UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission File Number: 0-18049
E*twoMedia.com
(Formerly Nerox Energy Corporation)
Nevada 91-1317131
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
67 Brompton Road
London, SW31DB
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: 44-020-7225-3113
Securities registered under Section 12(b) of the Exchange Act:
(Title of each class) (Name of each exchange on which registered)
NONE NONE
Securities registered under Section 12(g) of the Exchange Act:
(Title of each class)
COMMON STOCK ($0.004167)
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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [_] NO [X]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant'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. [X]
State issuer's revenues for its most recent fiscal year: $556,019.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: There were 22,703,276 shares of the
Registrants Common Stock issued and outstanding as of April 30, 2000.
<PAGE>
PART I
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT
EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT E*TWOMEDIA.COM AND
OUR INDUSTRY. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES.
E*TWOMEDIA.COM'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, AS MORE FULLY
DESCRIBED IN THIS SECTION AND ELSEWHERE IN THIS REPORT. E*TWOMEDIA.COM
UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR
ANY REASON, EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN
THE FUTURE.
ITEM 1 DESCRIPTION OF BUSINESS
General
E*twoMedia.com was incorporated in the State of Nevada in 1985. Reference in
this Report to "E*twoMedia", "The Company", "The Registrant" " we", "our", and
"us" refer to E*twoMedia.com Up until December of 1998 the company's primary
activities had been directed towards the development of oil, gas and coal
properties. The Registrant on December 18,1998 completed a stock purchase
agreement selling all the outstanding stock it held in its subsidiary Nerox
Power Systems Inc. (NPSI) to Ross Production Company Inc. NPSI held all the
Coal, Oil and Gas interests of the company on a consolidated basis.
The Registrants primary activities are now directed towards developing online
publishing. The Registrant is constantly seeking business opportunities in the
online publishing industry and other means of revenue activities and financing
to enable it to complete its business plan.
<PAGE>
Recent Transactions
The Company acquired FPS a United Kingdom based
company. These transactions are described in Note 3 to the financial statements
included in this Report and are referred to herein as the "Pending
Transactions."
E*twoMedia.com, Inc. has acquired a stake in PeopleBank, one of the UK's largest
online recruitment companies.
Investment Properties
As part of the Stock Purchase agreement entered into December 18,1998 the
company sold all its rights and obligations relating to oil, gas and coal
properties.
Revenues
The Registrant's revenues in 1998 were derived from its proportionate interest
in domestic oil and gas producing properties prior to the sale of all its rights
and obligations relating to the oil, gas and coal properties. The Registrant was
never the operator of any wells in which it owned interest.
<PAGE>
Competitive Conditions
Subsequent to the stock purchase agreement entered into December 18, 1998 the
company no longer expects to realize revenues from oil, gas and coal operations
which had contributed to over 90% of the Company's revenues and earnings stream.
The Company's operations currently are directed towards the online publishing
industry. The company has been in negotiations to acquire a United Kingdom based
publishing company.
E*twoMedia.com has developed a business plan including creating markets, namely
Internet advertising and related products and services, which are intensely
competitive. E*twoMedia.com expects such competition to continue to increase
because its markets pose no substantial barriers to entry. Competition may also
increase as a result of industry consolidation. E*twoMedia.com believes that its
ability to compete depends on many factors both within and beyond its control,
including the following:
(i) the timing and market acceptance of new solutions and enhancements to
existing solutions developed by either E*twoMedia.com or its
competitors
(ii) customer service and support efforts
(iii) sales and marketing efforts
(iv) the ease of use, performance, price and reliability of solutions
developed either by E*twoMedia.com or its competitors.
E*twoMedia.com will compete for Internet Publishing revenues with large Web
publishers and Web search engine companies, such as America Online, Excite,
Lycos, Microsoft, Infoseek and Yahoo!. E*twoMedia.com will also encounter
competition from a number of other sources, including content aggregation
companies, companies engaged in advertising sales networks, advertising
agencies, and other companies which facilitate Internet publishing.
<PAGE>
Many of E*twoMedia.com's future competitors, as well as a number of potential
new competitors, have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than does E*twoMedia.com. These factors allow them to
respond more quickly than E*twoMedia.com can to new or emerging technologies and
changes in customer requirements. They may also allow them to devote greater
resources than E*twoMedia.com can to the development, promotion and sale of
their products and services. Such competitors may also engage in more extensive
research and development, undertake more far-reaching marketing campaigns, adopt
more aggressive pricing policies and make more attractive offers to existing and
potential employees, strategic partners, advertisers and Web publishers. It is
possible that E*twoMedia.com's competitors will develop products or services
that are equal or superior to E*twoMedia.com's products or that achieve greater
market acceptance than E*twoMedia.com's products. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products or services to address the needs of E*twoMedia.com's prospective
advertising and Web publisher customers. As a result, it is possible that new
competitors may emerge and rapidly acquire significant market share. Increased
competition is likely to result in price reductions, reduced gross margins and
loss of market share. It is possible that E*twoMedia.com will not be able to
compete successfully or that competitive pressures will not materially and
adversely affect its results of operations or financial condition.
Companies doing business on the Internet, including E*twoMedia.com must also
compete with television, radio, cable and print (traditional advertising media)
for a share of advertisers' total advertising budgets. Advertisers may be
reluctant to devote a significant portion of their advertising budget to
Internet advertising if they perceive the Internet to be a limited or
ineffective advertising medium.
<PAGE>
INDUSTRY OVERVIEW
The online publishing industry is rapidly growing due in part to the ever
increasing need of businesses for specialized information. As a result of this
need for information, many publishers have oriented their business toward online
publishing.
The online publishing market is diverse, consisting of online trade journals,
newsletters, directories and magazines aimed at specific target markets such as
computers, sports fans, financial information, travel, and lifestyles, etc.
Online directories, including association directories and yellow page
directories, are just one part of the online publishing market. Advertisers are
increasingly seeking ways to channel their advertising dollars toward specific
target markets.
In 1999, the Registrant plans to expand its business to include electronic
publishing on the Internet for clients. The Registrant will provide hosting
services and maintain web sites.
Acquisition Strategy
In addition to online publishing the company expects to enter acquisitions which
will enable it to complete its business plan. The Company seeks to acquire
underperforming middle market media businesses whose acquisition costs are low
relative to potential revenues and cashflow. The Company focuses on developing
significant long-term franchises in middle markets. The Company then seeks to
improve revenues and cashflow, using its particular promotional, marketing,
sales, programming and editorial approaches. The Company targets businesses that
it believes operate in underdeveloped market segments with a low level of
competition and a strong economic base.
<PAGE>
The Company believes that its acquisition strategy, properly implemented, has a
number of specific benefits, including
(i) diversification of revenues and cashflow across a broader base of
media industries, properties and markets,
(ii) geographic clustering which has allowed improved cashflow margins
through the consolidation of facilities, centralized newsgathering,
cross-selling of advertising and elimination of redundant expenses
(iii) improved access to consultants and other industry resources
(iv) greater appeal to qualified industry management talent and
(v) efficiencies from economies of scale.
If and when achieved, new acquisitions may adversely affect near-term operating
results due to increased capital requirements, transitional management and
operating adjustments, increased interest costs associated with acquisition
debt, and other factors. Any future acquisitions may be highly-leveraged, and
such acquisitions well may increase the Company's overall leveraged position.
There can be no assurance that debt or equity financing for such acquisitions
will be available on acceptable terms, or that the Company will be able to
identify or consummate any new acquisitions. Any failure to make necessary
acquisitions, or the making of unsuccessful acquisitions, could have a material,
adverse effect on the future financial condition and operating results of the
Company.
<PAGE>
GOVERNMENT REGULATION
The Company plans to be in the business of Online Publishing which is dependent
upon Internet access, in part, through transmissions over public telephone
lines. These transmissions are governed by regulatory policies establishing
charges and terms for communications. The Company, as an online publishing
company will depend upon Internet access providers, who are not currently
subject to direct regulation by the Federal Communications Commission (the
"FCC") or any other agency, other than regulations applicable to businesses
generally. However, the Company could become subject in the future to
regulations by the FCC and/or other regulatory commissions as a provider of
basic telecommunications services.
Such regulations could affect the charges that the Company pays to connect to
the local telephone network or for other purposes. Currently, Internet access
providers, are not required to pay carrier access charges. Access charges are
assessed by local telephone companies to long-distance companies for the use of
the local telephone network to originate and terminate long-distance calls,
generally on a per minute basis. Access charges have been a matter of continuing
dispute, with long-distance companies complaining that the rates are
substantially in excess of cost and local telephone companies arguing that
access rates are justified to subsidize lower local rates for end users and
other purposes. In May 1997, the FCC reaffirmed its decision that Internet
access providers should not be required to pay carrier access charges. In a
related order, the FCC also concluded that Internet access providers should not
be required to contribute to a new universal service fund established to replace
current local rate subsidies and to meet other public policy objectives, such as
enhanced communications systems for schools, libraries, and certain health care
providers. As a result, unlike telecommunications carriers and other
telecommunications providers, Internet access providers will not have to
contribute a percentage of their revenues to the federal universal service fund
and are not likely to be required to contribute to similar funds being
established at the state level. However, both the access charge and universal
service treatment of Internet access providers are the subjects of further
proceedings and could change. Telephone companies are actively seeking
reconsideration or reversal of the FCC decisions, and their arguments are
gaining more support as Internet-based telephony begins to compete with
conventional telecommunications companies.
The Company is not in a position to predict how these matters will be resolved,
but it could be adversely affected if, in the future, it and other Internet
access providers are required to pay access charges or contribute to universal
service support.
<PAGE>
The law relating to the liability of Internet access providers and on-line
services companies for information carried on or disseminated through their
networks is unsettled. Although no claims seeking to impose such liability have
been asserted against the Company to date, there can be no assurance that such
claims will not be asserted in the future or, if asserted, will not be
successful. As the law in this area develops, the potential imposition of
liability upon the Company for information carried on and disseminated through
its network could require the Company to implement measures to reduce its
exposure to such liability, which may require the expenditure of substantial
resources or the discontinuation of certain products or service offerings. Any
costs that are incurred as a result of contesting any such asserted claims or
the consequent imposition of liability could materially adversely affect the
Company's business, financial condition, and results of operations.
Due to the increasing popularity and use of the Internet, it is possible that
additional laws and regulations may be adopted with respect to the Internet,
covering issues such as content, user privacy, pricing, and copyright
infringement. The Company cannot predict the impact, if any, that any future
regulatory changes or developments may have on its business, financial
condition, and results of operations. Changes in the regulatory environment
relating to the Internet access industry, including regulatory changes that
directly or indirectly affect telecommunication, costs or increase the
likelihood or scope of competition from regional telephone companies or others,
could have a material adverse effect on the Company's business, financial
condition, and results of operations.
<PAGE>
Insurance Coverage
None
Employees
As of April 30,2000, the Registrant had 5 employees. Currently, the Registrant
is charged for office space and clerical staff time through the offices of
Daniel Jefferies, President and CEO.
ITEM 2 DESCRIPTION OF PROPERTIES
None
ITEM 3 LEGAL PROCEEDINGS
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
High and Low Bid
The following table sets forth the high and low bid prices of the Common Stock
of the Registrant in the over-the-counter market (OTC Bulletin Board) by quarter
in 1998 and 1999. The information was provided by the market-maker in the
Registrant's stock and statistical reports by the NASD. Such over-the-counter
market quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions.
Mar 1998 Jun 1998 Sep 1998 Dec 1998
High 11/20 2/5 1/8 1/40
Low .7/25 2/25 1/25 7/50
Mar 1999 Jun 1999 Sep 1999 Dec 1999
High 6 3/4 7 6 1/4 2 3/8
Low 2 3 1/8 1 3/4 1
Holders
At the date of this filing there are approximately 439 holders of the Common
Stock of the Registrant.
Dividends
The Company has paid no dividends on its common stock and for the foreseeable
future has no plans to pay dividends. The Preferred shareholders elected to
convert accrued dividends into common stock in 1999.
<PAGE>
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The following review of operations should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto included elsewhere in
this document.
1999 compared to 1998
Total revenues from resulted from on-line publishing in 1999, which amounted to
$556,019. In 1998 there were no on-line publishing sales due to the fact that
the Company had changed its business plan. Management was disappointed with
revenues less then expected compounded by increased pressure on margins.
Exceptional costs due to the merger and fund raising for expansion further
impacted this year's results. Management is in the process of developing other
product lines to compliment its existing guide business and capitalize on our
growing experience in the e-commerce arena. Further acquisitions are planned for
the year 2000.
Liquidity and Capital Resources
At December 31, 1999, the Company had current liabilities totaling $783,964 and
current assets of $247,179 for a working capital deficit of $536,785 due
primarily to professional fees accrued relating to the reorganization of the
company at the end of 1999 and compensated for in cash payments and in the form
of stock issued to the individuals listed in item 11.
Inflation
Inflation during the year ended December 31, 1999 has had little effect on the
Company's capital costs and results of operations.
<PAGE>
ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Exhibit A, Auditor's Report, attached hereto and incorporated herein by this
reference.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 9, 1999, the Company filed an 8-K to report the appointment of
Nelson, Mayoka and Company CPA's as its new independent accountants.
PART III
ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Board of Directors
Name Age Position with the Company Since
Daniel Jefferies 35 Chief Executive Officer/Director May 10, 1999
Daniel Jefferies has served as managing director and owner of FPS a United
Kingdom based publishing company. Mr. Jefferies has fourteen years of experience
in the media promotions and packaging industry. He set up Bolton Films in 1986
and developed a number of successful deals. He also was involved in the launch
of Maximize Media which specialized in repackaging and selling paid for
newspaper space in the form of advertorials and special features.
<PAGE>
ITEM 10 EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1999, none of the Officers or
Directors of the Company had compensation with the exception of payments to
Daniel Jefferies in the amount of approximately $130,000.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 30, 2000 as to
each person who is known to the Registrant to be the beneficial owner of more
than 5% of the common stock of the Registrant, and as to the security ownership
of each Director of the Registrant and all Officers and Directors of the
Registrant as a group. Except where specifically noted, each person listed in
the table has sole voting and investment power in the shares listed.
Name and Address Number of Shares Percent of
Of Beneficial Owner Beneficially Owned Shares Outstanding
Daniel Jefferies 17,000,000 74.90%
67 Brompton Road
London, SW31DB
(1) A person is deemed to be the beneficial owner of securities than can be
acquired by such person within 60 days from April 30, 2000 upon the exercise of
warrants or options. Each beneficial owner's percentage ownership is determined
by assuming that options or warrants that are held by such person (but not those
held by any other person) and which are exercisable within 60 days from May
12,1999 have been exercised.
<PAGE>
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, 955,000 shares of common stock were issued to consultants as
compensation for services from 1998 as follows.
Shares
Oram Ltd. 200,000
William W. Bolles 525,000
Michael A. Cassin 200,000
Marc A. Palazzo 30,000
-------
955,000
The company in the first quarter of 1999 began negotiations with FPS a United
Kingdom based company to be acquired.
<PAGE>
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT A Auditors' Report
FORM 8-K
On February 9, 1999 E*twoMedia.com filed an 8-K reporting the company filed a
Certificate of Amendment to the Certificate of Incorporation which changed the
name of the Company from Nerox Energy Corporation to E*twoMedia.com. In addition
the company reported the engagement of Nelson, Mayoka & Company as its new
independent accountant.
On March 22,1999 the company filed an 8K reporting the Amendment of Article 4 of
the Articles of Incorporation, which superseded the Amendment of the Articles of
Incorporation file on an 8K on April 26, 1998 increasing the shares outstanding
to 12,000,000. On August 10,1999 the company filed an 8K reporting the Amendment
of Article 4 of the Articles of Incorporation, which superseded the Amendment of
the Articles of Incorporation file on an 8K on April 26, 1998 increasing the
shares outstanding to 50,000,000.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: May 22, 2000 E*TWOMEDIA.COM
By: /s/ Daniel Jefferies
-----------------------------
Daniel Jefferies, President and
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Dated: May 22, 2000 By: /s/ Daniel Jefferies
-----------------------------
Daniel Jefferies, President and
Secretary
<PAGE>
E*twoMedia.com, Inc.
December 31, 1999
Page
Independent Auditors Report ............................................ 1
Financial Statements
Balance Sheet ................................................. 2
Statement of Operations ....................................... 3
Statement of Cash Flows ....................................... 4
Notes to Financial Statements .......................................... 5-10
<PAGE>
Nelson, Mayoka & Company, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
551 5TH Avenue
New York, New York
10176-0001
Tel. (212) 697-7979
Fax (212) 697-8997
DIRECT LINE
INDEPENDENT AUDITORS REPORT
Board of Directors
E*twoMedia.com, Inc.
New York, New York
We have audited the accompanying statement of financial condition of
E*twoMedia.com, Inc. as of December 31, 1999 and the related statements of
income, changes in stockholders equity, cash flows, and changes in liabilities
subordinated to claims and general creditors for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating, the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of E*twoMedia.com, Inc. as of
December 31, 1999, and the results of operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company is a development stage enterprise.
The lack of sufficient working capital to operate as of December 31, 1999 raises
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are described in Note 4. the financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.
Nelson, Mayoka and Company, PC
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
May 19, 2000
1
<PAGE>
<TABLE>
<CAPTION>
E*twoMEDIA.com
CONSOLIDATED BALANCE SHEET
December 31, 1999
Assets
Current Assets:
<S> <C>
Cash .......................................................................... $ (54,530)
Trade Accounts Receivable ..................................................... 145,538
Other Receivables ............................................................. 156,587
Total Current Assets .......................................................... 247,596
Fixed Assets
Fixed Assets (Net of Accumulated Depreciation of 18,581) ...................... 18,900
Other Assets
Investment .................................................................... 1,070,682
Work in Progress .............................................................. 62,832
Total Other Assets ............................................................ 1,133,514
Total Assets .................................................................. $ 1,400,010
Liabilities and Stockholders' Equity
Current Liabilities
Trade Payables ................................................................ $ 475,163
Accrued Expenses .............................................................. 286,110
Other Expenses ................................................................ 76,331
Total Current Liabilities ..................................................... 837,604
Other Liabilities
Deferred Income ............................................................... 375,123
Loan Payable .................................................................. 1,931,331
Total Other Liabilities ....................................................... 2,306,454
Stockholders' Equity
Common stock, par value $.001; shares authorized 50,000,000, issued and
outstanding 19,703,276 (net of 4,507 treasury shares) ......... 19,703
Additional paid-in capital ............................................ 13,762,334
Accumulated deficit ................................................... (15,526,503)
Net Stockholders' equity ...................................................... (1,744,466)
Total Liabilities and Stockholders' Equity .................................... $ 1,399,593
See accompanying notes to the financial statements.
</TABLE>
2
<PAGE>
E*twoMEDIA.com
Statement of Operations
December 31, 1999
Revenues
On Line Publishing Sales .......... $ 556,019
Oil and gas sales ................. --
Total Sales ....................... 556,019
Cost and expenses
General and administrative ........ 1,665,998
Depreciation ...................... 4,138
Total Expenses .................... 1,670,136
Net Loss .................................. $(1,114,117)
Basic and diluted net loss per common share $ (0.20)
Basic and diluted weighted average number
of common shares outstanding ...... 5,556,664
See accompanying notes to the financial statements.
3
<PAGE>
E*twoMEDIA.com
(Formerly Nerox Holding Corporation)
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
For the Three Months
Ended September 30,
1999 1998
Revenues
On Line Publishing Sales .......... $ 86,918 $ --
Oil and gas sales ................. -- --
Total Sales ....................... 86,918 --
Cost and expenses
Oil and gas costs ................. -- --
Coal mine costs ................... -- --
General and administrative ........ 36,306 --
Interest .......................... 267 11,062
Depreciation ...................... 823
Depletion ......................... -- 8,118
37,396 19,180
Net Loss .................................. $ (37,396) $ (19,180)
Basic and diluted net loss per common share $ (0.01) $ (0.00)
Basic and diluted weighted average number
of common shares outstanding ...... 5,556,664 8,492,675
See accompanying notes to the financial statements.
4
<PAGE>
E*twoMEDIA.com
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1999
Cash flows from operating activities:
Net Loss .................................... $(1,114,117)
Adjustments to reconcile net loss to net cash
used by operating activities
Depreciation ................................ 4,138
Notes Receivable ............................ (10,000)
Accounts Receivable ......................... (145,538)
Other Receivables ........................... (156,587)
Accounts payable ............................ 475,163
Accrued expenses ............................ 181,110
Work in Progress ............................ (62,832)
Other Payables .............................. (76,331)
Deferred Income ............................. (375,123)
Loans Payable ............................... 1,931,331
Net cash used by operating activities ....... 651,214
Cash flows from investing activities:
Investment - Peoples Bank ................... (1,070,682)
Net cash used by investing activities ....... (1,070,682)
Cash flows from financing activities
Proceeds from notes payable ................. 10,000
Issuance of common stock .................... 19,036
Additional Paid In Capital .................. 335,902
Net cash provided by financing activities ... 364,938
Net increase (decrease) in cash ..................... (54,530)
Cash, and cash equivalents, beginning of period ..... --
Cash, and cash equivalents, end of period ........... $ (54,530)
Supplemental disclosure of cash flow activities:
Cash paid for interest ...................... $ --
Non-cash investing and financing transactions
Dividends in arrears ........................ $ --
See accompanying notes to the financial statements.
5
<PAGE>
E*TWOMEDIA.COM
Notes to Financial Statements
December 31, 1999
Note - 1 The Company and Summary of Significant Accounting Policies
E*twoMedia.com was incorporated on September 26, 1985 as Gemini
Energy Corporation under the laws of the State of Nevada. On January 28,1994,
the Company's name was changed to Nerox Energy Corporation. On April 26,1998 the
company name was changed to Nerox Holding Corporation. On December 7, 1998 the
company name was changed to E*twoMedia.com. E*twoMedia.com is constantly seeking
business opportunities in the online publishing industry and other means of
financing to enable it to complete its business plan.
As of August 31, 1999, E*twoMedia.com acquired all of the issued and outstanding
shares of common stock of Free Publishing Services Limited in exchange for an
aggregate of 17,000,000 authorized but unissued shares of the common stock,
$.001 par value, of E*twomedia.com. Free Publishing Services Limited engages in
the activity of organizing the production of advertising brochures for companies
in newspapers.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Cash and cash equivalents
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit and all highly liquid debt instruments with
original maturities of three months or less. Substantially all deposits are on
account with one institution.
<PAGE>
Income taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax basis
of assets and liabilities for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset federal income taxes.
Due to the Company's net operating losses in the fiscal years ended December 31,
1999, 1998 and 1997 of $1,114,117, $1,815,507 and $1,008,784 respectively, there
are no income taxes currently due. Due to recurring losses the company has a
zero valuation allowance.
Foreign Currency Translation
The financial position and results of operations of foreign divisions are
measured using the currency of the respective countries as the functional
currency. Assets and liabilities are translated into the reporting currency
(U.S. Dollars) at the foreign currency exchange rate in effect at the balance
sheet date, while revenues and expenses for the year are translated at the
average exchange rate in effect during the year. Translation gains and losses
are not included in determining net income or loss but are accumulated and
reported in stockholders' equity, as a component of other comprehensive income,
on a net of tax basis.
Goodwill
Goodwill arose on the transfer of the trade, assets and liabilities of Daniel
Jefferies trading as Free Publishing Services and amounted to the difference
between the fair market value of the consideration paid and the fair market
value of the assets and liabilities acquired. It was capitalized and was being
amortized through the profit and loss account over the directors useful economic
life of 10 years. An impairment review was carried out and resulted in the write
off of the total unamortized amount of goodwill.
<PAGE>
Revenue Recognition
On-line publishing sales represents sales to outside customers at invoiced
amounts less value added tax. Sales are recognized in the period in which the
promotion first appeared in the newspaper.
Work in Progress
Work in progress represents costs invoiced prior to the period end for
promotions which appear in the newspaper post period end.
Deferred Income
Deferred income represents sales invoiced prior to the period end for promotions
which appear in the newspaper post period end.
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation and
amortization. Depreciation and amortization are calculated using the
straight-line method over the useful life of the related assets ranging form 3
to 5 years. Repair and maintenance costs are charged to expense when incurred.
When assets are sold or retired, the cost and the related accumulated
depreciation are removed form the accounts, and any gain or loss is included in
operations.
Investments
The Company's investments are comprised of 11,696 shares of the common stock of
PeopleBank The Employment Network. The investment in PeopleBank The Employment
Network was purchased via loans made to the Company by related third parties.
Stock compensation
The Company accounts for compensation costs related to employee stock options
and other forms of employee stock-based compensation plans in accordance with
the requirements of Accounting Principles Board Opinion 25 ("APB 25"). APB 25
<PAGE>
requires compensation costs for stock based compensation plans to be recognized
based on the difference, if any, between the fair market value of the stock on
the date of the grant and the option exercise price. In October 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123
established a fair value-based method of accounting for compensation costs
related to stock options and other forms of stock-based compensation plans.
However, SFAS 123 allows an entity to continue to measure compensation costs
using the principles of APB 25 if certain pro forma disclosures are made. The
Company adopted the provisions of pro forma disclosure requirements of SFAS 123
in 1996. Options granted to non-employees are recognized at their estimated fair
value at the date of grant.
Fair value of financial instruments
The fair value of financial instruments, consisting principally of notes
payable, is based on interest rates available to the Company and comparison to
quoted prices. The fair value of these financial instruments approximated
carrying value. Fair values are based on quoted market prices and assumptions
concerning the amount and timing of estimated future cash flows and assumed
discount rates reflecting varying degrees of perceived risk. Based on borrowing
rates currently available to the Company with similar terms, the carrying value
of long-term debt and capital lease obligations approximate fair value.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with Statement of Financial
Accounting Standards 128, Earnings Per Share ("SFAS 128"), which superseded
Accounting Principles Board Opinion 15 ("APB 15"). Net loss per share for all
periods presented has been restated to reflect the adoption of SFAS 128.
Basic net loss per share is based upon the weighted average number of common
shares outstanding. Diluted net loss per share is based on the assumption that
all dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the period.
<PAGE>
Note - 2 Accrued Expenses
Accrued expenses include related publishing job costs incurred aggregating
$232,470.
Note - 3 Stockholders' equity
The company declared on November 20, 1998 a reverse 1 for 125 stock split
effective December 4, 1998.
On April 20, 1995, the Company's board of directors authorized two classes of no
par value preferred stock: Class A, 100,000 shares of 10% cumulative, non-voting
convertible preferred stock, and Class B, 100,000 shares of non-convertible,
non-voting shares. The Company amended its bylaws to combine the two classes of
stock to one class of 200,000 shares of cumulative, convertible, non-voting
preferred stock on April 20, 1996. After one year, the shares are convertible
into common shares on a one for one basis at the option of the holder. The
Company issued 70,709 shares of preferred stock in 1995 for cash of $495,000. In
late 1997, in order to induce conversion due to the inability to pay dividends,
the Company offered to convert shares at 7 to 1.
The company in December of 1998, converted all the remaining shares of preferred
stock for 70,714 shares of post reverse common stock.
The Company in March of 1998 issued 3,200,000 shares of common stock for
compensation of services.
The Company in December of 1998 converted $1,274,550 of debt into 10,196 shares
of post reverse common stock.
On September 1, 1999 a majority of the E*twoMedia.com, Inc.'s shareholders
authorized the amendment to the Company's Certificate of Incorporation to
increase the number of shares the company authorized to issue from 12,000,000
shares of common stock, par value $0.001, to 50,000,000 shares of common stock,
par value $0.001.
<PAGE>
Note - 4 Income taxes
Due to the Company's net operating losses in the fiscal years ended December 31,
1999, 1998 and 1997 of $1,114,117, $1,815,507 and $1,008,784 respectively, there
are no income taxes currently due. Due to recurring losses the company has a
zero valuation allowance.
Deferred tax assets and liabilities are recognized for temporary differences
between the financial reporting basis and the tax basis of the Company's assets
and liabilities. Deferred tax assets are reduced by a valuation allowance when
deemed appropriate. The measurement of deferred tax assets and liabilities is
computed using applicable current tax rates (34%), and is based on provisions of
the enacted tax law; the effects of future changes in tax laws or rates are not
anticipated.
The Company has a Federal net operating loss carryforward of $3,938,408 that may
be offset against future taxable income.
The Company's deferred tax benefit, which has been offset entirely by a
valuation allowance, is comprised of the following at December 31, 1999:
1999
Loss carryforwards $ 3,938,408
Applicable tax rate 34%
-----------
1,339,059
Valuation allowance (1,339,059)
-----------
$ -
===========
Note - 5 Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation and
amortization. As of December 31, 1999 the amounts were as follows:
Accumulated Net
Cost Depreciation Basis
Computer Equipment $ 8,880 $ 4,833 $ 4,046
Motor Vehicles ... 18,128 11,992 6,136
Office Equipment . 10,473 1,755 8,718
------- ------- -------
Totals ........... $37,481 $18,580 $18,900
======= ======= =======
<PAGE>
Note - 6 Basic and diluted net loss per share
The following table illustrates the required disclosure of the reconciliation of
the numerators and denominators of the basic and diluted earnings per share
computations.
December 31,
1999
Basic and diluted earnings per share:
Numerator
Net loss ............................................... ($1,114,117)
Denominator
Basic and diluted weighted average number
of common shares
outstanding during the period .......................... 8,417,498
Basic and diluted net loss per share.................... $ (0.13)
Note - 7 Going concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. As shown in the financial statements, the Company
has incurred a net loss of $1,114,117 during the year ended December 31, 1999
and, as of that date, had a working capital deficiency of approximately $95,000.
Additional capital infusion is necessary to continue general and administrative
operations. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management is currently seeking new business
opportunities.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810270
<NAME> E*twoMEDIA.com
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> (54,530)
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 247,596
<PP&E> 0
<DEPRECIATION> 4,138
<TOTAL-ASSETS> 1,400,000
<CURRENT-LIABILITIES> 837,604
<BONDS> 1,931,331
0
0
<COMMON> 19,703,276
<OTHER-SE> (1,744,466)
<TOTAL-LIABILITY-AND-EQUITY> 1,399,593
<SALES> 556,019
<TOTAL-REVENUES> 556,019
<CGS> 0
<TOTAL-COSTS> 1,670,136
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,114,117)
<INCOME-TAX> (1,114,117)
<INCOME-CONTINUING> (1,114,117)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,114,117)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
