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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
AMENDMENT NO. 3
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12 (b) or (g) of the Securities Exchange Act of 1934.
DYNAMIC INFORMATION SYSTEM & EXCHANGE, INC.
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(Exact name of registrant as specified in its charter)
Utah
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(State or other jurisdiction of incorporation or organization)
87-0508350
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(I.R.S. Employer Identification No.)
385 East 800 South, Orem, Utah 84097-6387
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(Address of principal executive offices) (Zip Code)
(801) 426-4600
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Registrant's telephone number, including area code
Securities to be registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered class is to be registered
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N/A N/A
Securities to be registered pursuant to section 12(g) of the Act:
Common Stock, par value $0.001 per share
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(Title of class)
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 9
ITEM 3. DESCRIPTION OF PROPERTY 16
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 17
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 18
ITEM 6. EXECUTIVE COMPENSATION 20
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 21
ITEM 8. DESCRIPTION OF SECURITIES 22
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER STOCKHOLDER MATTERS 23
ITEM 2. LEGAL PROCEEDINGS 25
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 25
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES 25
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS 26
PART F/S
FINANCIAL STATEMENTS 28
PART III
ITEM 1. INDEX TO EXHIBITS 57
ITEM 2. SIGNATURES 57
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
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Dynamic Information Systems and Exchanges, Inc., ("Dynamic")a private company,
was incorporated in the State of Utah on April 9, 1993. Dynamic was founded
to provide information services to the labor and employment industry. In
October 1994, Dynamic was acquired by M&K Investments, Inc. ("M&K"). M&K, an
inactive public company, was incorporated in the State of Utah on March 20,
1987.
Effective October 20, 1994, Dynamic and M&K completed an Agreement and Plan of
Reorganization whereby M&K issued 14,483,326 shares (3,620,838 post-split
shares) of its common stock in exchange for 100% of the issued and outstanding
common stock of Dynamic. Thereafter, Dynamic became a wholly-owned subsidiary
of M&K.
In connection with the reorganization, M&K's name was changed to Dynamic
Information System & eXchange, Inc. (hereinafter "the Company" or "DiSX").
The exchange of M&K's common stock for the common stock of Dynamic resulted in
the former stockholders of Dynamic obtaining control of the Company. On
October 31, 1994, the Company effected a reverse stock split of the
outstanding common shares at a rate of 1 share for every 2 shares outstanding.
During 1995, the shareholders approved an additional reverse stock split at a
rate of 1 share for every 2 shares outstanding.
Effective 11 Feb 1999, DiSX entered into a joint venture with a British
company, topjobs.net plc. This resulting joint venture company, topjobs.net
inc (the "JV"), provides recruitment opportunities for selected/premier
corporate clients using broadcast media to drive active and passive job
seekers to the JV's Internet job listing web site.
Effective September 31, 1999, DiSX merged with Dynamic, with DiSX being the
surviving entity.
The Company's corporate offices are located at 385 East 800 South, Orem, Utah
84097-6387. The Company sub-leases space to the JV at the same address. See
Item 3 DESCRIPTION OF PROPERTY.
Summary of Business Operations
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The original business of the Company was to provide comprehensive job-listing
information on CD-ROM. After the popularization of the Internet, the Company
changed its delivery tool to the Internet. The Company's target market was
domestic employers in search of qualified professional, management or
technical specialist job candidates.
In June 1998, the Company entered into a nine month research and cooperation
test marketing agreement, limited to the State of Utah and the city of
Houston, Texas, with topjobs.net plc (formerly "The Corporate Net,"
hereinafter referred to as "PLC"), a corporation located in Manchester,
England, engaged in Internet recruitment. Under the terms of the agreement,
PLC was to receive 30% of the gross revenues derived from customers
advertising on the Top Jobs on the Net website, after the deduction of
payments to local television stations.
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Partially as a result of securing contracts providing gross revenues to the
venture of $141,000 in December 1998 and January 1999, the Company and PLC
decided to terminate the test marketing arrangement and establish a permanent
venture in the United States. PLC formed a Delaware corporation, known as
topjobs.net inc, of which DiSX owns 49% and PLC owns 51% (for which both
stockholders paid a total of $1,000). On February 11, 1999, the Company
entered into a series of agreements with PLC, including a Stockholders
Agreement and Licensing Agreement. Under the terms of the agreements (which
continue for so long as the Company and PLC both own equity in the JV), PLC
granted the JV an exclusive license in the territory of the State of Utah, the
city of Houston, Texas, and such other United States cities as the parties may
mutually agree upon, to use PLC's software, name, and other trademarks to
promote and market the Top Jobs on the Net website in the territory in
accordance with the Top Jobs on the Net business plan. The Company agreed to
furnish the venture with the services of ten of its key personnel (who became
employees of the JV under employment agreements) and provide operating
facilities in Orem, Utah. The Company also granted an exclusive license in
the territory to use the Company's intellectual property and technical
information. The parties also agreed to assign to the JV all rights and
obligations under all customer agreements jointly developed under the test
marketing agreement.
PLC advanced $300,000 as an interest free loan to the Company in installments
through March 4, 1999. The Company agreed to advance up to a maximum of
$500,000 to the JV on an interest free basis to fund day-to-day working
capital requirements. The Company's loan to the JV is repayable at such time
as shall be determined by the the JV board of directors based on the venture's
cash flow and capital resources. Upon completion of PLC's initial public
offering, PLC paid DiSX an additional $200,000 in cash and canceled the
$300,000 loan. PLC also issued to DiSX $500,000 of PLC's ordinary shares
(valued at the initial per share public offering price). Based on a $12.00
per ADS offering price, a total of 41,667 of PLC's ordinary shares were issued
to DiSX. The agreements also:
- provide that the Company shall not sell or transfer any of PLC's
ordinary shares for at least one year after the date of PLC's initial public
offering, April 28, 1999,
- provide that PLC's representatives will constitute a majority of the
board of directors of the JV,
- contain "buy/sell" procedures under which the Company and PLC each
have the first and last right to purchase the other's equity in the JV, and
- provide for adjustments in the equity between the parties in the event
one stockholder is unable to fund it pro-rata share of the ongoing capital
requirements of the JV.
In February 1999, the Company agreed with PLC to commence operations in San
Francisco and in March 1999 to expand into Los Angeles.
Broadcast and Internet Media Services
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Following the creation of the joint venture, the JV, DiSX created an internal
division to provide media services, primarily, for the JV. To avoid confusion
with the parent company and more fully reflect the nature of the service being
provided, the division operates under the DBA name of Broadcast and Internet
Media Services (hereinafter referred to as "B&I"). The mission of B&I is to
"bring selected masses to the Internet." This is accomplished through the
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skilled selection and purchase of television and radio time, the use of sports
marketing to gain name recognition, the production of television commercials
and radio spots, and the preparation of printed materials such as print
advertisements, brochures, flyers, product descriptions and other materials
required by the customer to help promote the product.
Customers
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Subsequent to the signing of the joint venture agreement between DiSX and PLC
on 11 Feb 1999, the JV entered into an agency agreement with DiSX which
requires all media and production materials to be purchased through DiSX.
The JV signed a one year contract agreeing to pay a fifteen-percent (15%)
commission on all media purchases, ten percent (10%) on all collateral
materials and five-percent (5%) on all talent fees. These fees and
commissions from the JV constitute DiSX's primary revenue source, comprising
approximately 90% of DiSX's revenues. Efforts to secure other customers and
other sources of income are on going. The agency agreement between the two
companies is automatically annually renewed unless specifically terminated by
either of the parties to the agreement.
In addition to the agency agreement with the JV, DiSX aggressively seeks other
clients who require media and production materials. These customers would need
services (such as those provided by DiSX to the JV) to promote their product
or service to the masses. The nature of those products and services are of a
wide variety and could include almost any product or service currently in
existence.
DiSX holds two potential profit centers that could expand its customer base
and decrease its dependence on the joint venture. First, B&I hopes to secure
more customers who want media buying and advertising services. However, B&I's
largest and most profitable customer is Top Jobs on the Net, and it will
require additional revenue to extend services beyond current levels.
Secondly, DISX is test marketing an Internet recruitment product and site
known as UltimateResume.com. Revenue from this site would come from the sale
of resumes over the Internet.
Marketing this product and site for potential customers will involve a two
phased approach; the first phase educates our client company on the value of
Internet recruiting, and the second phase provides them with resumes from our
site where they only pay for the ones they choose. Companies and job seekers
will learn about the product through radio advertising, direct mail and direct
calls from sales people.
The JV has numerous clients, none of whom represent more than 10% of the JV's
revenues. Clients include Zion's Bank, and Intermountain Health Care (Utah),
M.D. Anderson, Baylor University Hospital, and University of Texas Health
Center (Texas).
DiSX's Principal Products or Services
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DiSX offers a variety of services including: the purchase of media,
television, radio, print and Internet advertising; the production of
commercials for television and radio; the creation and production of print
advertisements, brochures and flyers; the conduct of product research and
audience identification studies to determine the potential direction of sales
and marketing strategies; content development, writing, video taping and
editing; graphic production; and web page design and implementation.
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The advent of new technology and the creation of the Joint Venture affected
the initial principal products produced by DISX. Plans to put employment
information on CD-ROM and send the information to job seekers became obsolete
with the development of the Internet as a means of distribution and
communication. Consequently, the Company's product known as JobDISC was
abandoned. Two other DISX products, JobLISTING and JobSEARCH were also
shelved because they were in direct competition with the product offered by
the JV, Topjobs on the Net. Some aspects of the old products were used in the
development of another Internet recruitment product by the Company known as
UltimateResume.
UltimateResume, placed in operation in September 1999, takes a different
approach to Internet recruitment from that taken by the JV. Instead of posting
job openings for companies who then wait for potential candidates to send in
resumes, the UltimateResume site posts the resumes of potential employees.
This approach gives companies seeking employees the ability to "shop" the
database of resumes on the Internet for free and then purchase only the
resumes of job candidates the company is interested in interviewing.
UltimateResume is currently the only Internet recruitment product offered by
the Company. Other companies provide similar website services to those
offered by UltimateResume, including sites such as monster.com,
shotgunresume.com, headhunter.net, and hotjobs.com. Management believes its
product offers superior access, results, and ease of use, and will, therefore,
be able to compete successfully.
Competition for DiSX
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The exclusive nature of the agreement between DiSX and PLC regarding the
purchase of media, collateral materials and talent fees eliminates any
internal competition for these services. However the competition outside the
exclusive agreement includes a large number of advertising agencies and
production companies. These would include but not be limited to: Harris &
Love, Salt Lake City, Utah; TKO Advertising, Orem, Utah; and, Rushford & Ross
Marketing Communications, Provo, Utah. DiSX is a relatively new player in
this industry and the plausibility of exceeding the revenues of the more
established agencies in the near future is not great. Clients in this industry
are obtained in three primary ways. Advertising, personal referral and
notoriety of past work. DiSX seeks to obtain clients through the use of all
three of these methods.
Holdings
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As indicated above, effective 11 Feb 1999, DiSX entered into a joint venture
with topjobs.net plc, a British Internet recruitment company, to create a new
company, topjobs.net inc, a Delaware corporation (the "JV"). DiSX is a 49%
partner/owner in this joint venture. The joint venture is governed by a seven
person Board of Directors, four of whom were appointed by topjobs.net plc and
three by DiSX. Larry D. Heaps, DiSX President, was to serve as the initial
president of the JV. Mr. Heaps served as president of the JV until the 10th
of August, 1999, and has resumed his responsibilities at president of DiSX.
Ross Wolfley, a former consultant of the Company, has been appointed as
President of the JV.
JV Products and Services
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The JV uses broadcast media (TV and radio) and sports programming to drive job
seekers to view their Internet site which consists of job listings provided by
corporate clients. Presently, a direct sales method of approach for sales is
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used in the joint venture. Sales people in each locale approach prospective
corporate clients for the purpose of demonstrating the various aspects of the
product. The sales people demonstrate the uniqueness of the business and its
on-site ease-of-use from laptop presentations.
The prospective clients must have a need for recruiting in quantity during the
year to be viewed as a valid client. The JV has active websites in Salt Lake
City, Utah; Houston, Texas; and, Los Angeles, California. In addition to
active selling in these areas, the JV is actively selling in San Francisco,
California, and it is expected that the JV will have an active website in San
Francisco before the end of the calendar year 1999. Rollouts in additional
cities will be determined by the JV's board of directors.
Competition for the JV
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With the advent of the Internet, the job recruitment market is undergoing
significant internal changes. There are two primary areas of competition
within this job recruitment arena. First, all Internet recruitment companies
are competing with the default, traditional method for job recruiting, i.e.,
print media. Second, Internet recruitment companies are competing among
themselves.
In the past, the bulk of job advertising occurred in newsprint. The principal
methods of competition for the JV and other Internet recruitment companies
within this first area of competition are pricing and quick response.
Print media's strengths include a broad readership and distribution. It is
visual and tangible, i.e., the reader can see and feel it, and it can be put
down for a while and retrieved later for additional reading. Most important,
it is the default, traditional method already used by most employers.
Print media's weaknesses include high expense and limited space. If an
employer has to run an advertisement multiple times or is using more than a
few lines, print media becomes quite expensive. Additionally, to keep
expenses down, the employer will use as limited a space as possible to
advertise the job. Consequently, an obvious weakness is the limited space
that can be used to adequately describe the employment opportunity or describe
the company offering the job.
The customer's cost of advertising with the JV is significantly less than with
print media. The reduction in cost is passed on to the customer.
Additionally, rather than having to wait for days to have the print
advertisement on the streets for the potential job seeker to see it, a
customer can have its job listing on the Internet within minutes of having
decided to advertise the job opening. The reduced costs of job advertising
and the opportunity to shorten the hiring cycle are important competitive
advantages over the print media.
In the second area of competition, among Internet recruitment companies, the
principal methods of competition are competitive pricing, better customer
service and local emphasis. The JV's major Internet competitors include
Monster.com, HotJobs and Techies.com., all of which offer services similar to
those offered by the JV. Monster.com's approach to the market it to provide a
comprehensive job listing board that has as many jobs listed from as many
companies as possible. HotJobs, a more recent addition to the competition,
also emphasizes good customer service. Techies.com provides a local approach
but limits its job offerings to the technical fields.
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For about the same price that an employer would pay for a job listing with
such other Internet recruitment competitors, the JV provides the employer with
not only the job listing but also corporate pages to describe their company, a
local customer service representative to assist them with their job listings
and usage of the site, and comprehensive statistics regarding the site and
their jobs listings. Additionally, the JV has a local emphasis within each
geographical location. In other words, the Salt Lake City site that is
advertised in Utah lists only the jobs within that geographical location.
Only companies that have jobs in that local area are advertised on the site.
The job seeker can, if desired, link to the JV's other sites, but each site
generally lists and advertises only jobs and companies in the local area.
The JV's approach is to offer a variety of Internet-based services to
corporations to enhance their ability to attract qualified management,
professional, technical and other job seekers and expedite their recruitment
process. The JV seeks to distinguish itself from other Internet-based
recruitment services by providing its customers with more than just job
listings. The wide range of services are designed to capitalize on the
interactive nature and data processing capabilities of the Internet, and
enable the JV's customers to efficiently design, modify and monitor their own
recruitment advertising campaigns. These specific services include:
- a specified number of job slots, which are graphical templates branded to
a customer's particular style, that contain detailed job descriptions our
customers can modify or update at any time,
- corporate pages that provide our customers with their own branded
employment Website with Top Jobs on the Net,
- online marketing tools that direct job-seeker traffic to our customers'
job opportunities,
- software enabling our customers to monitor visits to their advertisements
and measure effectiveness,
- consulting and advertising support services and
- our extensive promotion of Top Jobs on the Net, through both online and
traditional marketing, including television and radio advertising.
The JV's Dependence on the Internet
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The JV depends specifically on the Internet infrastructure. As such, it
depends on Internet service providers, online service providers, and other
Website operators. Many of these service providers have experienced
significant service slowdowns, malfunctions, outages and capacity limitations.
The JV has taken significant steps, such as building in system redundancy, as
well as other software and hardware strategies to protect itself and its
customers from problems.
Governmental Regulations
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None known at present
Research and development
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To date, no research and development expenses have been capitalized in DiSX.
Employees
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At July 14, 1999, the Company had three full-time employees (including its
executive officers) and 5 part-time employees. The JV has 25 full time and 3
part-time employees. J. Robert Walz and Kurt H. Johansson have signed
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employment contracts with the Company. See EXECUTIVE COMPENSATION AND
EXHIBITS 10.07 and 10.08. The remainder of the Company's employees are at-
will and do not have written contracts. The JV's employees sign a standard
Employment Contract, a form of which is attached hereto as an exhibit. See
Schedule 2 of Exhibit 10.01.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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Cautionary Statement Regarding Forward-Looking Statements
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This report may contain "forward-looking" statements. Examples of forward-
looking statements include, but are not limited to: (a) projections of
revenues, capital expenditures, growth, prospects, dividends, capital
structure and other financial matters; (b) statements of plans and objectives
of the Company or its management or Board of Directors; (c) statements of
future economic performance, (d) statements of assumptions underlying other
statements and statements about the Company and its business relating to the
future; and (e) any statements using the words "anticipate," "expect," "may,"
"project," "intend," or similar expressions.
Year 2000 Disclosure
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The Company is working to resolve the potential impact of the year 2000, or
so-called Y2K, on the ability of the Company's computerized information
systems to accurately process information that may be date-sensitive. Any of
the Company's programs that recognize a date using "00" as the year 1900
rather than the year 2000 could result in errors or system failures. The
Company uses a minimum number of computer programs in its operations. The
Company has completed its assessment and currently believes that the costs of
this issue will not have a material adverse impact on the Company's financial
position. However, if the Company and third parties upon which it relies are
unable to address this issue in a timely manner, it could result in a material
financial risk to the Company. In order to assure that this does not occur,
the Company plans to devote all resources required to resolve any significant
Y2K issues in a timely manner.
State of Readiness
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The Company has completed a preliminary assessment of its operations. As far
as its information technology systems ("IT"), the Company uses newer model
desktop PCs in its executive office, and in the JV operation. These PCs are
all running commercial software with the patches and updates added as they are
available.
Costs of Y2K
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The Company has replaced or upgraded its IT systems in the ordinary course of
business and therefore cannot attribute specific costs of such upgrades to
Y2K. The costs of assessing potential non-IT problems have involved a small
amount of evaluation time which has likewise been incorporated into ordinary
business costs. There have been no significant hardware or software costs
directly attributable to Y2K.
Risks of Y2K
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The Company does not anticipate that Y2K problems pose substantial risks to
its current operations, unless Y2K causes catastrophic systemic failures of
the power grid, for instance. The worst case scenario contemplated to date
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would involve a temporary suspension of the JV's activities while systemic
problems are resolved. Any such suspension of operations might have a
significant adverse impact on the Company's overall revenues.
Continency Plans
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The Company does not have any contingency plans at this time and does not
intend to prepare any such plan because the most critical factors in the worst
case scenario are essentially beyond the Company's control. The Company
intends to continue its maintenance and upgrades of its internal systems, and
will query its major customers and suppliers concerning their respective
states of readiness.
Results of Operations
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In June 1998, the Company entered into a nine month research and cooperation
test marketing agreement, limited to the State of Utah and the city of
Houston, Texas, with topjobs.net plc (formerly "The Corporate Net,"
hereinafter referred to as "PLC"), a corporation located in Manchester,
England, engaged in Internet recruitment. Partially as a result of securing
contracts providing gross revenues to the venture of $141,000 in December
1998, the Company and PLC decided to terminate the test marketing arrangement
and establish a permanent venture in the United States. PLC formed a Delaware
corporation, known as topjobs.net inc. On February 11, 1999, the Company
entered into a series of agreements with PLC, including a Stockholders
Agreement and Licensing Agreement. Under the terms of the agreements, PLC
granted the JV an exclusive license in the territory of the State of Utah, the
city of Houston, Texas, and such other United States cities as the parties may
mutually agree upon, to use PLC's software, name, and other trademarks.
PLC advanced $300,000 as an interest free loan to the Company in installments
through March 4, 1999. The Company agreed to advance up to a maximum of
$500,000 to the JV on an interest free basis to fund day-to-day working
capital requirements. The Company's loan to the JV is repayable at such time
as shall be determined by the JV board of directors based upon the JV's cash
flow and capital resources. Upon completion of PLC's initial public offering,
PLC paid DiSX an additional $200,000 in cash and canceled the $300,000 loan.
PLC also issued to DiSX $500,000 of PLC's ordinary shares (valued at the
initial per share public offering price). Based on a $12.00 per ADS offering
price, a total of 41,667 of PLC's ordinary shares were issued to DiSX.
Three months ended September 30, 1999 compared to three months ended September
30, 1998
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Total revenues for the three months ended September 30, 1999, was $791,567
compared to $10,476 for the same period of 1998. This increase was attributed
to proceeds from media services provided for the JV. Direct costs for the
three-month period ended September 30, 1999 were $656,927 as compared to $537
for the same period ended September 30, 1998. The increase in direct costs
was due to advertising and related media costs.
For the third quarter of the 1999 fiscal year, operating expenses were
$162,561, consisting of salaries and wages of $71,299, depreciation and
amortization expenses of $4,010, and general and administrative expenses of
$87,252. These operating expenses resulted in a loss from operations of
$27,921 for the 1999 period. Total operating expenses for the third quarter
1998 were $225,880, consisting of salaries and wages of $57,669, depreciation
and amortization expenses of $4,041, and general and administrative expenses
of $164,170. These operating expenses resulted in an operating loss from
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operations of $215,941 for the 1998 period. The year to year decrease in
operating expenses was due to lower professional fees and promotional
expenses, partially offset by higher salaries and wages.
Total other income and expense for the third quarter of the 1999 fiscal year
netted an expense of $154,838 compared to other expense of $26,198 for 1998's
third quarter. The year to year increase was due primarily to the quarter's
$125,453 loss on the equity investment in the joint venture combined with
slightly higher interest expense for the period.
The net loss of $182,759 for the third quarter of 1999 compares with a net
loss of $242,139 for the same period of 1998. The reduction in net loss was
due to the increase in the gross margin and decreased operating expenses,
partially offset by the loss on the equity investment in the joint venture.
In the third quarter of 1999, the valuation of the marketable securities
received in the agreement with PLC experienced a gain of $15,446. This gain
on valuation yielded a comprehensive loss $167,313 for the three months ended
September 30, 1999 compared to a comprehensive loss of $242,139 for the same
period of 1998, a decrease of 30.90%. The basic loss per share for the third
quarter of fiscal 1999 was $0.01 as compared to a basic loss per share of
$0.01 for the same period of 1998, based on the weighted average number of
shares outstanding for the respective periods.
Nine months ended September 30, 1999 compared to nine months ended September
30, 1998
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Total revenues for the nine months ended September 30, 1999, was $1,628,297
compared to $27,846 for the same period of 1998. This increase was attributed
primarily to proceeds from media services provided for the JV. Direct costs
for the nine-month period ended September 30, 1999 were $1,495,995 as compared
to $4,707 for the same period ended September 30, 1998. The increase in
direct costs was due to advertising and related media costs provided for the
JV.
For the first nine months of the 1999 fiscal year, operating expenses were
$820,145, consisting of salaries and wages of $223,412, depreciation and
amortization expenses of $11,806, and general and administrative expenses of
$584,927, resulting in a loss from operations of $(687,843). Total operating
expenses for the same period in 1998 were $691,328, consisting of salaries and
wages of $154,673, depreciation and amortization expenses of $11,234, and
general and administrative expenses of $525,421, resulting in a loss from
operations of $(668,189). The increase in operating expenses during the
current 9 month period was due to higher salaries and wages, professional
fees, and promotional expenses.
Total other income and expense for the first nine months of the 1999 fiscal
year netted an expense of $477,587 compared to an expense of $80,897 for
1998's initial nine months. This other expense was comprised of $660 interest
income, offset by interest and related expenses of $102,519 and a loss on
equity investment in the JV totaling $375,728. The 1998 expenses consisted of
interest and related expenses.
The net loss of $1,165,430 for the initial nine month period of 1999 compares
with a net loss of $749,086 for the same period of 1998. The significant
portion of the increase in net loss is due to a loss on the Company's equity
investment in the JV. (It is projected that the JV will experience losses
through 1999, becoming profitable in late 2000.)
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In the third quarter of 1999, the valuation of the marketable securities
received in the agreement with PLC experienced a loss of $247,573. This loss
on valuation yielded a net comprehensive loss of $1,413,003 for the nine
months ended September 30, 1999, compared to a net comprehensive loss of
$749,086 for the same period of 1998. The basic loss per share for the first
nine months of fiscal 1999 was $0.06 as compared to a basic loss per share of
$0.04 for the same period of 1998, based on the weighted average number of
shares outstanding for the respective periods.
Liquidity and Capital Resources at September 30, 1999
- -----------------------------------------------------
During the first nine months of 1999, cash from operations, proceeds from the
agreement with PLC, and notes payable were utilized for working capital,
reduction of accrued expenses, conversion of debt, and for the continued
developmental activities of the Company.
The Company had a working capital deficit of $(1,699,870), at September 30,
1999. The Company had a cash overdraft of $3,861, and receivables of
$207,066. Cash flows provided from operating activities for the nine-month
period ended September 30, 1999, was $29,539, compared with cash flows used by
operating activities of $628,088 for the same period of 1998. The increase in
cash flows provided by operating activities for the period in 1999 is
attributed primarily to increases of $500,000 in deferred gain and $245,275 in
accounts payable offset in part by a decrease of $127,000 in deferred revenue.
Because the Company has an accumulated deficit of $(7,092,593), has a working
capital deficit and limited internal financial resources, the report of the
Company's auditor contains a going concern modification as to the ability of
the Company to continue. During fiscal 1999, the Company began substantial
business operations, reduced expenses where possible to reduce cash outflow
and continued to increase working capital through the conversion of accrued
liabilities and notes payable to common stock.
At September 30, 1999, the Company had recorded $227,520 in accrued expenses
consisting of accrued salaries and wages, accrued interest and unpaid payroll
taxes, and unemployment taxes, including reasonable interest and penalties for
late payment. Subsequent to December 31, 1998, and prior to the end of the
nine-month period, the Company has reduced its accrued expenses by 56.48% from
$402,858 at year end. This reduction was achieved by reducing outstanding
accrued salaries and wages and accrued interest through issuance of restricted
common stock. The Company has also paid a significant portion of the accrued
payroll taxes due to the Internal Revenue Service and the Utah State Tax
Commission and made arrangements with the Utah Department of Job Force
Services to pay $2,000 monthly towards the Company's unemployment tax
obligation.
At September 30, 1999, the Company had recorded deferred gain of $1,000,000.
This deferred gain relates to the $1,000,000 paid by topjobs.net plc to the
Company as an incentive to take a minority interest in the JV. This deferred
gain will be amortized over the life and profitability of the JV. (It is
projected that the JV will experience losses through 1999, becoming profitable
in late 2000.)
At September 30, 1999, the Company had recorded notes payable, convertible
debentures, and current portion of long-term liabilities totaling $434,759.
These accounts were reduced from $931,347 as of December 31, 1998. This
reduction was accomplished by the conversion of debt to equity through the
issuance of restricted common stock.
The Company is expected through its agreement with PLC to support the JV with
working capital as required. Future funding may involve the sale of some
ownership interests in the JV in accordance with the Stockholders Agreement.
<PAGE>
<PAGE> 13
Additional funding from the Company's side will be accomplished through
issuance of convertible debentures. There can be no assurance that the
required funding will be available to the JV.
The Company continues to reserve possible contingent liabilities with related
accrued interest totaling $340,231 to Laservend, Inc. The potential
litigation regarding Laservend is described below.
The Company expects to be able to generate the working capital necessary to
continue as a going concern. This will be done by generating profitable
operations and reducing expenses as necessary. The Company continues to
develop new products and markets. However, it is also expected that
operations will not provide the necessary capital to carry on over the next
twelve months. Therefore, outside funding will be required. The Company's
major shareholders are aware of the Company's position and management of the
Company believes they are committed to providing the necessary funding,
although no specific agreements are in place to assure such funding. In
addition, as stated herein, the Company has 41,667 shares of restricted common
stock in tobjobs.net plc. The restrictions on this stock will be removed in
May 2000. The sale of this stock may also provide additional capital to the
Company. However, if the Company is not able acquire adequate additional
financing from its shareholders or from the sale of its topjobs.net plc stock
to fund its ongoing operations, it may not be able to continue in business.
Impact of Inflation
- -------------------
The Company does not anticipate that inflation will have a material impact on
its current or proposed operations.
Seasonality
- -----------
The Company does not anticipate that seasonality will have a material impact
on its current or proposed operations.
Year ended December 31, 1998, compared to year ended December 31, 1997
- ----------------------------------------------------------------------
During 1997 and 1998, the Company continued in its developmental stage.
Financial statements during that period reflect that stage and year to year
changes may have limited significance. In late 1998 and early 1999, the
Company commenced operations and is no longer designated a developmental stage
company.
Total revenues for the year ended December 31, 1998, was $53,389 compared to
$51,246 for the same period of 1997, an increase of 4.18%. This increase was
attributed to a modest increase in sales of job listings to employers. Direct
costs for the year ended December 31, 1998, were $12,940 as compared to
$31,651 for the year ended December 31, 1997. The decrease in direct costs
were primarily due to a reduction in outside labor used to prepare the
Company's job data base.
For fiscal year 1998, operating expenses were $1,247,410, consisting of
salaries and wages of $374,616, depreciation and amortization expenses of
$16,833, and general and administrative expenses of $855,961, resulting in a
loss from operations of $1,206,941. Total operating expenses for 1997 were
$1,540,718, consisting of salaries and wages of $506,871, depreciation and
amortization expenses of $10,427, research and development expenses of $1,365,
and general and administrative expenses of $1,022,055, resulting in a loss
from operations of $1,521,123. The decrease in salaries and wages resulted
from a reduced number of data entry personnel. This staffing reduction was
made possible by automation of some data entry functions. The reduction in
general and administrative expenses was due to a decrease in professional
consulting costs.
<PAGE>
<PAGE> 14
Total other expense (consisting primarily of interest expense) for fiscal 1998
totaled $166,201 compared to $155,197 for fiscal 1997. The year to year
increase in interest expense was due to an accrual of $53,659 added to
contingent liabilities relating to the Laservend litigation described below.
The Company experienced a net loss $1,373,142 for the year ended December 31,
1998, compared to a net loss of $1,676,320 for the same period of 1997, a
decrease of 18.09%. The basic loss per share for fiscal 1998 was $0.09 as
compared to $0.18 for fiscal 1997, based on the weighted average number of
shares outstanding for the respective periods.
Liquidity and Capital Resources at December 31, 1998
- ----------------------------------------------------
During 1998, notes payable (some convertible to shares of the Company's common
stock) were utilized for working capital, conversion of debt, payment of
professional services and for the continued developmental activities of the
Company.
The Company had a working capital deficit of $(1,392,343), at December 31,
1998. The Company had a cash overdraft of $6,014 and receivables of $130,529.
Cash used in operations for the year ended December 31, 1998, was $977,680 and
$708,911 for the year ended December 31, 1999. Cash used in operations for
the year ended December 31, 1998, was funded primarily by notes payable, a
significant portion of which were converted to common stock.
Because the Company had an accumulated deficit of $(5,927,163), has a working
capital deficit and limited internal financial resources, the report of the
Company's auditor contains a going concern modification as to the ability of
the Company to continue. During fiscal 1998, the Company began to effect
measures to reduce cash outflow and increase working capital through the
conversion of accrued liabilities and notes payable to common stock.
At December 31, 1998, the Company had recorded $402,858 in accrued expenses
consisting of accrued salaries and wages, accrued interest and unpaid payroll
taxes, and unemployment taxes, including reasonable interest and penalties for
late payment. As noted above, subsequent to December 31, 1998, and prior to
this filing, the Company significantly reduced outstanding accrued salaries
and wages and accrued interest through issuance of restricted common stock.
At December 31, 1998, the Company had recorded notes payable, convertible
debentures, and current portion of long-term liabilities totaling $931,347.
The Company has reserved and recorded possible contingent liabilities with
related accrued interest totaling $340,231 to Laservend, Inc. In January
1997, the Company entered into a "Letter Offer to Acquire" with Laservend,
Inc. whereby Laservend would acquire all the issued and outstanding common
stock of the Company. In anticipation of the proposed merger, Laservend
advanced the Company $286,572 during the year ended December 31, 1997. The
Company has accrued $340,231 which includes the advances and estimated
interest due at December 31, 1998. The agreement was that such advanced funds
would reduce the acquisition price if the merger occurred and if the merger
did not occur, the Company would satisfy the obligation through the delivery
of its common stock at a rate of two shares for every dollar advanced. The
merger never occurred and Laservend has filed for bankruptcy. The Trustee of
the bankruptcy is now asserting that the advances are to be repaid in cash.
The Company does not plan on repaying the advances in cash but is willing to
issue common stock to repay the loan. The outcome is undeterminable at this
time.
<PAGE>
<PAGE> 15
Discussion and Analysis of the Company's Joint Venture (topjobs.net, inc.)
- --------------------------------------------------------------------------
Because the investment and agency relationship with topjobs.net, inc. (the
"JV") represents such a significant portion of the Company's business, the
Company's management has provided the following discussion of the JV's
financial condition and results of operations. Financial statements
(unaudited) for the JV from inception through September 30, 1999 are included
in this filing at the end of the financial statements for the Company.
Results of Operations for the JV
- --------------------------------
On February 2, 1999, topjobs.net, inc. was incorporated and commenced
operations on February 11, 1999. Because topjobs.net inc has not completed
its first year of activity, no comparisons can be made with earlier periods
and financial information has not yet been audited.
Unaudited Financial Statements Inception of Operations on February 11, 1999
through September 30, 1999
- -----------------------------------------------------------------------------
Recognized revenues for the period from inception through September 30, 1999
totaled $252,647. This revenue was derived from start-up activities in Salt
Lake City, Houston and Los Angeles. Direct costs for the period totaled
$1,659,796. These costs were comprised primarily of advertising and
promotional expenses.
For the period from inception through September 30, 1999, operating expenses
were $1,812,987, consisting of salaries and wages of $1,347,952, depreciation
of $10,628, and general and administrative expenses of $454,407. The above
revenues, less direct costs and operating expenses, resulted in a loss from
operations of $3,220,136.
Other expense for the period from February 11, 1999 through September 30, 1999
totaled $1,224 in banking related expenses. The net loss for the JV totaled
$3,221,360 for the period.
Liquidity and Capital Resources of the JV
- -----------------------------------------
During the initial period from February 11, 1999 through September 30, 1999,
cash from operations, loans from affiliated parties (topjobs.net plc and the
Company), and initial capitalization were utilized for the JV's working
capital and on going developmental activities.
The JV had a working capital deficit of $(617,750), at September 30, 1999.
topjobs.net inc had a cash overdraft of $23,567, accounts receivable of
$171,002, and prepaid expenses of $137,267. Accounts payable, deferred
revenue, and accrued expenses totaled $181,467, $359,721, and $361,264,
respectively.
Cash used in operating activities for the period from inception through
September 30, 1999 was $2,603,610. Fixed assets totaling $91,118 were also
acquired. Cash used in operations for the period was funded primarily by
$134,000 in proceeds from common stock and additional paid-in capital, and
$2,560,728 in notes payable from related parties. Of the $2,560,728, $375,728
was contributed by the Company and $2,185,000 was contributed by topjobs.net
plc.
<PAGE>
<PAGE> 16
Projections for the JV forecast the venture to break even late in year 2000.
Because the JV has an accumulated deficit of $(3,221,360) and a working
capital deficit, funding will continue to be provided by the joint venture
partners.
Adjustment of Ownership Percentage
- ----------------------------------
Based on informal agreement, the Company agreed to provide the initial funding
and personnel for the JV through June 1999. topjobs.net plc agreed to provide
the funding for the JV from July through September 1999. At September 1999,
topjobs.net plc had contributed $2,185,000 and the Company had contributed
$375,728 to the JV. As dictated by the Stockholders' Agreement, failure to
obtain parity in contributions between the JV partners will result in a shift
of common stock in the JV from one stockholder to the other. At the end of
September 1999, such an accounting would have caused a shift of 18% of the
common stock from the Company to topjobs.net plc. Based on the JV's results
of operations at September 30, 1999, it is anticipated that the Company will
not be able to reach full parity prior to March 31, 2000, and that an
adjustment in JV ownership will take place in accordance with the
Stockholders' Agreement. A parity accounting (a comparison of the Company's
and topjobs.net plc's respective dollar contributions to the JV) will occur at
or prior to the JV's fiscal year end, March 31, 2000. The disparity in
contributions does not require the Company to come up with additional funds or
record losses in excess of the Company's capital contribution, but will
trigger an adjustment in the Company's percentage ownership in the JV.
ITEM 3. DESCRIPTION OF PROPERTY
--------------------------------
Executive Offices
- -----------------
The Company leases its principal executive offices in Orem, Utah. The current
lease is for a space of approximately 6,745 square feet at a rate of $6,200
per month. The lease agreement is for three years from October 1, 1998 to
September 30, 2001. The lease includes provision for a 3% increase in lease
payment on October 1, 1999, and a 3% increase on October 1, 2000. The Company
sub-leases approximately 85% of its floor space to the JV for $5,525 per
month. The sub-lease is an oral agreement. The JV will bear its
proportionate cost of the percentage increases.
The Company's current facilities are generally adequate for anticipated needs
over the next 12 to 24 months.
The Company owns Lot 32 of a development known as Cottages on the Green, as
identified in the Plat recorded in the office of the Wasatch County Recorder,
as Entry No. 200360, in Book 371, at Page 458, contained with Plat C of
Cottages on the Green, P.U.D., Midway City, Wasatch County, State of Utah.
Value of the property is $95,000.
<PAGE>
<PAGE> 17
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------
The following table sets forth as of September 30, 1999, the name and address
and the number of shares of the Company's Common Stock, par value $0.001 per
share, held of record or beneficially by each person who held of record, or
was known by the Company to own beneficially, more than 5% of the 22,055,435
shares of Common Stock issued and outstanding, and the name and shareholdings
of each director and of all officers and directors as a group.
Principal Shareholders
- ----------------------
Name and Address Number of Shares Nature of Ownership % of Class
- ---------------- ---------------- ------------------- ----------
Larry D. Heaps 1,650,000 Direct 7.48
743 South 670 East 500,000 Indirect (2) 2.27
Orem, Utah 84097
Eric E. Marchant 1,650,000 Direct 7.48
3926 Riverwood Drive 24,608 Indirect (1) 0.11
Provo, Utah 84604
Curtis T. Johnson 1,300,000 Direct 5.89
1133 East 2570 North
Provo, Utah 84604
DeLynn Heaps 1,210,000 Direct 5.49
3805 North 450 West 500,000 Indirect(2) 2.27
Provo, Utah 84604
Craig Morrison 1,829,964 Direct 8.30
3771 Riverwood Drive
Provo, Utah 84604
Arnell Heaps 1,280,000 Direct 5.80
1357 East Pheasant Ridge
Bountiful, Utah 84010
Officers and Directors
- ----------------------
Name and Address Number of Shares Nature of Ownership % of Class
- ---------------- ---------------- ------------------- ----------
Larry D. Heaps -see above-
Eric E. Marchant -see above-
Curtis T. Johnson -see above
J. Robert Walz 101,575 Direct 0.46
3145 North Comanche
Provo, Utah 84604
Kurt Johansson 58,000 Direct 0.26
1181 East 300 North
Pleasant Grove, Utah
84062
All Officers/Directors 4,759,575 Direct 21.58
as a Group (5 Persons) 524,608 Indirect 2.38
[Footnotes appear on following page]
<PAGE> 18
(1) Represents shares held of record by Marchant & Sons, a family trust of
which Mr. Marchant is a beneficiary.
(2) Represents shares held of record by the Heaps Family Trust, an entity
controlled by DeLynn Heaps, of which Larry Heaps is a beneficiary.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
--------------------------------------------------------------------
The names of the Registrant's executive officers and directors and the
positions held by each of them are set forth below:
Name Age Position Held Position Since
- ---- --- -------- -------------------
Larry D. Heaps 50 President, Director October 1993
J. Robert Walz 42 Executive Vice President April 1999
Kurt Johansson 43 Vice President February 1999
Eric E. Marchant 47 Director October 1993
Curtis T. Johnson 50 Director October 1993
The term of office of each director of the Company is for one year and until
his or her successor is elected at the Registrant's annual shareholders'
meeting and is qualified, subject to removal by the shareholders. All
officers serve at the pleasure of the board of directors and until his or her
successor is elected at the annual meeting of the board of directors and is
qualified.
Biographical Information
- ------------------------
Set forth below is certain biographical information with respect to each of
the Registrant's officers and directors.
Larry D. Heaps has extensive experience in operations and manufacturing
management. Mr. Heaps has served as President of the Company since 1993.
From 1989 to 1993, as an independent operations consultant, Mr. Heaps
successfully worked with a number of clients in establishing improved
manufacturing and operational procedures. From 1972 to 1983, as Executive VP
and General Manager of a successful children's clothing manufacturing
operation, Larry managed operations that included hundreds of employees,
thousands of customer accounts, overseas exports and innovative receivables
financing. Educated at Brigham Young University, in 1972, Mr. Heaps received a
Bachelor of Science in Business Management with an emphasis in Marketing.
J. Robert Walz has nearly twenty years of experience as an on air talent
in the television industry. From 1984 to 1999, Mr. Walz worked for KSL-
Television in Salt Lake City, Utah, as a reporter/correspondent. His reports
were aired by CBS, ABC and NBC affiliate stations throughout the United States
and throughout the world on CNN. From 1992 to 1997, Mr. Walz taught
journalism at Brigham Young University and Utah Valley Community College. He
has written and produced numerous video productions. Mr. Walz received a
Bachelor of Arts in Communications from Brigham Young University with an
emphasis in Broadcast Journalism in 1982. He was the student president for
the Society of Professional Journalists in 1981.
Kurt Johansson joined the Company as vice president in February 1999.
From 1991 to 1999, Mr. Johansson owned and operated his own advertising agency
with major accounts such as Dannon Yogurt, Grand Targhee Ski Area and Fuji
<PAGE> 19
Film. In 1996, Mr. Johansson was the Director of Marketing at Mansell and
Associates. From 1992 to 1996, he was a director of Advertising at
HealthRider and was responsible for a multi-million dollar television, radio
and print budget. From 1986 to 1990, he worked in radio station sales and
management and was the number one sales person at a top Salt Lake City radio
station in 1990. From 1978 to 1985, Mr. Johansson owned a financial planning
firm, supervising 300 agents with offices in Utah, Arizona and Idaho.
Eric E. Marchant has served as a director of the Company since 1993.
From 1989 to 1993, Mr. Marchant served as President of Management Perspectives
Group, a management consulting firm that assists clients in improving their
strategic focus, cultural unity and management/leadership environment. He
oversaw and participated in the firm's product development and consulting
services. Prior to that period, as a private consultant, his list of clients
included Exxon, Dow Chemical, Department of Energy, and a number of other
organizations large and small. A lawyer and member of the Utah Bar
Association since 1978, Mr. Marchant received his Juris Doctorate from Brigham
Young University's J. Reuben Clark Law School in 1978. He received his B.A.
in Political Science/Spanish from Southern Utah State College where he
graduated with high honors (4.0 GPA) in three years in 1976.
Curtis T. Johnson worked as a Senior Marketing Manager from 1998 to 1999
for Intel. From 1993 to 1998, Mr. Johnson worked for the Company. From 1989
to 1993, he spent four years with Novell, Inc. as Product Line Manager and
Senior Marketing Manager in Sales/Marketing. He managed a major product line
from early specification through availability in the marketplace. His
responsibilities included establishing and maintaining OEM relationships with
major high technology vendors as well as creating and managing programs
relating to Novell's major customers. From 1974 to 1980, Mr. Johnson's
background also includes corporate responsibilities with Digital Equipment
Corporation and from 1980 to 1989 with Wang Laboratories. He filled a variety
of roles including technology development, sales, marketing and management.
<PAGE>
<PAGE> 20
ITEM 6. EXECUTIVE COMPENSATION
-------------------------------
The following tables set forth certain summary information concerning the
compensation paid or accrued for each of the Company's last three completed
fiscal years to the Registrant's chief executive officer and each of its other
executive officers that received compensation in excess of $100,000 during
such period (as determined at December 31, 1998, the end of the Registrant's
last completed fiscal year):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Other
Annual Restricted All Other
Name & Principal Compen- Stock Options/ LTIP Compensa-
Position Year Salary($) Bonus($) sation($) Award($) SARS(#) Payout($) tion($)
- ---------------- ---- --------- -------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eric E. Marchant 1998 $ 96,000 - - - - - -
CEO & Chairman 1997 $ 75,000 - $ 112,500(1) - - - -
1996 $ 60,000 - - - - - -
Larry D. Heaps 1998 $ 96,000 - - - - - -
President & Director 1997 $ 75,000 - $ 112,500(1) - - - -
1996 $ 60,000 - - - - - -
Curtis T. Johnson 1998 $ 5,750 - - - - - -
Director 1997 $ 75,000 - $ 112,500(1) - - - -
(President 1994-96) 1996 $ 60,000 - - - - - -
(1) These officers received restricted stock for accrued salaries.
</TABLE>
Accrued Compensation
- --------------------
During fiscal years 1998, 1997 and 1996, the Company accrued salaries for its
officers and directors in the amounts of $47,459, $15,123, and $246,988,
respectively.
Board Compensation
- ------------------
The Company's directors receive no payments for attendance at meetings. Board
members may be reimbursed for all reasonable out-of-pocket expenses incurred
by them in connection with their attendance at board meetings.
Options/SAR Grants in Last Fiscal Year
- ------- -------------------------------
No individual grants of stock options (whether or not in tandem with SARs), or
freestanding SARs were made during the last completed fiscal year to any of
the named executive officers.
<PAGE> 21
Bonuses and Deferred Compensation
- ---------------------------------
There are no compensation plans or arrangements, including payments to be
received from the Company, with respect to any person named as a director,
executive officer, promoter or control person above which would in any way
result in payments to any such person because of his resignation, retirement,
or other termination of such person's employment with the Company or its
subsidiaries, or any change in control of the Company, or a change in the
person's responsibilities.
Pension Table
- -------------
Not Applicable.
Other compensation
- ------------------
None.
Employment Agreements
- ---------------------
On February 1, 1999, the Company entered into an Employment Agreement with
Kurt H. Johansson for a salary of $50,000 per year, subject to the Company's
sole discretion to reduce or increase such compensation. The agreement
includes provisions for bonus payments in accordance with a prospective
incentive program to be mutually agreed upon by the employer and employee.
Termination of the agreement is at-will by either party.
On April 6, 1999, the Company entered into an Employment Agreement with J.
Robert Walz for a salary of $84,000 per year, subject to discretionary
increase pursuant to an annual review by the board of directors. The
agreement includes a signing bonus of fifty thousand (50,000) shares of the
Company's common stock. The agreement also includes provisions for a bonus
payment upon the anniversary date of signing based upon a determination of the
board of directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
------------------------------------------------------
Transactions with Management and Others
- ---------------------------------------
Except as indicated below, and for the periods indicated, there were no
material transactions, or series of similar transactions, since the beginning
of the Company's last fiscal year, or any currently proposed transactions, or
series of similar transactions, to which the Company was or is to be a party,
in which the amount involved exceeds $60,000, or in which any director or
executive officer, or any security holder who is known by the Company to own
of record or beneficially more than 5% or any class of the Company's common
stock, or any member of the immediate family of any of the foregoing persons,
has an interest.
Certain Business Relationships
- ------------------------------
Except as indicated below, and for the periods indicated, there were no
material relationships regarding directors that exist, or have existed during
the Company's last fiscal year.
<PAGE> 22
Indebtedness of Management
- --------------------------
Except as indicated below, and for the periods indicated, there were no
material transactions, or series of similar transactions, since the beginning
of the Company's last fiscal year, or any currently proposed transactions, or
series of similar transactions, to which the Company was or is to be a party,
in which the amount involved exceeds $60,000 and in which any director or
executive officer, or any security holder who is known to the Company to own
of record or beneficially more than 5% of any class of the Company's common
stock, or any member of the immediate family of any of the foregoing persons,
has an interest.
Transactions with Promoters
- ---------------------------
None.
Sub-lease to topjobs.net, Inc. (the "JV")
- ----------------------------------------
The Company sub-leases approximately 85% of its floor space to the JV for
$5,525 per month. The sub-lease is an oral agreement. Because the JV pays
DiSX the exact amount that DiSX pays the landlord, an unrelated third party,
management believes that the sub-lease is on terms as fair as could be
obtained from unrelated third parties and through arms-length negotiation.
ITEM 8. DESCRIPTION OF SECURITIES
----------------------------------
The Registrant is authorized to issue fifty five million (55,000,000) total
shares of stock, consisting of 50,000,000 shares designated as common stock,
par value $0.001 per share (the "Common Stock"), and 5,000,000 shares
designated as preferred stock, par value of $0.001 per share (the "Preferred
Stock"). The Company has 22,055,435 shares of Common Stock issued and
outstanding and no shares of Preferred Stock issued and outstanding at
September 30, 1999.
Common Stock
- ------------
The holders of Common Stock are entitled to one vote per share on each matter
submitted to a vote at any meeting of shareholders. Shares of Common Stock do
not carry cumulative voting rights and, therefore, a majority of the shares of
outstanding Common Stock will be able to elect the entire board of directors
and, if they do so, minority shareholders would not be able to elect any
persons of the board of directors. The Registrant's bylaws provide that a
majority of the issued and outstanding shares of the Registrant constitutes a
quorum for shareholders' meetings, except with respect to certain matters for
which a greater percentage quorum is required by statute or the bylaws.
Shareholders of the Registrant have no preemptive rights to acquire shares of
Common Stock or other securities. The Common Stock is not subject to
redemption and carries no subscription or conversion rights. In the event of
liquidation of the Registrant, the shares of Common Stock are entitled to
share equally in corporate assets after satisfaction of all liabilities.
Holders of Common Stock are entitled to receive such dividends as the board of
directors may from time to time declare out of funds legally available for the
payment of dividends. The Registrant seeks growth and expansion of its
business through the reinvestment of profits, if any, and does not anticipate
that it will pay dividends in the foreseeable future.
<PAGE> 23
Preferred Stock
- ---------------
The authority to issue the Preferred Stock is vested in the Board of Directors
of the Company, which has the authority to fix and determine the powers,
qualifications, limitations, restrictions, designations, rights preferences,
or other variations of each class or series within each class which the
Company is authorized to issue. The above described authority of the Board of
Directors may be exercised by corporate resolution from time to time as the
Board of Directors sees fit.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
-----------------------------------------------------------
OTCBB Eligibility Rules
- -----------------------
Effective July 1, 1999, all companies that began quotation on the NASD's OTC
Bulletin Board ("OTCBB") prior to January 4, 1999 are being reviewed to
determine compliance status with respect to the OTCBB's eligibility rules. To
be compliant, a company must be (1) registered with the SEC under section 13
or 15(d) of the Exchange Act, and current in its required filings, i.e., must
have filed its latest required annual filing and any subsequent quarterly
filings. In the alternative, a company may be deemed compliant if it has
filed a Form 10 or Form 10SB and has cleared all comments by the SEC.
Although the Company has filed a Form 10SB, at November 4, 1999, its deadline
for compliance, the Form 10SB had not cleared comments by the SEC, and the
Company's stock was delisted. Once the Form 10 SB has cleared comments, the
Company will seek to have its common stock reinstated for quotations on the
OTCBB. Until such time, the Company has requested its market maker to list
the Company's common stock in the National Quotation Bureau's "pink sheets."
At September 30,1999, the Company's Common Stock was quoted on the NASD's OTC
Bulletin Board under the symbol "DIXS." The following table sets forth, for
the respective periods indicated, the prices for the Company's Common Stock in
the over-the-counter market as reported by a weekly reporting service and
according to the NASD's OTC Bulletin Board. The bid prices represent inter-
dealer quotations, without adjustments for retail markups, markdowns or
commissions and may not necessarily represent actual transactions. All bid
prices in the table below have been rounded to the nearest whole cent.
<PAGE>
<PAGE> 24
Bid Prices
----------
High Bid Low Bid
-------- -------
Fiscal Year Ended December 31, 1996
- -----------------------------------
First Quarter $ 1.13 $ 0.25
Second Quarter $ 1.13 $ 0.13
Third Quarter $ 0.75 $ 0.13
Fourth Quarter $ 0.75 $ 0.13
Fiscal Year Ended December 31, 1997
- -----------------------------------
First Quarter $ 1.25 $ 0.25
Second Quarter $ 1.00 $ 0.13
Third Quarter $ 0.75 $ 0.19
Fourth Quarter $ 0.69 $ 0.06
Fiscal Year Ended December 31, 1998
- -----------------------------------
First Quarter $ 1.25 $ 0.06
Second Quarter $ 1.63 $ 0.22
Third Quarter $ 0.66 $ 0.13
Fourth Quarter $ 0.44 $ 0.10
Fiscal Year Ended December 31, 1999
- -----------------------------------
First Quarter $ 0.94 $ 0.16
Second Quarter $ 0.75 $ 0.38
As of September 30, 1999, there were approximately 194 shareholders of record
of the Company's Common Stock and the reported bid or asked prices for the
Company's Common Stock was $0.34 and $0.38, respectively.
As of September 30, 1999, the Company has issued and outstanding 22,055,435
shares of Common Stock.
Dividend Policy
- ---------------
The Company has not declared or paid cash dividends or made distributions in
the past and the Company does not anticipate that it will pay cash dividends
or make distributions in the foreseeable future. The Company currently
intends to retain and reinvest future earnings, if any, to finance its
operations.
Transfer Agent
- --------------
The transfer agent for the Company's Common Stock is Colonial Stock Transfer
Co., 455 East 400 South, Suite 100, Salt Lake City, Utah 84111.
<PAGE>
<PAGE> 25
ITEM 2. LEGAL PROCEEDINGS
-------------------------
The Company is involved in litigation with Laservend, Inc., a Utah corporation
("Laservend"), who is currently undergoing Chapter 7 bankruptcy proceedings in
the Bankruptcy Court for the District of Utah, Central Division. Laservend's
Bankruptcy Trustee filed a complaint against the Company on June 18, 1998,
alleging that Laservend had advance the Company $225,000.00 with the agreement
or understanding that the Company would repay Laservend $225,000.00 plus
interest. Subsequently, the complaint has been amended alleging that the
amounts advanced with interest are $273,000.00. The Company contends that the
parties were in merger negotiations and that the amounts advanced were part of
these negotiations. Further, that in the event that a merger did not occur,
any and all amounts advanced by Laservend to the Company would be repaid
through the Company's Common Stock at a rate of $0.50 per share. The merger
failed to take place due to events occurring in Laservend. The Bankruptcy
Court ruled on July 12, 1999, that the amounts owed by the Company are
$273,000.00. Negotiations are ongoing concerning the repayment of said
amount.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
-----------------------------------------------------
The Registrant has not changed nor had any disagreements with its independent
certified accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
-----------------------------------------------
During the first three quarters of 1999, the Company issued 3,040,488 shares
of restricted Common Stock to certain creditors of the Company for conversion
of outstanding indebtedness at an average price of $0.258 per share. Of that
total, 2,415,168 shares were issued to three affiliates of the Company at the
rate of $0.263 per share for the conversion of notes payable and convertible
debentures. The shares issued to affiliates were issued to Craig Morrison, in
the amount of 1,135,168 shares, Arnell Heaps, in the amount of 888,000 shares,
and DeLynn Heaps, in the amount of 400,000 shares.
In 1999, the Company issued 1,403,732 shares of restricted Common Stock to
various individuals for professional services relating to the Company's
business plan and providing technical services. The value for the services was
placed at an average of $0.25 per share. No cash consideration was received by
the issuer and aggregate offering price for the securities (approximately
$347,569) was determined to be the fair market value for the consulting
service provided.
In 1999, the Company issued 340,000 shares of restricted Common Stock for real
property as described in Item 3, Part I above, valued at $95,000.
In 1999, the Company issued 524,446 shares of restricted Common Stock at
$0.228 per share to pay $119,312 in accrued salaries and wages.
The securities issued in the foregoing transactions were issued in reliance on
the exemption from registration requirements provided by Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"). Of the above total
shares issued for the six-month period, 700,000 shares were issued to current
officers and directors at an average price of $0.250 per share for accrued
salaries and wages and for services rendered for the Company.
<PAGE> 26
In 1998, the Company issued 3,438,421 of shares of restricted Common Stock to
third-party creditors of the Company for conversion of outstanding
indebtedness at an average price of $0.233 per share.
In 1998, the Company issued 385,500 shares of restricted Common Stock to
various individuals for professional services relating to the Company's
business plan and providing technical services. The value for the services was
placed at an average of $0.303 per share. No cash consideration was received
by the issuer and aggregate offering price for the securities (approximately
$116,824) was determined to be the fair market value for the services
provided.
The securities issued in the foregoing transactions were issued in reliance on
the exemption from registration requirements provided by Section 4(2) of the
Securities Act.
In 1997, the Company issued 3,115,216 shares of restricted Common Stock to
certain third-party creditors of the Company for conversion of outstanding
notes payable and convertible debentures at an average price of $0.320 per
share.
In 1997, the Company issued 2,051,820 shares of restricted Common Stock to
various individuals for professional services relating to the development of
the Company's business plan and providing technical and other business related
services. The value for the services was placed at an average of $0.190 per
share. No cash consideration was received by the issuer and aggregate offering
price for the securities (approximately $389,846) was determined to be the
fair market value for the consulting service provided. Of the above total,
600,000 shares were issued to current officers and directors for services
rendered to the Company during a period when their salaries and wages were
reduced below contracted levels.
In 1997, the Company issued 1,800,000 shares of restricted Common Stock at
$0.188 per share to pay $337,500 in accrued salaries and wages to current
officers and directors.
The securities issued in the foregoing transactions were issued in reliance on
the exemption from registration requirements provided by Section 4(2) of the
Securities Act.
In 1996, the Company issued 82,774 shares of restricted Common Stock to
certain third-party creditors of the Company for conversion of outstanding
indebtedness at an average price of $0.492 per share.
The securities issued in the foregoing transactions were issued in reliance on
the exemption from registration requirements provided by Section 4(2) of the
Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-------------------------------------------------
Sections 16-10a-901 through 909 of the Utah Revised Business Corporation Act
provides in relevant parts as follows:
<PAGE>
<PAGE> 27
(1) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or on
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(2) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only
to the extent that the court in which such action or suit was brought shall
determine on application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in (1) or (2) of this subsection, or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith.
(4) The indemnification provided by this section shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as
action in another capacity while holding such office, and shall continue as to
a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors, and administrators of such
a person.
The foregoing discussion of indemnification merely summarizes certain aspects
of indemnification provisions and is limited by reference to the above
discussed sections of the Utah Revised Business Corporation Act.
<PAGE> 28
The Registrant's certificate of incorporation and bylaws provide that the
Registrant "may indemnify" to the full extent of its power to do so, all
directors, officers, employees, and/or agents. It is anticipated that the
Registrant will indemnify its officers and directors to the full extent
permitted by the above-quoted statute.
Insofar as indemnification by the Registrant for liabilities arising under the
Securities Act may be permitted to officers and directors of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant is aware
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
PART F/S
--------
The Company's consolidated balance sheets of Dynamic Information System &
eXchange, Inc. and Subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity (deficit), and
cash flows for the years ended December 31, 1998 and 1997, have been examined
to the extent indicated in their reports by Jones, Jensen & Company,
independent certified accountants, and have been prepared in accordance with
generally accepted accounting principles and pursuant to Regulation S-B as
promulgated by the Securities and Exchange Commission and are included herein.
The Company's consolidated balance sheets of Dynamic Information System &
eXchange, Inc. and Subsidiaries as of September 30, 1999, and the related
consolidated statements of operations, stockholders' equity (deficit), and
cash flows for the period ending September 30, 1999 have been prepared by the
Company, without audit, in accordance with the rules and regulations of the
Securities and Exchange Commission and, therefore may not include all
information and footnotes necessary for a complete presentation of the
financial position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments (which include only normal recurring
accruals) necessary to present fairly the financial position and results of
operations for the periods presented have been made. These financial
statements should be read in conjunction with the accompanying notes, and with
the historical financial information of the Company.
Financial statements for the Company's joint venture, topjobs.net, inc.,
including balance sheets at September 30, 1999, and the related statements of
operations and cash flows from inception on February 11, 1999 to September 30,
1999, are included herein and have been prepared without audit, and therefore
may not include all information and footnotes necessary for a complete
presentation of the financial position, results of operations, and cash flows
in conformity with generally accepted accounting principles. In the opinion
of management, all adjustments (which include only normal recurring accruals)
necessary to present fairly the financial position and results of operations
for the period presented have been made.
<PAGE>
PAGE> 29
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Dynamic Information System and eXchange, Inc. (DiSX) and Subsidiary
(A Development Stage Company)
Orem, Utah
We have audited the accompanying consolidated balance sheet of Dynamic
Information System & eXchange, Inc., (a development stage company) and
Subsidiary as of December 31, 1998 and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years ended
December 31, 1998 and 1997, and from inception on April 9, 1993 through
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated 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 Dynamic
Information System & eXchange, Inc. (a development stage company) and
Subsidiary as of December 31, 1998 and the results of their operations and
their cash flows for the years ended December 31, 1998 and 1997, and from
inception on April 9, 1993 through December 31, 1998 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 2 to
the financial statements, the Company is a development stage company with no
significant operating results to date, which raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
July 22, 1999
<PAGE>
<PAGE> 30
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Consolidated Balance Sheet
December 31, 1998
ASSETS
------
December 31, 1998
-----------------
CURRENT ASSETS
Accounts receivable (Note 1) $ 114,405
Accounts receivable - related party (Note 6) $ 16,124
Prepaids 6,526
---------------
Total Current Assets 137,055
---------------
FIXED ASSETS - net (Notes 1 and 3) 23,170
---------------
TOTAL ASSETS $ 160,225
===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Cash overdraft $ 6,014
Accounts payable 62,179
Accrued expenses (Note 4) 402,858
Deferred revenue 127,000
Current portion - long-term liabilities (Note 5) 289,734
Convertible debentures (Note 5) 354,622
Notes payable - related parties (Note 5) 286,991
---------------
Total Current Liabilities 1,529,398
---------------
LONG-TERM LIABILITIES (Note 5) -
Total Liabilities 1,529,398
---------------
COMMITMENTS AND CONTINGENCIES (Note 7) 340,231
---------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, 5,000,000 shares authorized
at $0.001 par value; no shares issued or
outstanding -
Common stock, 50,000,000 shares authorized at
$0.001 par value; 16,746,769 shares issued 16,747
Additional paid-in capital 4,201,012
Deficit accumulated during the development stage (5,927,163)
---------------
Total Stockholders' Equity (Deficit) (1,709,404)
---------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 160,225
===============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 31
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Consolidated Statements of Operations
December 31, 1998
From
Inception on
For the Years April 9,
Ended December 31, 1993 Through
----------------------- December 31,
1998 1997 1998
--------- ----------- -------------
SALES $ 53,389 $ 51,246 $ 112,421
COST OF SALES 12,920 31,651 50,459
--------- ---------- ------------
GROSS MARGIN 40,469 19,595 61,962
--------- ---------- ------------
EXPENSES
Salaries and wages 374,616 506,871 2,555,930
Depreciation and
amortization 16,833 10,427 51,421
Research and devel-
opment (Note 1) - 1,365 80,667
General and
administrative 855,961 1,022,055 2,862,955
---------- ---------- -----------
Total Expenses 1,247,410 1,540,718 5,550,973
---------- ---------- -----------
Loss from Operations (1,206,941) (1,521,123) (5,489,011)
---------- ---------- -----------
OTHER INCOME (EXPENSE)
Interest income 700 - 700
Other expense - (14,516) (14,516)
Interest expense (166,901) (140,681) (424,336)
---------- ---------- -----------
Total Other
Income (Expense) (166,201) (155,197) (438,152)
---------- ---------- -----------
NET LOSS $(1,373,142) $(1,676,320) $ (5,927,163)
========== ========== ===========
BASIC LOSS PER SHARE $ (0.09) $ (0.18)
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 32
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
December 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Additional During the Stockholders'
Common Stock Paid-in Development Equity
Shares Amount Capital Stage (Deficit)
-------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> -
Balance at inception
on April 9, 1993 - $ - $ - $ - $ -
Issuance of common stock to
founders at incorporation
date at $0.00 per share 2,500,000 2,500 (2,500) - -
Issuance of common stock
at $0.60 per share 112,500 113 67,387 - 67,500
Net loss from inception
through December 31, 1993 - - - (404,925) (404,925)
---------- ---------- --------- ------------ ----------
Balance, December 31, 1993 2,612,500 2,613 64,887 (404,925) (337,425)
Cancellation of common
stock issued to founder (1,000,000) (1,000) 1,000 - -
Common stock issued for
the conversion of
convertible debentures at
approximately $0.19 per
share 1,800,000 1,800 339,571 - 341,371
Common stock issued for
cash at approximately
$1.18 per share 208,338 208 244,792 - 245,000
Common stock issued in
recapitalization 1,309,200 1,309 6,036 - 7,345
Common stock issued from
private placement at $2.00
per share 75,000 75 149,925 - 150,000
Common stock issued in lieu
of wages at $2.00 per share 98,500 99 196,901 - 197,000
Net loss for the year ended
December 31, 1994 - - - (785,664) (785,664)
---------- ---------- --------- ---------- -------
Balance, December 31, 1994 5,103,538 $ 5,104 $ 1,003,112 $ (1,190,589) $ (182,373)
========= ========== ========= ========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PAGE> 33
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
December 31, 1998 (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Additional During the Stockholders'
Common Stock Paid-in Development Equity
Shares Amount Capital Stage (Deficit)
-------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance forward 5,103,538 $ 5,104 $1,003,112 $ (1,190,589) $ (182,373)
Common stock issued to
employees for services
rendered at $0.40 per
share 157,500 157 62,843 - 63,000
Conversion of notes and
interest payable to common
stock at $0.62 per share 400,000 400 249,505 - 249,905
Common stock issued in lieu
of wages at $1.00 per share 197,000 197 196,803 - 197,000
Common stock issued for
services rendered at appro-
ximately $1.21 per share 15,000 15 18,185 - 18,200
Net loss for the year ended
December 31, 1994 - - - (850,154) (850,154)
---------- ---------- --------- --------- -------
Balance, December 31, 1995 5,873,038 5,873 1,530,448 (2,040,743) (504,422)
Conversion of notes and
interest payable to common
stock at $0.49 per share 82,774 81 40,630 - 40,711
Net loss for the year ended
December 31, 1996 - - - (836,958) (836,958)
---------- ---------- --------- --------- ---------
Balance, December 31, 1996 5,955,812 $ 5,954 $ 1,571,078 $ (2,877,701) $ (1,300,669)
========== ========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 34
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
December 31, 1998 (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Additional During the Stockholders'
Common Stock Paid-in Development Equity
Shares Amount Capital Stage (Deficit)
-------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance forward 5,955,812 $ 5,954 $ 1,571,078 $ (2,877,701) $ (1,300,669)
Common stock issued for
services rendered at
$0.19 per share 2,051,820 2,052 387,794 - 389,846
Conversion of notes and
interest payable to
common stock at $0.19
per share 460,000 460 84,540 - 85,000
Common stock issued in
lieu of wages at $0.19
per share 1,800,000 1,800 335,700 - 337,500
Conversion of convertible
debentures and interest
payable at $0.34 per share 2,655,216 2,655 907,701 - 910,356
Net loss for the year
ended December 31, 1997 - - - (1,676,320) (1,676,320)
----------- ---------- ----------- --------- ---------
Balance, December 31, 1997 12,922,848 12,921 3,286,813 (4,554,021) (1,254,287)
Common stock issued for
services rendered at
$0.30 per share 385,500 386 116,438 - 116,824
Conversion of debentures
and interest payable to
common stock at $0.24
per share 2,562,813 2,563 618,350 - 620,913
Conversion of notes and
interest payable at
$0.21 per share 875,608 877 179,411 - 180,288
Net loss for the year
ended December 31, 1998 - - - (1,373,142) (1,373,142)
---------- ---------- ----------- --------- ---------
Balance, December 31, 1998 16,746,769 $ 16,747 $ 4,201,012 $ (5,927,163) $(1,709,404)
========== ========== =========== ============ =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 35
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Consolidated Statements of Cash Flows
December 31, 1998
<TABLE>
<CAPTION>
From
Inception on
For the Years April 9,
Ended December 31, 1993 Through
----------------------- December 31,
1998 1997 1998
-------------- -------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (1,373,142) $ (1,676,320) $ (5,927,163)
Adjustments to reconcile net loss
to net cash flows used by operating
activities:
Depreciation and amortization 16,014 10,427 50,602
Common stock issued for services 116,824 389,846 1,029,518
Changes in operating assets
and liabilities:
(Increase) decrease in accounts
receivable (106,970) (7,435) (114,405)
(Increase) decrease in accounts
receivable - related party (14,335) (1,789) (16,124)
(Increase) decrease in prepaid - (6,526) (6,526)
Increase (decrease) in Cash overdraft (2,030) (9,298) (11,328)
Increase in commitments and
contingencies 53,659 286,572 340,231
Increase (decrease) in accounts
payable 29,433 (8,718) 79,523
Increase in accrued expenses 155,867 314,330 931,123
Increase in deferred revenue 127,000 - 127,000
------------ ------------ ------------
Net Cash Flows (Used) by
Operating Activities (997,680) (708,911) (3,517,549)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs - - (4,100)
Purchase of fixed assets (17,363) (8,551) (60,879)
------------ ------------ ------------
Net Cash Flows (Used) by
Investing Activities (17,363) (8,551) (64,979)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Acquisition of shell - - 1,395
Payment on notes payable (180,781) (79,955) (373,796)
Proceeds from notes payable 1,195,824 797,417 3,492,429
Issuance of common stock for stock - - 462,500
------------ ------------ ------------
Net Cash Flows Provided by
Financing Activities $ 1,015,043 $ 717,462 $ 3,582,528
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 36
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
December 31, 1998
<TABLE>
<CAPTION>
From
Inception on
For the Years April 9,
Ended December 31, 1993 Through
----------------------- December 31,
1998 1997 1998
----------- -------------- ---------------
<S> <C> <C> <C>
NET INCREASE (DECREASE)
IN CASH $ - $ - $ -
CASH AT BEGINNING OF YEAR - - -
----------- ------------- ---------------
CASH AT END OF YEAR $ - $ - $ -
=========== ============= ===============
CASH PAID DURING THE
YEAR FOR:
Interest $ 71,276 $ 36,427 $ 125,209
Income taxes $ - $ - $ -
NON-CASH TRANSACTIONS
Equipment purchased
through capital lease $ - $ - $ 8,795
Debentures converted to
common stock $ 620,913 $ 778,323 $ 1,888,926
Interest converted to
common stock $ - $ 105,417 $ 147,717
Deposit on software
recorded through note
payable $ - $ - $ 39,198
Common stock issued for
notes payable $ 180,288 $ 71,051 $ 251,339
Common stock issued for
accrued wages $ - $ 337,500 $ 337,500
Common stock issued for
services $ 116,824 $ 389,846 $ 1,029,518
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 37
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------------
a. Organization
- ----------------
The consolidated financial statements presented are those of Dynamic
Information System & eXchange, Inc. (DiSX) (the Company) (a development
stage company). The Company was incorporated in the state of Utah on March
20, 1987.
Effective October 20, 1994, the Company and DiSX completed an Agreement and
Plan of Reorganization whereby the company issued 14,483,326 (3,620,838 post-
split shares) shares of its common stock in exchange for 100% of the issued
and outstanding common stock of DiSX. The Company also changed its name on
this date from M&K Investments, Inc. to Dynamic Information System & eXchange,
Inc. On October 31, 1994, the Company effected a reverse stock split of the
outstanding common shares at a rate of 1 share for every 2 shares outstanding.
During 1995 the shareholders approved an additional reverse stock split at a
rate of 1 share have been retroactively restated to reflect the reverse stock
splits.
DiSX was incorporated in the State of Utah on April 9, 1993. DiSX was founded
to provide information services to the labor and employment industry and has
developed a data base that includes over 60,000 professional job listings
throughout the United States. 85% of the listings are currently contained in
the Western United States. DiSX products includes, JobLISTINGS, JobSEARCH and
JobDISC.
At the time of the acquisition, the Company was essentially inactive, with no
operations and minimal assets. Additionally, the exchange of the Company's
common stock for the common stock of DiSX resulted in the former stockholders
of DiSX obtaining control of the Company. Accordingly, DISX became the
continuing entity for accounting purposes, and the transaction was accounted
for as a recapitalization of DiSX with no adjustment to the basis or assets
acquired or liabilities assumed by the Company. For legal purposes, the
Company was the surviving entity.
b. Accounting Method
- ---------------------
The Company's consolidated financial statements are prepared using the accrual
method of accounting. The Company has selected a calender year end.
c. Basic Loss Per Share
- ------------------------
The computation of basic loss per share of common stock is based on the
weighted average number of shares outstanding during the period of the
financial statements as follows:
For the Year Ended For the Year Ended
December 31, 1998 December 31, 1997
Loss Shares Per-Share Loss Shares Per-Share
(Numerator)(Denominator) Amount (Numerator)(Denominator) Amount
---------- ----------- --------- --------- ----------- ---------
Net Loss $(1,373,142) 14,845,019 $ (0.09) $1,676,320) 9,087,747 $ (0.18)
Fully diluted earnings (loss) per share is not presented as any common stock
equivalents are antidilutive in nature.
<PAGE> 38
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998
d. Provision for Taxes
- -----------------------
No provision for taxes has been made, due to cumulative operating losses at
December 31, 1998. The Company has net operating loss carryforwards of
approximately $5,450,000 which will expire in 2008 through 2014. No tax
benefit has been reported in the financial statements and the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
e. Cash and Cash Equivalents
- -----------------------------
The company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
f. Fixed Assets
- ----------------
Fixed assets are stated at cost. Depreciation of fixed assets is computed
using the straight-line method over the estimated useful lives of the related
assets, primarily five years.
g. Accounts Receivable
- -----------------------
Accounts receivable are shown net of the allowance for doubtful accounts. The
allowance for doubtful accounts at December 31, 1998 was $2,135.
h. Principles of Consolidation
- -------------------------------
The consolidated financial statements include those of Dynamic Information
System & eXchange, Inc. (the Company) and its wholly-owned subsidiary, Dynamic
Information System & eXchange, Inc. (DiSX). All significant intercompany
accounts and transactions have been eliminated.
i. Concentrations of Credit
- ----------------------------
The Company sells its services in Utah and various other states. The Company
extends credit to its customers.
Credit losses, if any, have been provided for in the financial statements and
are based on management's expectations. The Company's accounts receivable are
subject to potential concentrations of credit risk. The Company does not
believe that it is subject to any unusual risks, nor significant risks in the
normal course of its business.
j. Estimates
- -------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
k. Revenue Recognition
- -----------------------
The Company recognized revenues as billed as well as over the life of the
contract.
<PAGE>
<PAGE> 39
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998
l. Advertising
- ---------------
The company follows the policy of charging the costs of advertising to expense
as incurred. Advertising expense was $12,681 and $7,417 for the years ended
December 31,1998 and 1997, respectively.
m. Changes in Accounting Principles
- ------------------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general purpose financial statements. This statement
requires that an enterprise (a) classify items of other comprehensive income
by their nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. The Company has retroactively applied the provisions of this new
standard. There were no items of Other Comprehensive Income existing at
December 31, 1998 or 1997.
Note 2 GOING CONCERN
- ----------------------
The Company's financial statements are prepared using generally accepted
accounting principals applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other
material assets, nor does it have an established source of revenues sufficient
to cover its operating costs and to allow it to continue as a going concern.
It is the intent of the Company to generate cash flow through increased sales
and marketing of its Internet services.
NOTE 3 - FIXED ASSETS
- ---------------------
Fixed assets consisted of the following:
1998
-------------
Computer equipment $ 19,593
Office equipment 41,286
Capital lease equipment 8,795
-------------
69,674
Accumulated depreciation (46,504)
-------------
$ 23,170
=============
Total depreciation expense for the years ended December 31, 1998, and 1997 was
$15,386 and $9,607, respectively.
<PAGE>
<PAGE> 40
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 4 - ACCRUED EXPENSES
- ----------------------------
Accrued expenses consisted of the following:
1998
-----------
Accrued salaries and wages $ 124,407
Payroll taxes payable 167,975
Accrued interest payable 110,476
-----------
$ 402,858
===========
NOTE 5 - LONG-TERM LIABILITIES
- ------------------------------
Long-term liabilities consisted of the following:
1998
--------------
Notes Payable - Related Parties
- -------------------------------
Note payable to a family organization related
to an officer, secured by Company stock, at
12% per annum, payable on demand. $ 17,020
Note payable to officers, secured by Company
stock, at 10% per annum, payable on demand. 169,971
Note payable to an individual at 18%
per annum, secured by Company stock,
convertible to common stock at $3.75
per share, due upon demand. 100,000
-------
Total Notes Payable - Related Parties 286,991
-------
Convertible Debentures
- ----------------------
1996 Notes payable to three individuals at 10%
per annum, secured by Company stock, interest
and principal due on demand, convertible by 30,422
lender at $0.50 per share.
1997 Notes payable to six individuals at 10% per
annum, secured by Company stock, interest and
principal due on demand, 5 notes totaling $22,500 57,200
convertible by lender at $0.50 per share, 1 note
totaling $35,000 convertible by lender at $0.25
per share.
1998 Note payable to an individual at 16%
per annum, secured by Company stock,
due upon demand, convertible by lender at 267,000
$0.25 per share. -------
Total Convertible Debentures 354,622
-------
<PAGE>
<PAGE> 41
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 5 - LONG-TERM LIABILITIES(Continued) 1998
- ---------------------------------------- -------------
Current Portion Long-Term Liabilities
- -------------------------------------
Note payable to five individuals, secured by
Company stock, at 12% per annum, payable on
demand. 186,343
Capital lease payable at 12.7% per annum,
secured by equipment, with monthly principal
and interest payments of $115, matures
December 15, 1998. 2,328
Note payable to an individual at 30%
per annum, secured by Company stock,
due upon demand. 9,000
Note payable to an individual at 10%
per annum, secured by Company stock,
due upon demand. 50,000
Note payable to Utah State University
at 6% per annum, unsecured, with an
initial payment of $9,000 due June 30,
1996, and thereafter-monthly principal
and interest payments of $2,852. 39,198
Overdraft payable to bank at 21%,
unsecured, with an overdraft limit of
$7,500, payable on demand. 2,865
-------
Total Current Portion - Long Term Liabilities 289,734
-------
Total long-term liabilities 931,347
Less current portion long-term liabilities (289,734)
Less convertible debentures (354,622)
Less notes payable related parties (286,991)
Long-term liabilities $ -
=============
Principal maturities are as follows:
1999 $ 931,347
2000 -
2001 -
2002 -
2003 -
2004 and thereafter -
-------------
$ 931,347
=============
NOTE 6 ACCOUNTS RECEIVABLE - RELATED PARTY
- --------------------------------------------
During the year ended December 31, 1998, the Company made advances to an
employee in the amount of $15,000. The accounts receivable bears interest at
8%, is unsecured and due on December 31, 1999.
<PAGE>
<PAGE> 42
Dynamic Information System & eXchange, Inc. (DiSX)and Subsidiary (A
Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1998
NOTE 7 COMMITMENTS AND CONTINGENCIES
- --------------------------------------
On January 24, 1997, the Company entered into a Letter of Offer to Acquire
with Laservend, Inc. (Laservend) (formerly Mach One Corporation) whereby
Laservend would acquire all the issued and outstanding common stock of the
Company. In anticipation of the proposed merger, Laservend advanced the
Company $286,572 during the year ended December 31, 1997. The agreement was
that such advanced funds would reduce the acquisition price if the merger
occurred and if the merger did not occur, the Company would satisfy the
obligation through the delivery of its common stock at a rate of two shares
for every dollar advanced. The merger never occurred and Laservend has filed
for bankruptcy. The Trustee of the bankruptcy is now asserting that the
advances are to be repaid in cash. The Company does not plan on repaying the
advances in cash but is willing to issue common stock to repay the loan. The
litigation has just commenced and the outcome is undeterminable at this time.
Operating Lease Obligation
- --------------------------
The Company is leasing its office space on a month-to-month basis.
[The remainder of this page is left intentionally blank]
<PAGE>
<PAGE> 43
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX) AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
September 30, December 31,
1999 1998
----------- -----------
(Unaudited)
CURRENT ASSETS
Accounts receivable $ 146,349 $ 114,405
Accounts receivable - related party 60,717 16,124
Prepaids 66,658 6,526
----------- -----------
Total Current Assets 273,724 137,055
----------- -----------
FIXED ASSETS - NET 15,310 23,170
----------- -----------
OTHER ASSETS
Equity Investment in topjobs.net (Note 3) - -
Investment in marketable securities 252,427 -
Investment in property 95,000 -
----------- -----------
Total Other Assets 347,427 -
----------- -----------
TOTAL ASSETS $ 636,461 $ 160,225
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 44
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX) AND SUBSIDIARY
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
1999 1998
----------- -----------
(Unaudited)
CURRENT LIABILITIES
Cash overdraft $ 3,861 $ 6,014
Accounts payable 307,454 62,179
Accrued expenses 227,520 402,858
Deferred gain (Note 3) 1,000,000 -
Deferred revenue - 127,000
Current portion - long-term liabilities 194,452 292,309
Convertible debentures 169,922 354,622
Notes payable - related parties 70,385 284,416
----------- -----------
Total Current Liabilities 1,973,594 1,529,398
----------- -----------
LONG-TERM LIABILITIES 98,128 -
----------- -----------
Total Liabilities 2,071,722 1,529,398
----------- -----------
COMMITMENTS AND CONTINGENCIES 340,231 340,231
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, 5,000,000 shares authorized
at $0.001 par value; no shares issued or
outstanding - -
Common stock, 50,000,000 shares authorized at
$0.001 par value; 20,850,757 and 16,746,769
shares issued and outstanding, respectively 22,055 16,747
Additional paid-in capital 5,542,619 4,201,012
Other comprehensive loss (247,573) -
Accumulated deficit (7,092,593) (5,927,163)
----------- -----------
Total Stockholders' Equity (Deficit) (1,775,492) (1,709,404)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 636,461 $ 160,225
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 45
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX) AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the For the
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
REVENUE
Agency contract revenue $1,580,539 $ - $ 778,375 $ -
Other operating revenue 47,758 27,846 13,192 10,476
---------- ---------- --------- ----------
Total Revenues 1,628,297 27,846 791,567 10,476
COST OF SALES 1,495,995 4,707 656,927 537
---------- ---------- ---------- ---------
GROSS MARGIN 132,302 23,139 134,640 9,939
---------- ---------- ---------- ---------
EXPENSES
Salaries and wages 223,412 154,673 71,299 57,669
Depreciation and amortization 11,806 11,234 4,010 4,041
General and administrative 584,927 525,421 87,252 164,170
---------- ---------- ---------- ----------
Total Expenses 820,145 691,328 162,561 225,880
---------- ---------- ---------- ----------
Loss from Operations (687,843) (668,189) (27,921) (215,941)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest income 660 - 60 -
Other expense (10,493) (16,390) (335) (2,319)
Interest expense (92,026) (64,507) (29,140) (23,879)
Loss on equity investment (375,728) - (125,423) -
---------- ---------- ---------- ----------
Total Other Income
(Expense) (477,587) (80,897) (154,838) (26,198)
---------- ---------- ---------- ----------
NET (LOSS) (1,165,430) (749,086) (182,759) (242,139)
---------- ---------- ---------- ----------
OTHER COMPREHENSIVE LOSS
Gain (loss) on valuation of
marketable securities (247,573) - 15,446 -
---------- ---------- ---------- ----------
Total Other Comprehensive
Loss (247,573) - 15,446 -
---------- ---------- ---------- ----------
Net Comprehensive (Loss) $(1,413,003) $ (749,086) $ (167,313) $ (242,139)
========== ========== ========== ==========
BASIC (LOSS) PER SHARE $ (0.06) $ (0.04) $ (0.01) $ (0.01)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER
OF SHARES 18,875,986 16,892,380 18,937,643 17,001,312
========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 46
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX) AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)
<TABLE>
<CAPTION>
Total
Common Stock Additional Other Stockholder
-------------------------- Paid-in Comprehensive Accumulated Equity
Shares Amount Capital Loss Deficit (Deficit)
------------ ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 12,922,848 $ 12,921 $ 3,286,813 $ - $(4,554,021)$(1,254,287)
Common stock issued for services
rendered at $0.30 per share 385,500 386 116,438 - - 116,824
Conversion of debentures and
interest payable to common
stock at $0.24 per share 2,562,813 2,563 618,350 - - 620,913
Conversion of notes and interest
payable at $0.21 per share 875,608 877 179,411 - - 180,288
Net loss for the year ended
December 31, 1998 - - - - (1,373,142) (1,373,142)
----------- ----------- ----------- ----------- ----------- ---------
Balance, December 31, 1998 16,746,769 16,747 4,201,012 - (5,927,163) (1,709,404)
Common stock issued for services
rendered at $0.25 per share
(unaudited) 1,403,732 1,404 347,569 - - 348,973
Conversion of debentures and
interest payable to common
stock at $0.24 per share
(unaudited) 2,006,503 2,006 501,760 - - 503,766
Conversion of notes and interest
payable at $0.27 per share
(unaudited) 1,033,985 1,034 278,830 - - 279,864
Common stock issued for property
at $0.28 per share (unaudited) 340,000 340 94,660 - - 95,000
Common stock issued for accrued
salaries and wages at $0.22 per
share (unaudited) 524,446 524 118,788 - - 119,312
Loss on valuation of marketable
securities (unaudited)(Note5) - - - (247,573) - (247,573)
Net loss for the nine months
ended September 30, 1999
(unaudited) - - - - (1,165,430) (1,165,430)
----------- ----------- ----------- ----------- ----------- ---------
Balance, September 30, 1999
(unaudited) 22,055,435 $ 22,051 $ 5,542,619 $ (247,573) $(7,092,593)$(1,775,492)
=========== =========== =========== =========== =========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 47
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)AND SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
For the For the
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net (loss) $(1,165,430) $ (749,086) $ (182,759) $ (242,139)
Adjustments to reconcile net
(loss) to net cash flows
provided(used) by operating
activities:
Depreciation 11,806 11,234 4,010 4,041
Common stock issued
for services 348,973 116,824 6,669 116,854
Loss on equity investment 375,728 - 125,423 -
Changes in operating assets
and liabilities:
(Increase) decrease in
accounts receivable (31,944) (5,880) 17,427 473
(Increase) decrease in
accounts receivable -
related party (44,593) (31,040) (34,027) (13,700)
(Increase) decrease in
prepaids and other assets (60,132) (10,141) (49,636) (450)
Increase (decrease) in
cash overdraft (2,153) 6,491 (502) 14,535
Increase (decrease) in
accounts payable 245,275 34,036 69,074 3,225
Increase in accrued expenses (20,991) (526) 18,372 (5,607)
Increase (decrease) in
deferred gain 500,000 - - -
Increase (decrease) in
deferred revenue (127,000) - - -
---------- ---------- ---------- ----------
Net Cash Flows Provided
(Used)by Operating
Activities 29,539 (628,088) (25,919) (122,798)
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Advances to equity investee (375,728) - (125,423) -
Purchase of fixed assets (3,946) (17,362) (2,746) (9,885)
---------- ---------- ---------- ----------
Net Cash Flows (Used)
by Investing Activities (379,674) (17,362) (128,169) (9,885)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Payment on notes payable and
convertible debentures (640,950) (199,834) (18,912) (34,866)
Proceeds from notes payable
and convertible debentures 991,085 845,284 173,000 147,038
---------- ---------- ---------- ----------
Net Cash Flows Provided
by Financing Activities $ 350,135 $ 645,450 $ 154,088 $ 112,172
---------- ---------- ---------- ----------
<PAGE>
<PAGE> 48
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX) AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued) (Unaudited)
For the For the
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN
CASH $ - $ - $ - $ (20,511)
CASH AT BEGINNING OF PERIOD - - - 20,511
---------- ---------- ---------- ----------
CASH AT END OF PERIOD $ - $ - $ - $ -
========== ========== ========== ==========
CASH PAID DURING THE PERIOD FOR:
Interest $ 32,867 $ 16,974 $ 14,587 $ 6,902
Income taxes $ - $ - $ - $ -
NON-CASH INVESTING AND
FINANCING ACTIVITIES
Debentures converted to
common stock $ 491,471 $ - $ 300,500 $ -
Interest converted to
common stock $ 35,035 $ - $ 35,035 $ -
Common stock issued for
notes payable $ 257,124 $ - $ 257,124 $ -
Common stock issued for
accrued wages $ 119,312 $ - $ 76,950 $ -
Common stock issued for
real property $ 95,000 $ - $ - $ -
Common stock issued for
services $ 348,973 $ - $ 6,699 $ -
Acquisition of securities $ 500,000 $ - $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 49
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX)AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 1999 and 1998
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at September 30, 1999
and 1998 and for all periods presented have been made.
Certain information and footnote disclosures normally included in consolidated
financials statements prepared in accordance with general accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 1998
audited consolidated financial statements. The results of operations for the
periods ended September 30 are not necessarily indicative of the operating
results for the full year. The Company was a development stage company until
January 1, 1999.
a. Basic Loss Per Share
The computation of basic loss per share of common stock is based on the
weighted average number of shares outstanding during the period of the
financial statements as follows:
For the For the
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
---------- ----------- ---------- ------------
Numerator (net loss) $(1,165,430) $ (749,086) $ (182,759) $ (242, 139)
Denominator (weighted
average number of
shares outstanding) 18,875,986 16,892,380 18,937,643 17,001,312
Loss per share $ (0.06) $ (0.04) $ (0.01) $ (0.01)
========== ========== ========== ==========
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
relation of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other
material current assets, and has liabilities in excess of assets of
$1,775,492. It is the intent of the Company to continue to convert the notes
payable and convertible debentures to common stock. The Company is also
seeking to increase the gross margin on its revenue. In the interim,
shareholders of the Company have committed to meeting its operating expenses
by lending the Company money as needed.
NOTE 3 - EQUITY INVESTMENT IN TOPJOBS.NET
In June 1998, the Company entered into a nine month research and cooperation
test marketing agreement, limited to the State of Utah and the city of
Houston, Texas with topjobs.net plc (PLC), a corporation located in
Manchester, England. Partially as a result of securing contracts providing
gross revenues to the venture of $141,000 in December 1998 and January 1999,
the Company and PLC decided to terminate the test marketing arrangement and
establish a
<PAGE>
<PAGE> 50
DYNAMIC INFORMATION SYSTEM & eXCHANGE, INC. (DISX) AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 1999 and 1998
NOTE 3 - EQUITY INVESTMENT IN TOPJOBS.NET (Continued)
permanent joint venture in the United States. PLC formed a Delaware
corporation, known as topjobs.net inc. (joint venture). On February 11, 1999,
the Company entered into a series of agreements with PLC, including a
Stockholders Agreement and Licensing Agreement. As an incentive for the
Company to take a minority interest (49%) in the joint venture, PLC advanced
$300,000 to the Company in interest free loans through March 4, 1999. Upon
PLC's initial public offering, PLC paid the Company an additional $200,000,
forgave the $300,000 of loans and issued to the Company 41,667 shares of PLC's
ordinary shares valued at $12.00 per share for total consideration of
$1,000,000. This consideration is listed as a deferred gain on the September
30, 1999 balance sheet.
The Company has elected to defer the revenue of $1,000,000 until such time as
the joint venture is profitable or is disbanded. The Company is accounting
for the 49% investment in the joint venture as an equity investment per APB
No. 18. Additionally, the Company has agreed to advance up to $500,000 to the
joint venture as working capital and to provide equipment, premises and other
managerial services as needed. As of June 30, 1999, the Company had advanced
$250,305 to the joint venture as working capital. The advances are non-
interest bearing and are repayable at such time as the JV's board of directors
shall determine based on the JV's cash flow and capital resources. As of
September 30, 1999, the Company had advanced $375,728 to the joint venture as
working capital. From inception at February 11, 1999 through September 30,
1999, the joint venture had sustained losses of $3,221,360 of which $1,578,466
is attributable to the Company. Because of the losses of the joint venture,
the investment in the joint venture is valued at zero at September 30, 1999.
The joint venture agreement provides the joint venture to reimburse the
Company for reimbursable costs. At September 30, 1999, the joint venture did
not owe the Company any amounts for reimbursable costs.
NOTE 4 - AGENCY AGREEMENT WITH TOPJOBS.NET - CONCENTRATIONS OF RISK
The Company has entered into an agency agreement with the joint venture, a
related party, wherein the Company will provide advertising services for the
joint venture as follows. The Company will provide all of the advertising
services of planning, preparing and placing the advertising of the joint
venture. In return, the joint venture will pay the Company the costs of the
invoices plus a 5% commission on all media advertising and 10% on all
broadcast production activities. The revenue from the agency agreement
accounted for 97% and 98% of the revenues for the nine months and three months
ended September 30, 1999, respectively. The agency agreement will continue
until either party gives a 90 day written notice.
NOTE 5 - LOSS ON VALUATION OF MARKETABLE SECURITIES
As part of the agreement with PLC, the Company received 41,667 shares of free
trading PLC stock, valued at $12.00 per share. At September 30, 1999, the
stock was valued at $6.09 per share, resulting in a loss on valuation of
marketable securities of $247,573.
<PAGE>
<PAGE> 51
topjobs.net, inc.
Balance Sheets
ASSETS
------
September 30,
1999
(Unaudited)
-------------
CURRENT ASSETS
Accounts Receivable 171,002
Prepaid Expense 137,267
-------
Total Current Assets 308,269
-------
FIXED ASSETS 91,118
------
OTHER ASSETS
Long-Term Assets -
------
Total Other Assets -
------
TOTAL ASSETS $ 399,387
=======
<PAGE>
<PAGE> 52
topjobs.net, inc.
Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------
September 30,
1999
(Unaudited)
-------------
CURRENT LIABILITIES
Cash Overdraft $ 23,567
Accounts Payable 181,467
Deferred Revenue 359,721
Accrued Expenses 361,264
-------
Total Current Liabilities 926,019
-------
LONG-TERM LIABILITIES
Long-Term Note - Related Parties (Note 4) 2,560,728
---------
Total Long-Term Liabilities 2,560,728
---------
TOTAL LIABILITIES 3,486,747
---------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock 1,000
Additional Paid-in Capital 133,000
Retained Deficit (3,221,360)
---------
Total Stockholders' Equity (Deficit) (3,087,360)
---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 399,387
=======
<PAGE>
<PAGE> 53
topjobs.net, inc.
Statement of Operations
From Inception on
February 11, 1999
Through
September 30,
1999
(Unaudited)
-------------
REVENUES $ 252,647
COST OF SALES 1,659,796
---------
GROSS MARGIN (1,407,149)
---------
OPERATING EXPENSES
Salaries and Wages 1,347,952
Depreciation and Amortization 10,628
General and Administrative 454,407
---------
Total Expenses 1,812,987
---------
Income (Loss) from Operations (3,220,136)
---------
OTHER INCOME (EXPENSE)
Bank Charges (1,224)
-----
Total Other Income (Expense) (1,224)
-----
NET INCOME (LOSS) $ (3,221,350)
=========
<PAGE>
<PAGE> 54
topjobs.net, inc.
Statement of Cash Flows
From
Inception on
February 11,
1999 Through
September 30,
1999
-------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) from operations $ (3,221,360)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (171,002)
(Increase) decrease in prepaid expenses (137,267)
Increase (decrease) in accounts payable 181,467
Increase (decrease) in deferred revenue 359,721
Increase (decrease) in accrued expenses 361,264
Increase (decrease) in bank overdraft 23,567
---------
Net Cash (Used) by Operating Activities (2,603,610)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (91,118)
------
Net Cash (Used) by Investing Activities (91,118)
------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term liabilities - related party 2,560,728
Proceeds from common stock 134,000
---------
Net Cash Provided by Financing Activities 2,694,728
---------
INCREASE IN CASH AND CASH EQUIVALENTS -
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ -
=========
CASH PAID FOR:
Interest $ -
Income taxes $ -
<PAGE>
<PAGE> 55
topjobs.net, inc.
Notes to the Financial Statements
September 30, 1999
NOTE 1 DESCRIPTION OF THE BUSINESS
Topjobs.net inc (the "Company") is a corporation which was duly formed and
organized under the laws of the State of Delaware on February 2, 1999. The
Company's principal business purpose is to provide the comprehensive
job-listing information of its corporate clients on its Internet site. The
Company uses broadcast media (TV and radio) and sports programming to drive
job seekers to view its Internet site.
In June 1998, Dynamic Information System and Exchange, Inc., a Utah
corporation ("DiSX") and topjobs.net plc, a corporation located in
Manchester, England, (formerly "The Corporate Net" hereinafter referred to
as "PLC") entered into a nine month research and cooperation test marketing
agreement.
Partially as a result of securing contracts providing gross revenues to the
venture of $141,000 in December 1998 and January 1999, DiSX and PLC decided
to terminate the test marketing arrangement and establish a permanent
venture in the United States. PLC formed the Delaware corporation, known as
topjobs.net inc, of which DiSX owns 49% and PLC owns 51% (for which both
stockholders paid a total of $1,000).
On February 11, 1999, DiSX and PLC entered into a series of agreements with
each other, including a Stockholders Agreement and Licensing Agreement.
Under the terms of the agreements (which continue for so long as DiSX and
PLC both own equity in the Company), PLC granted the Company an exclusive
license in the territory of the State of Utah, the city of Houston, Texas,
and such other United States cities as the parties may mutually agree upon,
to use PLC's software, name, and other trademarks to promote and market the
Top Jobs on the Net web site in the territory in accordance with the Top
Jobs on the Net business plan. DiSX agreed to furnish the Company with the
services of ten of its key personnel (who became employees of the Company
under employment agreements) and provide operating facilities in Orem,
Utah. DiSX also granted an exclusive license in the territory to use DiSX's
intellectual property and technical information. The parties also agreed to
assign to the Company all rights and obligations under all customer
agreements jointly developed under the test marketing agreement.
In February 1999, DiSX and PLC agreed for the Company to commence operations
in San Francisco and in March 1999 to expand into Los Angeles.
NOTE 2 FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at September 30,
1999 and for the period presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with general
accepted accounting principles have been condensed or omitted.
<PAGE>
<PAGE> 56
topjobs.net, inc.
Notes to the Financial Statements
September 30, 1999
NOTE 3 GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
relation of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other
material current assets, and has liabilities in excess of assets of
$3,178,478. The Company is seeking to increase its revenues and the gross
margin on its revenues to bring the Company to the point of profitability.
This is not expected to take place before late in calendar year 2000. In
the interim, the shareholders of the Company have committed to meeting its
operating expenses by funding the Company as needed. If funds are not
provided by the shareholders during this interim period, the Company will
not be able to go forward.
NOTE 4 LONG-TERM NOTE RELATED PARTIES
As of September 30, 1990, the Company owed $2,560,728 to its shareholders.
At that date, $375,728 had been advanced by DiSX and $2,185,000 by PLC.
These advances are non-interest bearing and are repayable at such time as
the Company's board of directors shall determine based on the Company's cash
flow and capital resources.
<PAGE>
<PAGE> 57
PART III
ITEM 1. INDEX TO EXHIBITS
--------------------------
Copies of the following documents are included as exhibits to this Form 10SB
pursuant to Item 601 of Regulation SB.
SEC
Exhibit Reference
No. No. Title of Document Location
- --- --- ----------------- ----------------
2 2.01 Articles of Merger/Plan of Merger Original filing
3(i) 3.01 Articles of Incorporation "
of the Registrant and related Amendments
3(ii) 3.02 Bylaws of the Registrant "
4 4.01 Specimen Stock Certificate "
4 4.02 1995 Series A Convertible Preferred Stock "
Designation
10 10.01 Stockholders' Agreement and Related Schedules "
10 10.02 Amendment to Stockholders' Agreement "
10 10.03 DiSX Loan Cancellation Letter "
10 10.04 DiSX Agency Agreement "
10 10.05 DiSX Lock-up Agreement "
10 10.06 Lease Agreement "
10 10.07 Kurt Johansson Employment Agreement "
10 10.08 J. Robert Walz Employment Agreement "
27 27.01 Financial Data Schedule 12-31-98 Amendment No. 1
ITEM 2. SIGNATURES
-------------------
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized on
the dates indicated.
DYNAMIC INFORMATION SYSTEM & EXCHANGE, INC.
Date: January 24, 2000 By /s/ Larry D. Heaps
----------------------------------------
Larry D. Heaps, President
