<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 March 31, 2000
[ ] 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)
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 [X] 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 March 31, 2000, the registrant had
18,363,400 shares of $0.01 par value common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE> 2
SUMmedia.com INC.
INDEX TO FORM 10 - QSB
<TABLE>
<CAPTION>
Page
PART I: FINANCIAL INFORMATION
<S> <C> <C>
Item 1 - Consolidated Financial Statements 2
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2 - Plan of Operations 7
PART II: OTHER INFORMATION
Item 1 - Legal Proceedings 11
Item 2 - Changes in Securities 11
Item 3 - Defaults upon Senior Securities 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8 - K 13
Signatures 13
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
SUMmedia.com Inc.
(formerly Reliance Resources Inc.)
(a development stage company)
Consolidated Balance Sheet
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
(unaudited) (audited)
Assets
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 3,730,124 $ 2,108,167
Accounts receivable 360,307 65,830
Sales tax recoverable 191,397 173,519
Prepaid expenses 4,172,968 231,460
----------------- -----------------
Total Current Assets 8,454,796 2,578,976
Other Assets 350,895 74,359
Property and equipment, net of accumulated amortization 3,250,183 1,840,821
Goodwill, net of accumulated amortization 10,501,008 11,616,052
----------------- -----------------
22,556,882 16,110,208
================= =================
Liabilities
Current Liabilities
Accounts payable and accrued liabilities 3,749,398 1,407,212
Accrual for finders fee and other consulting services 4,080,000 --
Due to related parties 138,142 56,436
Deferred revenue 285,722 104,012
Current portion of obligation under capital lease 26,064 13,318
----------------- -----------------
8,279,326 1,580,978
Obligation under capital lease 117,203 58,939
----------------- -----------------
8,396,529 1,639,917
Shareholders' Equity
Capital Stock
Authorized
1,000,000 preferred shares, $0.01 par value
65,500,000 common shares, $0.01 par value
Issued
18,363,400 (1999 - 16,142,000) common shares 183,634 161,420
Additional paid-in capital 27,904,478 20,859,829
Warrants issued in connection with private placements 4,910,334 2,552,751
Share subscriptions (125,000) (125,000)
Deficit accumulated during the development stage (18,626,703) (8,959,271)
Accumulated other comprehensive income (86,390) (19,438)
----------------- -----------------
14,160,353 14,470,291
22,556,882 16,110,208
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE> 4
SUMmedia.com Inc.
(formerly Reliance Resources Inc.)
(a development stage company)
Consolidated Statement of Operations
(expressed in U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 7, 1990 (DATE OF
FOR THE THREE MONTHS ENDED INCORPORATION) TO
MARCH 31, MARCH 31,
2000 1999 2000
<S> <C> <C> <C>
Sales $ 474,512 $ -- $ 606,563
Cost of Sales 131,618 -- 249,558
------------ ------------ ------------
Gross Profit 342,894 -- 357,005
------------ ------------ ------------
Operating Expenses
General and administrative 5,539,935 1,500 8,005,343
Marketing 2,484,532 -- 3,912,081
Amortization of goodwill 1,115,044 -- 2,916,267
Stock based compensation 653,014 -- 3,153,014
Amortization of property and equipment 156,803 -- 254,221
Research and development 60,998 -- 158,012
------------ ------------ ------------
10,010,327 1,500 18,398,939
------------ ------------ ------------
Loss from operations (9,667,432) (1,500) (18,041,933)
============ ============ ============
Basic and fully diluted loss per share (0.55) nil
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 5
SUMmedia.com Inc.
(formerly Reliance Resources Inc.)
(a development stage company)
Consolidated Statement of Cash Flows
(expressed in U.S. dollars)
(unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 7, 1990
THREE MONTHS ENDED (DATE OF
MARCH 31, INCORPORATION) TO
MARCH 31,
2000 1999 2000
<S> <C> <C> <C>
Cash Flows From Operating Activities
Loss for the period $ (9,667,432) $ (1,500) $(18,041,933)
Adjustments to reconcile loss for the period to net cash --
used in operating activities
Stock based compensation 653,014 -- 3,153,014
Amortization of property and equipment and goodwill 1,271,847 -- 3,170,488
Changes in non-cash working capital items
Accounts receivable (292,380) -- (354,052)
Sales tax recoverable (19,376) -- (163,964)
Prepaid expenses (3,907,219) -- (4,130,447)
Accounts payable and accrued liabilities 2,333,980 1,500 3,627,188
Accrual for finders fee and other consulting fees 3,578,941 -- 3,578,941
Deferred revenue 181,024 -- 155,924
------------ ------------ ------------
(5,867,601) -- (9,004,841)
------------ ------------ ------------
Cash flows from (used in) financing activities
Proceeds from issuance of common shares 9,239,032 -- 16,603,262
Due to related parties 81,706 -- (659,394)
(Repayments) Additions to capital lease obligations (3,879) -- (8,945)
------------ ------------ ------------
9,316,859 -- 15,934,923
------------ ------------ ------------
Cash flows from (used in) investing activities
Other Assets (276,536) -- (271,822)
Purchase of property and equipment (1,491,276) -- (3,049,293)
Cash acquired on acquisition of SUM Media Corp. -- -- 212,591
------------ ------------ ------------
(1,767,812) -- (3,108,524)
------------ ------------ ------------
Foreign exchange effect on cash (59,489) -- (91,434)
------------ ------------ ------------
Net increase in cash and cash equivalents 1,621,957 -- 3,730,124
Cash and cash equivalents at beginning of period 2,108,167 -- --
------------ ------------ ------------
Cash and cash equivalents at end of period 3,730,124 -- 3,730,124
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 6
SUMmedia.com Inc.
(formerly Reliance Resources Inc.)
(a development stage company)
Notes to Interim Consolidated Financial Statements
(expressed in U.S. dollars)
(unaudited)
THE COMPANY
SUMmedia.com Inc. (the "company" or "SUMmedia.com") is an Internet media and
marketing company that provides online coupons for small and medium sized
businesses through its portal, savingumoney.com. The company's business consists
of providing Internet marketing initiatives including coupons, advertising
banners, discount shopping and website design and hosting, as well as selling
exclusive regional rights to market the company's products.
The company was incorporated on December 7, 1990, under the laws of the State of
Delaware as Pursuit Ventures Corporation ("Pursuit"). Under a Plan and Agreement
of Merger dated August 21, 1998, Pursuit merged with Remington Assets Limited
("Remington"), a Colorado corporation that was incorporated on March 20, 1997.
Under the terms of the Agreement of Merger, Remington became the surviving
company. Effective September 8, 1998, Pursuit changed its name to Reliance
Resources Inc. ("Reliance"). In June 1999, Reliance completed a 1:32 forward
stock split. These consolidated financial statements have been presented on a
post stock split basis.
On August 6, 1999, Reliance entered into a share exchange agreement with SUM
Media Corp. (formerly E-Com Media Corp.), a British Columbia, Canada company.
Pursuant to the terms of the agreement, Reliance issued 3,200,000 common shares
to acquire 100% of the issued and outstanding shares of SUM Media Corp. On
August 25, 1999, Reliance changed its name to SUMmedia.com Inc.
GOING CONCERN
The company has not yet generated significant revenues and has no assurance of
future profitability. Even if marketing efforts are successful, substantial time
may pass before profitability will be achieved. During this time, the company
will require additional financing. The company has losses from operations that
raise substantial doubt about its ability to continue as a going concern.
These consolidated financial statements have been prepared on the basis of
accounting principles applicable to a going concern, which assumes the
realization of assets and discharge of liabilities in the normal course of
business. The company is in discussions with financing institutions with respect
to securing equity financing. However, there are no assurances that the company
will be successful in closing such financing transactions.
The company's ability to continue as a going concern is dependent upon obtaining
additional financing and upon its ability to attain profitable operations. These
consolidated financial statements do not give effect to any adjustments that
would be necessary should the company not be able to continue as a going
concern.
DEVELOPMENT STAGE
The company's activities, subsequent to its acquisition of SUM Media Corp., have
primarily consisted of establishing facilities, recruiting personnel, conducting
research and development, developing business and financial plans and raising
capital. Accordingly, the company is considered to be in the development stage.
The accompanying financial statements should not be regarded as typical for a
normal operating period. Prior to its acquisition of SUM Media Corp., the
company was inactive incurring only general and administrative expenses.
5
<PAGE> 7
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by the
Company in accordance with generally accepted accounting principles for interim
financial information. Certain information and disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of the Company's
management, the unaudited consolidated financial statements contain all
adjustments necessary (consisting of normal recurring accruals) for a fair
presentation of the financial position as of March 31, 2000 and the results of
operations for the three month period ended March 31, 2000 and 1999. The results
of operations for the three month period ended March 31, 2000, are not
necessarily indicative of the results to be expected for the full year. For
further information, refer to the consolidated financial statements and notes
thereto included in SUMmedia.com's Form 10-KSB for the year ended December 31,
1999.
The consolidated financial statements include the accounts of SUMmedia.com and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated on consolidation. Investments in entities in which the Company
can exercise significant influence, but less than majority owned and not
otherwise controlled by the Company, are accounted for under the equity method.
PREPAID EXPENSES
Prepaid expenses related primarily to advertising services to be provided in
fiscal 2000 paid for in advance. These prepaid advertising services are being
recorded into expenses based on the fair value of the advertising services
consumed by the company.
OTHER ASSETS
Other assets includes amounts advanced to a potential joint venture party in
Asia. As at March 31, 2000, the amount recorded as advances in other assets was
$192,872.
PROPERTY AND EQUIPMENT
Amortization of the enterprise business system has been recorded commencing
March 1, 2000 as this software became available for use on that date.
ACCRUAL FOR FINDERS FEE AND OTHER CONSULTING SERVICES
Amount is due to a third party for various consulting services related to
establishing and developing business contacts in the Asian market. Amount also
includes an accrual for finders fees associated with private sales of securities
identified by the third party. The company is currently negotiating for the
settlement of the outstanding amount through the issuance of common shares.
REVENUE RECOGNITION
The company has changed its revenue recognition policy related to the design and
production of customer's websites from the completed contract method to the
percentage of completion method. This change does not have an effect on revenues
recorded in previous periods as the completed contract method approximated the
percentage of completion method for those prior periods due to the short term
nature of the website design contracts entered into in those prior periods. All
previous period contracts were complete at the end of the previous reporting
periods. The change in the company's revenue recognition policy to percentage of
completion was made as this method better reflects the company's earning process
with regards to this source of revenue.
The net profit related to the resale of computer equipment and software by the
company is recorded as revenues.
SEGMENT INFORMATION
The company identifies its operating segments based on business activities,
management responsibility and
6
<PAGE> 8
geographical location. During the quarter ended March 31, 2000, the company
operated within two operating segments, being website design and online
couponing services, and operated in two geographic areas, being Canada and the
United States. For the quarter ended March 31, 2000, substantially all of the
company's revenues were earned from website design, substantially all the
company's assets were located in Canada and substantially all of its revenues
were earned in Canada.
CONTINGENCIES
The company was notified of a legal action which was filed by a former officer
and director of the company for unfair dismissal. The amount and timing of any
potential claim cannot be reasonably estimated at this time.
SUPPLEMENTAL CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 7,
1990 (DATE OF
INCORPORATION)
MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000
<S> <C> <C> <C>
SUPPLEMENTAL NON-CASH INVESTING AND
FINANCING ACTIVITIES
Issuance of common shares for acquisition of
SUM Media Corp. $ -- $ -- $ 12,000,000
Stock based compensation 653,014 -- 3,153,014
Share subscriptions receivable -- -- 125,000
Finders fees
467,600 -- 467,600
Capital lease obligations
74,889 -- 74,889
</TABLE>
SUBSEQUENT EVENTS
During April 2000, the company entered into a joint venture agreement with
Golden Net Limited and Party Assets Limited whereby SUMmedia.com Asia Limited
was formed to establish and manage, in Asia, an Asian version of the
savingumoney.com website and to offer all the other related business services.
The Company's ownership interest in the joint venture is 45%. The investment is
being accounted for using the equity method. At March 31, 2000, the company had
advanced to the joint venture amounts totaling $192,872 which was recorded in
other assets.
ITEM 2 - PLAN OF OPERATIONS
FORWARD-LOOKING STATEMENTS
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.
CASH REQUIREMENTS
The company has not yet generated significant revenues, has no assurance of
future profitability and has losses from operations. These factors raise
concerns about the company's ability to continue as a going concern. To address
these issues, management is continuing to aggressively pursue additional
financings. Management plans to continue to pursue additional new financings to
fund operations until it is able to generate significant revenues and profits
from its business operations.
7
<PAGE> 9
SUMmedia.com believes that its existing cash and cash sources will not be
sufficient to fund its losses from operations, its capital expenditures and
other obligations beyond the next two months. If 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, its business, financial condition and operating results will be
materially adversely affected.
SUMmedia.com anticipates that at least $70 million U.S. will be required over
the next 12 months to fund the following: opening of new markets and generating
brand awareness ($10 million), worldwide launch of SUMmedia.com products ($50
million), expansion and improvement of the company's financial and information
technology infrastructure ($3.5 million), expansion and improvement of the
company's operations infrastructure ($6 million), and continued research and
development activities ($0.5 million).
In order to meet the expected cash deficiency and liquidity issues,
SUMmedia.com's management team is aggressively pursuing third-party investors
and strategic alliances. In addition, previously completed private sales of
securities includes warrants that allow investors to invest an additional $26
million in SUMmedia.com within one-year of the date of the purchase of the
warrant. 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. These changes may also require
SUMmedia.com to seek funding on less favorable terms than it would otherwise
desire.
RESEARCH AND DEVELOPMENT
During the next 12 months, SUMmedia.com intends to expend approximately $500,000
in the pursuit of Internet research and development. These expenditures will
relate to the development of new company web pages and the development of new
coupon delivery technologies. Amounts to be expended include salaries for
company employees and fees paid to consultants.
PURCHASES OF SIGNIFICANT EQUIPMENT
SUMmedia.com expects to spend $3.5 million related to the expansion and
improvement of the company's financial and information technology
infrastructure. In addition, the company expects to spend $6.0 million to expand
and improve its operations infrastructure.
EMPLOYEES
As of March 31, 2000, SUMmedia.com had 136 employees (including 29 in Toronto,
Ontario, 74 in Vancouver, British Columbia, 10 in Calgary, Alberta and 23 in
Seattle, Washington). SUMmedia.com plans to open corporate or joint venture
sales offices in 15 new cities or regions over the next 12 months. Each launch
of a business in a new region is expected to require the addition of
approximately 25 employees. As a result, the company expects to add
approximately 375 additional employees. At December 31, 1999, SUMmedia.com had
89 employees.
RESULTS OF OPERATIONS
SUMmedia.com commenced operations as an Internet media and marketing company on
August 6, 1999 with its purchase of all the issued and outstanding shares of SUM
Media Corp. From inception (December 7, 1990) to August 6, 1999, SUMmedia.com
was an inactive "shell" with no operations or revenues; it had an accumulated
deficit of $644,500, comprised mainly of general and administrative costs
(legal, audit, etc.). As a result, comparative figures for the quarter ending
March 31, 1999 are not meaningful and are, therefore, not included in this
discussion.
SUMmedia.com incurred a deficit of $9.8 million for the quarter ending March 31,
2000 and a deficit of $8.3 million from August 6, 1999 to December 31, 1999, due
primarily to stock based compensation, operating expenses, marketing and
branding development, goodwill amortization and continuing costs of raising
capital.
Revenues for the quarter ended March 31, 2000 were $475,000. Approximately 81%
of SUMmedia.com's revenues
8
<PAGE> 10
for the quarter ended March 31, 2000 were derived from web site development
contracts. These web site development revenues relate to amounts earned by the
company for business consulting and development work related to customers
websites. For the quarter, web site development revenues relate primarily to
work done on one large contract which accounted for 95% of the revenues earned
from this channel. The balance of SUMmedia.com's revenues were derived from the
resale of computer equipment and software (approximately 7%) , online
advertising on SUMmedia.com's website (approximately 7%), which was earned by
the company for each month that customer's banner ads are posted on a
SUMmedia.com web site and eCoupon sales revenue (approximately 5%) which was
earned by the company for each month that SUMmedia.com eCoupons are posted on
the savingumoney.com web site. During the quarter ended March 31, 2000, the
company did not recognize any regional exclusivity fee revenue and no new
regional exclusive rights to market the company's products in predefined areas
were sold. Revenues for the year ended December 31, 1999 were $132,000.
During the quarter ended March 31, 2000, SUMmedia.com incurred $5.5 million on
various general and administration costs, of which $3.5 million relates to
various consulting services received by the company related to establishing and
developing business contacts in the Asian market. The company is currently
negotiating the settlement of such consulting services through the issuance of
shares. General and administration costs also includes salaries and benefits of
$605,000 related to over 20 executive management and administrative personnel
and over 30 information technology employees. The company also incurred $315,000
related to office operations consisting primarily of rent, telephone and office
supplies. Another significant expenditure was travel expenses associated with
trips to the United States, Australia, Europe and Asia to solidify previous
contacts, develop new relationships, secure additional financing and identify
additional business partners for SUMmedia.com at a cost of approximately
$375,000. Also included in general and administration expenses are accounting
and legal fees of $310,000 which relate primarily to the completion of the
company's 10-SB registration statement, the filings of patents and trademarks,
the development of business contracts, the analysis of corporate structure and
the planning of business expansion. Continuing costs in the area of investor and
public relations added $130,000 to general and administration costs. The company
also engaged information technology consultants to assist in reconfiguring its
network, arrange wide area networks, arrange its server co-location facilities,
assist in deploying its branches worldwide and to provide technical support at a
cost of $300,000. SUMmedia.com anticipates that general and administrative
expenses will continue to increase as SUMmedia.com pursues its product rollouts
by expanding to new cities and regions. General and administration costs for the
year ended December 31, 1999 were $2.4 million.
Research and development costs amounted to $61,000 for the quarter ended March
31, 2000. Research and development costs were primarily comprised of payments to
outside contractors and expenses related to engineering design work and testing
of SUMmedia.com's technology. Product development expenses are expected to
increase to approximately $500,000, primarily due to the payment of consulting
fees and salaries related to the development of additional web sites and new
eCoupon technologies to be made in the next year. Research and development costs
for the year ended December 31, 1999 were $97,000.
During the quarter ended March 31, 2000, SUMmedia.com incurred $2.5 million on
various sales and marketing costs, of which $380,000 was spent on salaries for
over 84 sales and marketing employees, with the remainder being spent on
promotional activities. SUMmedia.com's sales and marketing expenses are
comprised primarily of compensation for SUMmedia.com's sales and marketing
personnel, advertising in various media including radio, newspapers, television,
and tradeshows and other promotional costs. During the first quarter of 2000,
SUMmedia.com intensified its North American branding efforts for the
savingumoney.com brand. Significant branding efforts rolled out in the first
quarter included the launch of the company's TV advertising campaign in Canada
and a major media launch directed at the Seattle market to coincide with the
company's launch of its Seattle office. Sales and marketing expenses are
expected to increase in the near term due to branding, advertising and marketing
expenses, as well as incremental expenses associated with personnel additions
expected to be made in the next year. Sales and marketing costs for the year
ended December 31, 1999 were $1.4 million.
Stock based compensation of $653,000 was recorded for the quarter ended March
31, 2000. Amount relates primarily to options issued to senior executives.
Amortization expense related to property and equipment was $157,000 for the
quarter ended March 31, 2000, during which period SUMmedia.com purchased
computers, office equipment, furniture and fixtures and software at a total cost
of $1.6 million. Amortization expense related to Goodwill on the purchase of SUM
Media Corp. was
9
<PAGE> 11
$1.1 million for the quarter ended March 31, 2000. Amortization expenses related
to property and equipment and goodwill were $97,000 and $1.8 million,
respectively, for the year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, SUMmedia.com had $3,730,124 in cash, working capital of
$175,470 and shareholders' equity of $14,059,131. Net cash used in
SUMmedia.com's operating activities was $5,505,554 for the quarter ended March
31, 2000. Net cash flows used in operating activities consisted primarily of a
loss for the quarter of $9,768,654. The loss for the quarter was offset by
non-cash stock-based compensation charges of $653,014 and amortization of
property and equipment and goodwill of $1,271,847. The change in the Company's
net working capital also contributed $2,338,239 to operating cash flows.
Cash flows from financing activities of $8,924,148 were derived primarily from
$8,771,432 of proceeds received from the issuance of common shares.
Cash flows used in investing activities of $1,741,479 related primarily to
purchases of property and equipment of $1,566,165.
Since SUMmedia.com continues to incur operating losses, its working capital will
continue to be depleted. In an effort to improve the company's working capital
going forward, the company's management is attempting to increase revenues
through marketing and branding efforts and through the use of strategic
alliances. The anticipated shortfall in working capital for the next year is
expected to be eliminated through the aggressive pursuit of third-party
investors and strategic relationships by company management.
For the quarter ended March 31, 2000, SUMmedia.com financed its operations
primarily through private sales of securities. Dilutive equity issuances
completed during the quarter, including options granted to employees and
warrants granted in private sales of securities to third party investors, will,
to the extent they are exercised, improve the company's liquidity and capital
resources. While the issuance of shares does raise funds to develop the
company's business, the continued issuance of shares may erode the company's
share price and as a result reduce the amount of capital that the company is
able to raise per share.
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, research and development, and
to implement 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. These
changes may also require SUMmedia.com to seek funding on less favorable terms
than it would otherwise desire.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
SUMmedia.com's exposure to market risk is principally confined to its cash and
cash equivalents, which have short maturities and are held with high credit
quality financial institutions and, therefore, are believed to involve minimal
market risk.
Currently, the Company's operations are primarily conducted in Canada. However,
as the Company expands its operations into the U.S. and other geographic areas
such as Asia and Europe, it will be exposed to foreign currency risks arising
from the movements in the Canadian dollar relative to other foreign currencies.
The Company does not plan on using hedges to mitigate this risk.
<TABLE>
<CAPTION>
U.S. to Canadian Dollar Quarter Ended
Exchange rates March 31, 2000 1999 1998 1997 1996
- -------------- -------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Period-end 1.4574 1.4433 1.5333 1.4305 1.3706
Average for the period 1.4710 1.4858 1.4831 1.3844 1.3636
Range 1.4341-1.4732 1.4433-1.5087 1.4198-1.5685 1.3470-1.4305 1.3383-1.3747
</TABLE>
10
<PAGE> 12
BUSINESS OVERVIEW
SUMmedia.com is an Internet media and marketing company that provides online
coupons, or eCoupons, for small businesses through its portal, savingumoney.com.
SUMmedia.com's goal is to provide Internet marketing initiatives for smaller
businesses lacking the expertise to exploit eCommerce opportunities.
FUTURE ACQUISITIONS
SUMmedia.com will consider strategic acquisitions of companies with a strong
brand identity and with customer and product information databases that augment
its databases. It will be SUMmedia.com's practice to allow the acquired
company's management team to retain responsibility for critical front-end
business functions such as merchandising, creative presentation and marketing,
while consolidating operational functions under its organization to realize
economies of scale.
PART II: OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Not applicable.
ITEM 2 - CHANGES IN SECURITIES
On March 22, 2000, the company's registration statement on Form 10-SB was made
effective.
All sales of unregistered securities issued by SUMmedia.com were denominated in
U.S. dollars.
In January 2000, SUMmedia.com granted 95,000 stock options to three senior
executives of the company. Each option entitles the holder to purchase one share
of common stock for $0.01. The stock options expire ten years from their date of
issuance and become fully vested on April 1, 2000. Issuance of these options was
made in reliance upon the exemption from registration provided by Rule 506 of
Regulation D of the 1933 Act. The option recipient was an accredited investor
and had access to full information concerning SUMmedia.com and represented that
the options were for the recipient's own account and not for the purpose of
distribution. The common shares to be issued on exercise of the options will
contain a restrictive legend advising that the securities may not be offered for
sale, sold or otherwise transferred without having first being registered under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act.
No underwriters were involved in the transaction.
In January 2000, SUMmedia.com issued 500 shares of its common stock to the
Toronto sales staff for gross cash proceeds of nil. Issuance of the units was
made in reliance upon the exemption from registration provided by Rule 506 of
Regulation D of the 1933 Act. The purchaser had access to full information
concerning SUMmedia.com and represented that it purchased the units for the
purchaser's own account and not for the purpose of distribution. The units
contained a restrictive legend advising that the securities represented by the
units may not be offered for sale, sold or otherwise transferred without having
first being registered under the 1933 Act or pursuant to an exemption from
registration under the 1933 Act. No underwriters were involved in the
transaction.
In January 2000, SUMmedia.com issued 159,900 shares of its common stock to Core
Pacific - Yamaichi International (H.K.) Limited pursuant to an option exercise
at $3.00 per share for gross cash proceeds of $479,700. Issuance of the shares
was made in reliance upon the exemption from registration provided by Section
4(2) of the 1933 Act. The purchaser was an accredited investor and had access to
full information concerning SUMmedia.com and represented that it purchased the
shares for the purchaser's own account and not for the purpose of distribution.
The shares contained a restrictive legend advising that they may not be offered
for sale, sold or otherwise transferred
11
<PAGE> 13
without having first being registered under the 1933 Act or pursuant to an
exemption from registration under the 1933 Act. No underwriters were involved in
the transaction.
In January 2000, SUMmedia.com issued 308,000 units to e-Kong Services Limited
for gross cash proceeds of $1,001,000. The per share price was determined by
reducing the market price, at the time of the commencement of negotiations
between the parties, by approximately 15% to 20% due to the illiquidity of the
shares. In addition, SUMmedia.com sold warrants for nominal consideration to
give the purchasers added incentive to invest and to allow the prospect of
future financing. Each unit consisted of one share of common stock and one
common stock purchase warrant. Each warrant is exercisable for 12 months for
$4.25 for one share of common stock. Issuance of the units was made in reliance
upon the exemption from registration provided by Section 4(2) of the 1933 Act.
The purchaser was an accredited investor and had access to full information
concerning SUMmedia.com and represented that it purchased the units for the
purchaser's own account and not for the purpose of distribution. The units
contained a restrictive legend advising that the securities represented by the
units may not be offered for sale, sold or otherwise transferred without having
first being registered under the 1933 Act or pursuant to an exemption from
registration under the 1933 Act. No underwriters were involved in the
transaction.
In January 2000, SUMmedia.com issued 1,000,000 units to Hollinger Digital Inc.
for gross cash proceeds of $4,000,000. The per share price was determined by
reducing the market price, at the time of the commencement of negotiations
between the parties, by approximately 15% to 20% due to the illiquidity of the
shares. In addition, SUMmedia.com sold warrants for nominal consideration to
give the purchasers added incentive to invest and to allow the prospect of
future financing. Each unit consisted of one share of common stock and one
common stock purchase warrant. Each warrant is exercisable for 12 months for
$6.00 for one share of common stock. Issuance of the units was made in reliance
upon the exemption from registration provided by Section 4(2) of the 1933 Act.
The purchaser was an accredited investor and had access to full information
concerning SUMmedia.com and represented that it purchased the units for the
purchaser's own account and not for the purpose of distribution. The units
contained a restrictive legend advising that the securities represented by the
units may not be offered for sale, sold or otherwise transferred without having
first being registered under the 1933 Act or pursuant to an exemption from
registration under the 1933 Act. No underwriters were involved in the
transaction.
In February 2000, SUMmedia.com issued 700,000 units to e-Kong Services Ltd. for
gross cash proceeds of $3,675,000. Each unit consisted of one share of common
stock and common stock purchase warrant. The per share price was determined by
reducing the market price, at the time of the commencement of negotiations
between the parties, by approximately 15% to 20% due to the illiquidity of the
shares. In addition, SUMmedia.com sold warrants for nominal consideration to
give the purchasers added incentive to invest and to allow the prospect of
future financing. Each unit consisted of one share of common stock and one
common stock purchase warrant. Each warrant is exercisable for 12 months for
$7.00 for one share of common stock. Issuance of the units was made in reliance
upon the exemption from registration provided by Section 4(2) of the 1933 Act.
The purchaser was an accredited investor and had access to full information
concerning SUMmedia.com and represented that it purchased the units for the
purchaser's own account and not for the purpose of distribution. The units
contained a restrictive legend advising that the securities represented by the
units may not be offered for sale, sold or otherwise transferred without having
first being registered under the 1933 Act or pursuant to an exemption from
registration under the 1933 Act. No underwriters were involved in the
transaction.
In March 2000, SUMmedia.com issued 3,000 shares of its common stock to the
Seattle Director of Sales for gross cash proceeds of nil. Issuance of the units
was made in reliance upon the exemption from registration provided by Rule 506
of Regulation D of the 1933 Act. The purchaser was an accredited investor and
had access to full information concerning SUMmedia.com and represented that it
purchased the units for the purchaser's own account and not for the purpose of
distribution. The units contained a restrictive legend advising that the
securities represented by the units may not be offered for sale, sold or
otherwise transferred without having first being registered under the 1933 Act
or pursuant to an exemption from registration under the 1933 Act. No
underwriters were involved in the transaction.
In March 2000, SUMmedia.com issued 50,000 units to an unrelated Canadian
individual for gross cash proceeds of $300,000. The per share price was
determined by reducing the market price, at the time of the commencement of
negotiations between the parties, by approximately 15% to 20% due to the
illiquidity of the shares. In addition, SUMmedia.com sold warrants for nominal
consideration to give the purchasers added incentive to invest and to
12
<PAGE> 14
allow the prospect of future financing. Each unit consisted of one share of
common stock and common stock purchase warrant. Each warrant is exercisable for
12 months for $8.50 for one share of common stock. Issuance of the units was
made in reliance upon the exemption from registration provided by Rule 506 of
Regulation D of the 1933 Act. The purchaser was an accredited investor and had
access to full information concerning SUMmedia.com and represented that it
purchased the units for the purchaser's own account and not for the purpose of
distribution. The units contained a restrictive legend advising that the
securities represented by the units may not be offered for sale, sold or
otherwise transferred without having first being registered under the 1933 Act
or pursuant to an exemption from registration under the 1933 Act. No
underwriters were involved in the transaction.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 - OTHER INFORMATION
Not applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8 - K
a) The following exhibits are filed as part of this report:
Exhibit 10 Stock Option Agreement
Exhibit 18 Letter on Change in Accounting Principles
Exhibit 27 Financial Data Schedule
b) Reports on Form 8 - K
None.
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.
May 12, 2000
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
13
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- --------------
<S> <C>
10 Stock Option Agreement
18 Letter on Change in Accounting Principles
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Agreement"), made as of <<HIRE>>, by
and between SUMmedia.com Inc. (the "Company"), a Colorado corporation, and
<<NAME>> ("Employee").
WHEREAS, the Company, pursuant to its 1999 Stock Option Plan (the
"Plan"), wishes to grant this stock option to Employee.
WHEREAS, this option is intended to be a non-qualified stock option for
purposes of Section 83 of the United States Internal Revenue Code of 1986, as
amended (the "Code").
WHEREAS, this stock option is subject to the terms and conditions of
the Plan, as interpreted in the sole and absolute discretion of the Company's
Compensation Committee.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Grant of Option. The Company hereby grants to Employee, on the date
set forth above, the right and option (hereinafter called the "Option") to
purchase all or any part of an aggregate of <<OPTIONS>> shares of the Company's
Common Stock, par value $0.01 per share (the "Common Stock"), at the price of
<<PRICE>> per share on the terms and conditions set forth herein. This Option is
not intended to be an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Vesting of Options. Options shall vest with the following terms:
(1) twenty-four percent (24%) of the Options will vest
upon completion of probation period;
(2) forty percent (40%) of the Options will vest on the
first anniversary date of this Agreement;
(3) three percent (3%) of Options will vest on the last
business day of each month thereafter during each of
the following twelve (12) months; and
(4) the Option to exercise shall fully vest after two (2)
years.
If the Employee's death or termination of employment with the Company occurs
prior to an anniversary date, the vested portion of the Option shall be
determined by reference to the vested percentage of the Employee earned as of
the preceding anniversary date.
3. Exercise of Option.
(a) Subject to the provisions of Section 6 of this Agreement,
any Option or portion of any Option granted pursuant to this Agreement which has
become
<PAGE> 2
2
vested in accordance with Section 2 of this Agreement may be exercised by the
Employee at any time prior to the termination of the Option pursuant to Section
4 of this Agreement.
(b) The Options granted to the Employee hereunder and any
Common Stock purchased by the Employee upon exercise of the Option are subject
to a hold period under British Columbia securities law and cannot be traded by
the Employee unless the trade is made pursuant to an available exemption under
British Columbia securities law from the prospectus and registration
requirements of the Securities Act (British Columbia), a prospectus is firstly
filed with the British Columbia Securities Commission and a receipt therefor is
obtained or a discretionary order exempting the trade from the prospectus and
registration requirements of the Securities Act (British Columbia) is obtained
from the British Columbia Securities Commission prior to the trade. The Company
hereby notifies the Employee that the Employee must file a report with the
British Columbia Securities Commission in the form attached hereto as Schedule A
(the "Initial Trade Report") within ten (10) days of the initial trade of the
Options or the Common Stock, as the case may be, by the Employee. Where the
Employee has filed an Initial Trade Report with respect to the Options or Common
Stock, the Employee is not required to file a further report in respect of
additional trades of Options or Common Stock, as the case may be, acquired under
this Agreement. The notification to the employee in this Section 3(b)
constitutes the notice in writing requirement of the Company pursuant to BOR
#95/17 of the British Columbia Securities Commission.
4. Termination of Option. This Option shall in all events terminate ten
(10) years after the date of grant.
5. Nontransferability of Options. This Option shall not be
transferable, except that Employee may, by will, transfer a vested Option to the
Employee's beneficiary or to the Employee's estate upon the death of the
Employee. This Option shall be exercisable during the Employee's lifetime only
by the Employee. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any Option (other than a transfer specifically permitted by
the first sentence of this Section 5), or upon the levy of any attachment or
similar process upon an Option, such Option shall immediately terminate.
6. Effect of Termination of Employment.
(a) In the event that Employee shall cease to be employed by
the Company or its subsidiaries, if any, for any reason other than Employee's
serious misconduct or Employee's death or disability (as such term is defined in
Section 6(c) hereof), Employee shall have the right to exercise the Option at
any time within one (1) month after such termination of employment to the extent
of the full number of shares vested under the Option as of the date of
termination, subject to the condition that no Option shall be exercisable after
the expiration of the term of the Option.
<PAGE> 3
3
(b) In the event that Employee shall cease to be employed by
the Company or its subsidiaries, if any, by reason of Employee's serious
misconduct during the course of employment, including but not limited to
wrongful appropriation of the Company's funds, the Option shall be terminated as
of the date of the misconduct.
(c) If Employee shall die while in the employ of the Company
or a subsidiary, if any, or within one (1) month after termination of employment
for any reason other than serious misconduct or if employment is terminated
because Employee has become disabled (within the meaning of Code Section
22(e)(3)) while in the employ of the Company or a subsidiary, if any, and
Employee shall not have fully exercised the Option, such Option may be exercised
at any time within twelve (12) months after Employee's death or date of
termination of employment for disability by Employee, personal representatives
or administrators, or guardians of Employee, as applicable, or by any person or
persons to whom the Option is transferred by will or the applicable laws of
descent and distribution, to the extent of the full number of shares Employee
was entitled to purchase under the Option on the date of death, termination of
employment, if earlier, or date of termination for such disability and subject
to the condition that no Option shall be exercisable after the expiration of the
term of the Option.
(d) The Employee acknowledges and agrees that in the event of
termination of the Employee's employment for any reason he/she will not be
entitled to any claim against the Company for loss, damages or any other remedy
with respect to the Employee's loss of any right to exercise stock options which
would have vested and become exercisable at any time after the Employee's
termination date. The provisions of this Section 6(d) shall however not
interfere with any right of the Employee to exercise (strictly within the grace
periods specified in this Section 6) any options to the extent (and only to the
extent) that such options were exercisable by the Employee on the termination
date.
7. Manner of Exercise.
(a) The Option can be exercised only by Employee or other
proper party by delivering within the Option period written notice to the
Company at its principal office. The notice shall state the number of shares as
to which the Option is being exercised and be accompanied by payment in full of
the Option price for all shares designated in the notice.
(b) Employee may pay the Option price in cash, by check (bank
check, certified check or personal check), by money order, or with the approval
of the Company (i) by delivering to the Company for cancellation Common Stock of
the Company with a fair market value as of the date of exercise equal to the
Option price or the portion thereof being paid by tendering such shares, (ii) by
delivering to the Company a combination of cash and Common Stock of the Company
with an aggregate fair market value and a principal amount equal to the Option
price or (iii) by authorizing the Company to retain from the total number of
shares as to which the Option is exercised that number of shares
<PAGE> 4
4
having a fair market value on the date of exercise equal to the exercise price
for the total number of shares as to which the Option is exercised.
(c) For purposes of Section 7(b), fair market value of the
Common Stock of the Company as of a particular date (the "Determination Date")
shall mean: (i) if the Company's Common Stock is traded on an exchange or is
quoted on Nasdaq, then the average closing or last sale prices, respectively,
reported for the ten (10) business days immediately preceding the Determination
Date, and (ii) if the Company's Common Stock is not traded on an exchange or on
Nasdaq but is traded on the over-the-counter market, then the average closing
bid and asked prices reported for the ten (10) business days immediately
preceding the Determination Date.
8. Miscellaneous.
(a) This Option is issued pursuant to the Company's 1999 Stock
Option Plan and is subject to its terms. The terms of the Plan are available for
inspection during business hours at the principal offices of the Company.
(b) This Agreement shall not confer on Employee any right with
respect to continuance of employment by the Company or any of its subsidiaries,
nor will it interfere in any way with the right of the Company to terminate such
employment at any time. Employee shall have none of the rights of a shareholder
with respect to shares subject to this Option until such shares shall have been
issued to Employee upon exercise of this Option.
(c) The exercise of all or any parts of this Option shall only
be effective at such time that the sale of Common Stock pursuant to such
exercise will not violate any state or federal securities or other laws.
(d) If there shall be any change in the Common Stock of the
Company through merger, consolidation, reorganization, recapitalization,
dividend in the form of stock (of whatever amount), stock split or other change
in the corporate structure of the Company, and all or any portion of the Option
shall then be unexercised and not yet expired, then appropriate adjustments in
the outstanding Option shall be made by the Company in its sole discretion, in
order to prevent dilution or enlargement of Option rights. Such adjustments
shall include, where appropriate, changes in the number of shares of Common
Stock and the price per share subject to the outstanding Option.
(e) The grant of this Option shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure or to merge,
consolidate, dissolve or liquidate or to sell or transfer all or any part of its
business or assets.
(f) The Company shall at all times during the term of the
Option reserve and keep available such number of shares as will be sufficient to
satisfy the requirements of this Agreement.
<PAGE> 5
5
(g) If Employee shall dispose of any of the Common Stock of
the Company acquired by Employee pursuant to the exercise of the Option within
two (2) years from the date this Option was granted or within one (1) year after
the transfer of any such shares to Employee upon exercise of this Option, then,
in order to provide the Company with the opportunity to claim the benefit of any
income tax deduction which may be available to it under the circumstances,
Employee shall promptly notify the Company of the dates of acquisition and
disposition of such shares, the number of shares so disposed of, and the
consideration, if any, received for such shares. In order to comply with all
applicable federal or state income tax laws or regulations, the Company may take
such action as it deems appropriate to insure (i) notice to the Company of any
disposition of the Common Stock of the Company within the time periods described
above and (ii) that, if necessary, all applicable federal or state payroll,
withholding, income or other taxes are withheld or collected from Employee.
(h) Employee agrees to disclose neither the contents nor any
of the terms and conditions of this Option to any other person, and agrees that
such disclosure may result in both immediate termination of this Option without
the right to exercise any part thereof and termination of employment with the
Company.
(i) Employee acknowledges that this Agreement is issued
subject to the terms and conditions of the Plan. In the event any term or
condition hereof conflicts with the Plan, the Plan shall control. Interpretation
of any term or provision of this Agreement shall be at the sole discretion of
the Compensation Committee, in accordance with the Plan.
(j) The Employee acknowledges that the Company has advised the
Employee to obtain independent legal and tax advice prior to entering into this
Agreement, and prior to the resale of any Options or Common Stock acquired
hereunder.
(k) All references to the Code in this Agreement are to the
United States Internal Revenue Code of 1986, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
SUMMEDIA.COM INC.
By:
--------------------------------------
David R. Lewis, Chief Financial Officer
------------------------------------------
<<NAME>>
<PAGE> 6
6
SCHEDULE "A"
Initial Trade Report
Securities Act
1. Name and address of seller
----------------------------------------------------------------------
----------------------------------------------------------------------
2. Name and address of the issuer whose securities were traded by the
seller
----------------------------------------------------------------------
----------------------------------------------------------------------
3. Name and address of the party from whom the seller acquired the
securities
----------------------------------------------------------------------
----------------------------------------------------------------------
4. Description of securities sold
(a) Number and description of securities
------------------------
-------------------------------------------------------------
(b) Date of acquisition of securities by the seller
-------------
-------------------------------------------------------------
(c) Exemption under which securities were acquired by the seller
-------------------------------------------------------------
(d) Exemption under which securities were traded by the seller
-------------------------------------------------------------
(e) Date of sale of securities
----------------------------------
-------------------------------------------------------------
(f) Sale price
--------------------------------------------------
-------------------------------------------------------------
<PAGE> 7
7
5. Certificate of seller
The undersigned seller hereby certifies that the information given in
this report relating to the seller is true and that, to the best of the
seller's information and belief,
(a) the information given in this report relating to any other
party is true,
(b) no unusual effort has been made to prepare the market or
create a demand for the securities, and
(c) no extraordinary commission or other consideration has been
paid in respect of the trade which this report relates.
DATED at ___________ this _________ day of __________ 19___
Signature of the seller or, if the seller is a company, signature of authorized
signatory
- -------------------------------------------
Name of the seller or, if the seller is a company, name and office of authorized
signatory
- -------------------------------------------
Instructions:
1. If the space provided for any answer is insufficient, additional sheets
may be used. Each sheet must be cross-referenced to the relevant item,
properly identified and signed by the person whose signature appears on
the report.
2. File this report with the required fee and completed Fee Checklist. In
order to determine the fee payable, consult section 22 of the
Securities Regulation, B.C. Reg. 478/95. Cheques should be made payable
to the "British Columbia Securities Commission". IT IS AN OFFENCE FOR A
PERSON TO MAKE A STATEMENT IN A DOCUMENT REQUIRED TO BE FILED OR
FURNISHED UNDER THE SECURITIES ACT THAT, AT THE TIME AND IN LIGHT OF
CIRCUMSTANCES UNDER WHICH IT IS MADE, IS A MISREPRESENTATION
<PAGE> 1
EXHIBIT 18
[PRICEWATERHOUSECOOPERS LETTERHEAD]
May 10, 2000
Board of Directors
SUMmedia.com Inc.
Suite 1200, 1055 West Hastings Street
Vancouver, BC, V6E 2E9
Canada
Dear Directors:
We are providing this letter to you for inclusion as an exhibit to your Form
10-QSB filing pursuant to Item 601 of Regulation S-B.
We have been provided a copy of the Company's Quarterly Report on Form 10-QSB
for the period ended March 31, 2000. Item 1 therein describes a change in
accounting principle from the completed contract method to the percentage of
completion method. It should be understood that the preferability of one
acceptable method of accounting over another for revenue recognition has not
been addressed in any authoritative accounting literature, and in expressing our
concurrence below we have relied on management's determination that this change
in accounting principle is preferable. Based on our reading of management's
stated reasons and justification for this change in accounting principle in the
Form 10-QSB, and our discussions with management as to their judgement about the
relevant business planning factors relating to the change, we concur with
management that such change represents, in the Company's circumstances, the
adoption of a preferable accounting principle in conformity with Accounting
Principles Board Opinion No. 20.
We have not audited any financial statements of the Company as of any date or
for any period subsequent to December 31, 1999. Accordingly, our comments are
subject to change upon completion of an audit of the financial statements
covering the period of the accounting change.
Very truly yours,
PricewaterhouseCoopers LLP
<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
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> $3,730,124
<SECURITIES> 0
<RECEIVABLES> 360,307
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,454,796
<PP&E> 3,250,183
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,556,882
<CURRENT-LIABILITIES> 8,279,326
<BONDS> 0
0
0
<COMMON> 183,634
<OTHER-SE> 13,976,719
<TOTAL-LIABILITY-AND-EQUITY> 22,556,882
<SALES> 474,512
<TOTAL-REVENUES> 474,512
<CGS> 131,618
<TOTAL-COSTS> 10,010,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,667,432
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,667,432
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,667,432
<EPS-BASIC> 0.55
<EPS-DILUTED> 0.55
</TABLE>
