<PAGE>
As Filed with the Securities and Exchange Commission on June 7, 2000
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 Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
SUITE 390 - 1122 MAINLAND STREET,
VANCOUVER, BRITISH COLUMBIA, CANADA V6B 5L1
(604) 682-1400
--------------------------------------------------------------------------------
(Address, and telephone number, of principal executive offices)
SUITE 390 - 1122 MAINLAND STREET,
VANCOUVER, BRITISH COLUMBIA, CANADA V6B 5L1
--------------------------------------------------------------------------------
(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
--------------------------------------------------------------------------------
(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. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
----------------------------------------------------------------------------------------------------------------------
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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<S> <C> <C> <C> <C>
Common Stock, 922,068 $922,068(1) $922,068 $243.00
$.001 par value
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Common Stock, 625,000(2) $5.00(3) $3,125,000 $825.00
$.001 par value
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Common Stock, 54,440(2) $5.50(3) $299,420 $79.00
$.001 par value
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Common Stock, 25,000(2) $4.96(3) $124,000 $33.00
$.001 par value
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TOTAL $1,180.00
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</TABLE>
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(1) The registration fee has been calculated in accordance with rule
457(c). On May 31, 2000, the average of the closing price for the Company's
Common Stock on the OTC Bulletin Board was $1.00.
(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.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 7, 2000
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 1,626,508 shares of our Common Stock. Of such shares, an aggregate of 922,068
shares are issued and outstanding and 704,440 shares are issuable on exercise of
outstanding common stock purchase warrants.
Our Common Stock is quoted on the OTC Bulletin Board(R) with a trading
symbol of "BOWG." On May 23, 2000, the closing bid quotation of our Common Stock
as reported on the OTC Bulletin Board(R) was $1 5/8.
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 7 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 JUNE [ ], 2000
<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.
2
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary............................................................................4-6
Risk Factors.................................................................................7-21
Cautionary Statement for Purposes of The "Safe Harbor" Provisions of
The Private Securities Litigation Reform Act of 1996...........................................22
Use of Proceeds................................................................................23
Price Range of Common Stock....................................................................24
Dividend Policy................................................................................25
Capitalization.................................................................................25
Management's Discussion and Analysis of
Financial Condition or Plan of Operation....................................................26-30
Business of the Company.....................................................................31-44
Management..................................................................................45-46
Executive and Director Compensation............................................................47
Certain Relationships and Related Transactions.................................................47
Principal and Other Stockholders............................................................48-49
Selling Securityholders.....................................................................50-51
Plan of Distribution...........................................................................51
Description of Capital Stock...................................................................52
Legal Matters..................................................................................53
Independent Public Accountants.................................................................53
Financial Statements...................................................................F-1 et seq
</TABLE>
3
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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. Since 1996, our Contributing Editors, who are
typically enthusiasts with a passion for a particular topic, have created a
topically organized directory with over 32,000 hand-picked and personally
reviewed links. At the end of May 2000, we had over 1,000 Web guides or
"Contributing Editors" searching the Internet for the best resources in over
1,000 topic areas.
In addition to compiling the directory, our Contributing Editors have also
written close to 27,000 searchable, archived articles and managed 26,000
discussions in 1,000 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.com 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.
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THE OFFERING
Offering of Common Stock by the Selling Stockholders (1) 1,626,508 shares
Shares to be outstanding after the Offering of Common Stock 13,859,486 shares
and exercise of the warrants, assuming all the warrants are
exercised.(2)
------------------------------
(1) Includes 922,068 shares that are issued and outstanding and 704,440
shares issuable on exercise of common stock purchase warrants. The warrants are
exercisable at prices ranging from $4.96 to $5.50 per share and expire on dates
commencing on February 17, 2002 through July 15, 2002.
(2) Based on the number of shares of Common Stock outstanding on May 10,
2000.
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 $3,548,420.
Market Symbol (OTC Bulletin Board) BOWG
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."
5
<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, 1999 and the three-month periods ended March 31, 1999 and March 31, 2000.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, QUARTER ENDED MARCH 31
1998 1999 1999 2000
---- ---- ---- ----
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Sales $18,769 $1,925 $416 $413
Operating expenses $396,057 $1,687,850 $212,051 $865,047
Loss from operations $(377,288) $(1,685,925) $(211,635) $(864,634)
Net loss $(373,767) $(1,548,429) $(211,309) $(785,896)
Net loss per share $(0.10) $(0.13) $(0.02) $(0.06)
(basic and diluted)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999 AS OF MARCH 31, 2000
----------------------- --------------------
(AUDITED) (UNAUDITED)
--------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash $2,847,438 $9,321,525
Working capital $2,824,655 $6,974,788
Total assets $3,059,059 $9,776,696
Stockholders' equity $2,970,371 $7,121,783
</TABLE>
6
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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.
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 March 31, 2000, our total revenues from our
Internet operations activities were negligible. During that period, we
accumulated losses of $3,091,656. 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 May
31, 2000, we had approximately 200,000 Members and had grown from 35
Contributing Editors in October 1996 to over 1,000 in May 2000. During the month
of April 2000, our site received approximately 4.5 million page views, according
to PC Data Online. We cannot assure you that such growth rates are sustainable.
Our business plan is to continue to expand our numbers of visitors, Members and
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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 17 full-time employees.
Accordingly, there can be no 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 communications inc. ("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
8
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- 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.
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
9
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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 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, 1999 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. In February 2000, we realized gross proceeds of $4,500,000 from the
exercise of warrants issued in a 1999 private sale of securities. Also in
February 2000, we realized gross proceeds of $2,500,000 from a private sale of
our securities. During the first quarter of 2000, we also realized gross
proceeds of approximately $205,000 on the exercise of stock options under the
1998 Stock Incentive Plan and from the exercise of warrants. At March 31, 2000,
our cash was $9,321,525. In April 2000, we used approximately $2,531,000 of
these funds to prepay the outstanding principal and accrued interest on the
promissory notes we sold in February, 2000 which were scheduled to mature on
June 30, 2000.We believe these cash resources 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.
10
<PAGE>
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.
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.
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<PAGE>
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 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 strategic relationships with various 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 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
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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 providers, 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
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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. In order to build our brand awareness
we have launched a brand-enhancing campaign that will include online
advertising, promotional programs targeted at Members and visitors, and other
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,
as well as systems licensed from others. Our 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 our 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 our Web site which will 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.
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
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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 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 enacted the Internet Tax Freedom Act on October 21, 1998 which imposes
a national moratorium in the United States on state and local taxes on Internet
access services, on-line services, and multiple or discriminatory taxes on
electric commerce effective October 1, 1998 and ending three years after its
enactment. There can be no assurance 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. 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
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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.
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.
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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 we intend that our
agreements with these parties will 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.
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
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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.
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 our 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
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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 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.
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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 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.
As of May 10, 2000, our Directors and Northfield Capital Corporation, and
their respective affiliates, in the aggregate, beneficially owned approximately
4,321,272 shares or 32.8% 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.
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
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Stock will be sustained or that the market price of our Common Stock will not
decline or fluctuate widely 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 May 10, 2000, 13,155,046 shares of common stock outstanding. Of such
shares, 4,321,272 shares were held by Directors of the Company, 284085 BC Ltd.
and Northfield Capital Corporation. Substantially all of such shares 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 for an exemption from registration under Rules 144, 144(k) or
701 promulgated under the Securities Act. We believe that approximately
8,833,774 shares of our Common Stock may be transferred freely under U.S.
Federal securities laws. 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.
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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 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 - Suite101.com, Inc.", "Risk Factors", "Dividend
Policy", "Management's Discussion and Analysis of Financial Condition or Plan of
Operation", and "Business of the Company". Forward-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 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 and
establish strategic relationships 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 various risk factors accompany those forward looking statements and are
described, among other places, under the caption "Risk Factors" herein,
beginning on page seven. They are also described in our Annual Report on Form
10-KSB for the year ended December 31, 1999, beginning on page 25, 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. We 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
will be used for general corporate purposes. If all the Warrants were exercised
at their current exercise prices, we would receive gross proceeds of $3,548,420.
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 May 23, 2000.
<TABLE>
<CAPTION>
BID
---------------------------------------------------------
CALENDAR QUARTER HIGH LOW
-----------------------------------------------------------------------------------------------
<S> <C> <C>
1999: First Quarter $7.88 $2.00
1999: Second Quarter $11.31 $3.25
1999: Third Quarter $4.38 $1.06
1999: Fourth Quarter $4.25 $0.63
2000: First Quarter $11.00 $2.97
2000: Second Quarter (through $7.38 $1.59
May 23, 2000)
</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 May 24, 2000, the closing bid quotation for the Common
Stock, as reported on the OTC Bulletin Board was $1.31.
As of May 10, 2000, Suite101.com had approximately 131 shareholders of
record.
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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 March 31, 2000:
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
--------------------
<S> <C>
Cash $9,321,525
Capital Stock
Authorized: 40,000,000 common shares, par value $0.001 $13,147
per share, issued 13,146,233 common shares
Deferred Compensation $(362,322)
Additional paid-in capital $10,546,032
Deficit $(3,091,656)
Equity adjustment from foreign currency translation $13,582
Total stockholders' equity $7,121,783
Total liabilities and stockholders equity $9,776,696
</TABLE>
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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
Internet sites to engage people rather than software (search engines) to find
information on the Internet. At the end of May 2000, we have over 1,000 Web
guides or "Contributing Editors" searching the Internet for the best resources
in over 1,000 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 over 32,000 hand-picked and personally reviewed links. In addition to
compiling the directory, our Contributing Editors have also written close to
27,000 searchable, archived articles and managed over 26,000 discussions in
1,000 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.com
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 our Members. We intend 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 our Member-centric
database, we intend to offer our eVendors a unique opportunity to market
one-to-one to a very loyal and focused community.
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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 will be marketed and the transaction
will 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
A COMPARISON OF OUR OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND THE THREE MONTHS ENDED MARCH 31, 1999
During the three months ended March 31, 2000, our sales were $413 compared
with sales of $416 during the three months ended March 31, 1999. Sales in both
periods were primarily attributable to software licensing revenues of i5ive.
General and administrative expenses were $645,831 in the three months ended
March 31, 2000 compared with $212,051 during the three months ended March 31,
1999. This increase was primarily the result of the increase in the number of
our Contributing Editors, an increase in the number of personnel we employed, an
increase in the use of consultants, and the increased scale of our operations.
Marketing expenses were $219,216 during the three months ended March 31, 2000
compared with $-0- during the same three month period in 1999. This was the
consequence of our marketing activities aimed at increasing membership and
building the Suite101.com brand that commenced during the second quarter of
1999.
Our Loss From Operations was $864,634 in 2000 compared with $211,635 in
1999. The increase in our Loss From Operations in 2000 compared with 1999 was
the result of the increase in our operating expenses.
Other income was $78,738 in 2000 compared with $326 in 1999. The increase
was the result of interest earned on bank balances.
Our Net Loss was $785,896 in 2000 compared with $211,309 in 1999. The
increase in our Net Loss in 2000 compared with 1999 was the result of the
increase in the scale of our operations and the related increase in operating
expenses.
A COMPARISON OF OUR OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND
THE YEAR ENDED DECEMBER 31, 1998
During the year ended December 31, 1999, our sales were $1,925 compared
with sales of $18,769 during 1998. The decrease resulted from a decision made by
management to focus efforts on the development of the Suite101.com community.
Sales in 1999 were primarily attributable to software licensing revenues of
i5ive.
Operating expenses also increased during the year ended December 31, 1999
to $1,687,850 from $396,057 during the year ended December 31, 1998. Expenses in
1999 primarily related to general and administrative expenses of i5ive resulting
from increased Contributing Editor recruitment and additional employees. We pay
each of our Contributing Editors between $15 and $25 per month. Additional
expenses were also the result of purchases of computer hardware and Member
recruitment.
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The loss from operations for the year ended December 31, 1999 was
$1,685,925 compared with $377,288 during 1998.
Other income in 1999 was $137,496 compared with $3,521 in 1998. The
increase was primarily the result of interest earned on higher cash balances
carried in 1999.
Our net loss in 1999 was $1,548,429 compared with a net loss of $373,767 in
1998. The increased net loss was the result of our increased scale of operations
and level of expenditures in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The report of our independent auditors on their audit of our financial
statements as of December 31, 1999 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. In February 2000, we realized gross proceeds of $4,500,000 from the
exercise of warrants issued in a 1999 private sale of securities. Also in
February 2000, we realized gross proceeds of $2,500,000 from a private sale of
our securities. During the first quarter of 2000, we also realized gross
proceeds of approximately $205,000 on the exercise of stock options under the
1998 Stock Incentive Plan and from the exercise of warrants. At March 31, 2000,
our cash was $9,321,525. In April 2000, we used approximately $2,531,000 of
these funds to prepay the outstanding principal and accrued interest on the
promissory notes we sold in February, 2000 which were scheduled to mature on
June 30, 2000. We believe these cash resources 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
enter into strategic alliances, 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
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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 our inception in April 1996 through June 30, 1998, Northfield Capital
Corporation and 284085 BC Ltd., our principal shareholders, advanced to us the
sums of $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 proceeds from the private sale of securities.
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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 May 31,
2000, we had over 1,000 Contributing Editors publishing articles, facilitating
discussion threads, hosting online "chats," and contributing to Suite101.com's
"Best-of-Web Guide," a directory of links to top Web sites. As of that date, the
Contributing Editors had published and archived close to 27,000 articles on over
1,000 topics ranging from "artists" and "children's books" to "herb gardening"
and "virtual journeys," managed over 26,000 discussion threads, and created a
Web directory with over 32,000 hand-picked and reviewed links.
According to PC Data Online, our Web site attracted over 4.5 million page
views in April, 2000, compared to 2.26 million page views in April, 1999. Of
those visitors, approximately 200,000 as of April 30, 2000, had become Members,
compared to 32,300 Members on December 31, 1998.
We believe that the demographic profile of the Suite101.com Members is
unique compared to other Internet-based communities. While we believe others
tend to attract younger, unmarried male users, the Suite101.com community
through May 2000 has attracted primarily older (median age: 35), married (51
percent), female users (51 percent). Seventy-two 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 304.36 million users on the Internet today (with 136.86 million in
Canada and the US alone), the Internet is the largest conglomeration of authors
ever assembled, according to Nua Surveys (http://www.nua.ie/surveys, March
2000).
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
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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.
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.
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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.COM 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" 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 over
1,000 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 over 1,000 as of May 31, 2000 with a current backlog of over 150 completed
applications from prospective Contributing Editors. Through May 2000,
Suite101.com's Contributing Editors have created a Web directory with over
32,000 hand-picked and reviewed links, published and archived close to 27,000
articles, and managed over 26,000 discussion threads. Our site has over 1,000
topic areas and in April 2000, according to PC Data Online, we had over 4.5
million page views.
COMMUNITIES OF INTEREST. The content of Suite101.com is organized into 11
major subjects or "Communities of Interest:"
1. Arts and Humanities; 7. Home & Garden;
2. Business; 8. Law, Politics, & Issues;
3. Computers & Internet; 9. Society & Culture;
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4. Education; 10. Sports & Recreation; and
5. Entertainment & Media; 11. Travel & Leisure
6. Health;
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.com 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 participation of our Members and Editors, the
greater their loyalty and affinity to Suite101.com 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, e-mail and chat, 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
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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 over 1,000 topic areas (as of May
31, 2000). 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 states 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.
THE SUITE101.COM E-COMMERCE PROGRAM
OVERVIEW
To begin generating revenue without changing the nature of our community,
we intend to implement an e-commerce program that will help our 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, our
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.com 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-
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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.
The technology behind the Internet gives individuals an opportunity to
create their own loyalty programs. Suite101.com 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.com 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.
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- 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.
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.com.
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.com 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.com
eVendor, 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 eVendors will participate in
our consensual direct marketing program. Unlike other forms of direct marketing,
our program will mean eVendors 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 eVendors one-to-one contact with the consumer, our
Member. We believe that
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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.
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.com
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.com community.
To achieve this goal, working with an independent 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 approximately 200,000 currently to
250,000,
- Build the Suite101.com brand,
- Continue to enhance site functionality and performance, and
- Implement the e-commerce strategy.
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<PAGE>
- 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. To help achieve this
goal, we implemented a marketing plan beginning during 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 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, our 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 our Marketing Plan, we intend to raise the "brand
recognition," that is, our profile, among three target markets:
- The "general" Internet audience;
- Existing Editors and Members; and
- Investors, potential partners and the media
Approximately US$1.2 million has been allocated to the marketing and
promotion of the Suite101.com brand over the next year. Planned activities
include advertising in online media (banners, buttons, email campaigns), public
relations, sponsorships and strategic partnerships.
In addition, we intend to pursue a variety of distribution arrangements
with other Internet-based companies to raise the profile of our brand. We also
plan to introduce an "internal" promotional campaign --"SuiteGiving"-- to
increase brand awareness among our visitors, current Members and Contributing
Editors. We believe 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
We believe that continually providing visitors and Members with greater
functionality and performance is critical to our 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. In
September 1999, we redeveloped the site interface to insure increase usability
and accommodate additional functionality such as personal Home Pages, Web-based
e-mail, and
39
<PAGE>
electronic postcards. In 2000, we moved our servers to an outside facility
located in Vancouver, British Columbia. This move, we believe, increased the
stability of our site and increased the bandwidth by approximately 700 times,
thereby improving connection time.
We intend to further upgrade and expand our technological infrastructure to
provide faster and more reliable access and to ensure that the site's hardware
and software is scalable to handle much higher usage. The planned upgrades 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
- E-commerce and privacy tools,
- Upgraded electronic postcards,
- Upgraded personal HomePages,
- Chat room upgrades,
- Member-centric psycho-demographic profiles,
- PC-to-PC telecommunications, and
- SuitePoints (micropayments).
We believe 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, we intend to mobilize as
many suppliers of products and services relevant to our membership as possible.
But we do not intend to take inventory in the products and services of our
eVendors. Instead, we intend to help these providers deliver appropriate
marketing messages to Members who have agreed to participate in a particular
promotion. We also intend 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 our 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.com e-commerce program. Our ability to do this will stem from our
ability to build a broad information profile of each Member. By
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<PAGE>
helping Members get as much value as possible for these profiles --while
protecting them from abuse --Suite101.com 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. We intend to provide the
following to our Members:
- 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 Suite101.com 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 developed a web application framework that is built on Allaire's
Cold fusion Application Server 4.0 for Microsoft windows NT and Microsoft's SQL
Server 7.0. The web site is load balanced on multiple Windows NT servers running
Microsoft Internet Information Server using F5 BigIP load balancing
hardware/software solution. In an event that one of the web servers becomes
non-operational, all website traffic will fail over on to a secondary web
server. In an event that all web servers become non-operational, system alerts
will be sent to operations staff via email and pager. All web servers will
restart automatically after a pre-determined length of time.
Member-generated content is stored on multiple Microsoft SQL Server 7.0
databases that are replicated in real time to a backup SQL server. In an event
that one of the database servers becomes non-operational, the backup database
server will take over as primary production database server. Our database is
backed up to permanent storage on a daily basis and a weekly backup is kept off
site for one year.
Our network servers are co-located at a data center in Vancouver, British
Columbia. Site connectivity to the Internet is provided via a dedicated 100Mb/s
line provided on a 24-hour per day, seven days per week basis by the data
center. Any interruption in the service received from other providers, or any
failure of the data center 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
41
<PAGE>
financial condition. We will continue to upgrade and expand our server and
networking infrastructure in an effort to improve its fast and reliable access
to our community web site. 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.
EMPLOYEES
As of May 31, 2000, we had 17 full-time employees, including 12 in
operations and development and four 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.
COMPETITION
The market for community based e-commerce on the Internet is new and
rapidly evolving. 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 OSPs, sites
maintained by 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 providers, 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
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<PAGE>
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.
DESCRIPTION OF PROPERTY
Our executive offices and computer operations are currently located in
Vancouver, British Columbia, Canada in approximately 2,150 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 $31,400. We consider
these premises adequate for our existing operations.
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.
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LEGAL PROCEEDINGS
No legal proceedings are pending against us other than ordinary litigation
incidental to our business, the outcome of which we believe will not have a
material adverse effect on us.
44
<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 66 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 markets 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.
Cara Williams 37 Ms. Williams has been employed as Vice President, Finance
and principal accounting and financial officer of our
company since April 2000. She is a Chartered Accountant.
She was employed by PricewaterhouseCoopers LLP from
October 1997 to March 2000 and by Ellis Foster, Chartered
Accountants, from February 1993 to September 1997. She
received a BBA degree with a major in accounting from
Simon Fraser University in 1987.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
NAME AGE EMPLOYMENT HISTORY
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Julie M. Bradshaw 37 Ms. Bradshaw, a co-founder of i5ive, has been a Director
of i5ive since April 1996 and 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.
Mitchell G. Blumberg 56 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
currently with Blumberg Productions and Management. 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. 39 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. 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.
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<PAGE>
EXECUTIVE AND DIRECTOR COMPENSATION
During the year ended December 31, 1999, none of our officers or Directors
received compensation for serving in that capacity. Mr. Peter L. Bradshaw is
currently receiving compensation at the rate of (US) $80,000 per annum.
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.
From time to time, we use consultants to assist us, and we plan to
compensate them by the issuance of options to them.
CERTAIN RELATIONSHIPS AND 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.com, 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.
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<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 Directors and officers
as a group, as of May 10, 2000. As of May 10, 2000, we had 13,155,046 shares of
Common Stock outstanding.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner (1) Number of Shares Beneficially Percentage of Outstanding Common
Owned(2) Stock
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter L. Bradshaw 1,456,565(3)(5) 11.06%
Julie M Bradshaw 825,071(6) 6.26%
Mitchell G. Blumberg 85,000(4) 0.64%
833 Moraga Drive - #12
Los Angeles, CA 90049
Alfred J. Puchala, Jr 135,000(5) 1.02%
Signal Partners, LLC
10 East 53rd Street
New York, NY 10022
Northfield Capital Corporation 2,007,136 15.26%
350 Bay Street, Suite 1100
Toronto, Ontario, Canada M5H 2S6
284085 B.C. Ltd.
1122 Mainland Street - suite 390
Vancouver, BC, Canada V6B 5L1 1,456,565 11.06%
All officers and directors as a group
(4 persons) 2,501,636 18.75%
</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 May 10, 2000.
(3) Shares held by 284085 B.C. Ltd. of which Mr. Bradshaw is an officer,
Director and principal shareholder.
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<PAGE>
(4) Includes 75,000 shares issuable on exercise of an option.
(5) Includes 20,000 shares issuable on exercise of an option.
(6) Includes 17,500 shares issuable on exercise of an option.
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<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth the aggregate numbers of securities
beneficially owned by each Selling Securityholder as of April 30, 2000 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 OFFERED FOR SELLING
SECURITYHOLDERS' ACCOUNT
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Management Holding Co. 35,000(1) 35,000
Brimstone Limited 250,000(1) 250,000
Mezzacappa Berens, L.P. 20,000(1) 20,000
SM Investors, L.P. 70,000(1) 70,000
Whitmill Nominees Limited 250,000(1) 250,000
Brant Investments Limited 436,034 436,034
Falconberg Corporation 436,034 436,034
Boston Financial Partners, Inc. 75,440(2) 75,440
Grosvenor Capital Ltd. 14,000(2) 14,000
Peter Legault 3,000(2) 3,000
Don Ross 12,000(2) 12,000
KPMG, LLP 25,000(3) 25,000
</TABLE>
---------------------------------
(1) Includes shares of common stock issuable on exercise of warrants
expiring July 15, 2002 exercisable at $5.00 per share.
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<PAGE>
(2) Includes shares of common stock issuable on exercise of warrants expiring
February 28, 2002 exercisable at $5.50 per share.
(3) Includes shares of common stock issuable on exercise of warrants expiring
February 17, 2002 exercisable at $4.96 per share.
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(R)
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.
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<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 May 10, 2000, 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.
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<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, 1999 and December 31,
1998 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, 1999, 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.
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<PAGE>
SUITE101.COM INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS
December 31, 1999 and 1998 (Audited)
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in
Stockholders' Equity (Deficit) F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 to F-14
March 31, 2000 and March 31, 1999 (Unaudited)
Independent Accountants' Review Report F-15
Consolidated Balance Sheets at March 31, 2000 and
March 31, 1999 F-16
Consolidated Statements of Operations For the Three
Month Periods Ended March 31, 2000 and
March 31, 1999 F-17
Consolidated Statements of Cash Flows For the Three
Month Periods Ended March 31, 2000 and
March 31, 1999 F-18
Notes to Consolidated Financial Statements F-19 to F-29
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Suite101.com Inc.
We have audited the accompanying consolidated balance sheets of Suite101.com
Inc. as of December 31, 1999 and December 31, 1998 and the related consolidated
statements of operations, stockholders' equity (deficit) 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 the Company as of
December 31, 1999 and December 31, 1998, 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 experienced accumulated losses and has had
no material revenue producing operations to date. 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.
VANCOUVER, B.C. CHARTERED ACCOUNTANTS
March 14, 2000
F-2
<PAGE>
SUITE101.COM INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
--------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,847,438 $ 10,544
Accounts receivable 27,241 5,129
Income taxes recoverable - 1,020
Prepaid expenses 38,664 -
--------------------------------------
2,913,343 16,693
--------------------------------------
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 3)
Computer equipment 173,004 47,159
Furniture and fixtures 12,774 688
Leasehold improvements 11,845 16,495
--------------------------------------
197,623 64,342
Less: accumulated amortization 51,907 29,222
--------------------------------------
145,716 35,120
--------------------------------------
TOTAL ASSETS $ 3,059,059 $ 51,813
======================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 88,688 $ 126,338
DUE TO STOCKHOLDERS - 193,691
DUE TO AFFILITATED COMPANIES - 42,623
--------------------------------------
TOTAL LIABILITIES 88,688 362,652
--------------------------------------
CAPITAL STOCK (Notes 5, 6 and 10)
Authorized:
40,000,000 common shares with a par value of $0.001 each
Issued:
12,061,837 common shares 12,062 10,062
DEFERRED COMPENSATION (99,792) -
ADDITIONAL PAID-IN CAPITAL 5,354,504 386,261
DEFICIT (2,305,760) (757,331)
EQUITY ADJUSTMENT FROM FOREIGN
CURRENCY TRANSLATION 9,357 50,169
--------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 2,970,371 (310,839)
--------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 3,059,059 $ 51,813
======================================
COMMITMENTS AND SUBSEQUENT EVENTS (NOTE 10)
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
SUITE101.COM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 1998
--------------------------------------
<S> <C> <C>
SALES $ 1,925 $ 18,769
--------------------------------------
OPERATING EXPENSES
General and administrative 1,443,790 396,057
Marketing 244,060 -
--------------------------------------
1,687,850 396,057
--------------------------------------
LOSS FROM OPERATIONS (1,685,925) (377,288)
--------------------------------------
OTHER INCOME (EXPENSES)
Other income, net 145,626 3,521
Loss on disposal of leasehold improvements (8,130) -
--------------------------------------
137,496 3,521
--------------------------------------
NET LOSS $ (1,548,429) $ (373,767)
======================================
INCOME (LOSS) PER SHARE
Basic and Diluted $ (0.13) $ (0.10)
======================================
Average common shares outstanding 11,502,387 3,825,020
======================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
SUITE101.COM INC.
CONSOLIDATED OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
Equity
Adjustment
From Total
Additional Foreign Stockholders'
Common Stock Paid-in Deferred Currency Accumulated Equity
Shares Amount Capital Compensation Translation Deficit (Deficit)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1998 100 $ 73 $ - $ - $ 13,347 $ (383,564) $ (370,144)
Capitalization of stockholder
loans (Note 5) 717,703 468,078 - - - - 468,078
Adjustment of shares to reflect
capital stock as of date
reverse takeover 5,937,863 (461,495) 461,495 - - - -
Issuance of shares to effect
reverse takeover (Note2) 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
-----------------------------------------------------------------------------------------------
Balances, December 31, 1998 10,061,288 10,062 386,261 - 50,169 (757,331) (310,839)
Private placement 2,000,000 2,000 4,834,250 - - - 4,836,250
Stock options exercised 549 - 823 - - - 823
Stock options issued to
non-employees - - 133,170 (133,170) - - -
Stock compensation vested - - - 33,378 - - 33,378
Net loss for the year ended
December 31, 1999 - - - - - (1,548,429) (1,548,429)
Translation adjustments for
the year ended
December 31, 1999 - - - - (40,812) - (40,812)
-----------------------------------------------------------------------------------------------
Balances, December 31, 1999 12,061,837 $ 12,062 $5,354,504 $ (99,792) $ 9,357 $(2,305,760) $ 2,970,371
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
SUITE101.COM INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 1998
------------------------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACITIVITIES
Net loss $ (1,548,429) $ (373,767)
Adjustment to reconcile net loss to net cash used in operating activities
Loss on disposition of leasehold improvements 8,130 -
Amortization 29,352 -
Stock-based compensation 33,378 13,392
------------------------------------
(1,477,569) (360,375)
Changes in operating assets and liabilities
Accounts receivable (21,307) 1,602
Prepaid expenses and deposits (38,394) -
Accounts payable and accrued expenses (40,752) 113,611
Income taxes 1,020 (1,020)
------------------------------------
Net cash used in operating activities (1,577,002) (246,182)
------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of capital assets (143,495) (7,763)
------------------------------------
Net cash used in operating activities (143,495) (7,763)
------------------------------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Advances from (to) stockholders (198,664) (124,408)
Advances from (to) affiliated companies (43,091) (23,523)
Shares issued to effect reverse takeover - 3,406
Cost of reverse takeover - (75,234)
Proceeds from issuance of common stock 4,837,073 468,078
------------------------------------
Net cash provided by financing activities 4,595,318 248,319
------------------------------------
EFFECT OF EXCHANGE RATES ON CASH (37,927) 17,748
------------------------------------
NET INCREASE IN CASH 2,836,894 12,122
CASH (DEFICIENCY) AT BEGINNING OF YEAR 10,544 (1,578)
------------------------------------
CASH AT END OF YEAR $ 2,847,438 $ 10,544
====================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
SUITE101.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
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,
1999, the Company had accumulated $2,305,760 in losses and had no
material revenue producing operations. At the date of this report, the
Company's 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 raises 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, 1999, there were no
operations in 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 remains that of
the Company but the stockholders' deficit of i5ive has replaced the
stockholders' deficit of the Company.
F-7
<PAGE>
SUITE101.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
2. BUSINESS ACQUISITION BY WAY OF REVERSE TAKEOVER (CONTINUED)
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 judgment 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>
One-half the normal amortization is taken in the year of
acquisition.
F-8
<PAGE>
SUITE101.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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, 1999 and
December 31, 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>
December 31 rate .6929 .6522
Average rate for the year .6731 .6743
</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.
(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-9
<PAGE>
SUITE101.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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. RELATED PARTY TRANSACTIONS
The Company has incurred salaries and consulting fees of $128,174 (1998
- $28,319) to three directors of the Company.
5. CAPITAL STOCK
(a) In December, 1998, i5ive issued 717,703 common shares to
eliminate debt to stockholders of $468,078.
(b) In December, 1998, 3,405,622 shares were issued for the
purchase of i5ive (see Note 2).
(c) 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. The Company incurred $163,750 in expenses concerning
this share issuance and issued 15,000 warrants entitling the
holder to purchase an additional common share for $5.50 on or
before February 29, 2002.
Subsequent to December 31, 1999, all 1,000,000 warrants were
exercised to net the Company $4,500,000.
(d) During the year ended December 31, 1999, the Company issued
549 common shares for total proceeds of $823 upon exercise of
stock options (See Note 6).
F-10
<PAGE>
SUITE101.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
6. 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 was subject to approval by the stockholders of the Company
within twelve months of the date the Board of Directors adopted the
Plan. This approval came at the Company's annual general meeting. 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.
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.
The following is a table of stock options under the Plan as at December
31, 1999:
<TABLE>
<CAPTION>
Balance
Option Expiry Vesting Balance Granted Balance Exercisable
Exercise Date Date December 31, During Exercised (E) December 31, December 31,
Price (mm/dd/yy) (mm/dd/yy) 1998 the Year Cancelled (C) 1999 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.50 12/04/03 12/04/99 278,207 - 549 (E) 245,879 245,879
- 31,779 (C) - -
1.50 12/04/03 12/04/00 54,903 - 16,735 (C) 38,168 -
3.34 02/23/04 (1/3) 02/23/00 - 50,000 - 50,000 -
(1/3) 02/23/01
(1/3) 02/23/02
6.38 04/27/04 (1/3) 04/27/00 - 50,000 - 50,000 -
(1/3) 04/27/01
(1/3) 04/27/02
4.13 06/11/04 06/11/00 - 10,000 - 10,000 -
1.50 10/25/05 (1/2) 10/25/00 - 100,000 - 100,000 -
(1/2) 10/25/01
1.50 11/13/04 11/13/99 - 137,900 - 137,900 137,900
1.50 11/13/04 11/13/00 - 762,850 - 762,850 -
</TABLE>
F-11
<PAGE>
SUITE101.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
6. STOCK OPTIONS
THE COMPANY'S 1998 STOCK INCENTIVE PLAN (CONTINUED)
In addition, the Company issued the following options after December 31,
1999:
<TABLE>
<CAPTION>
Number Expiry Vesting
of Exercise Date Date
Options Price (mm/dd/yy) (mm/dd/yy)
------------------------------------------------------------
<S> <C> <C> <C>
70,000 3.53 01/31/05 01/31/01
4,000 3.53 01/31/02 (1/2) 01/31/00
(1/2) 01/31/01
50,000 3.56 01/06/05 01/06/01
100,000 7.00 02/15/05 02/15/01
</TABLE>
As the number of options issued exceeds the 1,200,000 approved by the
stockholders under the Plan, the additional options are conditioned
upon the amendment receiving stockholders' approval.
The above options are granted for services provided to the Company. Of
the above options, the 100,000 granted on October 25, 1999 are to
non-employees and the fair value of $99,750 has been reflected on the
financial statements as required by SFAS 123. This fair value was
determined using the Black-Scholes model with the following assumptions
used: risk-free rate was 5%, expected volatility of 272%, an expected
option life of 5 years and no expected dividends.
The remaining options issued were to officers, directors and employees.
As the options were granted at exercise prices based on the market
price of the Company's shares at the dates of the grant, no
compensation cost is recognized. However, under SFAS 123, the impact on
net income and net income per share of the fair value of stock options
must be measured and disclosed on a fair value based method on a pro
forma basis. The fair value of the employees' purchase rights under
SFAS 123 was estimated using the Black-Scholes model with the following
assumptions used for options: risk-free rate was 5.0%, expected
volatility of 272% for the $1.50 options and 50% for others, an
expected option life of 5 years and no expected dividends.
If compensation expense had been determined pursuant to SFAS 123, the
Company's net loss and net loss per share for the year ended December
31, 1999 would have been as follows:
<TABLE>
<S> <C>
Net loss
As reported $ (1,548,429)
Pro forma $ (1,855,497)
Basic net loss per share
As reported $ (0.13)
Pro forma $ (0.16)
</TABLE>
F-12
<PAGE>
SUITE101.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
7. INCOME TAXES
At December 31, 1999, there were deferred income tax assets resulting
primarily from operating loss carryforwards for Canadian tax purposes
totaling approximately $800,000 less a valuation allowance of $800,000.
The valuation allowance on deferred tax assets increased by $500,000
and $135,300 during 1999 and 1998, respectively.
At December 31, 1998, the Company had net operating loss carryfowards
for Canadian tax purposes of approximately $1,650,000. These
carryforwards begin to expire in 2003.
At December 31, 1999, there were deferred income tax assets resulting
from operating loss carryforwards for U.S. income tax purposes totaling
approximately $215,000 less a valuation allowance of $215,000. The
valuation allowance on deferred tax assets increased by $215,000 during
1999. The Company has approximately $500,000 available in operating
loss carryfowards, which may be carried forward and applied against
U.S. operating income. During the year ended December 31, 1998, the
Company's previous U.S. loss carryfowards were eliminated due to a
change in control of the Company and the change in the Company's
operations.
8. EARNINGS PER SHARES (EPS)
Earnings per share for the years ended December 31, were computed as
follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------------
<S> <C> <C>
Net loss $ (1,548,429) $ (373,767)
Weighted average common shares outstanding 11,507,387 3,825,020
-------------------------------
Basic and diluted EPS $ (0.13) $ (0.10)
================================
</TABLE>
9. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments consist of cash, accounts
receivable and accounts payable. 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-13
<PAGE>
SUITE101.COM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND DECEMBER 31, 1998
10. COMMITMENTS AND SUBSEQUENT EVENTS
(a) On March 23, 1999, the Company entered into a twelve-month
agreement with a consultant which provided for fees of $5,000
per month. In addition, the consultant was issued a one-year
warrant to purchase 50,000 shares of common stock at a price
of $3.06 per share. This warrant has been valued at $33,420
using the Black-Scholes model as described earlier and is
reflected as compensation on these financial statements.
Subsequent to December 31, 1999, this agreement was amended to
increase the fees to $20,900 for the six-month period
beginning August 23, 1999, extend the period of services by
six-months, and to issue a warrant to purchase 25,440 shares
of common stock of the Company at a price of $5.50 per shares
expiring February 28, 2002.
(b) Subsequent to December 31, 1999, the Company entered into a
one-year agreement with a consultant. The consultant was
issued a warrant to purchase 14,000 shares of common stock of
the Company at a price of $5.50 per share, expiring on January
15, 2001.
(c) The Company has entered into a consulting agreement with a
director, which provides for monthly payments of $5,000 until
June 30, 2000.
(d) Subsequent to December 31, 1999, the Company completed a
private placement of 250 units. Each unit consists of a
$10,000, 8% note payable due June 30, 2000 and 10 warrants
(totaling 2,500). Each warrant entitles the holder to purchase
one common share at a price of $5.00 up to July 15, 2002. In
the event that at any time prior to July 15, 2002 (a) the
shares of common stock issuable on exercise of the warrants
have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and (b) the average of the
closing bid and asked prices for the Company's common stock as
quoted on the OTC Bulletin Board (or such other automated
trading system or national securities exchange as is the
principal market for the Company's common stock) exceeds
(U.S.) $9.00 per share for a period of ten (10) business days,
then the warrants will expire at 5;00 PM, New York City time,
on a date sixty (60) days thereafter.
11. COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
1999 1998
-------------------------------
<S> <C> <C>
Net loss as reported $ (1,548,429) $ (373,767)
Add (deduct)
Foreign currency translation adjustments (40,812) 36,822
-------------------------------
Comprehensive Income (Loss) $ (1,589,241) $ (336,945)
===============================
Accumulated other comprehensive income
Foreign currency translation adjustments
Balance at beginning of year $ 50,169 $ 13,347
Change during the year (40,812) 36,822
------------------------------
Balance at end of year $ 9,357 $ 50,169
==============================
</TABLE>
F-14
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SUITE101.COM, INC.
VANCOUVER, B.C., CANADA
We have reviewed the accompanying consolidated balance sheet of SUITE101.COM,
INC. and subsidiaries as of March 31, 2000 and the related consolidated
statements of operations and cash flows for the three-month period then ended.
These financial statements are the responsibility of the Corporation's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ N.I. Cameron Inc.
VANCOUVER, B.C. CHARTERED ACCOUNTANTS
May 9, 2000
F-15
<PAGE>
SUITE101.COM, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
(EXPRESSED IN U.S. DOLLARS)
MARCH 31, MARCH 31,
2000 1999
------------------------------------------
(NOTE 1)
<S> <C> <C>
CURRENT ASSETS
Cash $ 9,321,525 $ 2,514,556
Accounts receivable 233,260 3,784
Income taxes recoverable - 1,020
Prepaid expenses 74,916 12,500
------------------------------------------
9,629,701 2,531,860
------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 4)
Computer equipment 184,096 51,099
Furniture and fixtures 13,655 700
Leasehold improvements 11,795 16,764
------------------------------------------
209,546 68,563
Less: accumulated amortization 62,551 32,662
------------------------------------------
146,995 35,901
------------------------------------------
TOTAL ASSETS $ 9,776,696 $ 2,567,761
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable (Note 10) $ 2,500,000 $ -
Accounts payable 154,913 119,896
------------------------------------------
2,654,913 119,896
DUE TO STOCKHOLDERS - 449,970
DUE TO AFFILIATED COMPANIES - 23,591
------------------------------------------
TOTAL LIABILITIES 2,654,913 593,457
------------------------------------------
CAPITAL STOCK (Notes 6, 7 and 11)
Authorized:
40,000,000 common shares with a par value of $0.001 each 1,000,000
preferred shares with a par value of $0.01 each
Issued:
13,146,233 common shares 13,147 10,062
CAPITAL STOCK SUBSCRIBED - 1,000
DEFERRED COMPENSATION (362,322) -
ADDITIONAL PAID-IN CAPITAL 10,549,032 2,885,260
DEFICIT (3,091,656) (968,640)
EQUITY ADJUSTMENT FROM FOREIGN
CURRENCY TRANSLATION (Note 12) 13,582 46,622
------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 7,121,783 1,974,304
------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,776,696 $ 2,567,761
==========================================
COMMITMENTS AND SUBSEQUENT EVENTS (Note 11)
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-16
<PAGE>
SUITE101.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(EXPRESSED IN U.S. DOLLARS)
MARCH 31, MARCH 31,
2000 1999
--------------------------------------
(NOTE 1)
<S> <C> <C>
SALES $ 413 $ 416
--------------------------------------
OPERATING EXPENSES
General and administrative 645,831 212,051
Marketing 219,216 -
--------------------------------------
865,047 212,051
--------------------------------------
LOSS FROM OPERATIONS (864,634) (211,635)
--------------------------------------
OTHER INCOME (EXPENSES)
Other income, net 78,738 326
--------------------------------------
NET LOSS $ (785,896) $ (211,309)
======================================
INCOME (LOSS) PER SHARE
Basic and Diluted $ (0.06) $ (0.02)
======================================
Average common shares outstanding 12,510,684 10,061,288
======================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-17
<PAGE>
SUITE101.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(EXPRESSED IN U.S. DOLLARS)
MARCH 31, MARCH 31,
2000 1999
---------------------------------------
(NOTE 1)
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACITIVITIES
Net loss $ (785,896) $ (211,309)
Adjustment to reconcile net loss to net cash used in operating activities
Stock-based compensation 228,489 -
Amortization 10,832 2,958
---------------------------------------
(546,575) (208,351)
Changes in operating assets and liabilities
Accounts receivable (206,109) (1,426)
Prepaid expenses and deposits (36,163) (12,500)
Accounts payable and accrued expenses 66,471 (7,078)
---------------------------------------
Net cash used in operating activities (722,376) (229,355)
---------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of capital assets (12,719) (3,166)
---------------------------------------
Net cash used in investing activities (12,719) (3,166)
---------------------------------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Increase in notes payable 2,500,000 -
Advances from stockholders - 254,201
Advances from (to) affiliated companies - (19,389)
Shares subscriptions - 2,500,000
Proceeds from issuance of common stock and warrants 4,704,594 -
---------------------------------------
Net cash provided by financing activities 7,204,594 2,734,812
---------------------------------------
EFFECT OF EXCHANGE RATES ON CASH 4,588 1,721
---------------------------------------
NET INCREASE IN CASH 6,474,087 2,504,012
CASH AT BEGINNING OF PERIOD 2,847,438 10,544
---------------------------------------
CASH AT END OF PERIOD $ 9,321,525 $ 2,514,556
=======================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-18
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
1. COMPARATIVE FIGURES
The financial statements for the period ended March 31, 1999 are
neither audited nor reviewed.
2. 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 directory and
community.
GOING CONCERN
The accompanying consolidated financial statements have been presented
assuming the Company will continue as a going concern. At March 31,
2000, the Company had accumulated $3,091,656 in losses and had no
material revenue producing operations. At the date of this report, the
Company's 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 raises 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, a Canadian company. All intercompany
accounts and transactions have been eliminated in consolidation. As at
March 31, 2000, there were no operations in Endovascular, Inc.
3. 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
F-19
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
3. BUSINESS ACQUISITION BY WAY OF REVERSE TAKEOVER (CONTINUED)
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. The
business combination was 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 remains that of
the Company but the stockholders' deficit of i5ive 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. The
cost is associated with publicly listing shares and not with any
business associated with the Company.
4. 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 judgment 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:
F-20
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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>
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 March 31, 2000 and
March 31, 1999 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.$) 2000 1999
---------------------
<S> <C> <C>
March 31 rate .6899 .6628
Average rate for the three-month period .6880 .6617
</TABLE>
F-21
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
(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.
F-22
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
5. RELATED PARTY TRANSACTIONS
The Company has incurred salaries and consulting fees of $35,640 (1999
- $6,948) to three directors of the Company.
6. CAPITAL STOCK
(a) 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. The Company incurred $163,750 in expenses concerning
this share issuance and issued 15,000 warrants entitling the
holder to purchase an additional common share for $5.50 on or
before February 29, 2002.
During the period ended March 31, 2000, all 1,000,000 warrants
were exercised to net the Company $4,500,000.
(b) During the period ended March 31, 2000, the Company issued
34,396 common shares for total proceeds of $51,594 upon
exercise of stock options (See Note 7).
(c) During the period ended March 31, 2000, the Company issued
625,000 warrants as part of the private placement of Notes
payable (Note 10). Each warrant entitles the holder to
purchase one common share at a price of $5.00 up to July 15,
2002. In the event that at any time prior to July 15, 2002 (a)
the shares of common stock issuable on exercise of the
warrants have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and (b) the average
of the closing bid and asked prices for the Company's common
stock as quoted on the OTC Bulletin Board (or such other
automated trading system or national securities exchange as is
the principal market for the Company's common stock) exceeds
(U.S.) $9.00 per share for a period of ten (10) business days,
then the warrants will expire at 5:00 PM, New York City time,
on a date sixty (60) days thereafter.
7. 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 was subject to approval by the stockholders of the Company
within twelve months of the date the Board of Directors adopted the
Plan. This approval was obtained on June 11, 1999. Under the
F-23
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
7. STOCK OPTIONS (CONTINUED)
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 are in effect for grants
made under the Company's Plan.
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.
The following is a table of stock options under the Plan as at March
31, 2000:
<TABLE>
<CAPTION>
Balance
Option Expiry Vesting Balance Granted Balance Exercisable
Exercise Date Date December 31, During Exercised (E) March 31, March 31,
Price (mm/dd/yy) (mm/dd/yy) 1999 the Year Cancelled (C) 2000 1999
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.50 12/04/03 12/04/99 245,879 - 34,396 (E) 211,483 211,483
- - - -
1.50 12/04/03 12/04/00 38,168 - 1,553 (C) 36,615 -
3.34 02/23/04 (1/3) 02/23/00 50,000 - - 50,000 16,667
(1/3) 02/23/01
(1/3) 02/23/02
6.38 04/27/04 (1/3) 04/27/00 50,000 - - 50,000 -
(1/3) 04/27/01
(1/3) 04/27/02
4.13 06/11/04 06/11/00 10,000 - - 10,000 -
1.50 10/25/05 (1/2) 10/25/00 100,000 - - 100,000 -
(1/2) 10/25/01
1.50 11/13/04 11/13/99 137,900 - - 137,900 137,900
1.50 11/13/04 11/13/00 762,850 1,400 5,100 (C) 759,150 -
3.56 01/06/05 01/06/01 - 50,000 - 50,000
3.53 01/31/02 (1/2) 01/31/00 - 4,000 - 4,000 2,000
(1/2) 01/31/01
3.53 01/31/05 01/31/01 - 70,000 - 70,000 -
7.00 02/15/05 02/15/01 - 100,000 - 100,000 -
7.88 03/21/05 03/21/00 - 20,000 - 20,000 20,000
</TABLE>
F-24
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
7. STOCK OPTIONS (CONTINUED)
THE COMPANY'S 1998 STOCK INCENTIVE PLAN (CONTINUED)
In addition, the Company issued the following options after March 31,
2000:
<TABLE>
<CAPTION>
Number Expiry Vesting
of Exercise Date Date
Options Price (mm/dd/yy) (mm/dd/yy)
-----------------------------------------------------------------
<S> <C> <C> <C>
30,000 2.05 04/17/05 (1/3) 04/17/01
(1/3) 04/17/02
(1/3) 04/17/03
38,000 2.05 04/17/05 4,000 - 04/17/00
8,500 - 04/17/01
8,500 - 04/17/02
8,500 - 04/17/03
8,500 - 04/17/04
32,000 2.05 04/17/05 11,000 - 04/17/00
12,750 - 04/17/00
2,750 - 04/17/02
2,750 - 04/17/03
2,750 - 04/17/04
</TABLE>
As the number of options issued exceeds the 1,200,000 approved by the
stockholders under the Plan, the additional options are conditioned upon
an amendment to the plan to increase the number of shares issuable on
exercise of options to 2,400,000, adopted by the Board of Directors on
November 13, 1999, receiving stockholders' approval.
The above options are granted for services provided to the Company. Of the
above options, the following options are to non-employees: and have been
reflected on the financial statements and valued, using the Black-Scholes
model with a risk-free rate of 5% and no expected dividends:
<TABLE>
<CAPTION>
Numbers of Exercise Grant Value Volatility Expected
Options Price Date Assumption Options Life
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
100,000 1.50 October 25, 1991 $ 99,750 272% 5 years
50,000 3.56 January 6, 2000 99,635 60% 5 years
4,000 3.53 January 31, 2000 5,120 60% 2 years
100,000 7.00 February 15, 2000 203,970 20% 5 years
20,000 7.88 March 21, 2000 45,922 20% 5 years
</TABLE>
F-25
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
7. STOCK OPTIONS (CONTINUED)
The remaining options issued were to officers, directors and employees.
As the options were granted at exercise prices based on the market
price of the Company's shares at the dates of the grant, no
compensation cost is recognized. However, under SFAS 123, the impact on
net income and net income per share of the fair value of stock options
must be measured and disclosed on a fair value based method on a pro
forma basis. The fair value of the employees' purchase rights under
SFAS 123 was estimated using the Black-Scholes model with the following
assumptions used for options: risk-free rate was 5.0%, expected
volatility of 272% for the $1.50 options, 60% for the $3.53 options,
and 50% for others, an expected option life of 5 years and no expected
dividends.
If compensation expense had been determined pursuant to SFAS 123, the
Company's net loss and net loss per share for the period ended March
31, 2000 would have been as follows:
<TABLE>
<S> <C>
Net loss
As reported $ (785,896)
Pro forma $ (1,060,633)
Basic net loss per share
As reported $ (0.06)
Pro forma $ (0.08)
</TABLE>
8. INCOME TAXES
At March 31, 2000, there were deferred income tax assets resulting
primarily from operating loss carryforwards for Canadian tax purposes
totaling approximately $990,000 less a valuation allowance of $990,000.
The valuation allowance on deferred tax assets increased by $190,000
during the period ended March 31, 2000.
At March 31, 2000, the Company had net operating loss carryforwards for
Canadian tax purposes of approximately $2,040,000. These carryforwards
begin to expire in 2003.
At March 31, 2000, there were deferred income tax assets resulting from
operating loss carryforwards for U.S. income tax purposes totaling
approximately $365,000 less a valuation allowance of $365,000. The
valuation allowance on deferred tax assets increased by $150,000 during
the period ended March 31, 2000. The Company has approximately $850,000
available in operating loss carryfowards, which may be carried forward
and applied against U.S. operating income. During the year ended
December 31, 1998, the Company's previous U.S. loss carryfowards were
eliminated due to a change in control of the Company and the change in
the Company's operations.
F-26
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
9. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments consist of cash, accounts
receivable, notes payable and accounts payable. 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.
10. NOTES PAYABLE
The notes payable are unsecured, bear interest at the rate of 8% and
are due June 30, 2000. They were repaid subsequent to March 31, 2000.
11. COMMITMENTS AND SUBSEQUENT EVENTS
(a) On March 23, 1999, the Company entered into a twelve-month
agreement with a consultant which provided for fees of $5,000
per month. In addition, the consultant was issued a one-year
warrant to purchase 50,000 shares of common stock at a price
of $3.06 per share. This warrant has been valued at $33,420
using the Black-Scholes model as described earlier and is
reflected as compensation on these financial statements.
During the period ended March 31, 2000, this warrant has been
exercised to net the Company $153,000. Subsequent to December
31, 1999, this agreement was amended to increase the fees to
$20,900 for the six-month period beginning August 23, 1999,
extend the period of services by six-months, and to issue a
warrant to purchase 25,440 shares of common stock of the
Company at a price of $5.50 per shares expiring February 28,
2002. This warrant has been valued at $11,750 using the
Black-Scholes model and is reflected as compensation on these
financial statements.
(b) Subsequent to December 31, 1999, the Company entered into a
one-year agreement with a consultant. The consultant was
issued a warrant to purchase 14,000 shares of common stock of
the Company at a price of $5.50 per share, expiring on
February 26, 2002. This warrant has been valued at $9,562
using the Black-Scholes model as described earlier and is
reflected as compensation on these financial statements.
F-27
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
11. COMMITMENTS AND SUBSEQUENT EVENTS (CONTINUED)
(c) The Company has entered into a consulting agreement with a
director, which provides for monthly payments of $5,000 until
June 30, 2000.
(d) The Company has entered into an agreement for consulting and
corporate finance services which provides for the issue of
2-year warrants at the following milestones:
Upon execution of consulting agreement -
25,000 (issued)
On signed letter of intent with target customer -
25,000
On signed agreement with target customer -
25,000
On signed agency agreement to market similar program
to others in same industry in North America -
25,000
In addition, the agreement provides for additional warrants to
be issued over 3 years based on 10% of any payout to
participants under the plan developed with customer(s)
resulting from the agency agreement. The warrants to be issued
are based on the average price of the Company's stock for the
10-day period prior to the issuance of the warrants, less a
20% discount.
The initial 25,000 warrants issued have an exercise price of
$4.96 per share and expire February 17, 2002. They have been
valued at $115,060 using the Black-Scholes model as described
earlier and have been reflected as compensation on these
financial statements.
F-28
<PAGE>
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND MARCH 31, 1999
(UNAUDITED)
12. COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
2000 1999
------------------------------
<S> <C> <C>
Net loss as reported $ (785,896) $ (211,309)
Add (deduct)
Foreign currency translation adjustments 4,225 (3,547)
-----------------------------
Comprehensive Income (Loss) $ (781,671) $ (214,856)
=============================
Accumulated other comprehensive income
Foreign currency translation adjustments
Balance at beginning of period $ 9,357 $ 50,169
Change during the period 4,225 (3,547)
------------------------------
Balance at end of period $ 13,582 $ 46,622
==============================
</TABLE>
F-29
<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 $ 1,180.00
----------------
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 stop transfer instructions were given to the Registrant's
transfer agent restricting transfer without
Part II - 1
<PAGE>
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.
4. On February 23, 2000, the Registrant completed the sale to five
persons of 250 Units, each Unit consisting of (U.S.)$10,000 principal amount of
an 8% Note due June 30, 2000 and warrants to purchase 2,500 shares of Common
Stock The Units were sold at a price of (US) $10,000 per Unit. Each warrant
included in the Units is exercisable at a price of (US) $5.50 per share, subject
to anti-dilution adjustment, through July 15, 2000. The Units and the securities
included in the Units were offered and sold in reliance upon the exemption from
the registration requirements of the Securities Act afforded by Section 4(2)
thereof and by Regulation D adopted under the Securities Act. The Units were
sold to persons who represented that they are "accredited investors" as defined
under Regulation D and that they were purchasing the securities for investment
and not for distribution. The securities bear a legend stating the restrictions
on resale of the securities.
5. On various dates in 1999 and 2000, the Registrant issued to five
persons warrants to purchase an aggregate of 129,440 shares of its Common Stock
for services rendered. The securities were issued in reliance upon the exemption
from the registration requirements of the Securities Act afforded by Section
4(2) thereof. The securities were sold to persons who represented that they were
purchasing the securities for investment and not for distribution. The
securities bear a legend stating the restrictions on resale of the securities.
Part II - 2
<PAGE>
6. On March 23, 2000, the Registrant issued to one person 50,000 shares
of Common Stock on exercise of a common stock purchase warrant issued in March
1999 and expiring on March 22, 2000. The shares were issued at an exercise price
of $3.06 per share. The securities were issued in reliance upon the exemption
from the registration requirements of the Securities Act afforded by Section
4(2) thereof. The securities were sold to persons who represented that they were
purchasing the securities for investment and not for distribution. The
securities bear a legend stating the restrictions on resale of the securities.
Part II - 3
<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.
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)
----------------------------
Footnotes on following page
</TABLE>
Part II - 4
<PAGE>
-----------------------
(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.
Part II - 5
<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
Part II - 6
<PAGE>
such liabilities (other than the payment by the Small Business Issuer of
expenses incurred or paid 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.
Part II - 7
<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 June 5, 2000.
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 June 5, 2000
------------------------------------ Officer and Chief Financial Officer
Peter L. Bradshaw (Principal Executive Officer)
Cara Williams Vice President, Finance (Principal June 5, 2000
/s/ Peter L. Bradshaw Financial and Accounting Officer)
(pursuant to power of attorney)
------------------------------------
Julia M. Bradshaw
/s/ Peter L. Bradshaw
(pursuant to power of attorney) Director June 5, 2000
------------------------------------
Mitchell G. Blumberg
/s/ Peter L. Bradshaw
(pursuant to power of attorney) Director June 5, 2000
------------------------------------
Alfred J. Puchala, Jr.
/s/ Peter L. Bradshaw
(pursuant to power of attorney) Director June 5, 2000
------------------------------------
</TABLE>
<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 June 5, 2000
--------------------------------- Officer and Chief Financial Officer
Peter L. Bradshaw (Principal Executive Officer)
/s/ Cara Williams Vice President, Finance (Principal June 5, 2000
--------------------------------- Financial and Accounting Officer)
Cara Williams
/s/ Julia M. Bradshaw Director June 5, 2000
---------------------------------
Julia M. Bradshaw
/s/ Mitchell G. Blumberg Director June 5, 2000
---------------------------------
Mitchell G. Blumberg
/s/ Alfred J. Puchala, Jr. Director June 5, 2000
---------------------------------
Alfred J. Puchala, Jr.
</TABLE>
