<PAGE>
As Filed with the Securities and Exchange Commission on August 19, 1999
Registration No. 333-__________
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Suite101.com, Inc.
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(Name of small business issuer in its charter)
DELAWARE 7372 33-0464753
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(State or other (Primary Standard (IRS Employer
jurisdiction incorporation Industrial Classification Identification
of or organization) Code Number) Number)
SUITE 390 - 1122 MAINLAND STREET,
VANCOUVER, BRITISH COLUMBIA, CANADA V6B 5L1
(604) 682-1400
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(Address, and telephone number, of principal executive offices)
SUITE 390 - 1122 MAINLAND STREET,
VANCOUVER, BRITISH COLUMBIA, CANADA V6B 5L1
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(Address of principal place of business or intended principal place of business)
PETER L. BRADSHAW, PRESIDENT
SUITE 390 - 1122 MAINLAND STREET,
VANCOUVER, BRITISH COLUMBIA, CANADA V6B 5L1
(604) 682-1400
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(Name, address, and telephone number, of agent for service)
Copy to:
WILLIAM S. CLARKE, ESQUIRE
WILLIAM S. CLARKE, P.A.
457 NORTH HARRISON STREET, SUITE 103
PRINCETON, NEW JERSEY 08540
(609) 921-3663
FACSIMILE (609) 921-3933
Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE.
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH
CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
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Common Stock, 2,000,000 1.72(1) $3,440,000 $956.00
$.001 par value
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Common Stock, 1,000,000(2) 4.50(3) $4,500,000 $1,251.00
$.001 par value
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TOTAL $2,207.00
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(1) The registration fee has been calculated in accordance with Rule 457(c).
On August 12, 1999, the average of the bid and asked price for the Company's
Common Stock on the OTC Bulletin Board was $1.72.
(2) Plus such additional shares as may be issued pursuant to the
anti-dilution provisions of the common stock purchase warrants.
(3) The shares are issuable on exercise of outstanding common stock purchase
warrants. Pursuant to Rule 457(g), the Registration fee has been calculated
on the basis of the exercise price of the warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its Effective Date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
I-2
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 19, 1999
PROSPECTUS
Suite101.Com, Inc.
COMMON STOCK
Suite101.com, Inc. is an Internet company engaged in the creation,
operation and maintenance of a World Wide Web based community, known as
Suite101.com, for Internet users to express themselves, share ideas,
interests and expertise, and publish content accessible to other users with
common interests.
This Prospectus relates to the resale by the holders of up to an
aggregate of 3,000,000 shares of our Common Stock. Of those shares, 2,000,000
are issued and outstanding and 1,000,000 shares are issuable on exercise of
outstanding common stock purchase warrants expiring February 29, 2000 and
currently exercisably at $4.50 per share. These shares are being registered
for resale pursuant to an agreement we entered into with the holders when
they purchased the shares in April 1999.
Our Common Stock is quoted on the OTC Bulletin Board-Registered
Trademark- with a trading symbol of "BOWG." On August 9, 1999, the closing
bid quotation of our Common Stock as reported on the OTC Bulletin
Board-Registered Trademark-was $1.56.
We expect that these shares of Common Stock may be sold or
distributed from time to time by or for the account of the holders through
underwriters or dealers, through brokers or other agents, or directly to one
or more purchasers, including pledgees, at market prices prevailing at the
time of sale or at prices otherwise negotiated. The shares also may be sold
by donees or by other persons acquiring the shares. We will receive no
portion of the proceeds from the sale of the shares, except that we may
receive the exercise price from any exercise of the warrants. We will bear
certain expenses incident to the registration of the shares.
WE ASK THAT YOU CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON
PAGE 6 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS DATED , 1999
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and its rules and regulations. This means
that we file reports, proxy and information statements and other information
with the Securities and Exchange Commission. The reports, proxy and
information statements and other information that we file can be read and
copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, Northwest, Washington, DC 20549; and at the
Commission's regional offices located at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can also be obtained from the
Commission at prescribed rates through its Public Reference Section at 450
Fifth Street, Northwest, Washington, DC 20549. The Commission maintains a Web
site that contains the reports, proxy and information statements and other
information that we file electronically with the Commission and the address
of that Web site is http://www.sec.gov.
This Prospectus is part of a registration statement we filed with
the Commission. You should rely only on the information or representations
provided in this Prospectus and any information we have incorporated by
reference. We have authorized no one to provide you with any information
other than that provided in this Prospectus. We have authorized no one to
provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not
assume that the information in this Prospectus is accurate as of any date
other than the date on the front of the document
i
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TABLE OF CONTENTS
<TABLE>
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Prospectus Summary........................................................... 1.
The Offering................................................................. 2.
Summary Historical Financial Data............................................ 3.
Risk Factors................................................................. 4.
Cautionary Statement for Purposes of
The "Safe Harbor" Provisions of
The Private Securities Litigation Reform Act of 1996......................... 20.
Use of Proceeds.............................................................. 22.
Price Range of Common Stock.................................................. 23.
Dividend Policy.............................................................. 24.
Capitalization............................................................... 24.
Management's Discussion and Analysis of
Financial Condition or Plan of Operation..................................... 25.
Business of the Company...................................................... 30.
Management................................................................... 44.
Certain Relationships & Related Transactions................................. 46.
Principal and Other Stockholders............................................. 47.
Selling Securityholders...................................................... 49.
Plan of Distribution......................................................... 52.
Description of Capital Stock................................................. 53.
Legal Matters................................................................ 54.
Independent Public Accountants............................................... 54.
Sources...................................................................... 54.
Financial Statements......................................................... F-1
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ii
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information, financial statements and other data appearing elsewhere
in this Prospectus. At various places in this Prospectus, we make reference
to the "Company." When we use that term, we mean Suite101.com, Inc. and its
wholly owned subsidiary.
Suite101.Com, Inc.
We are an Internet company engaged in the creation, operation and
maintenance of a World Wide Web based community, known as Suite101.com. Our
community includes our visitors and Members who are Internet users. It also
includes Contributing Editors who create our directory of personalized Web
sites organized topically into eleven major Communities of Interest. Our
directory, the "Best-of-Web Guide" was started in 1996. We believe we were
one of the first Internet sites to engage people rather than software (search
engines) to find information on the Internet. At the end of July 1999, we
have over 700 Web guides or "Contributing Editors" searching the Internet for
the best resources in 714 topic areas.
Since 1996, our Contributing Editors, who are typically enthusiasts
with a passion for a particular topic, have created a topically organized
directory with close to 21,000 hand-picked and personally reviewed links. In
addition to compiling the directory, our Contributing Editors have also
written over 15,375 searchable, archived articles and managed 15,131
discussions in 714 topics ranging from hitch-hiking, through romance, to
gardening.
Our revenue model will concentrate on electronic commerce
("e-commerce"). Using a consensual marketing model, Suite101.com will offer
participating enterprises ("eVendors" access to psycho-demographic
information on Suite101 Members who have consented to participate in the
program. eVendors will then be asked to pay a fee to market their products or
services directly to the participating Member. Revenue from these fees will
be shared between Suite101.com and its Members. Suite101.com intends to
receive additional revenues by participating in completed transactions.
OUR OFFICES
Our executive offices are located at 1122 Mainland Street, Suite
390, Vancouver, British Columbia V6B 5L1. Our telephone number is
604-682-1400, and our Internet address is www.suite101.com.
1.
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THE OFFERING
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Offering of Common Stock by the Selling Stockholders 2,000,000 shares
Offering of Common Stock by the Selling Stockholders 1,000,000 shares(1)
issuable on exercised of warrants
Shares to be outstanding after the Offering of Common Stock 13,061,288 shares
and exercise of the warrants, assuming all the warrants are
exercised.
</TABLE>
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(1) The warrants are exercisable through February 29, 2000 at $4.50 per
share. There can be no assurance that any of the warrants will be exercised.
<TABLE>
<S> <C>
Use of Proceeds We will not realize any of the
proceeds from the sale of the
securities offered. See "Use of
Proceeds." In the event all the
warrants are exercised, we will
receive gross proceeds of
$4,500,000.
Market Symbol (OTC Bulletin Board) BOWG
</TABLE>
RISK FACTORS
For a discussion of certain risks you should consider in connection with a
purchase of the shares of our Common Stock, see "Risk Factors."
2.
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The summary historical financial information presented below
has been derived from our financial statements for each of the two
years ended December 31, 1998 and from our unaudited financial
statements for the six months ended June 30, 1998 and 1999.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------- ----------------------------
1997 1998 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales $6,751 $18,769 $9,673 $842
Operating expenses 258,255 396,057 150,737 524,262
Loss from operations (251,504) (377,288) (141,064) (523,420)
Net loss (247,881) (373,767) (138,578) (488,237)
Net loss per share (basic and diluted) $(0.07) $(0.10) $(0.04) $(0.04)
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
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<S> <C>
BALANCE SHEET DATA:
Cash $4,057,447
Working capital 3,963,678
Total assets $4,196,535
Stockholders' equity 4,022,131
</TABLE>
3.
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RISK FACTORS
AN INVESTMENT IN SHARES OF OUR COMMON STOCK INVOLVES A HIGH DEGREE
OF RISK. YOU SHOULD CONSIDER THE FOLLOWING FACTORS, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, IN EVALUATING OUR BUSINESS AND
PROPOSED ACTIVITIES BEFORE YOU PURCHASE ANY SHARES OF OUR COMMON STOCK. YOU
SHOULD ALSO SEE THE "CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996" REGARDING
RISKS AND UNCERTAINTIES RELATING TO US AND TO FORWARD LOOKING STATEMENTS IN
THIS PROSPECTUS.
RISKS WE FACE ARISING OUT OF THE EARLY STAGE OF OUR BUSINESS
EARLY DEVELOPMENT STAGE
We are in the early stage of developing our business plan and
operations. We have realized no material revenues to date from our Internet
operations activities. From April 1996 through June 30, 1999, our total
revenues from our Internet operations activities were negligible. During that
period, we accumulated losses of $1,245,566. We have not achieved
profitability on a quarterly or annual basis to date, and anticipate that we
will continue to incur net losses for the foreseeable future. The extent of
our losses will be dependent, in part, on the amount and rates of our
expenditures and growth in net revenue from e-commerce transactions. We
expect our operating expenses to increase significantly, especially in the
areas of visitor and Member generation, brand marketing and e-commerce
promotion. As a result, we will need to generate increased amounts of
quarterly net revenue if we are to achieve profitability. We believe that
period-to-period comparisons of our operating results will not be meaningful
and that you should not rely on the results for any period as an indication
of our future performance. To the extent that our net revenues do not grow at
anticipated rates or that increases in our operating expenses precede or are
not subsequently followed by commensurate increases in net revenue, or that
we are unable to adjust operating expense levels accordingly, our business,
results of operations and financial condition will be materially and
adversely affected. There can be no assurance that our operating losses will
not increase in the future or that we will ever achieve or sustain
profitability.
We are currently developing our business through efforts to attract
visitors, Members and Contributing Editors to our Web-based community. At
July 31, 1999, we had approximately 45,000 Members and had grown from 35
Contributing Editors in October 1996 to 717 in July 1999. During the month of
June 1999, our site received approximately 1.8 million page views. We cannot
assure you that such growth rates are sustainable. Our business plan is to
continue to expand our numbers of visitors, Members and Contributing Editors
in an effort to reach a sufficient level of critical mass as well as to
continue to improve and enhance our site infrastructure through the
introduction of improved technology. We have not expended significant efforts
to date to realize revenues. Currently, we have ten full-time employees.
Accordingly, there can be no
4.
<PAGE>
assurance that our business plan can be successfully developed or that we
will realize any material revenues.
LIMITED OPERATING HISTORY; ANTICIPATED LOSSES; NO ASSURANCE OF PROFITABILITY
i5ive, our wholly-owned subsidiary through which we conduct our
Internet operations, was founded in April 1996 and has had no material
revenues to date. Accordingly, our current business plans and prospects are
not able to be evaluated on the basis of our operating history. Our business
plans and prospects must be considered in light of the risks, expenses and
problems frequently encountered by companies in the early stages of
development. This must be considered, particularly as to companies entering
new and rapidly developing markets like the Internet. These risks include:
- The lack of broad acceptance of the community concept on the
Internet
- The possibility that the Internet will fail to achieve broad
acceptance as a commercial medium
- The lack of acceptance by consumers of e-commerce
- Our ability to attract visitors, or retain Members and
Contributing Editors
- Our inability to generate significant e-commerce-based revenues
from our eVendors and Members
- Risks associated with a new and unproven business concept
- Our ability to anticipate and adapt to a developing market
- The failure of our network infrastructure (including our server,
hardware and software) to efficiently handle our Internet traffic
- Changes in laws and taxes that adversely affect our business
- The possibility that we will be unable to manage effectively any
rapid expansion of our operations, including the amount and
timing of capital expenditures and other costs relating to any
expansion of our operations
- The introduction and development of different or more extensive
communities by direct and indirect competitors, including those
with greater financial, technical and marketing resources
- Our inability to maintain and increase levels of traffic on our
Website
- Our inability to attract, retain and motivate qualified
personnel, technical difficulties, system downtime or Internet
brownouts
- The amount and timing of operating costs and capital expenditures
relating to development of our business, operations and
infrastructure, and
- General economic conditions.
5.
<PAGE>
To address these risks, we must, among other things:
- Attract visitors and retain Members and Contributing Editors
- Attract and retain a significant number of e-commerce vendors
(eVendors)
- Respond to competitive developments, form and maintain
relationships with strategic partners
- Attract and respond to competitive developments
- Retain and motivate qualified personnel, develop and upgrade our
technologies and commercialize our services incorporating such
technologies, and
- Be successful in attracting additional substantial capital at the
times, in the amounts and on the terms required.
There can be no assurance that we will be successful in addressing
these risks. Any failure to do so could have a material adverse effect on our
business, results of operations and financial condition. Because of the
foregoing factors, our quarterly net revenue and operating results are
difficult to forecast. Consequently, we believe that period to period
comparisons of our operating results will not necessarily be meaningful and
should not be relied upon as an indication of our future performance. It is
likely that in some future quarter or quarters our operating results may fall
below the expectations of securities analysts and investors. In such event,
the trading price of our Common Stock would likely be materially and
adversely affected.
UNPROVEN BUSINESS; DEPENDENCE ON MEMBERS
The success of our business depends upon our ability to expand upon
and develop our community-based platform of Internet access and to generate
multiple revenue streams. Currently, we have no source of material revenues.
The potential success of our business concept is unproven, and, to be
successful, we must, among other things, develop and market concepts that
achieve broad market acceptance by our Members and Internet users. We are and
will be substantially dependent upon our Member-generated content, the
promotional efforts of our Members, the acceptance by our visitors and
Members of marketing and other promotional programs of third parties and us,
and our ability and the ability of our Contributing Editors to attract Web
users to our site and to reduce the demands on our personnel. Our business
concept has existed for only a limited period of time. As a result, it is
relatively unproven.
There can be no assurance that our Member-generated content or the
promotional efforts of our Members will continue to attract users to our
Website. There can also be no assurance that our Members and Contributing
Editors will continue to devote time voluntarily to improving our community.
Given the fact that we provide free disk space to our Members and we support
the involvement of our Contributing Editors, third parties may attempt to
hold us responsible for our Contributing Editors' content and/or any of their
actions or omissions. There also can be no assurance that our business,
results of operations and financial condition would not be materially and
adversely affected if a
6.
<PAGE>
substantial number of Members or Contributing Editors became dissatisfied
with our services or our intention to commercialize those services or that
the Contributing Editors become dissatisfied with the amounts of compensation
we pay to them.
Moreover, considering the modest level of compensation paid to
Contributing Editors, there can be no assurance that consistent levels of
high quality Member generated content will be maintained. These levels of
compensation may hinder our efforts in the future to attract Contributing
Editors. Further, there can be no assurance that our community on the
Internet or our services will achieve broad market acceptance. Accordingly,
no assurance can be given that our business will be successful or that we can
sustain revenue growth or generate significant profits.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The report of our independent auditors on their audit of our
financial statements as of December 31, 1998 contains an explanatory
paragraph that describes an uncertainty as to our ability to continue as a
going concern due to our recurring losses and, as of the date of their
report, the lack of liquid resources. At December 31, 1998, we did not have
available to us the funds necessary to meet our anticipated capital needs.
However, through April 13, 1999, we realized gross proceeds of $5.0 million
from a private placement of our securities. We believe these funds will be
sufficient to meet our anticipated needs for working capital and capital
expenditures for at least the next 12 months. We may seek to raise additional
funds in order to fund more aggressive promotions and more rapid expansion,
to develop newer or enhanced services, to respond to competitive pressures or
to acquire complementary businesses, technologies or services.
There can be no assurance that any additional financing will be
available to us on favorable terms, or at all. If adequate funds are not
available or not available on acceptable terms, we may not be able to fund
our expansion, promote our e-commerce as we desire, or, develop or enhance
services or respond to competitive pressures. Any such inability could have a
material adverse effect on our business, results of operations and financial
condition. Additional funds raised through the issuance of equity or
convertible debt securities, will result in reducing the percentage ownership
of our stockholders and, our stockholders may experience additional dilution
and such securities may have rights, preferences or privileges senior to
those of the rights of our Common Stock.
As a result of our limited Internet operating history, we have
limited meaningful historical financial data upon which our planned operating
expenses can be based. Accordingly, our anticipated expense levels in the
future are based in part on our expectations as to future revenue from
proposed e-commerce revenue-sharing arrangements, and anticipated growth in
visitor traffic and in membership and will become, to a large extent, fixed.
Revenues and operating results generally will depend on the volume of, timing
of and ability to complete transactions, which are difficult to forecast.
7.
<PAGE>
In addition, there can be no assurance that we will be able to
accurately predict our net revenue, particularly in light of the unproven
manner in which we intend to derive our Internet revenue, the intense
competition for the sale of products and services on the Web, revenue-sharing
opportunities, our limited operating history and the uncertainty as to the
broad acceptance of the Web as an e-commerce medium. We may be unable to
adjust our spending in a timely manner to compensate for disappointing
results of our marketing efforts and efforts to develop Internet revenue, any
unexpected revenue shortfall or other unanticipated changes in the e-commerce
industry. Our failure to accurately make such predictions or adjustments in
our spending would have a material adverse effect on our business, results of
operations and financial condition.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY; UNPREDICTABILITY OF
FUTURE NET REVENUE
We expect our operating results to fluctuate significantly in the
future as a result of a variety of factors, many of which are outside of our
control. These factors include:
- The demand for the products and services we intend to market
through our Web site
- Our Members' acceptance of e-commerce on the Web site
- The level of traffic on our Suite101.com site
- The amount and timing of capital expenditures and other costs
relating to the expansion of our operations
- The introduction of new or enhanced services by us or our
competitors
- The timing and number of new hires, the availability of
desirable products and services for sale through our Web site
- Our loss of a key strategic or marketing relationship
- Changes in our marketing policy or those of our competitors
- The mix of products and services marketed by our eVendors
- Engineering or development fees that may be paid in connection
with us adding new Web site development and publishing tools
- Technical difficulties with our Suite101.com site
- General economic conditions, and
- Economic conditions specific to the Internet or all or a portion
of the technology market.
As a strategic response to changes in the competitive environment,
we may from time to time make certain pricing, service or marketing decisions
or business combinations that could have a material adverse effect on our
business, results of operations and financial condition. We expect to
experience seasonality in our business, with user traffic on our Suite101.com
site potentially being lower during the summer and year-end vacation and
holiday periods when overall usage of the Web is lower. Because
8.
<PAGE>
Web-based e-commerce is an emerging market, additional seasonal and other
patterns may develop in the future as the market matures. Any seasonality is
likely to cause quarterly fluctuations in our operating results. There can be
no assurance that such patterns will not have a material adverse effect on
our business, results of operations and financial condition.
MANAGEMENT OF GROWTH AND RELATIONSHIPS; BRIEF TENURE OF MANAGEMENT;
DEPENDENCE ON KEY PERSONNEL
In developing our business plan, we expect to be required to
establish and manage multiple relationships with various strategic and
eVendors, distributors, providers of services, technology licensors, Members,
marketers and other third parties. To date, only a limited number of such
relationships have been established. These requirements to enter into these
relationships will be exacerbated in the event of our material growth or in
the number of third party relationships, and there can be no assurance that
our systems, procedures or controls will be adequate to enable us to
establish and enter into these relationships, to support any substantial
growth in our operations or that our management will be able to implement or
manage any growth effectively.
To effectively manage growth, we must establish, implement and
improve operational, financial and management information systems and expand,
train and manage our employee base. Our development is and will continue to
be substantially dependent on the abilities and performance of our executive
officers and other key employees. The loss of the services of any of our
executive officers or other key employees could have a material adverse
effect on our prospects, business development, and results of operations and
financial condition. Competition for senior management, experienced sales and
marketing personnel, qualified Web engineers and other employees is and is
expected to continue to be intense. There can be no assurance that we will be
successful in attracting and retaining such personnel. There can be no
assurance that we may not experience difficulty from time to time in hiring
and retaining the personnel necessary to support the growth of our business.
Our failure to successfully manage our personnel requirements would have a
material adverse effect on our business, results of operations and financial
condition.
INTENSE COMPETITION
The market for community based e-commerce on the Internet is new and
rapidly evolving. Competition for visitors, Members and Contributing Editors,
strategic partners and eVendors is new, rapidly evolving, and intense. This
competition is expected to increase significantly in the future. Barriers to
entry into the Internet business are relatively insubstantial. We believe
that the principal competitive factors for companies seeking to create
community on the Internet are content, critical mass, functionality, brand
recognition, Member affinity and loyalty, broad demographic focus and open
access for visitors. Other companies who are primarily focused on creating
Web-based community on the Internet are About.com, Geocities, Inc.,
iVillage.com, Inc.Tripod, Inc., a subsidiary of Lycos, Inc., Angelfire
Communications, Xoom.com, Inc. and
9.
<PAGE>
theglobe.com. Each of these competitors is significantly larger than us and
more well-established and well-known in the Internet industry and with
greater capital resources.
We will likely also face competition in the future from Web
directories, search engines, shareware archives, content sites, commercial
online service providers ("OSPs"), sites maintained by Internet service
providers ("ISPs") and other entities that attempt to or establish
communities on the Internet by developing their own community or acquiring
one of our competitors. In addition, we could face competition in the future
from traditional media companies, a number of which, including Disney, CBS
and NBC have recently made significant acquisitions of or investments in
Internet companies. Further, there can be no assurance that our competitors
and potential competitors will not develop communities that are equal or
superior to ours or that achieve greater market acceptance than our community.
We also compete for visitors and Members with many Internet content
providers and ISPs, including Web directories, search engines, shareware
archives, content sites, commercial online services and sites maintained by
Internet service provides, as well as thousands of Internet sites operated by
individuals and government and educational institutions. These competitors
include free information, search and content sites or services, such as
American Online, Inc. ("AOL"), CNET, Inc. ("CNET"), CNN/Time Warner, Inc.
("CNN/Time Warner"), Excite, Inc. ("Excite"), Infoseek Corporation
("Infoseek"), Lycos, Inc. ("Lycos"), Netscape Communications Corporation
("Netscape"), Microsoft Corporation ("Microsoft"), About.com Inc., and Yahoo!
Inc. ("Yahoo!"). We also compete with traditional forms of media, such as
newspapers, magazines, radio and television. We believe that the principal
competitive factors in attracting strategic partners and other sources of
e-commerce business include the amount of traffic on our Web site, name
recognition, customer service, the demographics of our Members and viewers,
our ability to offer targeted audiences and the overall cost-effectiveness of
the e-commerce opportunities we offer. We believe that the number of Internet
companies relying on Web-based e-commerce and advertising revenue will
increase substantially in the future. Accordingly, we will likely face
increased competition, resulting in increased pressures on our revenue
sharing percentages which could, in turn, have a material adverse effect on
our business, results of operations and financial condition.
Substantially all of our existing and potential competitors,
including Web directories and search engines and large traditional media
companies, have longer operating histories in the Web market, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources. Such competitors are able to undertake
more extensive marketing campaigns for their brands and services, adopt more
aggressive advertising pricing policies and make more attractive offers to
potential employees, visitors, Members, distribution partners, eVendors,
marketers and third party content providers.
There can be no assurance that Internet content providers and ISPs,
including Web directories, search engines, shareware archives, sites that
offer professional editorial
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content, commercial online services and sites maintained by ISPs will not be
perceived by potential strategic partners, eVendors and marketers as having
more desirable Web sites. In addition, many persons with whom we would seek
to enter into a strategic relationship have already established collaborative
relationships with our competitors or potential competitors, and other
high-traffic Web sites. Accordingly, there can be no assurance that we will
be able to grow our visitor and Membership base, traffic levels and customer
base or retain our current Members, traffic levels or customers, or that
competitors will not experience greater growth in traffic than we experience
as a result of such relationships which could have the effect of making their
Web sites more attractive.
In addition, for these reasons, our strategic partners may sever or
elect not to renew their agreements with us. There can also be no assurance
that we will be able to compete successfully in the Internet or that
competition will not have a material adverse effect on our business, results
of operations and financial condition.
GROWTH WILL DEPEND ON OUR ABILITY TO DEVELOP OUR BRAND
We believe that establishing broader brand recognition of the
Suite101.com brand is critical to our future success. Accordingly, we intend
to launch a brand-enhancing campaign shortly that will include online
advertising, promotional programs targeted and Members and visitors, and
public relations activities. We intend to incur significant expenditures in
our marketing efforts. If our brand building strategy is unsuccessful, these
expenses may never be recovered and we may be unable to increase our future
revenues.
RISK OF RELIANCE ON INTERNALLY AND EXTERNALLY DEVELOPED SYSTEMS
We use and intend to use an internally developed system for our Web
site. This system has not been fully developed. A key element of our strategy
is to generate a higher volume of traffic to our Web site. Our inability to
further develop and modify this system as necessary to accommodate increased
levels of traffic on our Web site may cause unanticipated system disruptions,
slower response times, degradation in Member satisfaction and service leading
to a possible loss of Members and Contributing Editors, and delays in
reporting accurate financial information. Any of these events could have a
material adverse effect on our business, results of operations and financial
condition.
Furthermore, to expand our operations we will introduce new or
complementary enhancements on the Web site which may require us to outsource
development where we may have little control over the speed and quality of
the development. Any decline in the speed or quality of the development could
adversely effect our business, results of operations and financial condition.
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RISKS WE FACE ARISING OUT OF THE NATURE OF THE INTERNET
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
We are not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally. There are
currently few laws or regulations directly applicable to access to or
commerce on the Internet. However, due to the increasing popularity and use
of the Internet, a number of legislative and regulatory proposals are under
consideration by U.S. and Canadian federal, state, provincial, local and
foreign governmental organizations. It is possible that a number of laws or
regulations may be adopted with respect to the Internet relating to such
issues as user privacy, user screening to prevent inappropriate uses of the
Internet by, for example, minors or convicted criminals, taxation,
infringement, pricing, content regulation, quality of products and services
and intellectual property ownership and infringement. The adoption of any
such laws or regulations may decrease the growth in the use of the Internet,
which could, in turn, decrease the demand for our community, increase our
cost of doing business, or otherwise have a material adverse effect on our
business, results of operations and financial condition.
Moreover, the applicability to the Internet of existing laws
governing issues such as property ownership, copyright, trademark, trade
secret, obscenity, libel and personal privacy is uncertain and developing.
Any new legislation or regulation, or application or interpretation of
existing laws, could have a material adverse effect on our business, results
of operations and financial condition. There can be no assurance that any
legislation will not be enacted in the future that could expose us to
substantial liability. Legislation could also dampen the growth in the use of
the Web generally and decrease the acceptance of the Web as a communications
and commercial medium. The result could, thereby, have a material adverse
effect on our business, results of operations and financial condition.
It is also possible that our use of "cookies" to track demographic
information and user preferences and to target advertising may become subject
to laws limiting or prohibiting their use. A "cookie" is a bit of information
keyed to a specific server, file pathway or directory location that is stored
on a user's hard drive, possibly without the user's knowledge. A user is
generally able to remove cookies. Germany, for example, has imposed laws
limiting the use of cookies, and a number of Internet commentators, advocates
and governmental bodies in the United States and other countries have urged
the passage of laws limiting or abolishing the use of cookies. Limitations on
or elimination of our use of cookies could limit our effectiveness in
targeting of advertisements, which could have a material adverse effect on
our business, results of operations and financial condition.
In addition, a number of legislative proposals have been made at the
U.S. and Canadian federal, state, provincial and local level that would
impose additional taxes on the sale of goods and services over the Internet
and certain jurisdictions have taken measures to tax Internet-related
activities. The U.S. Congress has considered a number
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of versions of legislation which would place a moratorium of a number of
years on any new taxation of Internet commerce. There can be no assurance
that any such legislation will be adopted by the U.S. Congress. Moreover, it
is likely that, once such moratorium is lifted, some type of U.S. federal
and/or state taxes will be imposed upon Internet commerce, and there can be
no assurance that such legislation or other attempts at regulating commerce
over the Internet will not substantially impair the growth of commerce on the
Internet and. As a result, our opportunity to derive financial benefit from
these activities may be adversely affected.
In addition to the foregoing areas of recent legislative activities,
several telecommunications carriers are currently seeking to have
telecommunications over the Web regulated by the U.S. Federal Communications
Commission (the "FCC") in the same manner as other telecommunications
services. In addition, because the growing popularity and use of the Web have
burdened the existing telecommunications infrastructure and many areas with
high Web use have begun to experience interruptions in phone service, local
telephone carriers have petitioned the FCC to regulate ISPs and OSPs in a
manner similar to long distance telephone carriers and to impose access fees
on the ISPs and OSPs. If either of these petitions is granted, or the relief
sought is otherwise granted, the costs of communicating on the Web could
increase substantially, potentially slowing growth in use of the Web. This
could, in turn, decrease demand for our services or increase our cost of
doing business.
Due to the global nature of the Web, it is possible that, although
our transmissions over the Internet originate primarily in British Columbia,
Canada, the governments of various states in the United States and foreign
countries might attempt to regulate our transmissions or prosecute us for
violations of their laws. There can be no assurance that violations of local
laws will not be alleged or charged by state or foreign governments, that we
might not unintentionally violate such laws or that such laws will not be
modified, or new laws enacted, in the future. Any of the foregoing
developments could have a material adverse effect on our business, results of
operations and financial condition.
In addition, as our services are available over the Internet in
multiple foreign countries, provinces, states and other jurisdictions, such
jurisdictions may claim that we are required to qualify to do business as a
foreign corporation in each of those jurisdictions. We are qualified to do
business only in British Columbia, and our failure to qualify as a foreign
corporation in a jurisdiction where we are required to do so could subject us
to taxes and penalties and could result in our inability to enforce contracts
in such jurisdictions. Any such new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could have a material
adverse effect on our business, results of operations and financial condition.
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LIABILITY FOR INFORMATION RETRIEVED FROM THE WEB; ABSENCE OF LIABILITY
INSURANCE
Because materials may be downloaded by Members and other users of
our Web site and subsequently distributed to others, there is a potential
that claims will be made against us for defamation, negligence, copyright or
trademark infringement, personal injury or other theories based on the
nature, content, publication and distribution of these materials. Such claims
have been brought, and sometimes successfully pressed, against OSPs for
example, in the past. We have received inquiries from time to time from third
parties regarding such matters, all of which have been resolved to date
without any payments or other material adverse effect on us.
In addition, the increased attention focused upon liability issues
as a result of these lawsuits and legislative proposals could impact the
overall growth of Internet use. We could also be exposed to liability with
respect to the offering of third party content that may be accessible through
our Web site, or through content and materials that may be posted by Members
on their personal Web sites or chat rooms, or on-line discussions offered by
us. Such claims might include, among others, that by directly or indirectly
hosting the personal Web sites of third parties, we are liable for copyright
or trademark infringement, or other wrongful actions by such third parties
through such Web sites.
It is also possible that if any third party content information
provided on our web site contains errors, third parties could make claims
against us for losses incurred in reliance on such information. Even to the
extent that such claims do not result in liability to us, we could incur
significant costs in investigating and defending against such claims. The
imposition on us of potential liability for information carried on or
disseminated through our systems could require us to implement measures to
reduce our exposure to such liability, which may require the expenditure of
substantial resources and limit the attractiveness of our services to Members
and visitors.
We also intend to enter into agreements with eVendors and sponsors
whereby it is intended that we will be entitled to receive a share of any
revenue from the purchase of goods and services through direct links from our
Web site. Such arrangements may expose us to additional legal risks and
uncertainties, including potential liabilities to consumers of such products
and services by virtue of our involvement in providing access to such
products or services, even if we do not provide such products or services.
While our agreements with these parties are intended to provide that we will
be indemnified against such liabilities, there can be no assurance that such
indemnification, if available, will be adequate.
Currently, we do not carry general liability insurance intended to
protect us from any liability arising out of the foregoing. In any event,
however, insurance may not cover all potential claims to which we are exposed
or may not be adequate to indemnify us for all liability that may be imposed.
Any imposition of liability that is not covered by insurance or is in excess
of our insurance coverage would have a material adverse effect on our
business, results of operations and financial condition. In addition, the
increased attention focused upon liability issues as a result of these
lawsuits and legislative proposals could impact the overall growth of
Internet use.
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SECURITY RISKS
There can be no assurance that experienced programmers or "hackers"
may not from time to time attempt to penetrate our network security. To date,
none of this activity has occurred. However, in the event any such attempts
should occur and be successful, such a penetration may have a material
adverse effect on our business, results of operations or financial condition.
A party who is able to penetrate our network security could misappropriate
proprietary information or cause interruptions in our Web site.
In addition, in offering certain payment services, we could become
increasingly reliant on encryption and authentication technology licensed
from third parties to provide the security and authentication necessary to
effect secure transmission of confidential information, such as customer
credit card numbers. We may be required to expend significant capital and
resources to protect against the threat of such security, encryption and
authentication technology breaches or to alleviate problems cause by such
breaches.
Concerns over the security of Internet transactions and the privacy
of users may also inhibit the growth of the Internet generally, particularly
as a means of conducting commercial transactions. Security breaches or the
inadvertent transmission of computer viruses could expose us to a risk of
loss or litigation and possible liability. There can be no assurance that
contractual provisions attempting to limit our liability in such areas will
be successful or enforceable, or that other parties will accept such
contractual provisions as part of our agreements, which could have a material
adverse effect on our business, results of operations and financial condition.
RELIANCE ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We regard our technology as proprietary and attempt to protect it by
relying on trademark, service mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods. We
currently have no patents or patents pending and do not anticipate that
patents will become a significant part of our intellectual property in the
foreseeable future. We also generally enter into confidentiality or license
agreements with our employees and consultants, and generally control access
to and distribution of our documentation and other proprietary information.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our proprietary information without authorization or
to develop similar technology independently.
We pursue the registration of our trademarks and service marks in
the United States and Canada and internationally, and intend to apply for the
registration in the United States and Canada for a number of our service
marks There can be no assurance that such registration will be granted or, if
granted, that we will derive any material commercial benefit from such
registration. Effective trademark, service mark, copyright and trade secret
protection may not be available in every country in which our services are
distributed or made available through the Internet, and policing unauthorized
use of our proprietary information is difficult.
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Legal standards relating to the validity, enforceability and scope
of protection of certain proprietary rights in Internet-related businesses
are uncertain and still evolving. No assurance can be given as to the future
viability or value of any of our proprietary rights or other companies within
this market. There can be no assurance that the steps taken by us will
prevent misappropriation or infringement of our proprietary information. Any
such infringement or misappropriation, should it occur, could have a material
adverse effect on our business, results of operations and financial condition.
In addition, litigation may be necessary in the future to enforce
our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation might result in substantial costs and diversion of resources and
management attention and could have a material adverse effect on our
business, results of operations and financial condition and we may not have
available the resources necessary to pursue such litigation.
Furthermore, there can be no assurance that our business activities
will not infringe upon the proprietary rights of others, or that other
parties will not assert infringement claims against us. It can be expected
that we will be subjected to claims in the ordinary course of our business,
including claims of alleged infringement of the trademarks, service marks and
other intellectual property rights of third parties by us and the content
generated by its Members. Although such claims have not occurred to date,
such claims and any resultant litigation, should it occur, might subject us
to significant liability for damages and might result in invalidation of our
proprietary rights and even if not meritorious, could be time consuming and
expensive to defend and could result in the diversion of management time and
attention, any of which might have a material adverse effect on our business,
results of operations and financial condition.
We currently license from third parties certain technologies
incorporated into our Web site. As we continue to introduce new services that
incorporate new technologies, we may be required to license additional
technology from others. There can be no assurance that these third party
technology licenses will continue to be available to us on commercially
reasonable terms, if at all. Our inability to obtain any of these technology
licenses could result in delays or reductions in the introduction of new
services or could adversely affect the performance of our existing services
until equivalent technology could be identified, licensed and integrated.
DEPENDENCE ON CONTINUED GROWTH IN THE USE OF THE INTERNET; DEPENDENCE ON WEB
INFRASTRUCTURE
Our Company's future success is substantially dependent upon
continued growth in the use of the Internet and the Web in order to support
e-commerce development on our Web site and in the acceptance and volume of
e-commerce transactions on the Internet. There can be no assurance that the
number of Internet users will continue to grow or that e-commerce over the
Internet will become more widespread.
As is typical in the case of a new and rapidly evolving industry,
demand and market acceptance for recently introduced services are subject to
a high level of
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uncertainty. We cannot predict the extent to which consumers will be willing
to shift their purchasing habits from traditional retailers to online
retailers. The Internet may not prove to be a viable commercial marketplace
for a number of reasons, including lack of acceptable security technologies,
lack of access and ease of use, congestion of traffic, inconsistent quality
of service and lack of availability of cost-effective, high-speed service,
potentially inadequate development of the necessary infrastructure, excessive
governmental regulation, uncertainty regarding intellectual property
ownership or timely development and commercialization of performance
improvements, including high-speed modems.
The success of our Web site will depend in large part upon the
continued development of a Web infrastructure, such as a reliable network
backbone with the necessary speed, data capacity and security, and timely
development of complementary products, such as high-speed modems for
providing reliable Web access and services. Because global e-commerce and
online exchange of information on the Web and other similar open wide area
networks are new and evolving, it is difficult to predict with any assurance
whether the Web will support increasing use or will prove to be a viable
commercial marketplace.
The Web has experienced, and is expected to continue to experience,
significant growth in the number of users and the amount of content. To the
extent that the Web continues to experience increased numbers of users,
frequency of use or increased band width requirements of users, there can be
no assurance that the Web infrastructure will continue to be able to support
the demands placed on it by this continued growth or that the performance or
reliability of the Web will not be adversely affected by this continued
growth. In addition, the Web could lose its viability or effectiveness due to
delays and the development or adoption of new standards and protocols to
handle increased levels of activities or due to increased government
regulation.
There can be no assurance that the infrastructure or complementary
products or services necessary to make the Web a viable commercial
marketplace will be developed, or, if they are developed, that the Web will
achieve broad acceptance. If the necessary infrastructure standards,
protocols, or complementary products, services or facilities are not
developed, or if the Web does not become a viable commercial marketplace, our
business, results of operations and financial condition will be materially
and adversely affected. Even if such infrastructure, standards or protocols
or complementary products, services, or facilities are developed and the Web
becomes a viable commercial marketplace, there can be no assurance that we
will not be required to incur substantial expenditures in order to adapt our
services to changing Web technologies, which could have a material adverse
effect on our business, results of operations and financial condition.
SALES TAX COLLECTION
One or more states, provinces or countries may seek to impose sales
tax collection obligations on out-of-state or out-of-province or foreign
companies such as us which
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engage in online commerce. Any new operation or facilities in the United
States or Canada or elsewhere could subject shipments into such states or
provinces to state or provincial or foreign sales taxes. A successful
assertion by one or more states or provinces or any foreign country that we
should collect sales or other similar taxes on the sale of merchandise could
have a material adverse effect on our business, prospects, financial
condition and results of operations
OTHER RISKS WE FACE
CONTROL BY DIRECTORS, EXECUTIVE OFFICERS, NORTHFIELD CAPITAL CORPORATION AND
284085 BC LTD.
Three of our Directors and Northfield Capital Corporation, and their
respective affiliates, in the aggregate, beneficially own approximately
5,597,840 shares or 46.4% of our outstanding Common Stock. As a result, these
stockholders possess significant influence over us, giving them the ability,
among other things, to elect a majority of our Board of Directors and approve
significant corporate transactions. Such share ownership and control may also
have the effect of delaying or preventing a change in control of us, impeding
a merger, consolidation, takeover or other business combination involving us,
or discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of us which could have a material adverse effect
on the market price of our Common Stock.
YEAR 2000 COMPLIANCE
We are aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The "Year 2000
Problem" is pervasive and complex as virtually every computer operation will
be affected in some way by the rollover of the two-digit year value to 00.
The issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or fail. We are in
the process of working with our software vendors to ensure that the software
that we have licensed from third parties will operate properly in the year
2000 and beyond.
In addition, we are working with our external suppliers and service
providers to ensure that they and their systems will be able to support our
needs and, where necessary, inter-operate with our server and networking
hardware and software infrastructure in preparation for the year 2000.
Management does not anticipate that we will incur significant operating
expenses or be required to invest heavily in computer systems improvements to
be year 2000 compliant. However, significant uncertainty exists concerning
the potential costs and effects associated with any year 2000 compliance. Any
year 2000 compliance problems experienced by our customers, vendors or us
would
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have a material adverse effect on our business, results of operations and
financial condition.
NO ACTIVE PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK
PRICE
Prior to the closing of our transaction with i5ive, there was no
active public market for our Common Stock. Since December 30, 1998, our
Common Stock has been quoted on the OTC Bulletin Board. There can be no
assurance that an active trading market for our Common Stock will be
sustained or that the market price of our Common Stock will not decline based
upon market or other conditions. The market price may bear no relationship to
our revenues, earnings, assets or potential and may not be indicative of our
future business performance. The trading price of our Common Stock has been
and can be expected to be subject to wide fluctuations in response to
variations in our quarterly results of operations, the gain or loss of
significant strategic relationships, unanticipated delays in our development,
changes in estimates by analysts, announcements of technological innovations
or new solutions by us or our competitors, general conditions in the
technology and Internet sectors and in Internet-related industries, other
matters discussed elsewhere in this Prospectus and other events or factors,
many of which are beyond our control.
In addition, the stock market in general and the technology and
Internet sectors in particular have experienced extreme price and volume
fluctuations which have affected the market price for many companies in
industries similar or related to us and which have been unrelated to the
operating performance of these companies. These market fluctuations, as well
as general economic, political and market conditions, may have a material
adverse effect on the market price of our Common Stock.
In the past, following periods of volatility in the market price of
a company's securities, securities class action litigation has often been
instituted against such companies. Such litigation, if instituted, and
irrespective of the outcome of such litigation, could result in substantial
costs and a diversion of management's attention and resources and have a
material adverse effect on our business, results of operations and financial
condition.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of significant amounts of our Common Stock in the public
market or the perception that such sales will or could occur could materially
and adversely affect the market price of our Common Stock or the future
ability of the Company to raise capital through an offering of its equity
securities. We had, as of July 31, 1999, 12,061,288 shares of common stock
outstanding. Of such shares, 5,610,340 shares were held by Directors of the
Company, 284085 BC Ltd. and Northfield Capital Corporation. The 3,405,622
shares held by Northfield Capital Corporation and 284085 BC Ltd. are
"restricted securities" as such term is defined in Rule 144 under the
Securities Act. Restricted securities may be sold in the public market only
if registered or if they qualify
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for an exemption from registration under Rules 144, 144(k) or 701 promulgated
under the Securities Act. Approximately 4,450,948 shares of our Common Stock
are freely transferable under U.S. Federal securities laws.
In addition, the effectiveness under the Securities Act of the
registration statement of which this Prospectus is a part will enable the
offer and sale of the 3,000,000 shares (including 1,000,000 shares issuable
on exercise of warrants) sold in April 1999 in the private sale of our
securities. The sale of those shares or the perception that such sales will
or could occur could materially and adversely affect the market price for our
Common Stock.
We have filed a Form S-8 registration statement under the Securities
Act to register all shares of Common Stock issuable pursuant to outstanding
options and all shares of Common Stock reserved for issuance under our 1998
Stock Incentive Plan. Such registration statement became effective
immediately upon filing and the shares issuable on exercise of options
granted under the 1998 Stock Incentive Plan are covered by that registration
statement. Commencing December 4, 1999, the options granted under the 1998
Stock Incentive Plan begin to become exercisable and the shares issuable on
exercise eligible for sale,subject to Rule 144 limitations applicable to
affiliates. On that date, an aggregate of 278,207 shares will become eligible
for sale on exercise of the options. Thereafter on various dates commencing
on February 23, 2000 through April 27, 2002, an additional aggregate of
164,902 shares will become eligible for sale on exercise of options. As of
June 30, 1999, there were outstanding five-year options to purchase up to
443,109 shares of Common Stock: Of these options, 333,109 are exercisable at
a price of $1.50 per share and the balance are exercisable at prices ranging
from $3.34 to $6.38.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1996
With the exception of historical matters, the matters discussed in
this prospectus are "forward-looking statements" as defined under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended, that involve risks and uncertainties. Forward-looking statements
made herein include, but are not limited to, the statements in this
prospectus regarding our plans and objectives of management com for our
future operations, including plans or objectives relating to our products or
services as well as other financial items. These statements appear, among
other places, under the following captions: "Prospectus Summary - About
Suite101.com, Inc.", "Risk Factors", "Dividend Policy", "Management's
Discussion and Analysis of Financial Condition or Plan of Operation", and
"Business of the Company". Foreward looking statements made in this
prospectus include the assumptions made by management as to the future growth
and business direction of the Internet, e-commerce through the facilities of
the Internet and the role of Communities of Interest on the Internet. They
also include our beliefs as to the importance of privacy to Members, their
willingness to divulge certain demographic and psychographic information
regarding themselves, to participate in our proposed marketing programs and
plans, as well as our plans to improve the capabilities
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of our servers and facilities. We cannot assure you that our assumptions in
this regard or our views as to the commercial viability of our business plans
discussed herein will prove to be accurate. Likewise, we cannot assure you
that we will be successful in growing our membership base as we plan or
achieving any commercial advantage relative to other Internet companies. Our
ability to realize revenues from the business plans discussed herein cannot
be assured. If our assumptions are incorrect or our membership growth plans
or plans to realize revenues fail to materialize, we may be unsuccessful in
developing as a viable business enterprise. Under such circumstance your
investment will be in jeopardy. Our inability to meet our goals and
objectives or the consequences to us from adverse developments in general
economic or capital market conditions could have a material adverse effect on
us. We caution you that the various risk factors accompany those forward
looking statements and are described, among other places, under the caption
"Risk Factors" herein, beginning on page six. They are also described in our
Annual Report on Form 10-KSB for the year ended December 31, 1998, beginning
on page 17, in our Quarterly Reports on Form 10-QSB, and our Current Reports
on Form 8-K. These risk factors could cause our operating results, financial
condition and ability to fulfill our plans to differ materially from those
expressed in any forward-looking statements made in this prospectus and could
adversely affect our financial condition and our ability to pursue our
business strategy and plans.
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USE OF PROCEEDS
This Prospectus relates solely to the securities being offered and
sold for the account of the Selling Securityholders. The Company will not
receive any of the proceeds from the sale of the securities being offered by
the Selling Securityholders but will pay all expenses related to the
registration of the securities. The proceeds, if any, received from the
exercise of any Warrants included among the Securities will be used for
general corporate purposes. If all the Warrants were exercised at their
current exercise prices, the Company would receive gross proceeds $4,500,000.
There can be no assurance that any of such Warrants will be exercised. See
"Selling Securityholders."
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PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been quoted on the OTC Bulletin Board
since December 30, 1998 under the symbol BOWG. The following table sets forth
the high and low bid quotations on the OTC Bulletin Board for the Company's
Common Stock for the period January 1, 1999 through June 30 1999. Prior to
December 30, 1998 there was no active market for the Company's Common Stock.
<TABLE>
<CAPTION>
BID
-------------------------------------
CALENDAR QUARTER HIGH LOW
------------------------------------------------------------------------
<S> <C> <C>
1998: Fourth Quarter $5.00 $1.88
1999: First Quarter $7.88 $2.00
1999: Second Quarter $11.31 $3.25
1999: Third Quarter (through $4.38 $1.56
August 9)
</TABLE>
The foregoing amounts, represent inter-dealer quotations without
adjustment for retail markups, markdowns or commissions and do not represent
the prices of actual transactions. On August 9, 1999, the closing bid
quotation for the Common Stock, as reported on the OTC Bulletin Board was
$1.56.
As of June 30, 1999, Suite101 had approximately 646 shareholders of
record and believes that it has in excess of 500 beneficial holders.
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DIVIDEND POLICY
We do not intend to pay any dividends on our Common Stock for the
foreseeable future. Any determination as to the payment of dividends on our
Common Stock in the future will be made by our Board of Directors and will
depend on a number of factors, including future earnings, capital
requirements, financial condition and future prospects as well as such other
factors as our Board of Directors may deem relevant.
CAPITALIZATION
The following table sets forth the cash and cash equivalents and the
capitalization of the Company at June 30, 1999:
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-------------------
<S> <C>
Cash $4,057,447
- ----------------------------------------------------------------------------------------------
Capital Stock
Authorized: 40,000,000 common shares, par value 12,062
$0.001 per share, issued 12,061,288 common shares
Additional paid-in capital 5,220,510
Deficit (1,245,566)
Equity adjustment from foreign currency translation 35,125
Total stockholders' equity 4,022,131
-----------
Total liabilities and stockholders equity $4,196,535
</TABLE>
24.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
GENERAL
The following discussion and analysis of our financial condition or
plan of operation should be read in conjunction with, and is qualified in its
entirety by, the more detailed information including our Financial Statements
and the related Notes appearing elsewhere in this Prospectus. This Prospectus
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from the results discussed in the
forward-looking statements. Factors that may cause or contribute to such
differences include those discussed in "Risk Factors," as well as those
discussed elsewhere in this Prospectus.
OVERVIEW
We are an Internet company engaged in the creation, operation and
maintenance of a World Wide Web based community, known as Suite101.com, for
Internet users to express themselves, share ideas, interests and expertise, and
publish content accessible to other users with common interests. Our directory,
the "Best-of-Web Guide" was started in 1996. We believe we were one of the first
Internetsites to engage people rather than software (search engines) to find
information on the Internet. At the end of July 1999, we have over 700 Web
guides or "Contributing Editors" searching the Internet for the best resources
in 714 topic areas.
Since 1996, our Contributing Editors, who are typically enthusiasts
with a passion for a particular topic, have created a topically organized
directory with close to 21,000 hand-picked and personally reviewed links. In
addition to compiling the directory, our Contributing Editors have also written
over 15,375 searchable, archived articles and managed 15,131 discussions in 714
topics ranging from hitch-hiking, through romance, to gardening.
Our revenue model will concentrate on electronic commerce
("e-commerce"). Using a consensual marketing model, Suite101.com will offer
participating enterprises ("eVendors" access to psycho-demographic
information on suite101 Members who have consented to participate in the
program. eVendors will then be asked to pay a fee to market their products or
services directly to the participating Member. Revenue from these fees will
be shared between suite101.com and its Members. Suite101.com intends to
receive additional revenues by participating in completed transactions.
We intend to realize revenue by sharing in the proceeds of
e-commerce marketing and transaction fees. The marketing effort is expected
to be a collaborative effort: our company, our Members and our eVendors. Our
marketing plan is founded on the Member's consent, our role as custodian of
the Members privacy and the eVendor's commitment to deliver competitive,
quality goods and services on time. We currently intend to limit our
involvement to facilitating the introduction of the buyer to the seller, the
seller to the buyer. As custodian of the Members' psycho-demographic
information in
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our Member-centric database, we intend to offer its eVendors a unique
opportunity to market one-to-one to a very loyal and focused community.
Unlike traditional marketing campaigns, which typically use print
(newspapers, magazines and direct mail) or the electronic media (radio and
television), our campaigns will direct marketing material to the Member's
personal "HomePage" or personal Web site, significantly reducing the cost of
reaching the consumer. The interactive nature of the Web and the ability to
display attractive graphics and to facilitate Members "clicking" through
directly to the eVendor's site, will enable us to present such offerings 24
hours a day, 7 days a week in a complete, dynamic and timely manner. The
Internet's interactive properties and our dynamic software are, we believe,
compelling reasons why consenting Members and eVendors will utilize our
e-commerce program. Products and services can be marketed and the transaction
can be completed online quickly and easily. This capability offers our
Members electronic one-stop-shopping and our eVendors one-to-one contact with
the consumer, our Member.
As we grow, our operating expenses will increase in connection with
our visitor and Member generation, brand marketing and eVendors promotional
efforts, our increased funding of site development, technology and operating
infrastructure, and the increased general and administrative staff needed to
support our growth. We anticipate that we will incur net losses for the
foreseeable future. The extent of these losses will be contingent, in part,
on the amount and rates of growth in our net revenue from electronic commerce
(e-commerce). We expect our operating expenses to increase significantly,
especially in the areas of sales and marketing and brand promotion. We
believe that period-to-period comparisons of our Member recruitment results
are not meaningful and that the results for any period should not be relied
upon as an indication of future performance. There can be no assurance that
our operating losses will not increase in the future or that we will ever
achieve or sustain profitability.
To date, we have entered into a limited number of license
arrangements and strategic alliances in order to build our communities,
provide community-specific content, generate additional traffic, and increase
membership.
We intend to continue to increase reach and membership and to seek
additional strategic alliances with content and distribution partners,
including alliances that create co-branded sites through which we can market
our services.
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STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
During the six months ended June 30, 1999, the Company's sales were
$842 compared with sales of $9,673 during the 1998 period. Sales in both
periods were primarily attributable to software licensing revenues of i5ive.
General and administrative expenses were $482,772 in the six months
ended June 30, 1999 compared with $150,737 during the six months ended June
30, 1998. The increase was primarily the result of the increase in the number
of the Company's Contributing Editors and the increased scale of the
Company's operations in 1999. Marketing expenses were $41,490 during the six
months ended June 30, 1999 compared with $-0- during 1998. This was the
consequence of the initiation of these activities during the 1999 period.
The Company's Loss From Operations was $523,420 in 1999 compared
with $141,064 in 1998. Other income was $43,313 in 1999 compared with $2,486
in 1998. The increase was the result of interest earned on bank balances.
Loss on disposal of leasehold improvements in 1999 of $8,130 was the result
of relocating the Company's offices.
The increase in the Company's Net Loss in 1999 compared with 1998
was the result of the increase in operating expenses.
YEAR ENDED DECEMBER 31, 1998 AND 1997
During the year ended December 31, 1998, the Company's sales were
$18,769 compared with sales of $6,751 during 1997. The decrease resulted from
the sale in March 1997 of the Company's medical products business assets
which left the Company without any operating revenues. Sales in 1998 were
primarily attributable to software licensing revenues of i5ive.
Operating expenses also increased during the year ended December 31,
1998 to $396,057 from $258,255 during the year ended December 31, 1997.
Expenses in 1998 primarily related to general and administrative expenses of
i5ive resulting from increased Contributing Editor recruitment. The Company
pays each of its Contributing Editors between $15 and $28 per month.
The loss from operations for the year ended December 31, 1998 was
$373,767 compared with $247,881 during 1997.
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LIQUIDITY AND CAPITAL RESOURCES
The report of our independent auditors on their audit of our
financial statements as of December 31, 1998 contains an explanatory
paragraph that describes an uncertainty as to our ability to continue as a
going concern due to our recurring losses and, as of the date of their
report, the lack of liquid resources. At December 31, 1998, we did not have
available the funds necessary to meet our anticipated capital needs. However,
thereafter through April 13, 1999, we realized gross proceeds of $5,000,000
from a private placement of our securities. In the transaction, we sold
1,000,000 units of securities, each unit consisting of two shares of Common
Stock and one Common Stock Purchase Warrant. The warrants are exercisable
through February 29, 2000 at a price of $4.50 per share. We believe these
proceeds will be sufficient to meet our anticipated needs for working capital
and capital expenditures for at least the next 12 months.
We may seek to raise additional funds in order to fund more
aggressive promotions and more rapid expansion, to develop newer or enhanced
services, to respond to competitive pressures or to acquire complementary
businesses, technologies or services. There can be no assurance that any
additional financing will be available on terms favorable to us, or at all.
If adequate funds are not available or not available on acceptable terms, we
may not be able to fund our expansion, promote our e-commerce as we desire,
or, develop or enhance services or respond to competitive pressures. Any such
inability could have a material adverse effect on our business, results of
operations and financial condition. Additional funds raised through the
issuance of equity or convertible debt securities, will result in reducing
the percentage ownership of our stockholders and, stockholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the rights of our Common Stock.
As a result of our limited operating history, we have limited
meaningful historical financial data upon which to base planned operating
expenses. Accordingly, our anticipated expense levels in the future are based
in part on our expectations as to future revenue from proposed e-commerce
revenue-sharing arrangements, and anticipated growth in visitor traffic and
membership. We expect that these expense levels will become, to a large
extent, fixed. Revenues and operating results generally will depend on the
volume of, timing of and ability to complete transactions, which are
difficult to forecast. In addition, there can be no assurance that we will be
able to accurately predict our net revenue, particularly in light of the
intense competition for the sale of products and services on the Web,
revenue-sharing opportunities, our limited operating history and the
uncertainty as to the broad acceptance of the Web as an e-commerce medium. We
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall or other unanticipated changes in the e-commerce
industry. Any failure by us to accurately make such predictions would have a
material adverse effect on our business, results of operations and financial
condition.
From its inception in April 1996 through June 30, 1998, Northfield
Capital Corporation and 284085 BC Ltd., our principal shareholders, advanced
to us the sums of
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$270,156 and $197,098, respectively, used for general corporate purposes and
working capital. Such amounts accrued interest at the rate of 6.5% per annum.
At the closing of the sale of i5ive shares to us, Northfield Capital
Corporation and 284085 BC Ltd. converted these advances and accrued interest
into an aggregate of 414,975 and 302,753 shares, respectively, of our Common
Stock. Such shares of i5ive were exchanged for 1,969,057 and 1,436,565
shares, respectively, of our Common Stock or an effective purchase price,
based on the amounts advanced by such persons through June 30, 1998, of
approximately $0.14 per share of Common Stock.
Subsequent to June 30, 1998, Northfield Capital Corporation and
284085 BC Ltd advanced or incurred additional liabilities on behalf of the
Company aggregating $12,868 through December 31, 1998. Such amounts were
repaid out of the private sale of securities.
YEAR 2000 COMPUTER ISSUES
We are aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The "Year 2000
Problem" is pervasive and complex as virtually every computer operation will
be affected in some way by the rollover of the two-digit year value to 00.
The issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or fail. We are in
the process of working with our software vendors to ensure that the software
that we have licensed from third parties will operate properly in the year
2000 and beyond. In addition, we are working with our external suppliers and
service providers to ensure that they and their systems will be able to
support our needs and, where necessary, inter-operate with our server and
networking hardware and software infrastructure in preparation for the year
2000. We do not anticipate that we will incur significant operating expenses
or be required to invest heavily in computer systems improvements to be year
2000 compliant. However, significant uncertainty exists concerning the
potential costs and effects associated with any year 2000 compliance. Any
year 2000 compliance problems we experience or our customers or vendors would
have a material adverse effect on our business, results of operations and
financial condition.
29.
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BUSINESS OF THE COMPANY
BACKGROUND OF SUITE 101
We employ real people, known as guides or "Contributing Editors"
rather than software (search engines) to help Internet users find the
Best-of-the-Web resources. Our site offers not only a way to find quality
information on the Web, but also an opportunity to participate in a community
of like-minded people who share mutual interests.
Our original idea behind Suite101.com was to give people who have a
passion for a particular topic the opportunity to publish articles and act as
guides or Contributing Editors on the site to others with similar interests.
As of July 31, 1999, we had 717 Contributing Editors publishing articles,
facilitating discussion threads, hosting online "chats," and contributing to
Suite101's "Best-of-Web Guide," a directory of links to top Web sites. As of
that date, the Contributing Editors had published and archived over 16,000
articles on topics ranging from "artists" and "children's books" to "herb
gardening" and "virtual journeys," managed almost 16,000 discussion threads,
and created a Web directory with almost 22,000 hand-picked and reviewed links.
Our Web site attracted over 1.8 million page views in June, 1999,
compared to 1.37 million page views in December, 1998. Of those visitors,
almost 45,000 as of July 31, 1999, had become Members compared to 32,101
Members on December 31, 1998.
We believe that the demographic profile of the Suite101 Members is
unique compared to other Internet-based communities. While we believe others
tend to attract younger, unmarried male users, the Suite101 community at June
30, 1999 has attracted primarily older (median age: 37), married (63 percent)
female users (60 percent). Eighty-five percent have attended a post-secondary
institution.
INDUSTRY BACKGROUND
The digital evolution has brought about the revolutionary
communications medium called the Internet ("Net"). In many ways the medium is
transforming how we live and interact with one another. The introduction of
the World Wide Web ("WWW" or "Web") in the mid-1990s accelerated this
transformation. Web sites, browsers, and development tools quickly made a
relatively complex technology accessible to a much larger population.
Hundreds of millions of people now have the opportunity to develop and
publish their own information without requiring substantial economic
resources or being limited by geographical boundaries. With an estimated 171
million users on the Internet today (with 105 million in the US alone), the
Internet is the largest conglomeration of authors ever assembled.
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THE GROWTH OF ONLINE COMMUNITIES
Early Internet users developed a unique, give-and-take culture that
emphasized the sharing of information and resources. We believe that these are
the basic elements of community. However, the rise in the popularity and the
subsequent commercialization of the Web has changed the focus of this culture
from one of "give-and-take" (sharing and interaction) to passive consumption
where Internet "surfers" are relegated to the role of viewers, readers and
subscribers. The WWW has become a vast network of millions of Web sites, for the
most part broadcasting to the Net, professionally created, static content at
users. For the typical user, the Web does not live up to its promise; instead of
the powerful, two-way communication medium that it could be, we view the Web as
a chaotic, overloaded brochure rack.
"Portal" sites with powerful search engines were introduced to help
users find information on the Internet. In many cases, search engines have
added to, not diminished, the chaos on the Web. As the use of the Net and the
number of Web sites has grown, the utility of these search engines has
declined because of their inability to stay abreast of the growth in Web
sites. As experienced Net surfers know, their software does not distinguish
the quality or relevance of one site from another. A recent Nature magazine
article stated that it takes on average up to six months for a new page to
show up in a search engine, and even the best search engine only searches
one-sixth of the Net's pages. Therefore, when a surfer uses a search engine,
he or she is faced with the daunting task of wading through hundreds --
sometimes thousands --of search engine suggestions responding to the topic
searched that may be irrelevant, incomplete, or outdated.
Looking for a more effective way of finding quality information on
the Internet, we believe that many users are increasingly turning to Web
directories and online communities to find, read, and discuss information
that is relevant to their lives. According to the Nature article, online
community sites now reach approximately 36 per cent of the Internet audience.
And many sites that did not start as online communities are beginning to
emulate these communities: each of the top five Web sites in May, 1999
included chat and discussion areas, the essential elements that make two-way
communication and thus community, possible. To subscribe and publish; to
share in the give-and-take, users in these online communities are starting to
realize the availability of the Internet as an interactive, two-way
communication medium.
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E-COMMERCE IN THE COMMUNITIES
Online communities tend to attract like-minded people who share mutual
interests and a similar demographic profile. Topically organized, they attract
interested users who tend to spend a significant portion of their time online at
the community Web site. Most of the online communities, such as Yahoo! Inc.,
also offer other services, such as personal home pages and messaging functions,
that further increase the site's "stickiness" (capacity to keep users at the
site). We believe that advertisers have not overlooked the marketing potential
of these commercially attractive, site-loyal demographic groups.
We believe that advertisers want to be seen in the online
communities because they include the ability to aggregate attractive
demographic groups with significant purchasing power and known interests.
Advertisers can place their ads in a context that makes them available to
persons with a demonstrated interest -- for example, ads for fishing tackle
on a site devoted to fly fishing. Because many of the communities collect
substantial demographic information from their members, marketers see an
opportunity to tailor the marketing of their products or services directly to
particular groups within the community. Most of the popular online community
sites now generate a substantial portion of their revenues from banner
advertising.
PRIVACY CONCERNS
We believe that the lure of online communities will continue to grow for online
vendors because of focused demographics. Focused demographics makes available
targeted marketing to topically organized groups. But the nature of the
commercial opportunities envisioned by many of these vendors will be changing
for one very important reason -- privacy. Privacy concerns are increasingly
affecting what users do on the Internet, especially as consumers. We believe
many users are already uncomfortable giving their demographic information or
making purchases online because of these privacy concerns. They are especially
uncomfortable when they find that their personal demographic information is
being collected, used, and traded without their knowledge, authorization, or
benefit. Consumers are making these concerns about privacy more public. To
ultimately succeed at e-commerce, we believe marketers and vendors will have to
find ways of gaining the confidence of potential customers by demonstrating that
they will act sensitively and responsibly with regard to consumers' privacy
issues.
THE SUITE101 CONCEPT
THE SUITE101.COM COMMUNITY.
The Suite101.com community is based on Web site software that compiles,
organizes, and distributes content created by Members of its community. This
enhances Members' experiences on the Web because they can publish their own
articles, share ideas, and interact with other Members who have common
interests.
Our concept is a community of Internet users dedicated to
self-expression, interaction, and sharing. We believe that, like any
community in the "bricks-and-mortar"
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world, the Members of Suite101.com come to feel a high degree of affinity to
our site and responsibility to each other because they share their interests
and passions with each other in a safe, non-threatening environment. Members
of Suite101.com, we believe, come to feel they have a "home" on the Internet.
The products and services of this community include articles written by
"Contributing Editors," discussion threads and chats, contests and polls,
and, of course, links to the best sites on the Web in close to 700 different
topic areas (the "Best-of-Web" guide).
With the addition of more Members and Contributing Editors, the
Suite101.com community has grown from approximately 35 Editors in October
1996 to almost 717 as of July 31, 1999 with a current backlog of over 200
applications from prospective Contributing Editors. Through July 1999,
Suite101's Editors have created a Web directory with almost 22,000
hand-picked and reviewed links, published and archived over 16,000 articles,
and managed almost 16,000 discussion threads. Our site has 717 topic areas
and in June, we had over 1.8 million page views.
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COMMUNITIES OF INTEREST. The content of Suite101.com is organized
into 11 major subjects or "Communities of Interest:"
<TABLE>
<S> <C>
1. Arts and Humanities; 7. Home & Garden;
2. Business; 8. Law, Politics, & Issues;
3. Computers & Internet; 9. Society & Culture;
4. Education; 10. Sports & Recreation; and
5. Entertainment & Media; 11. Travel & Leisure
6. Health;
</TABLE>
These Communities are managed by Managing Editors. These are
individuals who have demonstrated an extraordinary commitment to the
Community. Each Community is further organized into topic areas overseen by a
Contributing Editor.
This topical organization of the site's content makes it quick and
easy for both visitors and Members to locate the content that interests them.
They can read the articles or explore the list of related links created by
the Contributing Editors in each topic area. The organization of the content
also helps them find other users who share their interests. For example,
people who are interested in perennial plants can "find" each other in the
discussion threads and chat rooms of the Home and Garden Community. The
functions and features available to each Contributing Editor allows them to
encourage self-expression and interaction by providing a forum for
discussion, sharing, learning, and understanding.
ACTIVE PARTICIPATION. The organization of the Suite101 community
encourages users to increase their participation. As they become more at home
on the site, they can move from visitor to Member. If they have a particular
passion and want to write, then they can apply to become a Contributing
Editor. If they want to guide and be a leader in the community, they can
apply to be a Managing Editor.
With each level of participation comes added commitment and
responsibility to the community. Contributing Editors write articles,
facilitate discussions and chats, initiate contests and polls, and, of
course, develop and maintain the Best-of-Web guide in their topic area.
Managing Editors oversee a number of topic areas and Contributing Editors,
supporting and encouraging their efforts.
Members and Editors can also contribute to the community in other
ways with suggestions and feedback that improve the community. Through these
interactions, the Members and Editors develop a sense of personal involvement
in Suite101.com. They also tend to become champions of the community,
actively encouraging visitors, friends and family to join and participate. We
believe that the greater the interaction and
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participation of our Members and Editors, the greater their loyalty and
affinity to Suite101 community.
STATE-OF-MARKET FEATURES, TOOLS & SERVICES. We strive to improve the
online experience of our Members by providing state-of-the-market tools and
services. Members can create personal HomePages that can include
autobiographical information, communication tools, personalized lists of
links (including what's new on Suite101.com), and an area for personalized,
consensual e-commerce.
Each Contributing Editor is provided with publishing and
communication tools for posting and archiving articles, facilitating
discussion threads and chats, and creating contests and polls in their topic
area. These features, tools and services are provided free of charge to
Members to encourage self-expression and interaction in an online,
information-rich environment.
Both visitors and Members have free access to the Best-of-Web
directory, which we believe is one of the most significant features of
Suite101.com. Collectively maintained by the Contributing Editors, this
topically organized directory of links to other sites on the Internet helps
users find the best, most relevant information on the Internet in 717 topic
areas (as of July 31, 1999). Intended to help users overcome the chaos of the
Internet, this Web directory in many ways replaces the powerful search
engines on the major "portal" sites.
These engines, although impressive in the QUANTITY of information
they can generate, do not help users distinguish the QUALITY of the
information. The Nature magazine article stated that many search engine
contents are out of date and incomplete. According to that report, even the
best search engines take over six months to index a new Web page and
typically only cover one-sixth of the Net's pages.
With the Best-of-Web directory, users can be assured that they are
being directed to quality, up-to-date information because someone with a
passion for the topic (the Contributing Editor) has picked and reviewed it
for them. Suite101.com offers Contributing and Managing Editors several
online forums to proactively determine what improvements and suggestions are
important to the Suite101.com community. These forums are supplemented with
newsletters and ad-hoc committees and teams.
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THE SUITE101 E-COMMERCE PROGRAM
OVERVIEW
To begin generating revenue for the Company without changing the
nature of its community, Suite101 intends to implement an e-commerce program
that will help its Members meet their needs and wants, cost-effectively,
while protecting their privacy. The program is based on three principles:
(1) Protection of Members' privacy;
(2) Participation only by consent; and
(3) Sharing of marketing revenues.
Adherence to these principles will ensure the e-commerce program
will add to rather than detract from the nature of the Suite101.com community.
Although similar to the goals of traditional direct-marketing
programs, the Suite101 e-commerce program is intended to be fundamentally
different in one very important way: customers rather than companies will
reap the rewards of its success. The program will offer participating
Suite101 Members the means to collect, consolidate, market, and benefit from
their "psycho-demographic" information (data on their age, sex, marital
status, income, buying habits and consumption behavior). We intend that
customers will be able to use their psycho-demographic information, when
aggregated with other customers, to purchase quality products and services at
prices traditionally only offered to large institutional and commercial
buyers.
Psycho-demographic information has been primarily collected and used
by direct marketing and database companies as well as major financial
institutions and retailers. This psycho-demographic information was then sold
or used by companies to help them target their marketing activities.
Many of today's loyalty programs, for example Air Miles and
frequent-flyer points, are marketed as "reward" programs but are also, in
fact, an excellent way for companies to gather information about their
customers.
Managed by the vendor, these loyalty programs do reward the customer
with better prices and service, but they also limit their choice. For
example, an airline's frequent-flyer program does reward a customer with
reduced fares and more perks, but only if that customer stays with the
airline. If the customer wants to fly with another airline because of a more
convenient departure time, for example, they cannot "transfer" their points
to this airline to take advantage of its frequent-flyer program. Because
these programs are "vendor-centric," their ultimate benefit of influencing
customers' buying behavior is realized by the vendor rather than the customer.
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The technology behind the Internet gives individuals an opportunity
to create their own loyalty programs. Suite101 intends to provide its Members
with the technology to collect their own psycho-demographic information in
"Member-centric" databases. When aggregated with the information of other
participating Members, we believe that quality, name-brand vendors will
recognize the value of this database and will actively seek to access it.
ELEMENTS OF OUR E-COMMERCE PROGRAM
- CONSENSUAL PARTICIPATION IN DIRECT MARKETING ACTIVITIES
Each Member of Suite101.com will be given an opportunity to develop
his or her own "Member-centric" database containing their psycho-demographic
information and a periodic "wish list" of planned purchases. This information
will be securely stored at Suite101.com, accessible online only to the
individual Member. Heretofore, this demographic information has been
primarily collected and controlled by large marketing groups and vendors.
With Members' explicit consent, Suite101 will then consolidate
participating Members' demographic data into a central, aggregated database
for the entire Suite101.com community. Using a strong security system,
Members' actual identities will be separated from their demographic data. A
Member-selected online alias and a password will be the only connection
between a Member's actual identity and their demographic data. The aggregated
database will contain valuable but anonymous information.
- SHARING OF MARKETING REVENUE WITH PARTICIPATING MEMBERS
We then intend to contract with qualified companies ("eVendors") to
give them direct access to this aggregated database. By running various
searches for potential customers in the database, these "eVendors" will be
able to develop lists of potential customers. For a per-person fee, we will
then facilitate the eVendor's online, direct marketing campaign.
Participating Members will not, however, receive a barrage of email or be
subjected to banner ads.
Participating Members will be notified of the eVendor's offer by
having a postage-stamp-sized "SuiteStamp" placed on their personal HomePage.
This clickable button will allow the Member to decide if they want to view
the eVendor's offer (by clicking on the SuiteStamp) or ignore it. If they do
click through, it is intended that they will be rewarded by receiving a
portion of the revenues generating from the eVendor's marketing fee. Revenues
will most likely be distributed to participating Members as "SuitePoints"
(much like Air Miles) that can be used to purchase other products or services.
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At all times, prior to the moment of a completed sale to an
individual Member, the participating Member's identity will be protected by
Suite101. eVendors will only have access to the aggregated demographic
information and Members' aliases. Even though only Members who consent to
participate in the marketing program will share in the eVendors' marketing
payments to Suite101.com, a Member's lack of participation will in no way
take away from their rights and privileges as a Member of the Suite101.com
community. Members will be able to opt in and out of the marketing program at
any time. Only the profiles of Members participating in the program will be
included in the aggregated demographic information.
- GROUP-BUYING OPPORTUNITIES WITH DYNAMIC PRICING
Suite101 believes that the nature of its e-commerce strategy will
attract high-quality, brand-name eVendors. As a result, we believe that
Members will have access to a wide array of products and services at a
reduced cost. The technology behind Suite101.com is also intended to give
Members who want to purchase a product or service the opportunity to
aggregate their purchases together with other Members, so they or we will be
able to negotiate reduced prices from eVendors. We believe that it will be
possible for a large group of Members who want to purchase a particular type
of car from a Suite101 e-Vendor, for example, to negotiate a group price with
the provider. There may even be opportunities to improve the block pricing
dynamically as more Members join together to purchase a desirable product or
service.
ADVANTAGES OF OUR E-COMMERCE PROGRAM
We believe that our e-commerce strategy and the Internet's
interactive properties are compelling reasons why Members and e-Vendors will
participate in our consensual direct marketing program. Unlike other forms of
direct marketing, our program will mean e-Vendors can reach a targeted group
of pre-qualified customers quickly and effectively (with what we believe will
be an anticipated response rate well above the current two to four percent
rate of off-line direct mail campaigns). This capability we believe offers
our Members electronic one-stop-shopping and our e-Vendors one-to-one contact
with the consumer, our Member. We believe that our e-commerce strategy will
not only reward Members for their participation and bring them substantial
savings, but it will also strengthen the bonds of community.
BUSINESS STRATEGY
- OVERVIEW
- We believe there is occurring, because of the Internet e-commerce
opportunities, a dramatic shift in the balance of power from vendors to
customers. Prior to the Internet, the vendor with superior market knowledge
dominated the marketplace. Today, the Internet is arming the customer with this
superior market knowledge. With this knowledge, the customer is getting smarter,
faster, than most vendors today.
38.
<PAGE>
Suite101.com intends to earn a role in this transforming marketplace
by implementing a business strategy that puts its Members and their interests
first. Our "Member-centric" strategy is based on the following four
principles:
(1) respect for and protection of our Members' privacy;
(2) sharing with participating Members marketing revenues
derived from selected companies for their use of Members' aggregated,
psycho-demographic information;
(3) supporting the community by providing the tools and
infrastructure for communication and interaction; and
(4) acting first and foremost as an advocate for our Members.
We believe that our business strategy, based on these four
principles, will provide a pleasant, effective, non-threatening
environment for the Suite101 community to grow. We also believe that
this strategy will create a platform for e-commerce that will ensure
our Members realize the monetary rewards of membership in the Suite101
community.
To achieve this goal, working with Doublespace, a New York
based marketing group to develop a marketing and publicity plan, we
have recently started several initiatives that we believe will grow and
strengthen Suite101.com:
- Accelerate membership growth from 45,000 currently to 250,000,
- Build the Suite101.com brand,
- Continue to enhance site functionality and performance, and
- Implement the e-commerce strategy.
- ACCELERATE MEMBERSHIP GROWTH
We also believe that a growing membership will keep the Suite101.com
community vibrant and appealing to our targeted demographic group. It will
also provide qualified e Vendors with an attractive market for the promotion
of their products and services.
Our immediate membership goal is 250,000 Members. We believe this
goal is attainable within the defined time parameters (the first quarter of
2000) and the budget allocated (US$675,000). To help achieve this goal, we
contracted with New-York-based Doublespace in June, 1999, to prepare our
Marketing Plan. This Marketing Plan will be piloted in August, 1999, and full
implementation will begin during September, 1999.
We believe 250,000 Members is the minimum "critical mass" required
to implement our e-commerce strategy. We intend to grow our Membership.
Therefore, the success of our marketing effort will not only be measured by
attaining 250,000 Members
39.
<PAGE>
within our budget and timeframe, but it will also be measured by attracting
Members within our targeted demographic profile.
BUILD THE SUITE101.COM BRAND
- - To date, Suite101.com's growth has been primarily by word-of-mouth,
ad hoc public relations by our management and the informal promotional
efforts of our Members. However, by implementing the Marketing Plan, we
intend to raise the "brand recognition," that is, the profile of Suite101.com
among three target markets:
- The "general" Internet audience;
- Existing Editors and Members; and
- Investors, potential partners and the media
Approximately US$1.2 million will be allocated to the marketing and promotion
of theSuite101.com brand over the next year. Planned activities include
advertising in both off-line (print and radio), and online media (banners,
buttons, email campaigns); public relations; sponsorships; and strategic
partnerships.
In addition, Suite101.com intends to pursue a variety of
distribution arrangements with other Internet-based companies to raise the
profile of its brand. It also plans to introduce an "internal" --"Friends and
Family" --promotional to increase brand awareness among its current Members
and Contributing Editors. Suite101.com believes that a high-profile and
well-recognized Suite101.com brand will not only attract additional Members,
but it will also make the Community more attractive to qualified eVendors.
- CONTINUE TO ENHANCE FUNCTIONALITY AND PERFORMANCE
- - Suite101.com believes continually providing visitors and Members with
greater functionality and performance is critical to its success. In November
1998, we introduced a new user interface which substantially improved the
usability of our site, presenting Member-generated content in a more intuitive,
topical format. The site redesign was very well received by Suite101.com's
Members
Using approximately (US)$675,000 from our recent private sale of
securities, Suite101.com intends to substantially upgrade and expand our
technological infrastructure to provide faster and more reliable access and
to ensure that the site's software is scalable to handle much higher usage.
The planned upgrade will also provide Members with additional Web page
publishing and communication tools to further enhance the community
experience. A list of planned enhancements to the functions and features of
the Suite101.com site include
- Chat Room upgrades,
40.
<PAGE>
- E-commerce and privacy tools,
- Electronic postcards,
- Personal HomePage upgrades,
- Member-centric psycho-demographic profiles,
- PC-to-PC conferencing, and
- SuitePoints (micropayments).
Suite101 believes that continually enhancing site functionality and
performance will foster growth and affinity to the community. We believe that
a large and loyal membership will make Suite101.com very attractive as a
platform for e-commerce.
IMPLEMENT THE E-COMMERCE PROGRAM
Traditional direct-marketing companies, such as mail-order
companies, either develop and market their own products or at least take
inventory in the products of others. This gives them a considerable vested
interest in selling more of their own products or services. In contrast,
Suite101.com intends to mobilize as many suppliers of products and services
relevant to our membership as possible.
But Suite101 does not intend to take inventory in the products and
services of its eVendors. Instead, it intends to help these Providers deliver
appropriate marketing messages to Members who have agreed to participate in a
particular promotion. Suite101 also intends to help facilitate transactions.
In return, we will receive fees from eVendors for helping to connect buyer
and seller (which will be shared with the consenting, participating Members
who have opted to receive the marketing offering) and, if a sale is
consummated, a share in the transaction.
We believe that acting as advocates, or agents, on behalf of its
Members will develop a strong sense of trust. By aggressively representing
the interests of our Members, we will help them optimize the value they
receive from the Suite101 e-commerce program. Suite101's ability to do this
will stem from our ability to build a broad information profile of each
Member. By helping Members get as much value as possible for these profiles
- -- while protecting them from abuse --Suite101 will provide our Members with
lower prices and increased privacy.
We also believe that these profiles will be attractive to eVendors
because they will have the opportunity to target a marketing message to
consumers who have indicated they are considering a purchase. Suite101.com
intends to provide the following to its Members:
41.
<PAGE>
- A range of eVendors (products and services) that will maximize
the value of their profiles to the Members.
- A set of privacy tools that will prevent eVendors from obtaining
information about the Members prior to the moment of completed
transactions.
- A set of profiling tools that will help Suite capture detailed
information about the Members.
By automatically tracking what they do within Suite101.com, Members
and we will be able to develop a comprehensive portrait of the Members'
interests and browsing patterns. Updates to their psycho-demographic profile
and "wish lists" of planned expenditures combined with accurate monitoring of
actual purchases, we believe will create a valuable marketing resource. When
this psychographic information is combined with transaction records from
Members' credit cards, the Members will have created a complete profile of
both their online and traditional retail activities. or return users to make
the site attractive to advertisers.
INFRASTRUCTURE AND OPERATIONS
We have has developed a software system that is built on Microsoft
Internet Information Server, Allaire's Cold Fusion Application Server and
Microsoft SQL Server. The system is designed to be reliable and responsive. With
its planned redevelopment, the system will be increasingly scalable across
multiple application and SQL database servers to handle a continually growing
load.
Our network servers are housed in Vancouver, British Columbia.
Member-generated content is stored in a SQL Server database that is backed up
daily with a weekly backup taken off site weekly. We will continue to upgrade
and expand our server and networking infrastructure in an effort to improve its
fast and reliable access to the Company's community web site. Using
approximately $675,000 from our recent private sale of securities, we intend to
substantially upgrade and expand our technological infrastructure to provide
faster and more reliable access and to ensure that the site's software is
scalable to handle much higher usage. The planned upgrade will also provide
Members with additional Web page publishing and communication tools to further
enhance the community.
Site connectivity to the Internet is provided via a shared T-1 provided
on a 24-hour per day, seven days per week basis by Pro.Net Communications inc.
Any interruption in the service that Pro.Net receives from other providers, or
any failure of Pro.Net to handle higher volumes of Internet users to the
Suite101.com site could have a material adverse effect on our business, results
of operations and financial condition.
42.
<PAGE>
EMPLOYEES
As of June 30, 1999, we had ten full-time employees, including eight in
operations and development and two in administration. Our future success will
depend, in part, on our ability to attract, retain and motivate highly qualified
technical and management personnel, for whom competition is intense. Our
employees are not covered by any collective bargaining agreement, and we have
never experienced a work stoppage. We believe our relationship with our
employees is good.
PROPERTIES
Our executive offices and computer operations are currently located in
Vancouver, British Columbia, Canada in approximately 1,046 square feet of office
space. The premises are occupied pursuant to a monthly lease with a
non-affiliated person providing for an annual rental of $14,571. We consider
these premises adequate for our existing operations.
COMPETITION
The market for community based e-commerce on the Internet is new and
rapidly evolving. Competition for visitors, Members and Contributing Editors,
strategic partners and eVendors is new, rapidly evolving, and intense. This
competition is expected to increase significantly in the future. Barriers to
entry into the Internet business are relatively insubstantial. We believe
that the principal competitive factors for companies seeking to create
community on the Internet are content, critical mass, functionality, brand
recognition, Member affinity and loyalty, broad demographic focus and open
access for visitors. Other companies who are primarily focused on creating
Web-based community on the Internet are About.com, Geocities, Inc.,
iVillage.com, Inc.Tripod, Inc., a subsidiary of Lycos, Inc., Angelfire
Communications, Xoom.com, Inc. and theglobe.com. Each of these competitors is
significantly larger than us and more well-established and well-known in the
Internet industry and with greater capital resources.
We will likely also face competition in the future from Web
directories, search engines, shareware archives, content sites, commercial
online service providers ("OSPs"), sites maintained by Internet service
providers ("ISPs") and other entities that attempt to or establish
communities on the Internet by developing their own community or acquiring
one of our competitors. In addition, we could face competition in the future
from traditional media companies, a number of which, including Disney, CBS
and NBC have recently made significant acquisitions of or investments in
Internet companies. Further, there can be no assurance that our competitors
and potential competitors will not develop communities that are equal or
superior to ours or that achieve greater market acceptance than our community.
We also compete for visitors and Members with many Internet content
providers and ISPs, including Web directories, search engines, shareware
archives, content sites, commercial online services and sites maintained by
Internet service provides, as well as thousands of Internet sites operated by
individuals and government and educational institutions. These competitors
include free information, search and content sites or services, such as
American Online, Inc. ("AOL"), CNET, Inc. ("CNET"), CNN/Time Warner, Inc.
("CNN/Time Warner"), Excite, Inc. ("Excite"), Infoseek Corporation
("Infoseek"), Lycos, Inc. ("Lycos"), Netscape Communications Corporation
("Netscape"), Microsoft Corporation ("Microsoft"), About.com Inc., and Yahoo!
Inc. ("Yahoo!"). We also compete with traditional forms of media, such as
newspapers, magazines, radio and television. We believe that the principal
competitive factors in attracting strategic partners and other sources of
e-commerce business include the amount of traffic on our Web site, name
recognition, customer service, the demographics of our Members and viewers,
our ability to offer targeted audiences and the overall cost-effectiveness of
the e-commerce opportunities we offer. We believe that the number of Internet
companies relying on Web-based e-commerce and advertising revenue will
increase substantially in the future. Accordingly, we will likely face
increased competition, resulting in increased pressures on our revenue
sharing percentages which could, in turn, have a material adverse effect on
our business, results of operations and financial condition.
Substantially all of our existing and potential competitors,
including Web directories and search engines and large traditional media
companies, have longer operating histories in the Web market, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources. Such competitors are able to undertake
more extensive marketing campaigns for their brands and services, adopt more
aggressive advertising pricing policies and make more attractive offers to
potential employees, visitors, Members, distribution partners, eVendors,
marketers and third party content providers.
There can be no assurance that Internet content providers and ISPs,
including Web directories, search engines, shareware archives, sites that
offer professional editorial content, commercial online services and sites
maintained by ISPs will not be perceived by potential strategic partners,
eVendors and marketers as having more desirable Web sites. In addition, many
persons with whom we would seek to enter into a strategic relationship have
already established collaborative relationships with our competitors or
potential competitors, and other high-traffic Web sites. Accordingly, there
can be no assurance that we will be able to grow our visitor and Membership
base, traffic levels and customer base or retain our current Members, traffic
levels or customers, or that competitors will not experience greater growth
in traffic than we experience as a result of such relationships which could
have the effect of making their Web sites more attractive.
In addition, for these reasons, our strategic partners may sever or
elect not to renew their agreements with us. There can also be no assurance
that we will be able to compete successfully in the Internet or that
competition will not have a material adverse effect on our business, results
of operations and financial condition.
43.
<PAGE>
MANAGEMENT
Our Directors and Executive Officers and their ages are as follows:
<TABLE>
<CAPTION>
NAME AGE EMPLOYMENT HISTORY
-------------------------------------------------------------------------------------
<S> <C> <C>
Peter L. Bradshaw 65 Mr. Bradshaw, a co-founder
of i5ive, has been the
Chairman of the Board,
chief executive officer
and a Director of i5ive
since April 1996 and of
our company since December
10, 1998. From April 1993
to April 1996, he was a
Director of Mobile Data
Solutions, Inc. ("MDSI"),
including Chairman of the
Board from April 1993 to
December 1995. MDSI
develops and markets
computer aided mobile
(wireless) resource
management software. Its
shares of common stock are
traded on the Nasdaq
SmallCap Market.
From May 1998 to August
1998, he was Chief
Executive Officer and from
July 1997 to the present,
he has been Chairman of
the Board of eDispatch.com
Wireless Data, Inc
(formerly InStep Mobile
Communications, Inc.)
("eDispatch.com"), which
also develops and market
computer aided mobile
(wireless) resource
management software.
Commencing in September
1996 through January 1998,
he was Director of Unitec
International Controls
Corp.
Commencing in 1992 through
December 1995, he was
Chairman of the Board and
Chief Executive Officer of
TeleSoft Mobile Data,
Inc., a venture capital
Firm investing in
enterprises utilizing
wireless data protocol.
Mr. Bradshaw has a B.Com.
Degree in Commerce and a
major in History from the
University of British
Columbia. Mr. Bradshaw is
the father of Julie M.
Bradshaw.
Julie M. Bradshaw 36 Ms. Bradshaw, a co-founder
of i5ive, has been a
Director of i5ive since
April 1996 and is
currently the Managing
Director of Real World
Relations. She has been a
Director of our company
since December 10, 1998.
Prior to April 1996, she
attended the University of
Paris, Sorbonne and the
University of British
Columbia. In 1992, Ms.
Bradshaw earned her BA
degree from the University
of British Columbia with a
major in French
Literature. Ms. Bradshaw
is the daughter of Peter
L. Bradshaw.
44.
<PAGE>
<CAPTION>
NAME AGE EMPLOYMENT HISTORY
-------------------------------------------------------------------------------------
<S> <C> <C>
Sunny H. Hirai 27 Mr. Hirai, a co-founder of
i5ive, has been a Director
and the Chief Technical
Officer of i5ive since
April 1996. He has been a
Director of our company
since December 10, 1998.
Prior to April 1996, he
was, from June 1993 to
April 1996, the owner of
Salt and Pepper Graphix, a
graphic design group, and
from June 1994 to April
1995 he was the head of
marketing at Artel
Educational Resources.
From June 1993 to June
1994, he was engaged in
marketing with
SunnyMarketing, Inc., a
seafood brokerage firm.
Mr. Hirai is a graduate
from the British Columbia
Institute of Technology,
specializing in Small
Business: Marketing
Management.
Mitchell G. Blumberg 55 Mr. Blumberg was elected a
Director of our company in
February 1999. He has
been, since June 1994,
engaged as a film producer
and talent manager in Los
Angeles, California
initially with Blumberg
Productions and thereafter
with Blumberg Productions
and Management, through
December 1998 and with
Pritcher Forman/Mitch
Blumberg since January
1999. Prior to June 1994,
he was an Executive Vice
President of RKO Pictures,
Inc. Mr. Blumberg is also
a Director of
eDispatch.com. Mr.
Blumberg holds
undergraduate and law
degrees from the
University of
Pennsylvania, and an MBA
from Harvard University.
Alfred J. Puchala, Jr. 38 Mr. Puchala was elected a
Director of our company in
April 1999. Mr. Puchala is
a Managing Partner of
Signal Equity Partners,
LLC and a Principal of New
York-based Signal Capital
Partners, LP, positions he
has held since April 1996
and June 1998,
respectively. From April
1989 to April 1996, he was
employed by Lazard Freres
& Co. LLC, most recently
as a Vice President. Mr.
Puchala has a BA degree
from Yale University, a JD
degree from Georgetown
University and a M. Econ.
degree from New York
University.
</TABLE>
Each of Mr. Bradshaw, Ms. Bradshaw, Mr. Hirai, Mr. Blumberg and Mr.
Puchala will serve as Directors until our annual meeting of stockholders in
2000 and the election and qualification of his or her successor.
45.
<PAGE>
EXECUTIVE AND DIRECTOR COMPENSATION
During the year ended December 31, 1998, none of our officers or
Directors received compensation for serving in that capacity.
Our Directors do not receive any cash compensation for serving in
that capacity; however, they are reimbursed for their out-of-pocket expenses
in attending meetings. Pursuant to the terms of our 1998 Stock Incentive
Plan, each non-employee Director automatically receives an option grant for
50,000 shares on the date such person joins the Board. In addition, on the
date of each annual stockholder meeting, each non-employee Board member who
is to continue to serve as a non-employee Board member will automatically be
granted an option to purchase 5,000 shares. Each such option has a term of
five years, subject to earlier termination following such persons cessation
of Board service, and is subject to certain vesting provisions.
CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS
In April 1996, i5ive issued an aggregate of 100 Class A common
shares to Northfield Capital Corporation and 284085 BC Ltd. for an aggregate
purchase price of $73.
From its inception in April 1996 through June 30, 1998 Northfield
Capital Corporation and 284085 BC Ltd. advanced to i5ive the sums of $270,156
and $197,098 used for general corporate purposes and working capital. Such
amounts accrued interest at the rate of 6.5% per annum. At the closing of the
sale of the i5ive shares to Suite101, Northfield Capital Corporation and
284085 BC Ltd. converted these advances and accrued interest into an
aggregate of 414,975 and 302,753 shares, respectively, of i5ive. Such shares
of i5ive were exchanged for 1,969,057 and 1,436,565 shares, respectively, of
our Common Stock or an effective purchase price, based on the amounts
advanced by such persons through June 30, 1998, of approximately $0.14 per
share of our Common Stock.
Subsequent to June 30, 1998, Northfield Capital Corporation and
284085 BC Ltd. advanced or incurred additional liabilities on behalf of i5ive
aggregating $92,721 through November 30, 1998. Such amounts were repaid out
of the proceeds of a private sale of our securities completed in April, 1999.
46.
<PAGE>
PRINCIPAL AND OTHER STOCKHOLDERS
Set forth below is information concerning the Common Stock ownership
of all persons known by us to own beneficially 5% or more of our Common
Stock, and the Common Stock ownership of each of our Directors and all our
Directors and officers as a group, as of June 30, 1999. As of July 31, 1999,
we had 12,061,288 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL NUMBER OF SHARES PERCENTAGE OF OUTSTANDING
OWNER (1) BENEFICIALLY OWNED(2) COMMON STOCK
<S> <C> <C>
Peter L. Bradshaw 1,436,565 (3) 11.9%
Julie M. Bradshaw 807,571 6.7%
Sunny Hirai 1,122,068 9.3%
Mitchell G. Blumberg 55,000(4) 0.5%
833 Moraga Drive - #12
Los Angeles, CA 90049
Alfred J. Puchala, Jr 115,000(4)(5) 1.0%
Signal Partners, LLC
10 East 53rd Street
New York, NY 10022
Benitz & Partners Limited (6) 2,400,000 19.9%
94 Mount Street - First Floor
London, England W1Y 5H5
Northfield Capital Corporation 2,231,636 18.5%
350 Bay Street - Suite 1100
Toronto, ON M5H 2S6
284085 BC Ltd. 1,436,565 11.9%
1122 Mainland Street - Suite 390
Vancouver, BC V6B 5L1
All officers and directors as a group 3,526,204 29.3%
(5 persons)
</TABLE>
- --------------------------------
(1) Unless otherwise indicated, the address of such person is c/o the Company.
(2) For purposes of the above table, a person is considered to "beneficially
own" any shares with respect to which he or she exercises sole or shared
voting or investment power or of which he or she has the right to acquire
the beneficial ownership within 60 days following March 29, 1999.
(3) Shares held by 284085 BC Ltd. of which Mr. Bradshaw is an officer,
Director and principal shareholder.
(4) Includes 50,000 shares issuable on exercise of an option.
(5) Includes 40,000 shares of Common Stock and warrants to purchase 20,000
shares of Common Stock.
47.
<PAGE>
(6) Benitz & Partners Limited is an investment dealer regulated in England by
the Securities and Futures Authority and holds the shares as a portfolio
manager as an agent for accounts fully managed by it. Benitz & Partners
Limited disclaims a beneficial interest in such shares.
48.
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth the aggregate numbers of securities
beneficially owned by each Selling Securityholder as of June 30, 1999 and the
aggregate number of securities registered hereby that each Selling
Securityholder may offer and sell pursuant to this Prospectus. Because the
Selling Securityholders may sell all or a portion of the securities at any
time and from time to time after the date hereof, no estimate can be made of
the number of shares of Common Stock that each Selling Securityholder may
retain upon the completion of the Offering. The shares of Common Stock have
been included in this Prospectus pursuant to contractual rights granted to
the Selling Securityholders to have their shares of Common Stock registered
under the Securities Act.
<TABLE>
<CAPTION>
NAME OF SELLING SECURITYHOLDER COMMON STOCK TOTAL NUMBER OF SHARES
BENEFICIALLY OWNED OF COMMON STOCK
PRIOR TO THIS OFFERING(1) OFFERED FOR SELLING
SECURITYHOLDERS' ACCOUNT(1)
- ---------------------------------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Ackley Financial Ltd. 120,000 120,000
Balboa Fund, LP 60,000 60,000
Bank Sal. Oppenheim Jr. & Cie. 120,000 120,000
(Switzerland) Ltd.
Arthur Bergeron 39,000 39,000
Malcolm Blumberg 48,000 48,000
J. Barrie Bradshaw 130,800 130,800
Jonathan Brooks 120,000 120,000
Canadian Advantage Limited Partnership 90,000 90,000
Falcarberg Corporation 364,200 364,200
Henry Fong 39,000 39,000
Irwin Gold 39,000 39,000
Roger A. Granberg 39,000 39,000
</TABLE>
49.
<PAGE>
<TABLE>
<CAPTION>
NAME OF SELLING SECURITYHOLDER COMMON STOCK TOTAL NUMBER OF SHARES
BENEFICIALLY OWNED OF COMMON STOCK
PRIOR TO THIS OFFERING(1) OFFERED FOR SELLING
SECURITYHOLDERS' ACCOUNT(1)
- ---------------------------------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Hepplewhite Fund, LP 48,000 48,000
JO Hambro Investment Mgmt. LTD 120,000 120,000
Jonpol Investments Limited 60,000 60,000
K&S Associates 45,000 45,000
Lazard Capital Markets 410,000 410,000
Wayne W. Mills 203,000 203,000
Osprey Group of Funds Limited 90,000 90,000
Paine Webber Incorporated 90,000 90,000
PEQUOD Investments, L.P. 60,000 60,000
Picachon Investments Limited 90,000 90,000
Puchala & Co. LLC (2) 60,000 60,000
Felicia Ross 60,000 60,000
Gretchen Ross 115,500 115,500
Royal Trust Company, SA 124,500 124,500
SM Investors, L.P. 60,000 60,000
Jeffrey Thorp 120,000 120,000
Jeff Werbalowsky 39,000 39,000
</TABLE>
- -------------------------------------
50.
<PAGE>
(1) Includes shares of common stock issuable on exercise of warrants expiring
February 29, 2000. Such warrants are exercisable at $4.50 per share.
(2) Alfred J. Puchala, Jr., a Director, is a principal of this firm.
51.
<PAGE>
PLAN OF DISTRIBUTION
The Selling Securityholders may sell or distribute some or all of the
Common Stock from time to time through underwriters or dealers or brokers or
other agents or directly to one or more purchasers, including pledgees, in
transactions (which may involve block transactions) on the OTC Bulletin
Board-Registered Trademark- or in privately negotiated transactions
(including sales pursuant to pledges), or in a combination of such
transactions. Such transactions may be effected by the Selling
Securityholders at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices, or at fixed
prices, which may be changed. Brokers, dealers, agents or underwriters
participating in such transactions as agent may receive compensation in the
form of discounts, concessions or commissions from the Selling
Securityholders (and, if they act as agent for the purchaser of such shares,
from such purchaser). Such discounts, concessions or commissions as to a
particular broker, dealer, agent or underwriter might be in excess of those
customary in the type of transaction involved.
The Selling Securityholders and any such underwriters, brokers,
dealers or agents that participate in such distribution may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
commissions or concessions received by any such underwriters, brokers,
dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. Neither we nor the Selling
Securityholders can presently estimate the amount of such compensation. We do
not know of any existing arrangements between the Selling Securityholders and
any underwriter, broker, dealer or other agent relating to the sale or
distribution of the Selling Securityholders Securities.
Under applicable rules and regulations currently in effect under the
Exchange Act, any person engaged in a distribution of any of the shares of
Common Stock may not simultaneously engage in market activities with respect
to the Common Stock for a period of five business days prior to the
commencement of such distribution. In addition, and without limiting the
foregoing, the Selling Securityholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation Regulation M thereunder, which provisions may
limit the timing of purchases and sales of any of the shares of Common Stock
by the Selling Securityholders. All of the foregoing may affect the
marketability of the Common Stock.
We will pay substantially all of the expenses incident to this
offering of the securities to the public other than commissions and discounts
of underwriters, brokers, dealers or agents. The Selling Securityholders may
indemnify any broker, dealer, agent or underwriter that participates in
transactions involving sales of the securities against certain liabilities,
including liabilities arising under the Securities Act.
52.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Under our Certificate of Incorporation, the total number of shares
of all classes of stock that we have authority to issue is 41,000,000
consisting of 1,000,000 shares of preferred stock, par value $0.01 per share,
and 40,000,000 shares of common stock, par value $0.001 per share.
PREFERRED STOCK
Up to 1,000,000 shares of preferred stock, par value $0.01 per
share, may be issued from time to time in one or more series. Our Board of
Directors, without further approval of the stockholders, is authorized to to
fix the rights and terms relating to dividends, conversion, voting,
redemption, liquidation preferences, sinking funds and any other rights,
preferences, privileges and restrictions applicable to each such series of
preferred stock. The issuance of preferred stock, while providing flexibility
in connection with possible financings, acquisitions and other corporate
purposes, could, among other things, adversely affect the voting power of the
holders of our Common Stock and, under certain circumstances, be used as a
means of discouraging , delaying or preventing a change in control of our
company. As of June 30, 1999, we had no shares of preferred stock outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on
all matters voted on by stockholders, including elections of Directors, and,
except as otherwise required by law or provided in any resolution adopted by
the Board of Directors with respect to any series of preferred stock
establishing the powers, designations, preferences and relative,
participating, option or other special rights of such series ("Preferred
Stock Designation"), the holders of such shares exclusively possess all
voting power. The Certificate of Incorporation does not provide for
cumulative voting in the election of directors. Subject to any preferential
rights of any outstanding series of preferred stock, the holders of Common
Stock are entitled to such distributions as may be declared from time to time
by the Board of Directors from funds available therefor, and upon liquidation
are entitled to receive pro rata all assets of the Company available for
distribution to such holders. All shares of Common Stock outstanding are
fully paid and non-assessable and the holders thereof have no preemptive
rights.
53.
<PAGE>
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby has
been passed upon for the Company by William S. Clarke, P.A., Princeton, New
Jersey.
INDEPENDENT PUBLIC ACCOUNTANTS
Our consolidated balance sheets as of December 31, 1998 and December
31, 1997 and the related consolidated statements of operations, changes in
stockholders' equity (deficit) and cash flows for each of the two years in the
period ended December 31, 1998, appearing elsewhere in this Prospectus, have
been included herein in reliance on the report of N.I. Cameron Inc., chartered
accountants, given on the authority of said firm as experts in accounting and
auditing.
SOURCES
Our references to the Nature magazine article on pages 31 and 35
refer to an article entitled, "Accessibility of Information on the Web", by
Steve Lawrence and C. Lee Giles, that appeared on page 107 of the July 8,
1999 issue, volume 400. Nature is a Macmillan Magazines Ltd. publication.
54.
<PAGE>
SUITE101.COM INC.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Independent Auditors' Report..................................................................F-2
Consolidated Balance Sheets as of December 31, 1998
and December 31, 1997.........................................................................F-3
Consolidated Statements of Operations for
the years ended December 31, 1998 and December 31, 1997.......................................F-5
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the years ended December 31, 1998 and
December 31, 1997.............................................................................F-6
Consolidated Statement of Cash Flows for the years
ended December 31, 1998 and
December 31, 1997.............................................................................F-7
Notes to Consolidated Financial Statements for
the years ended December 31, 1998 and
December 31, 1997.....................................................................F-8 to F-14
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Accountants' Compilation Report..............................................................F-15
Consolidated Balance Sheets as of June 30, 1998 and
June 30, 1999................................................................................F-16
Consolidated Statements of Operations for the Six Months and
Three Months Ended June 30, 1997 and June 30, 1998...........................................F-18
Consolidated Statements of Cash Flows for the
Six Months and Three Months Ended June 30, 1999
and June 30, 1998............................................................................F-19
Notes to Consolidated Financial Statements for the
Six Months and the Three Months Ended June 30, 1999
and June 30, 1998............................................................................F-20
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Suite101.com Inc.
(formerly known as Kinetic Ventures Ltd.)
We have audited the accompanying consolidated balance sheets of Suite101.com
Inc. as of December 31, 1998 and December 31, 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for the two years
then ended. The financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Suite101.com Inc. as
of December 31, 1998 and December 31, 1997, and the results of their operations
and their cash flows for the two years then ended, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
and, at the date of this report, has no liquidity resources. The Company's
ability to continue as a going concern is dependent upon its ability to raise
additional capital or to merge with a revenue producing venture partner. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
N.I. Cameron Inc. (signed)
VANCOUVER, B.C. CHARTERED ACCOUNTANTS
February 11, 1999
F-2
<PAGE>
SUITE101.COM INC.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
-------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 10,544 $ -
Accounts receivable (Note 4) 5,129 7,177
Income taxes recoverable 1,020 -
-------------------------------------
16,693 7,177
-------------------------------------
PROPERTY, PLANT AND EQUIPMENT, at cost (Notes 3 and 4)
Computer equipment 47,159 42,612
Furniture and fixtures 688 740
Leasehold improvements 16,495 17,727
------------------------------------
64,342 61,079
Less: accumulated amortization 29,222 17,485
------------------------------------
35,120 43,594
------------------------------------
TOTAL ASSETS $ 51,813 $ 50,771
====================================
</TABLE>
F-3
<PAGE>
SUITE101.COM INC.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND DECEMBER 31, 1997
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Checks written in excess of funds on deposit $ - $ 1,578
Accounts payable 126,338 14,528
--------------------------------------
126,338 16,106
DUE TO STOCKHOLDERS (Note 4) 193,691 335,203
DUE TO AFFILIATED COMPANIES (Note 5) 42,623 69,606
--------------------------------------
TOTAL LIABILITIES 362,652 420,915
--------------------------------------
CAPITAL STOCK (NOTES 7 AND 8)
Authorized:
40,000,000 common shares with a par value of $0.001 each
Issued:
10,061,288 common shares 10,062 73
ADDITIONAL PAID-IN CAPITAL 386,261 -
DEFICIT (757,331) (383,564)
EQUITY ADJUSTMENT FROM FOREIGN
CURRENCY TRANSLATION 50,169 13,347
--------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (310,839) (370,144)
--------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 51,813 $ 50,771
======================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
SUITE101.COM INC.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
----------------------------------------
<S> <C> <C>
SALES $ 18,769 $ 6,751
OPERATING EXPENSES
General and administrative 396,057 258,255
---------------------------------------
LOSS FROM OPERATIONS (377,288) (251,504)
OTHER INCOME
Other income, net 3,521 3,623
---------------------------------------
NET LOSS $ (373,767) $ (247,881)
=======================================
INCOME (LOSS) PER SHARE
Basic and Diluted $ (0.10) $ (0.07)
=======================================
Average common shares outstanding 3,825,020 3,405,622
=======================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
Equity
Adjustment
From Total
Additional Foreign Stockholders'
Common Stock Paid-in Currency Accumulated Equity
Shares Amount Capital Translation Deficit (Deficit)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997 100 $ 73 $ - $ 693 $ (135,683) $ (134,917)
Net Loss for the Year
Ended December 31, 1997 (247,881) (247,881)
Translation Adjustments for
the Year Ended
December 31, 1997 12,654 12,654
-----------------------------------------------------------------------------------------------
Balances, December 31, 1997 100 73 - 13,347 (383,564) (370,144)
Capitalization of stockholder
loans (Note 7) 717,703 468,078 - 468,078
Adjustment of shares to reflect
Capital stock as of date of
reverse takeover 5,937,863 (461,495) 461,495 -
Issuance of shares to effect
reverse takeover (Note 2) 3,405,622 3,406 3,406
Cost of reverse takeover (Note 2) (75,234) (75,234)
Net loss for the Year Ended
December 31, 1998 (373,767) (373,767)
Translation Adjustments for
the Year Ended
December 31, 1998 36,822 36,822
-----------------------------------------------------------------------------------------------
10,061,288 $ 10,062 $386,261 $50,169 $ (757,331) $ (310,839)
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
---------------------------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss $ (373,767) $ (247,881)
Adjustment to reconcile net loss to
net cash used in operating activities
Amortization 13,392 12,699
------------------------------------
(360,375) (235,182)
Changes in operating assets and liabilities
Accounts receivable 1,602 1,745
Accounts payable and accrued expenses 113,611 4,254
Income taxes (1,020) -
------------------------------------
Net cash used in operating activities (246,182) (229,183)
------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of capital assets (7,763) (22,102)
------------------------------------
Net cash used in operating activities (7,763) (22,102)
------------------------------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Advances from (to) stockholders (124,408) 204,661
Advances from (to) affiliated companies (23,523) 33,485
Shares issued to effect reverse takeover 3,406 -
Cost of reverse takeover (75,234) -
Proceeds from issuance of common stock
to reduce stockholder loans 468,078 -
------------------------------------
Net cash provided by financing activities 248,319 238,146
------------------------------------
EFFECT OF EXCHANGE RATES ON CASH 17,748 (67)
------------------------------------
NET INCREASE (DECREASE) IN CASH 12,122 (13,206)
CASH (DEFICIENCY) AT BEGINNING OF YEAR (1,578) 11,628
------------------------------------
CASH (DEFICIENCY) AT END OF YEAR $ 10,544 $ (1,578)
====================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND DECEMBER 31, 1997
1. THE COMPANY
Suite101.com Inc. (formerly known as Kinetic Ventures Ltd. (the
"Company")) was incorporated in the State of California, United States
on May 20, 1991, and reincorporated in the State of Delaware, United
States on December 31, 1993. By way of a reverse takeover on December
8, 1998 (see Note 2) the Company acquired a wholly-owned subsidiary
i5ive communications inc. ("i5ive"). i5ive is engaged in the creation,
operation and maintenance of a World Wide Web based community.
GOING CONCERN
The accompanying consolidated financial statements have been presented
assuming the Company will continue as a going concern. At December 31,
1998, the Company had accumulated $757,331 in losses and had no
material revenue producing operations. At the date of this report, the
Company has almost no liquidity and its ability to continue as a going
concern is dependent upon its ability to raise additional capital or
merge with a revenue producing venture partner. These matters raise
substantial doubt about the Company's ability to continue as a going
concern. No adjustments have been made in the accompanying consolidated
financial statements to provide for this uncertainty.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Endovascular, Inc., a
California corporation and i5ive communications inc. a Canadian
company. All intercompany accounts and transactions have been
eliminated in consolidation. As at December 31, 1998, there were no
operations in the Company or Endovascular, Inc.
2. BUSINESS ACQUISITION BY WAY OF REVERSE TAKEOVER
By an agreement which was completed on December 8, 1998, the Company
acquired all the issued and outstanding shares of i5ive for
consideration by the issuance of 3,405,622 common shares of the
Company. The issuance of these shares and the concurrent transfer of
2,500,000 previously-issued shares to the former stockholders of i5ive
resulted in control of these companies being acquired by the former
stockholders of i5ive. In addition, the entire Board of Directors of
the Company is comprised of directors of i5ive. The business
combination is accounted for as a reverse takeover whereby the
consolidated financial statements are issued under the name of the
Company but described in the notes and elsewhere as a continuation of
i5ive and not the Company. The legal capital structure
F-8
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND DECEMBER 31, 1997
2. BUSINESS ACQUISITION BY WAY OF REVERSE TAKEOVER (CONTINUED)
remains that of the Company but the stockholders' deficit of i5ive has
replaced the stockholders' deficit of the Company.
The cost of the purchase has been based on the par value of the issued
shares of the legal parent. The cost of the purchase has been allocated
to the assets and liabilities of the legal parent as follows:
<TABLE>
<S> <C>
Cost of purchase $ 3,406
Less: Assets (1,114)
Add: Liabilities 72,942
---------
Unallocated purchase price $ 75,234
=========
</TABLE>
The unallocated purchase price has been treated for accounting purposes
as a reduction of additional paid-in capital and not to goodwill as the
nature of the transaction was for i5ive to obtain a listing on the OTC
Bulletin Board by way of reverse takeover. The cost is associated with
publicly listing shares and not with any business associated with the
Company.
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company have been prepared
in accordance with generally accepted accounting principles. Because a
precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period
necessarily involves the use of estimates which have been made using
careful judgement by management.
The consolidated financial statements have, in management's opinion,
been properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies summarized
below:
(a) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are capitalized at original cost
and amortized over their estimated useful lives at the following
annual bases and rates:
<TABLE>
<S> <C>
Computer equipment 30% declining balance
Furniture and fixtures 20% declining balance
Leasehold improvements 20% straight-line
</TABLE>
F-9
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND DECEMBER 31, 1997
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
One-half the normal amortization is taken in the year of
acquisition
(b) RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
(c) FOREIGN EXCHANGE
Unless otherwise stated, all amounts are in United States dollars.
The functional currency of i5ive is the Canadian dollar. Hence,
all asset and liability accounts have been translated using the
exchange rate as at December 31, 1998 and December 31, 1997 and
all revenues and expenses have been translated using the average
exchange rate for each period. The rates used were as follows:
<TABLE>
<CAPTION>
(equivalent Cdn $ per U.S. $) 1998 1997
---------------------
<S> <C> <C>
December 31 rate .6522 .7009
Average rate for the year .6743 .7223
</TABLE>
(d) INCOME TAXES
The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which requires the recognition of
deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial
statements or tax returns.
Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement
and the tax basis of assets and liabilities using enacted rates in
effect for the year in which the differences are expected to
reverse. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
F-10
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND DECEMBER 31, 1997
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) STOCK OPTIONS
Statement of Financial Accounting Standards No. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATION," encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES," and related interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any,
of the quoted market price of the Company's stock at the date of the
grant over the amount an employee must pay to acquire the stock.
(f) NET LOSS PER COMMON SHARE
The Company computes its loss per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "EARNINGS PER SHARE"
("EPS") issued in February 1997. SFAS No. 128 requires dual
presentation of basic EPS and diluted EPS on the face of the income
statement for entities with complex capital structures. Basic EPS is
computed as net income divided by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through stock
options, warrants and other convertible securities.
4. DUE TO STOCKHOLDERS
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
(a) Amounts payable on demand bearing interest $ 128,690 $ 335,203
at 6.5% per annum calculated semi-annually not
in advance. The loans are secured by all the assets
of i5ive. Interest on these loans has been waived
during the year.
(b) Amounts with no specific terms of repayment. 65,001 -
-------------------------------
$ 193,691 $ 335,203
===============================
</TABLE>
F-11
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND DECEMBER 31, 1997
5. DUE TO AFFILIATED COMPANIES
Amounts due to affiliated companies have no specific terms of repayment
and are interest-free. Of the total, $24,028 (1997 - $69,606) is owed to
100%-owned subsidiaries of a 14% stockholder of the Company and $18,595
(1997 - 0) is owed to a related management company.
6. RELATED PARTY TRANSACTIONS
The Company has incurred salaries of $28,319 (1997 - $22,754) to a
minority stockholder and director of the Company.
7. CAPITAL STOCK
In December 1998, i5ive issued 717,703 common shares to eliminate debt to
stockholders of $468,078.
In December 1998, 3,405,622 shares were issued for the purchase of i5ive
(see Note 2).
8. STOCK OPTIONS
THE COMPANY'S 1998 STOCK INCENTIVE PLAN
In December 1998, the Company adopted the 1998 Stock Incentive Plan (the
"Plan"). The Plan was adopted by the Board of Directors of the Company
and is subject to approval by the stockholders of the Company within
twelve months of the date the Board of Directors adopted the Plan. All
options currently outstanding under the Plan are conditioned upon the
plan receiving such approval. Under the Plan, 1,200,000 shares of Common
Stock have been reserved for issuance on exercise of options granted
under the Plan.
On the date of the closing of the Transaction with i5ive, outstanding
options granted under i5ive's 1998 Stock Incentive Plan were assumed by
the Company under the Plan and no further option grants will be made
under i5ive's Plan. The assumed options have substantially the same
terms, subject to anti-dilution adjustment, as will be in effect for
grants made under the Company's Plan.
F-12
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND DECEMBER 31, 1997
8. STOCK OPTIONS
THE COMPANY'S 1998 STOCK INCENTIVE PLAN (CONTINUED)
The Board of Directors of the Company may amend or modify the Plan at any
time, subject to any required stockholder approval. The Plan will
terminate on the earliest of (i) 10 years after the Plan Effective Date,
(ii) the date on which all shares available for issuance under the Plan
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with certain changes in control or
ownership of the Company.
As a consequence of assuming options granted under the i5ive Plan, the
Company has outstanding under the Plan options to purchase an aggregate
of 333,110 shares of Common Stock at an exercise price of $1.50. Of these
options, 278,207 will vest to the holders on December 4, 1999 and 54,903
will vest on December 4, 2000.
9. INCOME TAXES
At December 31, 1998, there were deferred income tax assets resulting
primarily from operating loss carryforwards for Canadian tax purposes
totalling approximately $300,000 less a valuation allowance of $300,000.
The valuation allowance on deferred tax assets increased by $110,300 and
$135,300 during 1997 and 1998, respectively.
At December 31, 1998, the Company had net operating loss carryforwards
for Canadian tax purposes of approximately $603,957. These carryforwards
begin to expire in 2003. During the year, the Company's U.S. loss
carryforwards were eliminated due to a change in control of the Company
and the change in the Company's operations.
10. EARNINGS PER SHARE (EPS)
Earnings per share for the years ended December 31, were computed as
follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
<S> <C> <C>
Net loss $ (373,767) $ (247,881)
Weighted average common shares outstanding 3,825,020 3,405,622
-----------------------------------
Basic and diluted EPS $ (0.10) $ (0.07)
===================================
</TABLE>
F-13
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND DECEMBER 31, 1997
11. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range
from minor errors to significant systems failure which could affect an
entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting
the entity, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
12. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments consist of cash, accounts receivable,
accounts payable and due to stockholders. It is management's opinion that
the Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments. The fair value of these
financial instruments approximate their carrying values.
F-14
<PAGE>
ACCOUNTANTS' COMPILATION REPORT
We have compiled the accompanying consolidated balance sheets of Suite101.com
Inc. as of June 30, 1999 and June 30, 1998 and the related consolidated
statements of operations and cash flows for the six-month and three-month
periods then ended in accordance with Statements on Standards for Accounting and
Review services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and accordingly, do not express
an opinion or any form of assurance on them.
N.I. Cameron Inc. (signed)
VANCOUVER, B.C. CHARTERED ACCOUNTANTS
July 16, 1999
F-15
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED - SEE ACCOUNTANTS' COMPILATION REPORT)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1999 1998
<S> <C> <C>
CURRENT ASSETS
Cash $ 4,057,447 $ 2,320
Accounts receivable 9,135 2,024
Prepaid expenses and deposits 71,500 -
-------------------------------------
4,138,082 4,344
-------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment 65,250 44,850
Furniture and fixtures 10,621 721
Leasehold improvements 11,350 17,260
-------------------------------------
87,221 62,831
Less: accumulated amortization 28,768 23,464
-------------------------------------
58,453 39,367
-------------------------------------
TOTAL ASSETS $ 4,196,535 $ 43,711
=====================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-16
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED - SEE ACCOUNTANTS' COMPILATION REPORT)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 174,404 $ 21,963
DUE TO STOCKHOLDERS - 445,736
DUE TO AFFILIATED COMPANIES - 72,550
-----------------------------------
TOTAL LIABILITIES 174,404 540,249
-----------------------------------
CAPITAL STOCK (Note 4)
Authorized:
40,000,000 common shares with a par value of $0.001 each
Issued:
12,061,288 common shares 12,062 73
ADDITIONAL PAID-IN CAPITAL 5,220,510 -
DEFICIT (1,245,566) (522,141)
EQUITY ADJUSTMENT FROM FOREIGN
CURRENCY TRANSLATION 35,125 25,530
-----------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 4,022,131 (496,538)
-----------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 4,196,535 $ 43,711
===================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-17
<PAGE>
Suite101.com Inc.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTH AND THREE-MONTH PERIODS ENDED
JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED - SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
SALES $ 426 $ - $ 842 $ 9,673
---------------------------- ---------------------------
OPERATING EXPENSES
General and administrative 270,721 80,553 482,772 150,737
Marketing 41,490 - 41,490 -
---------------------------- ---------------------------
312,211 80,553 524,262 150,737
---------------------------- ---------------------------
LOSS FROM OPERATIONS (311,785) (80,553) (523,420) (141,064)
---------------------------- ---------------------------
OTHER INCOME (EXPENSE)
Loss on disposal of leasehold improvements (8,130) - (8,130) -
Other income, net 42,987 2,154 43,313 2,486
---------------------------- ---------------------------
34,857 2,154 35,183 2,486
---------------------------- ---------------------------
NET LOSS $ (276,928) $ (78,399) $ (488,237) $ (138,578)
============================ ===========================
INCOME (LOSS) PER SHARE
Basic and Diluted (Note 5) $ (0.02) $ (0.02) $ (0.04) $ (0.04)
============================ ===========================
Weighted average common shares outstanding 11,797,551 3,405,622 10,934,216 3,405,622
============================ ===========================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-18
<PAGE>
SUITE101.COM INC.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED - SEE ACCOUNTANTS' COMPILATION REPORT)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1999 1998
-------------------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss $ (488,237) $ (138,578)
Adjustments to reconcile net loss to
net cash used in operating activities
Loss on disposal of leasehold improvements 8,130 -
Amortization 7,119 6,558
-------------------------------
(472,988) (132,020)
Changes in operating assets and liabilities
Accounts receivable (3,772) 5,093
Income taxes 1,020 -
Prepaid expenses and deposits (71,500) -
Accounts payable and accrued expenses 44,870 7,953
-------------------------------
Net cash used in operating activities (502,370) (118,974)
-------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of capital assets (36,745) (3,409)
-------------------------------
Net cash used in operating activities (36,745) (3,409)
-------------------------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Advances from (to) stockholders (198,664) 121,588
Advances from (to) affiliated companies (43,091) 4,866
Shares issued 4,836,250 -
-------------------------------
Net cash provided by financing activities 4,594,495 126,454
-------------------------------
EFFECT OF EXCHANGE RATES ON CASH (8,477) (173)
-------------------------------
NET INCREASE IN CASH 4,046,903 3,898
CASH (DEFICIENCY) AT BEGINNING OF PERIOD 10,544 (1,578)
-------------------------------
CASH AT END OF PERIOD $ 4,057,447 $ 2,320
===============================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-19
<PAGE>
SUITE101.COM INC.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED - SEE ACCOUNTANTS' COMPILATION REPORT)
1. THE COMPANY
Suite101.com Inc. (formerly known as Kinetic Ventures Ltd. (the
"Company")) was incorporated in the State of California, United States on
May 20, 1991, and reincorporated in the State of Delaware, United States
on December 31, 1993. By way of a reverse purchase acquisition on December
8, 1998 the Company acquired a wholly-owned subsidiary, i5ive
communications inc. ("i5ive"). i5ive is engaged in the creation, operation
and maintenance of a World Wide Web based community. Because of this
reverse purchase acquisition, the financial statements for June 30, 1998
and the six-month period then ended are those of i5ive and not those
originally reported for Kinetic Ventures Ltd.
GOING CONCERN
The accompanying consolidated financial statements have been presented
assuming the Company will continue as a going concern. As at June 30,
1999, the Company had accumulated $1,245,566 in losses and had no material
revenue producing operations.
2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Endovascular, Inc., a California
corporation and i5ive communications inc. a Canadian company. All
intercompany accounts and transactions have been eliminated in
consolidation. As at June 30, 1999, there were no operations in the
Company or Endovascular, Inc.
Although unaudited, the interim consolidated financial statements in this
report reflect all adjustments, consisting of normal recurring accruals,
which are, in the opinion of management, necessary for a fair statement of
financial position, results of operations and cash flows for the interim
periods covered and of the financial condition of the Company at the
interim balance sheet dates. The results of operations for the interim
periods presented are not necessarily indicative of the results expected
for the entire year.
F-20
<PAGE>
SUITE101.COM INC.
(FORMERLY KNOWN AS KINETIC VENTURES LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED - SEE ACCOUNTANTS' COMPILATION REPORT)
2. BASIS OF PRESENTATION (CONTINUED)
These consolidated financial statements should be read in conjunction with
the Company's audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
3. FOREIGN EXCHANGE
Unless otherwise stated, all amounts are in United States dollars. The
functional currency of i5ive is the Canadian dollar. Hence, all asset and
liability accounts have been translated using the exchange rate as at June
30, 1999 and June 30, 1998 and all revenues and expenses have been
translated using the average exchange rate for each period. The rates used
were as follows:
<TABLE>
<CAPTION>
(equivalent Cdn $ per U.S. $) 1999 1998
-----------------------
<S> <C> <C>
June 30 rate .6835 .6825
Average rate for the three-month period .6790 .6912
</TABLE>
4. CAPITAL STOCK
In April 1999, the Company completed a private placement of 1,000,000
units for $5,000,000. Each unit was comprised of two common shares and one
warrant entitling the holder to purchase an additional common share for
$4.50 on or before February 29, 2000. To date, none of these warrants have
been exercised. The Company incurred $163,750 in expenses concerning this
share issuance.
5. EARNINGS PER SHARE
The calculation of fully diluted earnings per share has excluded any
potential exercise of warrants or options, as the inclusion of these items
would be anti-dilutive.
F-21
<PAGE>
PART II - INFORMATION NOT REQUIRED IN
PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law and Article Five,
Section 5.1 of the Registrant's By-Laws provide for indemnification of present
and former officers, directors, employees and agents.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the issuance and distribution of the
securities being registered hereunder, other than underwriting commissions and
expenses, are estimated to be as follows:
<TABLE>
<S> <C>
Registration Fee $ 2,207.00
------------
Printing Expenses $ *
------------
Accounting Fees and Expenses $ *
------------
Legal Fees and Expenses $ *
------------
State Securities Law Fees and Expenses $ *
------------
Transfer Agent and Registrar Fees and Expenses $ *
------------
Miscellaneous Expenses $ *
------------
TOTAL $ *
------------
</TABLE>
- ---------------------
* To be provided by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Registrant has issued the following
unregistered securities.
1. During the months of March and April 1999 the Registrant
sold 1,000,000 Units of securities, each Unit consisting of two (2) shares of
Common Stock, par value $0.001 per share, and one (1) warrant expiring
February 29, 2000 to purchase one (1) share of Common Stock at an exercise
price of $4.50 per share. The Units were purchased by 38 persons all of whom
were "accredited investors" as defined in Regulation D under the Securities
Act of 1933, as amended (the "Securities Act"). Restrictive legends were
affixed to the share certificates and
II-1
<PAGE>
stop transfer instructions were given to the Registrant's transfer agent
restricting transfer without compliance with the registration requirements of
the Securities Act. The Registrant relied on the exemption from the
registration requirements of the Securities Act provided by Regulation D and
Section 4(2) of the Securities Act.
2. On December 10, 1999, in connection with its acquisition of
the outstanding capital stock of i5ive communications, Inc., the Registrant
issued an aggregate of 3,405,622 shares of Common Stock to Northfield Capital
Corporation and 284085 BC, Ltd. Restrictive legends were affixed to the share
certificates and stop transfer instructions were given to the Registrant's
transfer agent restricting transfer without compliance with the registration
requirements of the Securities Act. The Registrant relied on the exemption
from the registration requirements of the Securities Act provided by Section
4(2) of the Securities Act.
3. In December 1997, the Registrant sold 5,000,000 shares of
Common Stock to Benitz & Partners Limited for $300,000. The purchaser
represented that it was an "accredited investor" as defined under Regulation
D under the Securities Act and that it was acquiring the shares for
investment and not with a view to distribution Restrictive legends were
affixed to the share certificates and stop transfer instructions were given
to the Registrant's transfer agent restricting transfer without compliance
with the registration requirements of the Securities Act. The Registrant
relied on the exemption from the registration requirements of the Securities
Act provided by Section 4(2) of the Securities Act.
II-2
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
------------------------ -----------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation filed with the State of
Delaware December 15, 1993(1)
3.2 Plan and Agreement of Merger filed with the state of
Delaware on December 31, 1993(1)
3.3 Certificate of Amendment filed with the State of
Delaware on March 20, 1997(2)
3.4 Certificate of Correction filed with the State of
Delaware on April 7, 1997(2)
3.5 Certificate of Amendment filed with the State of
Delaware on November 25, 1998(3)
3.6 Certificate of Amendment filed with the State of
Delaware on December 4, 1998(3)
3.7 By-laws of the Registrant(1)
5.1* Opinion of William S. Clarke, P.A.
21 Subsidiaries of the Registrant:
NAME STATE OF INCORPORATION
i5ive communications, Inc. British Columbia
23.1 Consent of N.I. Cameron Inc.
II-3
<PAGE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
------------------------ -----------------------------------------------------
<S> <C>
23.2 * Consent of William S. Clarke, P.A. (included in
Exhibit 5.1)
24 Power of Attorney (included in the Signature Pages of
this Registration Statement)
</TABLE>
- -----------------------------
* to be filed by amendment
(1) Filed as an exhibit to the Registrant's registration statement on Form
10-SB.
(2) Filed as an exhibit to the Registrant's Current Report on Form 8-K
dated March 20, 1997.
(3) Filed as an exhibit to the Registrant's Current Report on Form 8-K
dated December 10, 1998.
II-4
<PAGE>
ITEM 28. UNDERTAKINGS
A. The undersigned Registrant hereunder undertakes:
(1) to file, during any period in which it offers or
sells securities, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Act");
(ii) reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) include any additional or changed material
information on the plan of distribution.
(2) That, for the purpose of determining liability
under the Act, to treat each such post-effective amendment as a new
Registration Statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(4) For purposes of determining any liability under
the Act, to treat the information omitted from the form of prospectus filed
as part of a registration statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Act as part of this registration statement as of
the time the Commission declared it effective.
(5) For determining any liability under the Act, to
treat each post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
B. Insofar as indemnification for liabilities arising under
the Act may be permitted to directors, officers and controlling persons of
the Small Business Issuer pursuant to the foregoing provisions, or otherwise,
the Small Business Issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Small Business Issuer of expenses incurred or paid
II-5
<PAGE>
by a director, officer or controlling person of the Small Business Issuer in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Small Business Issuer will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2, and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Vancouver, Province of British Columbia, on August 16, 1999.
SUITE101.COM, INC.
By: /s/ Peter L. Bradshaw
------------------------------------
Peter L. Bradshaw, President,
Chief Executive Officer
and Chief Financial Officer
In accordance with the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<S> <C> <C>
/s/ Peter L. Bradshaw Director, President, Chief Executive August 16, 1999
- ----------------------------------- Officer and Chief Financial Officer
Peter L. Bradshaw (Principal Executive Officer and
Principal Financial and Accounting Officer)
Julia M. Bradshaw
/s/ Peter L. Bradshaw
(pursuant to power of attorney) Director August 16, 1999
- -----------------------------------
Sunny Hirai
/s/ Peter L. Bradshaw
(pursuant to power of attorney) Director August 16, 1999
- -----------------------------------
Mitchell G. Blumberg
/s/ Peter L. Bradshaw
(pursuant to power of attorney) Director August 16, 1999
- -----------------------------------
Alfred J. Puchala, Jr.
/s/ Peter L. Bradshaw
(pursuant to power of attorney) Director August 16, 1999
- -----------------------------------
</TABLE>
II-7
<PAGE>
SUITE101.COM, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned
directors and officers of Suite101.com, Inc. a Delaware corporation, which is
filing a Registration Statement on Form SB-2 with the Securities and Exchange
Commission, Washington, D.C. 20549 under the provisions of the Securities Act
of 1933, as amended (the "Securities Act"), hereby constitutes and appoints
Peter L. Bradshaw and Julia M. Bradshaw, and each of them, the individual's
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for the person and in his name, place and stead, in any
and all capacities, to sign such Registration Statement and any or all
amendments, including post-effective amendments, to the Registration
Statement, including a Prospectus or an amended Prospectus therein and any
registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act, and all other
documents in connection therewith to be filed with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact as agents or any of
them, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Peter L. Bradshaw Director, President, Chief Executive August 16, 1999
- ----------------------------------- Officer and Chief Financial Officer
Peter L. Bradshaw (Principal Executive Officer and
Principal Financial and Accounting Officer)
/s/ Julia M. Bradshaw Director August 16, 1999
- -----------------------------------
Julia M. Bradshaw
/s/Sunny Hirai Director August 16, 1999
- -----------------------------------
Sunny Hirai
/s/ Mitchell G. Blumberg Director August 16, 1999
- -----------------------------------
Mitchell G. Blumberg
/s/ Alfred J. Puchala, Jr. Director August 16, 1999
- -----------------------------------
Alfred J. Puchala, Jr.
</TABLE>
II-8
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion/incorporation by reference in the
Prospectus constituting part of this Registration Statement on Form SB-2 (File
No. 333-__________) of our report dated February 11, 1999, on our audits of the
consolidated financial statements of Suite101.com, Inc. and Subsidiaries.
N.I. Cameron Inc. (signed)
VANCOUVER, B.C. CHARTERED ACCOUNTANTS
August 18, 1999
