD.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
March 31, 1999 and 1998
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Panther Resources Ltd.
(A Development Stage Company)
Vancouver, B.C. Canada
We have audited the accompanying consolidated balance sheet of Panther
Resources Ltd. (a development stage company) as of March 31, 1999 and the
related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the years ended March 31, 1999 and 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Panther Resources Ltd. (a development stage company) as of March 31, 1999
and the consolidated results of their operations and their cash flows for the
years ended March 31, 1999 and 1998 in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 3 to the consolidated financial statements, the Company is a
development stage company with no significant operating results to date which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
May 11, 1999
<TABLE>
PANTHER RESOURCES LTD.
(A Development Stage Company)
Consolidated Balance Sheet
<CAPTION>
ASSETS
March 31,
1999
<S> <C>
CURRENT ASSETS
Cash $ 82
Prepaid expenses 799
Total Current Assets 881
FURNITURE AND EQUIPMENT, NET (Note 4) 45,538
OTHER ASSETS
Mineral properties (Note 5) -
Deposits 46,380
Total Other Assets 46,380
TOTAL ASSETS $ 92,799
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 175,121
Accounts payable - related parties (Note 6) 329,948
Reserve for discontinued operations (Note 7) 258,161
Total Current Liabilities 763,230
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock: 10,000,000 shares authorized of $0.10 par value,
2,000,000 shares issued and outstanding 200,000
Common stock: 100,000,000 shares authorized of $0.001 par value,
48,071,600 shares issued and outstanding 48,072
Additional paid-in capital 9,991,227
Deficit accumulated during the development stage (10,909,730)
Total Stockholders' Equity (Deficit) (670,431)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 92,799
</TABLE>
<TABLE>
PANTHER RESOURCES LTD.
(A Development Stage Company)
Consolidated Statements of Operations
<CAPTION>
From
Inception on
November 10,
For the Years Ended 1995 Through
March 31, March 31,
1999 1998 1999
<S> <C> <C> <C>
REVENUES $ - $ - $ -
EXPENSES
General and administrative - - -
Total Expenses - - -
LOSS FROM OPERATIONS - - -
LOSS FROM DISCONTINUED
OPERATIONS (Note 7) (6,031,215) (3,332,577) (10,909,730)
NET LOSS (6,031,215) (3,332,577) (10,909,730)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation (268,031) 260,719 -
Total Other Comprehensive Income (Loss) (268,031) 260,719 -
NET COMPREHENSIVE LOSS $ (6,299,246)$(3,071,858)$(10,909,730)
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.16) $ (0.16)
FULLY DILUTED LOSS PER SHARE OF
COMMON STOCK $ (0.16) $ (0.16)
</TABLE>
<TABLE>
PANTHER RESOURCES LTD.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
<CAPTION>
Additional
Preferred Stock Common Stock Paid-In
Shares Amount Shares Amount Capital
<S> <C> <C> <C> <C> <C>
Balance at
November 10, 1995
(Inception) - $ - - $ - $ -
Common stock issued
for cash at
approximately $0.00
per share - - 2 - -
Currency translation
adjustment - - - - -
Net loss for the
year ended
March 31, 1996 - - - - -
Balance, March 31, 1996 - - 2 - -
Common stock issued
for cash at
approximately $0.38
per share - - 2,884,998 2,885 1,086,602
Common stock issued
for services at
approximately $0.76
per share - - 115,000 115 87,441
Currency translation
adjustment - - - - -
Net loss for the year
ended March 31, 1997 - - - - -
Balance, March 31, 1997 - $ - 3,000,000 $ 3,000 $1,174,043
Recapitalization
(Note 1) - - 12,308,990 12,309 381,753
Common stock issued
for cash at
approximately $0.36
per share - - 6,107,610 6,107 2,816,020
Common stock issued
for services at
approximately $0.36
per share - - 3,366,500 3,367 1,176,259
Issuance of warrants - - - - 17,220
Common stock issued
for debt at
approximately $0.26
per share - - 3,828,000 3,828 991,891
Common stock issued
for mineral properties
at $1.00 per share - - 550,000 550 549,450
Preferred stock issued
for services at
$0.18 per share 2,000,000 200,000 - - 160,000
Currency translation
adjustment - - - - -
Net loss for the
year ended
March 31, 1998 - - - - -
Balance, March 31,
1998 2,000,000 $ 200,000 29,161,100 $ 29,161 $7,266,636
Common stock issued
for cash @ $.14
per share - - 8,563,333 8,563 1,215,717
Common stock issued
for services @ $.15
per share - - 10,227,167 10,228 1,484,994
Common stock issued
for debt @ $.20
per share - - 120,000 120 23,880
Receipt of stock
subscription
receivable - - - - -
Currency translation
adjustment - - - - -
Net loss for the
year ended
March 31, 1999 - - - - -
Balance,
March 31, 1999 2,000,000 $ 200,000 48,071,600 $ 48,072 $9,991,227
</TABLE>
<TABLE>
PANTHER RESOURCES LTD.
(Formerly Golden Panther Resources, Ltd.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
<CAPTION>
Deficit
Accumulated
Stock Currency During the
Subscription Translation Development
Receivable Adjustment Stage
<S> <C> <C> <C>
Balance at
November 10, 1995
(Inception) $ - $ - $ -
Common stock issued
for cash at
approximately $0.00
per share - - -
Currency translation
adjustment - (1,230) -
Net loss for the
year ended
March 31, 1996 - - (157,549)
Balance, March 31, 1996 - (1,230) (157,549)
Common stock issued
for cash at
approximately $0.38
per share - - -
Common stock issued
for services at
approximately $0.76
per share - - -
Currency translation
adjustment - 8,542 -
Net loss for the year
ended March 31, 1997 - - (1,388,389)
Balance, March 31, 1997 - $ 7,312 (1,545,938)
Recapitalization
(Note 1) - - -
Common stock issued
for cash at
approximately $0.36
per share (100,000) - -
Common stock issued
for services at
approximately $0.36
per share (154,281) - -
Issuance of warrants - - -
Common stock issued
for debt at
approximately $0.26
per share - - -
Common stock issued
for mineral properties
at $1.00 per share - - -
Preferred stock issued
for services at
$0.18 per share - - -
Currency translation
adjustment - 260,719 -
Net loss for the
year ended
March 31, 1998 - - (3,332,577)
Balance, March 31,
1998 $ (254,281) $ 268,031 $(4,878,515)
Common stock issued for
cash @ $.14 per share - - -
Common stock issued for
services @ $.15 per share - - -
Common stock issued for debt
@ $.20 per share - - -
Receipt of stock subscription
receivable 254,281 - -
Currency translation adjustment - (268,031) -
Net loss for the year ended
March 31, 1999 - - (6,031,215)
Balance, March 31, 1999 $ - $ - $(10,909,730)
</TABLE>
<TABLE>
PANTHER RESOURCES LTD.
(A Development Stage Company)
Consolidated Statements of Cash Flows
<CAPTION>
From
Inception on
November 10,
For the Years Ended 1995 Through
March 31, March 31,
1999 1998 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(6,031,215)$(3,332,577)$(10,909,730)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation expense 14,554 3,437 23,483
Stock issued for services 1,495,222 1,385,345 2,968,123
Bad debt expense - 213,313 224,941
Write-off mineral property 3,465,386 145,900 3,914,434
Issuance of warrants - 17,220 17,220
Currency translation adjustment (168,626) - (168,626)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable - (179,245) (213,312)
(Increase) decrease in deposits and
prepaid expenses (3,521) (24,717) (132,544)
Increase (decrease) in cash overdraft (22,245) 22,245 -
Increase (decrease) in accounts payable (56,759) (443,802) 166,890
Increase (decrease) in management fee
payable (26,371) 26,371 -
Increase in reserve for discontinued
operations 258,161 - 258,161
Net Cash (Used) by Operating
Activities (1,075,414) (2,166,510) (3,850,960)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - (66,822) (149,014)
Purchase of mineral property and deferred
exploration costs (526,313) (1,386,226) (2,762,539)
Net Cash (Used) by Investing Activities (526,313) (1,453,048) (2,911,553)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock 1,478,561 2,722,127 5,290,175
Proceeds on notes payable 123,248 644,181 1,472,420
Net Cash Provided by Financing
Activities 1,601,809 3,366,308 6,762,595
NET INCREASE (DECREASE) IN CASH 82 (253,250) 82
CASH AT BEGINNING OF PERIOD - 253,250 -
CASH AT END OF PERIOD $ 82 $ - $ 82
CASH PAID FOR:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for acquisition $ - $ 394,062 $ 394,062
Common stock issued for debt
conversion $ 24,000 $ 995,719 $1,019,719
Common stock issued for mineral
properties $ - $ 550,000 $ 550,000
</TABLE>
PANTHER RESOURCES LTD.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND HISTORY
The consolidated financial statements presented are those of Panther
Resources Ltd. (the Company). The Company was originally incorporated as
Thermacor Technology, Inc. on September 21, 1984 under the laws of the
State of Nevada. On March 26, 1997, the Company changed its name to Golden
Panther Resources, Ltd. and on March 10, 1998, the Company changed its name to
Panther Resources Ltd.
Golden Panther Resources Ltd. (premerger) (GPR) was incorporated under
the Company Act of British Columbia on November 10, 1995 as 508556 B.C.
Ltd. and changed its name to Golden Panther Resources Ltd. on March 28, 1996.
On April 2, 1997, Panther Resources Ltd. and Golden Panther Resources,
Ltd. completed an Agreement and Plan of Reorganization whereby the Company
issued 3,000,000 shares of its common stock in exchange for all of the
outstanding common stock of GPR. Immediately prior to the Agreement and Plan
or Reorganization, the Company had 12,308,990 shares of common stock
issued and outstanding.
The acquisition was accounted for as a recapitalization of GPR because
the shareholders of GPR controlled the Company after the acquisition.
Therefore, GPR is treated as the acquiring entity. There was no adjustment to
the carrying value of the assets or liabilities of GPR in the exchange.
The Company is the acquiring entity for legal purposes and GPR is the
surviving entity for accounting purposes. On March 1, 1997, the Company
completed a reverse stock split of 1-for-10 shares. All references to shares
of common stock have been retroactively restated. On March 22, 1997, the
shareholders of the Company authorized a reverse stock split of 1-for-20
shares. All references to shares of common stock have been retroactively
restated.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a March 31 year end.
b. Cash and Cash Equivalents
Cash equivalents include short term, highly liquid investments with
maturities of three months or less at the time of acquisition.
c. Basic Loss Per Share
The computations of basic loss per share of common stock are based on
the weighted average number of shares outstanding during the period of the
financial statements. Fully diluted loss per share is the same as
basic loss per share because of the antidilutive nature of the stock
equivalents.
d. Provision for Taxes
At March 31, 1999, the Company had net operating loss carryforwards of
approximately $10,900,000 that may be offset against future taxable income
through 2013. No tax benefit has been reported in the financial statements,
because the Company believes there is a 50% or greater chance the carryforward
will expire unused. Accordingly, the potential tax benefits of the loss
carryforward are offset by a valuation account of the same amount.
e. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
f. Preferred Stock
The Company has authorized 10,000,000 shares of preferred stock, par
value $0.10 per share. 2,000,000 shares of the preferred stock have been
issued as a Class A issuance. Each share is convertible into 5 shares of
common stock at $0.10 per share.
g. Mineral Properties
The costs associated with acquiring and exploring mineral properties
are capitalized on an individual property basis. When a property is
developed to the stage of commercial production, the related costs will be
amortized over the estimated reserve life of the property. If a property is
abandoned or if it is determined that its net recoverable value is less than
book value, the related costs will be charged against operations in the year
of abandonment or impairment in value.
The recorded amounts represent cost to date and do not necessarily
reflect present or future value.
Mineral property option payments received by the Company upon sale of
an interest in a mining property are considered a recovery of costs and
are recorded as a reduction of the mineral property costs.
The Company has set up an allowance for the full amount of the mineral
properties due to the doubtfulness of the recoverability of the costs
(Note 5).
h. Title to Mineral Properties
Although it is the Company's policy to confirm the validity of its
rights to title to, or contract rights with respect to, each mineral property
in which it has a material interest, there is no guarantee that title to its
properties will not be challenged or impugned. Title insurance generally is
not available, and the Company's ability to ensure that it has obtained
secure claim to individual mineral properties or mining concessions may be
severely constrained. The Company has conducted surveys of all of the claims
in which it holds direct or indirect interests and, therefore, the precise
area and location of such claims is not in doubt.
i. Concentrations of Risk - Foreign Operations
The Company has conducted exploration activities in countries with
developing economies, including Mexico and Indonesia. Both of these countries
have experienced recently, or are experiencing currently, economic or
political instability. Hyperinflation, volatile exchange rates and rapid
political and legal change, often accompanied by military insurrection, have
been common in these and certain other emerging markets in which the Company
may conduct operations. The Company may be materially adversely affected by
possible political or economic instability in any one or more of those
countries. The risks include, but are not limited to terrorism, military
repression, expropriation, changing fiscal regimes, extreme fluctuations in
currency exchange rates, high rates of inflation and the absence of industrial
and economic infrastructure. Changes in mining or investment policies or
shifts in the prevailing political climate in any of the countries in which
the Company conducts exploration and development activities could
adversely affect the Company's business. Operations may be affected in
varying degrees by government regulations with respect to production
restrictions, price controls, export controls, income and other taxes,
expropriation of property, maintenance of claims, environmental legislation,
labor, welfare benefit policies, land use, land claims of local residents,
water use and mine safety. The effect of these factors cannot be accurately
predicted.
j. Capital Assets and Amortization
Capital assets are recorded at cost and amortization is provided over
the estimated economic life on a straight line basis at the following
rates:
Office furniture and equipment 20% per year
Computer equipment 30% per year
Drilling equipment 20% per year
k. Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are
translated into United States dollars at the period and exchange rate. Non-
monetary assets are translated at the historical exchange rate and all income
and expenses are translated at the exchange rates prevailing during the
period. Foreign exchange currency translation adjustments are included in
the stockholders' equity section.
l. Fair Value of Financial Instruments
As at March 31, 1999, the fair value of cash, accounts receivable and
accounts and advances payable including amounts due to and from related
parties, approximate carrying values because of the short-term maturity of
these instruments.
m. Principles of Consolidation
The consolidated financial statements include the accounts of Panther
Resources Ltd. Golden Panther Resources, Incorporated, Golden Panther
Investments, Ltd. and Panther Group, Ltd. All significant intercompany
accounts have been eliminated.
n. Change in Accounting Principles
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share" during the year ended December 31, 1998. In
accordance with SFAS No. 128, diluted earnings per share must be calculated
when an entity has convertible securities, warrants, options, and other
securities that represent potential common shares. The purpose of calculating
diluted earnings (loss) per share is to show (on a proforma basis) per share
earnings or losses assuming the exercise or conversion of all securities that
are exercisable or convertible into common stock and that would either dilute
or note affect basis EPS. As permitted by SFAS No. 128, the Company has
retroactively applied the provisions of this new standard by showing the fully
diluted loss per common share for all years presented.
The Company adopted Statement of Financial Accounting Standards
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), which requires the
Company to determine compensation costs for the Company's stock option plans
and other stock awards in accordance with the fair value based method
prescribed in SFAS No. 123. The adaption of SFAS No. 123 had no material
effect on the Company's financial statements.
n. Change in Accounting Principles (Continued)
The Company also adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income" during the year ended March
31, 1999. SFAS No. 130 established standards for reporting and display of
comprehensive income (loss) and its components (revenues, expenses, gains and
losses) in a full set of general purpose financial statements. This
statement requires that an enterprise classify items of other comprehensive
income by their nature in a financial statement and display the accumulate
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a balance sheet. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997. The
Company has retroactively applied the provisions of this new standard by
showing the other comprehensive income (loss) for all years presented.
NOTE 3 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company does not have significant
cash or other current assets, nor does it have an established source of
revenues sufficient to cover its operating costs and to allow it to continue
as a going concern. The Company intends to develop business on the internet
(Note 10).
NOTE 4 - FURNITURE AND EQUIPMENT
1999
Accumulated Net Book
Cost Depreciation Value
Office furniture and equipment $ 71,260 $ 25,722 $ 45,538
$ 71,260 $ 25,722 $ 45,538
During the years ended March 31, 1999 and 1998, the Company expensed
$14,554 and $3,437 in depreciation, respectively. These amounts are included
in loss from discontinued operations.
NOTE 5 - MINERAL PROPERTIES AND DEFERRED EXPENDITURES
La Verde, Mexico property $ 820,208
Exploration costs - La Verde property 1,161,485
Kutai property - East Kaumantan, Indonesia 1,250,000
Exploration and development costs - Kutai
property 233,693
Allowance for loss on mineral properties (3,465,386)
$ -
Kutai Property, Indonesia
Panther acquired in 1996 a property known as Kutai. It is 123,548
acres (50,000 hectares) in size and is located in the province of Eastern
Kalimantan on the Island of Borneo. Panther has a joint venture agreement on
the property with an Indonesian partner, P.T. Pertiwi Kencana Abadi (PKA), a
company incorporated in Indonesia. Panther has 80% of the concession while
PKA has 20%. Panther can acquire an additional 10% of the property for a
$5,000,000 lump sum payment to PKA.
La Verde Property, Sinaloa, Mexico
The La Verde properties are located near Cosala in the State of
Sinaloa, about 99 miles north of Mazatlan, Mexico, and 97 miles southeast of
Culiacan, the capital of Sinaloa.
Allowance for Loss on Mineral Properties
The Company has set up an allowance for 100% of the mineral properties
because of the change in the Company's business plan. This amount is recorded
in the loss from discontinued operations.
NOTE 6 - ACCOUNTS PAYABLE - RELATED PARTIES
The Company owed officers and directors $329,948 in past wages and
salaries as of March 31, 1999. These amounts were converted into equity in
May 1999.
NOTE 7 - LOSS FROM DISCONTINUED OPERATIONS
On March 31, 1999, the Board of Directors of the Company decided to
discontinue the mining operations due to a lack of funding and low precious
metal prices. The following is a summary of the loss from discontinued
operations.
From
Inception on
November 10,
For the Years Ended 1995 Through
March 31, March 31,
1999 1998 1999
[S] [C] [C] [C]
REVENUES $ - $ - $ -
EXPENSES
General and administrative 2,720,444 2,970,269 6,923,450
Depreciation 14,554 3,437 23,483
Total Expenses 2,734,998 2,973,706 6,946,933
LOSS FROM OPERATIONS (2,734,998) (2,973,706)(6,946,933)
OTHER INCOME (EXPENSE)
Currency translation income 168,626 - 168,626
Write-off of mineral property (3,465,386) (145,900)(3,914,434)
Bad debt expense - (213,313) (224,941)
Interest income 543 342 7,952
Total Other Income (Expense) (3,296,217) (358,871)(3,962,797)
NET LOSS $ (6,031,215)$(3,332,577)$(10,909,730)
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.16) $ (0.16)
FULLY DILUTED LOSS PER SHARE
OF COMMON STOCK $ (0.16) $ (0.16)
The Company had liabilities of $258,161 which are associated with the
discontinued operations. No income tax benefit has been attributed to the
loss from discontinued operations.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company has a month-to-month office lease agreement which calls
for payments of $6,292 per month.
NOTE 9 - OPTIONS AND WARRANTS
The Company has authorized a 1997 and 1998 Stock Option Plan:
Exercise Number Number Number Number
Price Authorized Exercised Canceled Outstanding
1997 Plan $ 0.20 2,222,000 2,222,000 - -
1997 Plan $ 0.50 1,328,000 1,328,000 - -
1998 Plan $ 0.08 800,000 800,000 - -
1998 Plan $ 0.08 1,100,000 1,100,000 - -
1998 Plan $ 0.30 1,260,000 1,201,500 - 58,500
1998 Plan $ 0.50 200,000 - - 200,000
1998 Plan $ 0.70 240,000 - - 240,000
1998 Plan $ 0.75 200,000 - - 200,000
The Company has the following outstanding warrants:
Number of Exercise Number Number Expiration
Warrants Price Exercised Outstanding Date
75,000 $ 1.00 - 75,000 July 26, 1999
75,000 $ 1.25 - 75,000 Dec. 11, 1999
1,864,000 $ 0.25 - 1,864,000 Apr. 13, 2000
15,000 $ 0.40 - 15,000 July 17, 1999
1,875,000 $ 0.25 - 1,875,000 July 2, 2000
2,000,000 $ 0.25 - 2,000,000 Oct. 3, 2000
5,000,000 $ 0.15 - 5,000,000 Feb. 15, 2001
NOTE 10 -SUBSEQUENT EVENTS
a. Name Change
On June 11, 1999, the shareholders of the Company voted to change the
name of the Company to PhantomFilm.com.
b. Reverse Stock Split
On June 11, 1999, the shareholders of the Company voted to effect a
reverse split of the Company's common stock on a 1 share for 10 basis. The
Company also changed the par value of its preferred stock to $0.001 from $0.10
per share.
c. Change of Business Plan
Due to the recent weakness in the mineral resources industry,
management has chosen not to concentrate the Company's business activities on
mineral property acquisition, exploration and extraction. Although management
presently intends to maintain its current interests in mineral properties and
to resume the acquisition, exploration and development of mineral properties
in the future, to the extent that it is economically feasible, the Company
is currently examining the possibility of acquiring a worldwide license to
"streaming video" technology for use over the internet. This technology
allows the transmission, via modem, of television-quality video signals. The
Company and the owner of the technology have discussed the possibility of
acquiring a license for the technology through the issuance of an undetermined
number of "unregistered" and "restricted" shares of the Company's common
stock. If the negotiations with the owner of the technology are successful,
the Company plans to provide services that will allow the creation and
real-time delivery of audio, video, text and other media content over the
internet.
d. Cancellation of Employment Agreements
Effective April 1, 1999, the officers of the Company canceled their
employment agreements in exchange for 500,000 post-split shares of common
stock.
LICENSING AGREEMENT
GENERAL TERMS & CONDITIONS June 29,
1999
Between:
AlphaTrade.com a company incorporated pursuant to the laws of the State
of Nevada;
(the "Licensor")
AND:
PhantomFilm.com, a company incorporated pursuant to the laws of the
state of Nevada;
(the "Company")
Whereas the Licensor has a 100% ownership interest in certain streaming
video technology known as the "Technology", which it wishes to license
to the Company on a non-exclusive basis and the Company wishes to have a
non-exclusive license to the Technology.
Now therefore this agreement witnesses that in consideration of the
premises and the mutual agreements and covenants herein contained (the
receipt and sufficiency of which is acknowledged by each party) the
parties hereby covenant and agree as follows:
1. DEFINITIONS
1.1 The terms defined in this section shall have the following
meanings for the purposes of this Agreement:
(a) "Closing Date" is the date of execution of this agreement; .
(b) "Confidential Information" means all information (including,
without limitation, Technology, trade secrets, know-how,
specifications, analyses, formulas, drawings, data, reports,
patterns, devices, plans, processes, methodologies or
compilations) and any other documentation, whether written,
graphic or stored electronically or magnetically, belonging
to either party which may not be generally known;
c) "Standard Code" means the current version of the streaming
audio and video Technology developed by the Licensor. It is
expressly understood that base level encoding and
compression technology is part of the Standard Code;
further, thinning and bandwidth negotiation are part of the
Standard Code to the extent such technologies are used in
the current version of the Technology.
Page 2
"Documentation" shall mean any and all systems manuals.
2. LICENSE GRANTS
2.1 Licensor hereby grants to the Company, and the Company hereby
accepts, a non- exclusive worldwide right and license, with right
to sublicense, to do any and all of the following: use, modify,
prepare derivative works of, include in other product material,
copy and produce, make and have made, publicly display, publicly
perform, license, support, maintain, market, distribute otherwise
commercialize the Licensed Technology, in both object code and
source code form, the Documentation and any related know-how.
2.2 The Company shall assume no liabilities nor shall it become liable
for any liabilities of the Licensor or its business undertaking
and the Licensor shall pay, satisfy, assume, discharge, observe,
perform, fulfill and indemnify and save harmless the Company from
and against any such liabilities.
2.3 The Company shall issue on the Closing Date to the Licensor TWO
HUNDRED AND FIFTY THOUSAND (250,000) common shares in
consideration of granting an non-exclusive license in the
Technology to the Company for a period of twelve months.
2.4 The Company shall also pay to the Licensor the sum of TWENTY FIVE
THOUSAND DOLLARS ($25,000) per month commencing on the date of
execution of the expanded version of the Licensing Agreement for a
period of twelve months thereafter. The monthly payment of
$25,000 will be renegotiated at the completion of the initial
twelve month term.
2.5 After the expiration of the initial one year term, the Company may
extend the agreement by issuing the following Rule 144 shares to
the Licensor on the anniversary date of this Agreement:
First anniversary 90,000 common Rule 144 shares
Second anniversary 80,000 common Rule 144 shares
Third anniversary 70,000 common Rule 144 shares
Fourth anniversary 60,000 common Rule 144 shares
Fifth anniversary 50,000 common Rule 144 shares
Sixth anniversary and
Every anniversary thereafter 50,000 common Rule 144 shares
Page 3
2.6 Both parties agree that within 60 days an expanded version of this
Licensing Agreement listing the exact code and terms and use for
optimal benefit of the parties will be finalized.
3. SHARE RESTRICTIONS
3.1 The Licensor acknowledges that the PhantomFilm.com shares to be
issued hereunder are issued pursuant to Rule 144 of the Securities
and Exchange Commission and as such are subject to certain selling
restrictions. The Licensor agrees not to resell the PhantomFilm
shares otherwise than in accordance with application securities
legislation. The Licensor agrees to execute all documents and make
such filings as may be required on the part of the Licensor under
applicable securities legislation.
ADJUSTMENT IN SHARE CAPITAL OF THE COMPANY
4.1 In case of any capital reorganization or reclassification of the
shares of common stock of the Company, or in case of any
consolidation or merger of the Company into another corporation,
then the number of shares that the Licensor shall receive shall be
proportionately decreased or increased accordingly.
5. LICENSOR'S REPRESENTATIONS AND WARRANTIES
5.1 The Licensor represents and warrants to the Company that:
(a) the Licensor is duly incorporated and validly exists under the
laws of the State of Nevada and is in good standing with respect
to all statutory filings required by the applicable corporate and
securities laws of the State of Nevada;
(b) the Licensor has good and sufficient corporate capacity, power and
authority to enter into this Agreement on the terms and conditions
herein set forth, to complete the transactions contemplated hereby
and to duly observe and perform all of its covenants and
obligations in accordance with the Agreement and all necessary
action has been taken by or on the part of the Licensor to
authorize the execution and delivery of the Agreement,
(c) the completion of the transactions contemplated hereby will not
result in any fees, duties, taxes, assessments or other amounts
relating to the Technology becoming due or payable;
Page 4
(d) the Licensor is the sole and exclusive owner of the entire right,
title, and interest in and to, and has the sole and exclusive
right to use, free and clear of any payment obligation or other
encumbrances or liabilities, all intellectual property relating to
the Technology, whether registered or not, which registrations are
in good standing, valid, subsisting and in full force and effect
in accordance with their terms;
(e) The Technology is legally and beneficially owned by the Licensor
and the Licensor has good and marketable title thereto free and
clear of all encumbrances and liabilities and the Technology is in
the Licensor's possession;
(f) The Licensor has full knowledge of the purpose for which the
Company intends to use the Technology and that the Technology is
free and clear of any and all defects which may adversely affect
the purpose for which the Company intends to use the Technology;
(g) The Agreement has been duly executed and delivered by the Licensor
and constitutes a legal, valid and binding obligation of the
Licensor, enforceable against it in accordance with its terms
subject to applicable bankruptcy, insolvency and other similar
laws affecting creditors' rights generally and except that the
remedies of specific performance, injunctive relief or other
equitable remedies may not be available in any particular
instance;
(h) The performance of this Agreement will not be in violation of the
incorporating documents of the Licensor, any law, judgement, rule,
or regulation to which the Licensor, its assets or the Technology
are subject or of any agreement to which the Licensor is a party
and will not result in the creation or imposition of any lien,
encumbrance or restriction of any nature whatsoever in favor of a
third party upon or against the Technology,
(i) The use of the Technology by the Licensor does not infringe or
otherwise violate any rights of any person or entity, and there is
no pending or, to the knowledge of the Licensor, threatened claim
alleging any such infringement or violation, or alleging any
defect in or invalidity, misuse or unenforceability of, or
challenging the ownership or use of the Licensor's rights with
respect to the Technology.
5.2 The representations and warranties of the Licensor contained in
this Agreement or any certificates or documents delivered pursuant
to the provisions hereof or in connection with the transactions
contemplated hereby will be true at and as of the Closing Date as
though such representations and warranties were made at and as of
such time.
Page 5
5.3 In the event that any of the said representations and warranties
are found to be incorrect and such incorrectness results in any-
loss or damage sustained directly or indirectly by the Company
then the Licensor will pay the amount of such loss or damage to
the Company within 30 days of receiving notice thereof provided
that the Company will not be entitled to make any claim unless the
loss or damage suffered will exceed the amount of $1,000.
6. COMPANY'S REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Licensor that:
(a) the Company is duly incorporated and validly exists under
the laws of the State of Nevada and is in good standing;
(b) on the Closing Date, 100,000 shares will be issued as fully
paid and non-assessable;
(c) the Company has the corporate power to own the assets owned
by it and to carry on the business carried on by it and is
licensed to carry on business in all places where it
conducts business;
(d) the Company has good and sufficient corporate capacity,
power and authority to enter into this Agreement on the
terms and conditions herein set forth, to complete the
transactions contemplated hereby and to duly observe and
perform all of its covenants and obligations in accordance
with this Agreement and all necessary action has been taken
by or on the part of the Company to authorize the execution
and delivery of this Agreement;
(e) the performance of this Agreement will not be in violation
of the incorporating documents of the Company or of any
agreement to which the Company is a party and will not give
any person or company any right to terminate or cancel any
agreement or any right enjoyed by the Company and will not
result in the creation or imposition of any lien,
encumbrance or restriction of any nature whatsoever in favor
of a third party upon or against the assets of the Company,
there are no actions, suits, proceedings, investigations,
complaints, orders, directives or notices of defect or
non-compliance by or before the courts, administrative
tribunal, arbitrator or governmental authority issued,
pending
Page 6
or, to the knowledge of the Company, threatened against or
affecting the Company, its business or its assets (including
proceedings or actions by any taxation authority) which, if
successful, could have a materially adverse effect on the
business of the Company.
6.2 The representations and warranties of the Company contained in
this Agreement or any certificates or documents delivered pursuant
to the provisions hereof or in connection with the transactions
contemplated hereby will be true at and as of the Closing Date as
though such representations and warranties were made at and as of
such time.
6.3 In the event that any of the said representations and warranties
are found to be incorrect and such incorrectness results in any
loss or damage sustained directly or indirectly by the Licensor,
then the Company will pay the amount of such loss or damage to the
Licensor within 30 days of receiving notice thereof provided that
the Licensor will not be entitled to make any claim unless the
loss or damage suffered will exceed the amount of $1,000.
7. CONDITIONS PRECEDENT
7.1 All obligations of the Licensor under this Agreement are further
subject to the Company delivering or causing to be delivered, on
the Closing Date,
(a) to the Licensor:
(i) a copy of the resolutions of the Directors of the
Company authorizing the form, execution and delivery
of this Agreement and the completion of the
transactions contemplated in this Agreement
(ii) a copy of the resolution of the Directors of the
Company authorizing the issue of 100,000 "restricted"
and "unregistered" shares to the Licensor.
7.2 All obligations of the Company under this Agreement are further
subject to:
(a) all consents and approvals required to be obtained by the
Licensor for the purpose of licensing the Technology have
been obtained;
(b) no material loss or damage having occurred to the Technology
since the date of this Agreement;
(c) the Licensor delivering or causing to be delivered to the
Company on the Closing Date:
Page 7
(i) a copy of the resolution of the Directors of the
Licensor authorizing the licensing of the Technology
to the Company;
(ii) a copy of the resolution of the Directors of the
Licensor authorizing the form, execution and delivery
of this Agreement and the transactions contemplated
herein;
(iii) the Technology.
7.3 The conditions set forth in paragraph 7.2 of this Agreement are
for the exclusive benefit of the Company and the Company may waive
the conditions in whole or in part by delivering to the Licensor,
at or before the time of closing, a written waiver to that effect
stated to be made pursuant to this subsection and executed by the
Company.
8 CLOSING
8.1 The licensing of the Technology and the issuance of the
PhantomFilm shares will take place on the Closing Date at the
offices of PhantomFilm.com, #400, 1111 W. Georgia Street,
Vancouver, British Columbia following the satisfaction of the
conditions precedent set out in Part 7 of this Agreement.
9 GENERAL
9.1 Time is of the essence in this Agreement.
9.2 The terms and provisions herein contained constitute the entire
agreement between the parties and supersede all previous oral or
written communications.
9.3 This Agreement will be governed by, construed and enforced in
accordance with the laws of the State of Nevada in the United
States.
9.4 References to dollar amounts in this Agreement means United
States.
9.5 This Agreement and each of its terms and provisions will enure to
the benefit of and be binding upon the parties to this Agreement
and their respective heirs, executors,administrators, personal
representatives, successors and assigns.
Page 8
9.6 If any one or more of the provisions contained in- this Agreement
should be invalid, illegal or unenforceable in any respect in any
jurisdiction, the validity, legality and enforceability of such
provisions or provisions will not in any way be affected or
impaired thereby in any other jurisdiction and the validity,
legality and enforceability of the remaining provisions contained
herein will not in any way be affected or impaired thereby, unless
in either case as a result of such determination this Agreement
would fail in its essential purpose.
9.7 This Agreement is not transferable or assignable without the
written consent of the other parties.
9.8 Any notices under this Agreement must be:
(a) in writing,
(b) delivered, telecopied or mailed by prepaid post, and
(c) addressed to the party to which notice is to be given at the
address for such party indicated herein or at another
address designed by such party in writing.
9.9 Notices shall be addressed as follows:
(a) if to the Company:
#400, 1111 West Georgia Street
Vancouver, British Columbia V6E 4M3
Attention: President
Facsimile: (604) 689-5377
(b) if to the Licensor:
#400, 1111 West Georgia Street
Vancouver, British Columbia V6E 4M3
Attention: President
Facsimile: (604) 681-7710
Page 9
9.10 This Agreement may be executed in as many counterparts as may be
necessary or by facsimile and each of the facsimile or counterpart
so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same instrument
and notwithstanding the date of execution shall be deemed to bear
the date as set out on the first page of this Agreement.
MISCELLANEOUS
It is agreed that this Letter of Intent has been prepared solely
to outline the agreed upon licensing terms and as such may be
altered or amended by either party's legal representatives as long
as the terms of this Letter of Intent remain the same.
AlphaTrade.com PhantomFilm.com
Per: Per:
/s/ Rafael de Noyo /s/ Penny Perfect
------------------ -----------------
Authorized Signatory Authorized Signatory
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