<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission file number: 33-38214-D
SUMmedia.com Inc.
(Exact name of small business issuer as specified in its charter)
Colorado 95-4734398
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Suite 1200, 1055 W. Hastings, Vancouver, B.C. CANADA V6E 2E9
(Address of principal executive offices)
(604) 605-0901
(Registrant's telephone number, including area code)
Former names, former address and former fiscal year, if changed since last
report:
RELIANCE RESOURCES INC.
1621 Altivo Way
Los Angeles, CA 90026
818-980-0929
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 whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
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: On September 30, 1999, the registrant
had 13,900,000 shares of $0.01 par value common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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<PAGE> 2
SUMmedia.com Inc.
INDEX
<TABLE>
<CAPTION>
Part 1 FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheet
September 30, 1999
December 31, 1998 3
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
For the Period from Inception (December 7, 1990) to
September 30, 1999 4
Consolidated Statement of Operations
Nine Months Ended September 30, 1999 and 1998
Three Months Ended September 30, 1999 and 1998 5
Consolidated Statement of Cash Flow
Nine Months Ended September 30, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Plan of Operation 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
Part II OTHER INFORMATION
Item 1. Legal proceedings 18
Item 2. Changes in securities 18
Item 3. Submission of matters to a vote of security holders 18
Item 4. Exhibits and reports on Form 8-K 18
</TABLE>
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<PAGE> 3
SUMMEDIA.COM INC.
CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 327,247 $ --
Short term deposits (Note 7) 30,959
Accounts receivable (Note 3) 137,190 --
Prepaid expenses 25,164 --
----------- -----------
$ 520,560 $ --
Security deposits 57,481 --
Capital assets (Note 3) 288,014 --
----------- -----------
$ 866,055 $ --
=========== ===========
LIABILITIES
CURRENT LIABILITIES
Accounts payable (Note 3) $ 436,914 $ 4,500
Deferred revenue (Note 3) 25,143 --
Current portion of obligation under capital lease 18,456 --
Due to related parties (Note 8) 171,726 --
----------- -----------
$ 652,239 $ 4,500
----------- -----------
LONG TERM LIABILITIES
Obligation under capital lease (Note 7) $ 40,989 $ --
----------- -----------
SHAREHOLDERS' EQUITY
Common shares (Note 6) $ 12,000 $ 2,000
Additional paid-in capital (Note 6) 1,043,230 53,230
Share subscriptions (Note 6) 1,500,000 --
Subscriptions receivable (Note 10) (500,000) --
Stock-based compensation (Note 4) 1,033,000 --
Accumulated deficit (2,925,039) (59,730)
Cumulative translation adjustment 9,636 --
----------- -----------
$ 172,827 $ (4,500)
----------- -----------
$ 866,055 $ --
=========== ===========
</TABLE>
Commitments (Note 7)
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<PAGE> 4
SUMMEDIA.COM INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
COMMON SHARES PAID IN SHARE
SHARES AMOUNT CAPITAL SUBSCRIPTION OTHER
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 500,000 $ 500 $ 34,730 $ -- $ --
Shares issued to officer for cancellation of debt 1,500,000 1,500 18,500
Net loss, year ended December 31, 1998
------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1998 2,000,000 2,000 53,230 -- --
Cancellation of shares issued to officer for
cancellation of debt in June 1998 (1,500,000)
Forward stock split 1:32 (Note 6) 15,500,000
Cancellation of shares to sole officer (Note 6) (6,210,000)
Acquisition of subsidiary (Note 6) 3,200,000
Private placement #1 (Note 6) 1,000,000 10,000 990,000
Private placement #2 (Note 6) 1,500,000
Share subscription receivable (Note 6) (500,000)
Stock-based compensation 1,033,000
Translation adjustment 9,636
Net loss for the nine months
------------ ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1999 13,990,000 $ 12,000 $ 1,043,230 $ 1,500,000 $ 542,636
============ ============ ============ ============ ============
COMPREHENSIVE INCOME
Net income as above
Translation adjustment
Total comprehensive income
<CAPTION>
ACCUMULATED SHAREHOLDERS'
DEFICIT EQUITY (DEFICIT)
------------ ----------------
<S> <C> <C>
BALANCE, DECEMBER 31, 1997 $ (55,230) $ (20,000)
Shares issued to officer for cancellation of debt 20,000
Net loss, year ended December 31, 1998 4,500 (4,500)
------------ ------------
BALANCE, DECEMBER 31, 1998 (59,730) (4,500)
Cancellation of shares issued to officer for
cancellation of debt in June 1998
Forward stock split 1:32 (Note 6)
Cancellation of shares to sole officer (Note 6)
Acquisition of subsidiary (Note 6)
Private placement #1 (Note 6) 1,000,000
Private placement #2 (Note 6) 1,500,000
Share subscription receivable (Note 6) (500,000)
Stock-based compensation 1,033,000
Translation adjustment 9,636
Net loss for the nine months (2,865,309) (2,865,309)
------------ ------------
BALANCE, SEPTEMBER 30, 1999 $ (2,925,039) $ 172,827
============ ============
COMPREHENSIVE INCOME
Net income as above $ 2,865,309
Translation adjustment 9,636
------------
Total comprehensive income $ 2,855,673
============
</TABLE>
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<PAGE> 5
SUMMEDIA.COM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ 145,401 $ -- $ 149,659 $ --
------------ ------------ ------------ ------------
OPERATING EXPENSES
General and administrative $ 1,907,637 $ 2,000 $ 2,115,585 $ 3,000
Marketing and sales 612,526 -- 765,890 --
Amortization 118,518 -- 133,493 --
------------ ------------ ------------ ------------
$ 2,638,681 $ 2,000 $ 3,014,968 $ 3,000
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS FOR THE PERIOD AND BEFORE
INCOME TAXES $ (2,493,280) $ (2,000) $ (2,865,309) $ (3,000)
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (2,493,280) $ (2,000) $ (2,865,309) $ (3,000)
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE:
Basic (0.24) (0.00) (0.23) (0.00)
============ ============ ============ ============
Diluted NA NA NA NA
============ ============ ============ ============
WEIGHTED AVERAGE SHARES:
Basic 10,575,240 9,790,000 12,411,538 9,790,000
============ ============ ============ ============
Diluted 12,075,240 12,290,000 13,911,538 12,290,000
============ ============ ============ ============
</TABLE>
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<PAGE> 6
SUMMEDIA.COM INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(IN U.S. DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATIONS
Income (loss) for period $(2,865,309) $(2,000)
Adjustments to reconcile net loss to net cash used in
operating activities 133,493 -
Changes in non-cash working capital
Short term deposit (30,959)
Accounts receivable (137,190) -
Prepaid expenses (25,164) -
Accounts payable 432,414 2,000
Deferred revenue 25,143 -
Current portion of obligation under capital lease 18,456 -
Due to related parties 171,726 -
----------- -------
$(2,277,390) $ -
----------- -------
FINANCING ACTIVITIES
Issuance of common shares 1,000,000 -
Share subscription less subscription receivable 1,000,000 -
Stock-based compensation 1,033,000
Obligation under capital lease 40,989 -
----------- -------
$ 3,073,989 $ -
----------- -------
INVESTING ACTIVITIES
Security deposits (57,481) -
Purchase of capital assets (421,507) -
----------- -------
$ (478,988) $ -
----------- -------
FOREIGN EXCHANGE EFFECT ON CASH 9,636 -
----------- -------
INCREASE IN CASH ON HAND $ 327,247 $ -
CASH ON HAND, BEGINNING OF PERIOD - -
----------- -------
CASH ON HAND, END OF PERIOD $ 327,247 $ -
=========== =======
</TABLE>
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<PAGE> 7
SUMmedia.com Inc.
Notes to Interim Consolidated Financial Statements
September 30, 1999
(UNAUDITED)
(in U.S. Dollars)
1. THE COMPANY AND BASIS OF PRESENTATION
THE COMPANY
SUMmedia.com Inc. (the "Company" or "SUMmedia.com") was incorporated
on December 7, 1990 under the laws of the State of Delaware as Pursuit
Ventures Corporation. Under a Plan and Agreement of Merger, effective
August 21, 1998 (the "Agreement of Merger"), the Company merged with a
Colorado corporation. The Colorado corporation was incorporated on
March 20, 1997, under the name Remington Assets Limited, and,
effective on August 19, 1998, changed its name to Pursuit Ventures
Corporation. Under the terms of the Agreement of Merger, Pursuit
Ventures Corporation, Colorado became the surviving company. The
Company changed its name to Reliance Resources Inc., effective
September 8, 1998.
In a Special Shareholders' Meeting on August 20, 1999, the
shareholders approved the acquisition of SUM Media Corp., a British
Columbia, Canada company.
The Company subsequently changed its name to SUMmedia.com Inc.,
effective on August 25, 1999. Concurrently, it received approval to
change its trading symbol in the over-the-counter bulletin board (from
"PSVC") to "ISUM", effective August 30, 1999.
The Company is an Internet media and marketing company that provides
online coupons for small business through its portal,
SavingUMoney.com. The Company's goal is to provide Internet marketing
initiatives for smaller businesses lacking the expertise to embrace
eCommerce.
BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements
for the nine months ended September 30, 1999 and 1998 have been
prepared on a going concern basis, which assumes the realization of
assets and settlement of liabilities in the normal course of business
and, in the opinion of management, reflect all adjustments, which
include only normal recurring adjustments, necessary to present fairly
the Company's financial position, results of operations and cash flows
as of September 30, 1999 and for the nine months ended September 30,
1999 and 1998.
As shown in these unaudited interim consolidated financial statements,
the Company incurred losses of $2,869,809 for the nine months ended
September 30, 1999. As at September 30, 1999, the Company also had a
working capital deficit of $131,679 and shareholders' equity of
$172,827. The results for the nine months ended September 30, 1999 are
not necessarily indicative of the expected results for the year ending
December 31, 1999.
The Company acquired its subsidiary, SUM Media Corp., in a transaction
accounted for as pooling of interests. Pursuant to the terms of the
acquisition, the Company issued 3,200,000 common shares from treasury
to acquire 100% of the issued and outstanding shares of SUM Media
Corp. Accordingly, all financial information included herein has been
restated to reflect the combined operations of SUMmedia.com and the
acquired company. Certain prior period balances have been reclassified
to conform to the current period presentation.
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<PAGE> 8
SUMmedia.com Inc.
Notes to Interim Consolidated Financial Statements
September 30, 1999
(UNAUDITED)
(in U.S. Dollars)
The financial statements do not include any adjustments relating to
the recoverability and classification of liabilities that may be
necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a
timely basis and to obtain additional financing or refinancing. The
Company presently has no firm commitments for such financing.
2. SIGNIFICANT ACCOUNTING POLICIES
GENERALLY ACCEPTED ACCOUNTING POLICIES
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States.
BASIS OF CONSOLIDATION
These consolidated financial statements of the Company include the
accounts of its wholly-owned subsidiary, SUM Media Corp. All
significant intercompany balances and transactions have been
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires
management to make estimates and assumptions which affect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements,
revenues and expenses for the periods reported. Actual results could
differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including cash, cash equivalents,
accounts receivable, accounts payable and capital lease obligations
are carried at cost, which approximates their fair value because of
the short-term maturity of these instruments. The fair value of the
long-term automotive capital lease approximates carrying value, as the
lease was recently signed.
CAPITAL ASSETS
Capital assets are stated at net book value and are amortized over
their useful lives at the following rates:
Automobile straight line over 3 years
Furniture and fixtures straight line over 5 years
Computer equipment straight line over 2 years
Leasehold improvements straight line over the remaining lease term
Office Equipment straight line over 5 years
PRODUCT DEVELOPMENT COSTS
Product development costs include expenditures incurred by the Company
to design and enhance the Company's website. Product development costs
are expensed in the period in which they are incurred.
REVENUE RECOGNITION
(i) Exclusivity Fee: Revenue from an exclusivity fee is
recognized over a three-month period commencing with the date
of the signing of an Exclusivity Agreement. This period
corresponds to the time period in which a site or territory
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<PAGE> 9
SUMmedia.com Inc.
Notes to Interim Consolidated Financial Statements
September 30, 1999
(UNAUDITED)
(in U.S. Dollars)
is commissioned and includes such tasks as: locating of
office premises, leasing of space, furniture, and equipment,
staff recruiting, and staff training.
(ii) Coupons and Banners: Revenue from coupons and banners is
recorded from the date of exhibition on the Company's
website.
(iii) Website: Revenue from development of a customer's website is
earned upon final approval of production results by the
customer.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The Company reports in U.S. dollars; however, the Canadian dollar is
the Company's functional currency. The Company uses the current rate
method for translating financial statements denominated in foreign
currencies. Under this method, assets and liabilities are translated
into U.S. dollars using period end exchange rates; whereas revenues,
costs of sales and expenses are translated using average exchange
rates for the period. Transaction amounts denominated in foreign
currencies are translated at exchange rates prevailing at the
transaction dates. The net effect of the foreign currency translation
is not significant, but is included in cumulative translation
adjustments in Shareholders' equity.
LOSS PER COMMON SHARE
Loss per common share is calculated on the basis of the weighted
average number of shares outstanding after giving effect to the
recapitalization on a retroactive basis during the period. The effect
of potential issues of shares under warrant arrangements and share
option agreements has not been disclosed because they are
anti-dilutive.
INCOME TAXES
As at September 30, 1999, the Company has approximately $2.7 million
of non-capital losses available to reduce future years' income for tax
purposes. These losses expire in 2007. The potential tax benefits
relating to the non-capital losses have not been recognized in the
consolidated financial statements.
The Financial Accounting Standards Board ("FASB") issued Statement
Number 109 ("SFAS 109") on Accounting for Income taxes, which is
effective for fiscal years beginning after December 15, 1992. SFAS 109
requires the use of the asset and liability method of accounting for
income taxes. Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Considering the Company's
cumulative losses, the Company has provided an allowance of 100%
against all available income tax loss carryforwards.
COMPREHENSIVE INCOME
In December 1997, the FASB issued Statement Number 130 on Reporting
Comprehensive Income, which established a new financial statement to
be included in a full set of general-purpose financial statements.
Comprehensive income is defined as the change in equity from
transactions and other events and circumstances other than those
resulting from investments by owners and distributions to owners.
Comprehensive income consists of net income and other comprehensive
income. The accumulated balance of other comprehensive income is
included in the equity section of the balance sheet. The Company's
other comprehensive income consists of foreign exchange adjustments.
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<PAGE> 10
SUMmedia.com Inc.
Notes to Interim Consolidated Financial Statements
September 30, 1999
(UNAUDITED)
(in U.S. Dollars)
3. BALANCE SHEET COMPONENTS
(a) ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
AT
SEPTEMBER 30, 1999
-------------------
<S> <C>
Sales taxes recoverable $ 66,658
Advances to consultants 63,178
Trade receivables 7,354
-------------------
$ 137,190
===================
</TABLE>
(b) CAPITAL ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET AT
COST AMORTIZATION SEPTEMBER 30,1999
--------------- ------------- -----------------
<S> <C> <C> <C>
Automobile $ 85,526 $ 21,370 $ 64,156
Furniture and fixtures 18,380 2,740 15,640
Computer equipment 270,063 101,760 168,303
Leasehold improvements 16,367 2,945 13,422
Office equipment 31,171 4,678 26,493
--------------- ------------- -----------------
$ 421,507 $ 133,493 $ 288,014
=============== ============= =================
</TABLE>
(c) ACCOUNTS PAYABLE
<TABLE>
<CAPTION>
AT
SEPTEMBER 30, 1999
-------------------
<S> <C>
Trade accounts payable $ 247,870
Accrued liabilities 126,835
Employee and payroll taxes 62,209
-------------------
$ 436,914
===================
</TABLE>
(d) DEFERRED REVENUE
<TABLE>
<CAPTION>
AT
SEPTEMBER 30, 1999
-------------------
<S> <C>
Deferred exclusivity fees $ 23,973
Deferred coupon revenues 1,170
-------------------
$ 25,143
===================
</TABLE>
4. STOCK-BASED COMPENSATION
In October 1995, the FASB issued Statement Number 123 on Accounting
for Stock-based Compensation which established financial accounting
and reporting standards for stock-based employee compensation. The
Company has retained the Intrinsic Value based method as described in
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB No. 25") to recognize the compensation cost
of incentive stock options granted to directors and employees. Under
this method, the difference between the market
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<PAGE> 11
SUMmedia.com Inc.
Notes to Interim Consolidated Financial Statements
September 30, 1999
(UNAUDITED)
(in U.S. Dollars)
this method, the difference between the market price of stock at the
date of grant and the exercise price of the stock option is to be
expensed as compensation cost over the period between the date of
granting the option and the date it is first exercisable. These costs
were $1,033,000 for the three- and nine-month periods ended September
30, 1999.
5. RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP98-1").
SOP98-1 provides guidance for determining whether computer software is
internal-use software and accounting for the proceeds of computer
software originally developed or obtained for internal use and then
subsequently sold to the public. It also provides guidance on
capitalization of the costs incurred for computer software developed
or obtained for internal use. The disclosures prescribed by SOP98-1
will be effective for the year ending December 31, 2000 consolidated
financial statements. The Company has not yet determined the impact,
if any, of adopting this statement.
In June 1998, the FASB issued Statement Number 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
establishes accounting and reporting standards for derivative
instruments, embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure
those instruments at fair value. The accounting for changes in fair
value of the derivative depends on the intended use of the derivative
and the resulting designation. The Company has not yet determined the
impact, if any, of adopting this statement.
6. SHARE CAPITAL
<TABLE>
<S> <C>
AUTHORIZED SEPTEMBER 30, 1999
----------------------------------------------------------- ------------------
65,500,000 common shares with par value of $.01 per share
1,000,000 preferred shares with a par value of $1.00 per
share
ISSUED
----------------------------------------------------------- ------------------
13,990,000 common shares $ 12,000
</TABLE>
As at December 31, 1998, the authorized capital stock of the Company
consisted of 50,000,000 shares of common stock with a par value of
$.001 of which 2,000,000 were issued and outstanding. Pursuant to a
June 4, 1999 Board of Directors resolution, Patrick Brooks, the sole
Director and Officer, agreed to the cancellation of 1,500,000 shares
previously issued to him as compensation. On June 16, 1999, the Board
of Directors passed a resolution to adopt a forward stock split at a
ratio of 1:32 with the effect that the total issued and outstanding
shares would be 16 million. Brooks concurrently executed a formal
waiver of the right to receive 6.21 million post-split shares; the
resultant issued and outstanding shares then totaled 9.79 million.
On June 24, 1999, the Company's Articles of Incorporation were amended
to increase the Company's authorized common stock to 65,500,000
shares.
On August 20, 1999, the Company acquired all of the issued and
outstanding shares of SUM Media Corp. for the consideration of
3,200,000 SUMmedia.com Inc. treasury shares.
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<PAGE> 12
SUMmedia.com Inc.
Notes to Interim Consolidated Financial Statements
September 30, 1999
(UNAUDITED)
(in U.S. Dollars)
On August 26, 1999, the Company closed a private placement of
1,000,000 equity units at a price of $1 per unit for gross cash
proceeds of $1,000,000. Each unit consisted of one common share and
one share purchase warrant. The warrant may be exercised to acquire an
additional share of the Company at a price of $3 for a period expiring
24 months after issuance. The proceeds of the financing are being used
to expand the Company's current business. No warrants were outstanding
at the beginning of the year and no others were issued during the
period.
7. COMMITMENTS
The Company has the following annual commitments under the terms of
operating and financing leases:
<TABLE>
<CAPTION>
YEAR OPERATING CAPITAL
--------------- ---------------- ---------------
<S> <C> <C>
2000 $ 231,700 $ 18,456
2001 228,850 18,456
2002 228,850 18,456
2003 228,850 4,077
2004 67,750 --
---------------- ---------------
$ 938,000 $ 59,445
================ ===============
</TABLE>
Office lease payments for the nine months ended September 30, 1999 of
$68,510 were included in general and administrative costs. A letter of
credit has been issued by Company's bank in the amount of $30,959 for
the benefit of the Vancouver landlord.
8. RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 1999, two shareholders
loaned the Company $171,726 without interest and without stated terms
of repayment.
The Company incurred $40,500 for consulting and related services to a
company controlled by one of the significant shareholders of the
Company during the same period.
9. SEGMENT INFORMATION
Effective July 1, 1999, the Company adopted the provisions of the
FASB's Statement of Financial Accounting Standards Number 131,
"Disclosures about Segments of an Enterprise and Related Information."
SFAS 131 establishes the standards for reporting information about
operating segments in annual financial statements and requires that
certain selected information about operating segments be reported in
interim financial reports. It also establishes standards for related
disclosures about products and services and geographic areas. Segment
selection is based upon the internal organization structure, the
manner in which these operations are managed and their performance
evaluated by management, the availability of separate financial
information, and overall materiality considerations. Segment
performance measurement is based on operating income before income
taxes, amortization of intangibles, stock compensation, and related
merger costs.
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<PAGE> 13
SUMmedia.com Inc.
Notes to Interim Consolidated Financial Statements
September 30, 1999
(UNAUDITED)
(in U.S. Dollars)
The Company currently has only one operating segment: online couponing
services, and currently operates in only one geographic area: Canada.
Substantially all of the Company's assets are located in Canada, and
substantially all of its revenues are produced in Canada.
10. SUBSEQUENT EVENTS
On September 23, 1999, the Company entered into a lease commitment for
office space located in Seattle, Washington. The lease period is for
60 months, commencing November 1, 1999, and covers 3,916 square feet
at a base rental rate of $86,152 for the first three years, increasing
to $90,068 for the fourth and fifth years.
In late September 1999, the Company announced its intention to
commence a private placement for 500,000 units at a price of $3 per
unit for gross cash proceeds of $1.5 million of which $1 million was
received by September 30, 1999. Each unit consisted of one common
share and one share purchase warrant. The warrant may be exercised to
acquire an additional share of the Company at a price of $4.50 for a
period of 12 months from the issuance date.
In early October 1999, the Company reserved approximately 2.1 million
shares for incentive stock options for certain of its directors,
officers and employees. Option prices and dates have not yet been
fixed by the Board of Directors. No options were outstanding at the
beginning of the year, and none were issued during the period.
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<PAGE> 14
ITEM 2. PLAN OF OPERATION
Forward-Looking Statements
The following discussion should be read in conjunction with the consolidated
financial statements of SUMmedia.com Inc. ("SUMmedia.com").
This document contains certain forward-looking statements that involve risks and
uncertainties, such as statements of SUMmedia.com's plans, objectives,
expectations and intentions. When used in this document, the words "expects,"
"anticipates," "intends," "plans" and similar expressions are intended to
identify certain of these forward-looking statements. The cautionary statements
made in this document should be read as being applicable to all related forward
- -looking statements wherever they appear in this document. SUMmedia.com's actual
results could differ materially from those discussed in this document. Factors
that could cause or contribute to such differences include those discussed
below.
Overview of SUMmedia.com
SUMmedia.com is an Internet media and marketing company that provides online
coupons for small businesses through its "eCoupon portal," SavingUMoney.com.
Products and services provided by SUMmedia.com enable the millions of local
small business merchants without Web expertise to easily and inexpensively
market over the Internet to target and attract online shoppers. SUMmedia.com has
offices in Vancouver, Toronto, Seattle, and Hong Kong and approximately 90
employees. SUMmedia.com's common stock is traded publicly on the OTC Bulletin
Board under the symbol "ISUM."
SUMmedia.com was incorporated on December 7, 1990 under the laws of the State of
Delaware as Pursuit Ventures Corporation. Under a Plan and Agreement of Merger,
effective August 21, 1998, SUMmedia.com merged with a Colorado corporation. The
Colorado corporation was incorporated on March 20, 1997, under the name
Remington Assets Limited, and, effective August 19, 1998, changed its name to
Pursuit Ventures Corporation. Under the terms of the Agreement of Merger,
Pursuit Ventures Corporation, Colorado, became the surviving company. The
Colorado corporation changed its name to Reliance Resources Inc., effective on
September 8, 1998. Reliance Recources Inc. changed its name to SUMmedia.com
Inc., effective on August 25, 1999.
On August 20, 1999, the shareholders of SUMmedia.com approved the acquisition of
SUM Media Corp. ("SUM") which was incorporated under the laws of British
Columbia, Canada. In the merger SUMmedia.com Inc., exchanged 3,200,000 shares of
its common stock for 100% of the issued and outstanding shares of common stock
of SUM. SUM was incorporated to explore the potential of the electronic
couponing concept and, to develop initial enabling software.
Expansion Plans
Over the next 12 months, the management of SUMmedia.com plans to expend
significant resources to:
o expand marketing and sales in current and new locations served by the
SavingUMoney.com website;
o build awareness of SUMmedia.com through advertising campaigns;
o enter into markets in other U.S. cities, Europe, Asia, Australia and
New Zealand; and
o open new offices and hire additional employees to support the above.
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<PAGE> 15
Research and Development
During the next 12 months, SUMmedia.com intends to expend significant resources
towards the pursuit of Internet research and development to support internal
operations, Internet content and geographic expansion.
Results of Operations
SUMmedia.com commenced operations in June 1999. Prior to that, SUMmedia had no
significant operations or revenues. As a result, comparative figures are not
included in this report.
SUMmedia.com has incurred a net loss of $2.9 million from December 7, 1990 (date
of inception) through September 30, 1999 ($2.5 million in the quarter then
ended), due to continuing costs of raising capital, initial operating expenses
over a startup period, and due to funds applied to marketing and branding
development.
Revenues for the quarter ended September 30, 1999 were $145,401. Approximately
80% of SUMmedia.com's revenue for the quarter ended September 30, 1999 was
derived from license fees from Canadian businesses. The balance of
SUMmedia.com's revenue was derived from coupon sales and website development and
hosting. All of SUMmedia.com's revenues are derived from fees paid by its
customers. To date, online advertising on SUMmedia.com's website has not
significantly contributed to revenue, however, revenue generation is expected in
the near future.
General and administrative expenses for the quarter ended September 30, 1999
were $1.9 million. These expenses are generally attributed to the hiring of over
30 administrative staff to build up the infrastructure of SUMmedia.com in areas
of executive management, administrative personnel, and technical support for
SUMmedia.com's offices at a quarterly cost of $1,257,000, which includes
$1,033,000 in stock-based compensation. Also included are fees for external
professional advisors. A significant general and administrative expense was the
purchase of software licenses at a cost of nearly $100,000. Another significant
expenditure was travel expenses associated with trips to the United States,
Australia, and the Asia to secure financing and business partners for
SUMmedia.com at a cost of $165,000. Office space increased from approximately
1,000 square feet at the end of the quarter ended June 30, 1999 to over 13,000
square feet office space at September 30, 1999 resulting in a quarterly cost of
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10QSB99-.DOC 11/18/99 12:42 PM Page 15
<PAGE> 16
$48,000. SUMmedia.com anticipates that these expenses will continue to increase
as SUMmedia.com pursues its product rollouts.
Research and development costs amounted to $130,000 for the quarter ended
September 30, 1999. Research and development costs were primarily comprised of
payments to outside contractors and associated expenses related to engineering
design work and testing of SUMmedia.com's technology. These costs are included
in the general and administrative category. Product development expenses are
expected to increase significantly in future periods primarily from consulting
fees, personnel additions, and additional depreciation costs as SUMmedia.com
continues to purchase equipment to improve and expand its operations both
domestically and internationally, and as it completes the commercial development
of its technology.
During the quarter ended September 30, 1999, SUMmedia.com incurred direct merger
related transaction costs of $17,000 which were charged to operations.
SUMmedia.com plans to acquire new companies; such acquisitions could lead to
additional direct and indirect expenses which would negatively affect
SUMmedia.com's result of operations. These costs are included in the general and
administrative category.
During the quarter ended September 30, 1999, SUMmedia.com incurred $613,000 in
various advertising and marketing costs, of which $257,000 was spent on salaries
for over 40 new sales and marketing employees. SUMmedia.com's sales and
marketing expenses are comprised primarily of compensation for SUMmedia.com's
sales and marketing personnel, advertising, tradeshow and other promotional
costs and expenses for creative design of SUMmedia.com's websites. The increases
resulted primarily from continued growth in the number of personnel, increases
in online, radio, and international advertising and third party services. Sales
and marketing expenses are expected to increase in the near term due to
branding, advertising and marketing, and incremental expenses associated with
personnel additions made in the current quarter and those expected in future
quarters.
Amortization expense was $118,000 for the quarter ended September 30, 1999.
During the nine months ended September 30, 1999, SUMmedia.com purchased
computers and office furniture totaling $336,000 and a promotional vehicle for
$86,000.
Liquidity and Capital Resources
At September 30, 1999, SUMmedia.com had $327,247 in cash, a working capital
deficiency of $(131,679) and shareholders' equity of $172,827. Net cash used in
SUMmedia.com's operating activities was $2.3 million in the nine months ended
September 30, 1999. The net cash used in operating activities in the period
resulted primarily from net losses, offset by the timing of payable settlements,
funds from shareholders, subscriptions receivable, and, to a lesser degree, by
non-cash charges for amortization of unearned compensation, the provision for
doubtful accounts, depreciation and amortization and increases in various
liability categories. Since SUMmedia.com has no significant revenue, working
capital will continue to be depleted by operating expenses. Furthermore, if
SUMmedia.com should generate an operating loss for the last quarter comparable
to the loss incurred for the third quarter ended September 30, 1999, a
substantial portion of the Corporation's remaining cash will be depleted and the
working capital deficit increased.
Since June 1999, SUMmedia.com has financed its operations primarily through
stock offerings and unsecured advances from the founders of SUM Media Corp.
Net cash provided by financing activities in July and late September 1999
resulted from the sale of 1,500,000 shares of common stock for gross proceeds of
$2.5 million. The net proceeds from these financing activities were used for
funding operations and capital expenditures.
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<PAGE> 17
Net cash used in investing activities in 1999 primarily resulted from the
purchase of $421,000 in capital assets composed primarily of computer equipment,
furniture, and a promotional vehicle. In additional investing, SUMmedia.com
acquired all of the shares of SUM Media Corp., a private British Columbia
company in exchange for 3.2 million shares.
SUMmedia.com has no material commitments for capital expenditures at September
30, 1999, but expects such expenditures to be at least $1 million through the
remainder of 1999. Such expenditures will primarily for computer equipment for
SUMmedia.com's enterprise-wide systems, furniture and fixtures, computers, and
leasehold improvements. SUMmedia.com also has total minimum lease obligations of
$938,000 under certain operating leases and $59,000 in capital leases through
September 2004.
SUMmedia.com believes that its existing cash and cash sources will be sufficient
to fund its losses from operations, its capital expenditures, and other
obligations in the immediate future (through January 2000). In addition, if
during that period or immediately thereafter, SUMmedia.com is not successful in
generating sufficient cash flow from operations or in raising additional capital
when required in sufficient amounts and on terms acceptable to SUMmedia.com,
SUMmedia.com's business, financial condition, and operations will be materially
adversely affected.
SUMmedia.com's funding needs may vary depending upon a number of factors,
including the number and nature of the marketing and sales launch initiatives;
progress of SUMmedia.com's research and development programs; the number and
breadth of these programs; the progress of the development and commercialization
efforts of new products; and competing technological and market developments. In
the future, SUMmedia.com will need to raise substantial additional funds to
continue to conduct its branding, marketing plans, and research and development,
and implementation of enterprise-wide infrastructure programs. SUMmedia.com
intends to seek additional funding through public or private financing and
up-front licensing fees of its technology. There can be no assurance that such
funds will be available on favorable terms, if at all. If adequate funding is
not available, SUMmedia.com may be required to delay, reduce or eliminate one or
more of its marketing strategies or research and development programs.
Year 2000 Issues
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot reliably
distinguish dates beginning on January 1, 2000 from dates prior to the year
2000. Many companies' software and computer systems may need to be upgraded or
replaced in order to correctly process dates beginning in 2000 and to comply
with the "Year 2000" requirements. SUMmedia.com has reviewed its internal
programs and has determined that there are no significant Year 2000 issues
within SUMmedia.com's systems or services. SUMmedia.com has completed
modifications to its internal systems to fix identified Year 2000 issues in an
attempt to ensure Year 2000 compliance. The costs of these modifications have
not been material and have involved a reallocation of internal resources rather
than incremental expenditures. Although SUMmedia.com believes that its own
software is Year 2000 compliant, SUMmedia.com may be wrong. If SUMmedia.com is
wrong, it could face unexpected expenses to fix the problem or unanticipated
website outages, either of which would harm its business. SUMmedia.com uses
third-party equipment and software that may not be Year 2000 compliant.
SUMmedia.com is also conducting a further review of third-party software and
embedded systems used in its online business. SUMmedia.com expects that the
incremental cost of
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10QSB99-.DOC 11/18/99 12:42 PM Page 17
<PAGE> 18
all of these reviews will not exceed $50,000. The cost of any necessary upgrades
or changes cannot currently be precisely estimated. SUMmedia.com may be harmed
if necessary upgrades or changes are not identified, or, if identified, are not
timely and successfully implemented at an acceptable cost. SUMmedia.com also may
be harmed by Year 2000 problems at its vendors and business partners. For
example, SUMmedia.com may rely on credit card companies to collect the majority
of its revenues from users. Due to the nature of the credit card system, some
industry analysts have questioned the effect of the year 2000 on credit card
processing and billing. Failure of SUMmedia.com's credit card vendors or other
third-party equipment or software vendors to properly process dates for the year
2000 and thereafter could require it to incur unanticipated expenses in seeking
alternative means of payment or hardware or software replacements. It also could
result in loss of revenues or unanticipated website outages. SUMmedia.com's
marketing efforts are also dependent on the continued operation of Internet
portals and other Internet sites on which it advertises.
SUMmedia.com has not yet developed contingency plans with respect to collecting
payment under these circumstances, and it will be unable to make such
contingency plans if any significant number of the computers constituting the
Internet fail to process dates properly for the year 2000 and there is a
system-wide slowdown or breakdown. SUMmedia.com's business is dependent on the
continued successful operation of the Internet. Any interruption or significant
degradation of Internet operations due to Year 2000 problems could harm
SUMmedia.com's business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
SUMmedia.com's exposure to market risk is principally confined to its cash and
cash equivalents which have short maturities and, therefore, minimal and
immaterial market risk.
Foreign Currency Risk
SUMmedia.com reports in U.S. dollars; however, the Canadian dollar is its
functional currency. SUMmedia.com's financial statements have been translated at
the exchange rate in effect at the balance sheet date. The net effect of the
foreign currency translation is not significant, but is included in cumulative
translation adjustments in shareholders' deficit.
In the future, management expects the majority of SUMmedia.com's sales and
expenses to be denominated in U.S. dollars. While SUMmedia.com is planning some
transactions in foreign currencies during late 1999, it does not expect that
foreign exchange gains or losses will be significant. As SUMmedia.com expands
internationally, foreign currency risks will become more important. SUMmedia.com
has not engaged in foreign currency hedging to date.
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<PAGE> 19
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In August 1999, a forward split of 32:1 was made to each share of issued and
outstanding common stock (but not unissued, authorized shares).
On August 6, 1999, SUMmedia.com issued 3,200,000 shares of its common stock for
9,000,001 shares of SUM Media Corp. SUMmedia.com issued the shares in reliance
on Section 4(2) of the Securities Act of 1933 (the "Act").
In August 1999, SUMmedia.com closed a private offering to offshore investors of
1,000,000 units for gross proceeds of $1,000,000. Each unit consists of one
share of common stock and one common stock purchase warrant. Each warrant may be
exercised at any time prior to August 2001 for $3.00 for one share of common
stock.
In September 1999, SUMmedia.com issued 500,000 units to offshore investors for
$3.00 per unit for gross cash proceeds of $1,500,000. Each unit consists of one
share of common stock and common stock purchase warrant. Each warrant is
exercisable for 12 months for $4.50 for one share of common stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
SUMmedia.com held a Special Meeting of Shareholders on August 20, 1999. The
following is a brief description of each matter voted upon at the meeting, all
of which were unanimously approved:
(a) The shareholders approved the appointment of the auditors.
(b) The shareholders approved that SUMmedia.com's Articles of Incorporation be
amended to change the company's name to SUMmedia.com Inc. and to forward split
each share of issued and outstanding stock (but not unissued, authorized shares)
32:1, with each shareholder post-split holding 32 shares for every share
previously held effective June 16, 1999; (c) The shareholders approved that the
Board of Directors in its sole discretion be authorized to grant or amend
incentive stock purchase options to insiders, management, and employees of
SUMmedia.com pursuant to either a stock option plan or individual stock option
grants, and to approve the exercise of stock options
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
Exhibit 3.1 Articles of Amendment to the Articles of
Incorporation of the registrant dated August 25,
1999.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
None
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<PAGE> 20
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SUMmedia.com Inc.
Date: November 12, 1999
By: /s/ Grant M. Petersen
Grant M. Petersen
Chairman and CEO
By: /s/ David R. Lewis
David R. Lewis
Chief Financial Officer and Secretary Treasurer
FINANCIAL DATA SCHEDULE
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<PAGE> 21
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Articles of Amendment to the Articles of Incorporation of the
registrant dated August 25, 1999.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
(AS AMENDED AND RESTATED)
OF
RELIANCE RESOURCES, INC.,
A COLORADO CORPORATION
Reliance Resources, Inc. (the "Corporation"), pursuant to C.R.S. Section
7-110-106, hereby amends its Articles of Incorporation (as amended and restated
to-date), as follows, effective as of the date of filing with the Colorado
Secretary of State.
I
Name
The name of the Corporation is RELIANCE RESOURCES, INC.
II
Amendments
Article I of the Corporation's Amended and Restated Articles of
Incorporation is hereby amended as follows:
" ARTICLE I
NAME
THE NAME OF THE CORPORATION IS SUMMEDIA.COM INC."
III
Date and Manner of Adoption
The above amendment was recommended by the Corporation's board of
directors, then duly adopted at a special meeting of shareholders held on August
20, 1999. The number of votes cast for this amendment by each voting group
entitled to vote separately on the amendment (if any) was sufficient for
approval by such voting group.
These Articles of Amendment to the Articles of Incorporation (As Amended
and Restated) are effective as of filing with the Secretary of State of the
State of Colorado.
Our hands and seals this 20th day of August, 1999:
/s/
-------------------------------------
President
-------------------------------------
Chair, Board of Directors
Attest: /s/
-------------------------------------
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUMMEDIA.COM
INC.'S QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED SEPTEMBER 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 327,247
<SECURITIES> 0
<RECEIVABLES> 153,628
<ALLOWANCES> (16,438)
<INVENTORY> 0
<CURRENT-ASSETS> 520,560
<PP&E> 421,507
<DEPRECIATION> (133,493)
<TOTAL-ASSETS> 866,055
<CURRENT-LIABILITIES> 652,239
<BONDS> 0
0
0
<COMMON> 12,000
<OTHER-SE> 160,827
<TOTAL-LIABILITY-AND-EQUITY> 866,055
<SALES> 0
<TOTAL-REVENUES> 149,659
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,014,968
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,865,309)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,865,309)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,865,309)
<EPS-BASIC> (0.23)
<EPS-DILUTED> 0
</TABLE>
