SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
Mark One:
[X] Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the fiscal year ended
DECEMBER 31, 2002; or
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the transition period from
__________ to __________.
COMMISSION FILE NO. 0-25136
SUITE101.COM, INC
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(Name of Small Business Issuer in its Charter)
DELAWARE 33-0464753
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
347 BAY STREET - SUITE 301, TORONTO, ONTARIO, CANADA M5H 2R7
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(Address of Principal Executive Offices) (Zip Code)
416-628-5902
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which Registered
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None
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Securities Registered Pursuant to Section 12(g) of the Exchange Act:
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Common Stock, par value $.001 per share
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(Title of Each Class)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve (12) months
(or for such shorter period that the Issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B in this form, and no disclosure will be contained, to
the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB, or any amendment to
this Form 10-KSB. [X]
State Issuer's revenues for its most recent fiscal year: $6,799.
The aggregate market value of the voting and non-voting equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity, as of March 10,
2003, was $14,766,089. (Non-affiliates have been determined on the basis of
holdings set forth in Item 11 of this Annual Report on Form 10-KSB.)
The number of shares outstanding of each of the Issuer's classes of
common equity, as of March 10, 2003, was 14,086,687.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
ITEM 1 - DESCRIPTION OF BUSINESS:
Since 1999 through late 2001, we were engaged in the creation,
operation and maintenance of a Word Wide Web-based community, known as
Suite101.com. Its emphasis was on creating an online community where Internet
users could express themselves, share ideas, interests and expertise, and
publish content accessible to other Internet users with common interests. Using
approximately $6.1 million out of total proceeds of $9.5 million we raised in
private sales of our securities in 1999 and 2000, we endeavored to develop our
activities into revenue generating operations. During the period January 1, 1999
through December 31, 2001, our total revenues were $43,600 and our available
cash fell from $9,321,525 at the end of March 2000 to $4,048,630 at the end of
December 2001. Subsequent to 1999, there were enormous changes in the stock
market's perception of the likelihood of success for Internet-based enterprises
which affected substantially our valuation and ability to raise capital and
achieve our business objectives. Accordingly, by unanimous action of our Board
of Directors taken in the fourth quarter of 2001, we determined to review our
business activities with a view to redirecting those activities.
To this end, by letters and a press release dated January 8, 2002, we
invited companies and other persons with a possible strategic interest in
Suite101.com to consider entering into discussions with us looking to a possible
business combination, restructuring or other reorganization transaction. In
conjunction with our efforts to re-direct our operations, in early January 2002,
we reduced our staff by five people to 14 employees and revised our monthly
compensation arrangements with our Contributing Editors. Again, later in
January, 2002, we further reduced our staff and by early February 2002, our only
employee was our President and Chief Executive Officer.
In place of our staff, on February 14, 2002, effective January 31,
2002, we entered into an agreement with Creative Marketeam Canada Ltd., a
corporation wholly owned by Douglas Loblaw, our former chief operating officer,
to provide continuing management and operating services, at Marketeam's expense,
for the day-to-day operations of the Suite101 Web site. Subsequently, on
February 25, 2002, Mr. Loblaw was elected a Director of our Company. The
management agreement with Marketeam was for an initial one-month period
commencing January 31, 2002 and continued from month to month thereafter until
terminated by either party on ten (10) days' notice. In consideration of the
services performed by Marketeam, we paid Marketeam a fee of $26,000 per month,
plus an amount equal to our receipts from our contracts with BarnesandNoble.com,
LLC. Marketeam provided continuing management and operating services, at its
expense, over the day-to-day operations of the Suite101 Web site. It was
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responsible to our Board of Directors for all phases of the day-to-day
management and operations of the Suite101 Web site, including accounting and
bookkeeping, making payments at its expense to Senior and Managing Editors,
providing administration, oversight and fulfillment of our duties and
responsibilities under our agreements with BarnesandNoble.com, LLC, providing
Internet access to the Web site, hosting email, providing property maintenance,
implementing software upgrades, and arranging intellectual property licensing,
among other matters. In connection with the subsequent termination of our
Web-based community activities, the agreement with Marketeam was terminated on
May 31, 2002.
In response to our invitation to persons with a possible strategic
interest in the Suite101 Web site and community, we received two responses we
believed merited further discussions. One response involved an interest
expressed on behalf of a group of persons interested in acquiring 1,625,617
million of the shares of our common stock held by Peter Bradshaw and his
daughter, Julie Bradshaw, and having representation on our Board of Directors.
On February 13, 2002, Peter Bradshaw and Julie Bradshaw, both then Directors of
our company and Mr. Bradshaw was then our Chairman and Chief Executive Officer,
entered into agreements to sell, at a price of $0.25 per share, their 1,625,617
shares of Common Stock. The sale was completed on February 25, 2002. The
purchasers of the shares were five investors none of whom acquired more than
five percent of our shares outstanding and none of whom are residents of the
United States. The shares sold include all of the shares held by Peter Bradshaw,
other than options to purchase 418,545 shares exercisable at prices ranging from
$0.25 to $1.50 per share. Julie Bradshaw retained 618,519 shares and options to
purchase 85,000 shares exercisable at $1.50 per share. Concurrently with the
sale of the shares, on February 25, 2002, Peter Bradshaw and Julie Bradshaw
resigned as Directors, and Peter Bradshaw resigned as our Chairman and Chief
Executive Officer. At the same meeting of Directors held on February 25, 2002,
Douglas F. Loblaw, John J. Campbell and Brent J. Peters, were elected to our
Board of Directors to fill the vacancies created by the resignations of Peter
Bradshaw and Julia Bradshaw as Directors on February 25,2002 and the resignation
of Alfred J. Puchala, Jr. as a Director on February 13, 2002.
As a consequence of the sale of the shares by the Bradshaws and their
resignations as Directors and the election of replacement Directors, a change
of control of our company may be deemed to have occurred.
The second response to our invitation for discussions relating to a
possible business combination was from a corporation interested in acquiring an
option to purchase the assets of the Suite101 Web site. After negotiations, on
March 18, 2002, we entered into an option agreement with Double B Holdings, LLC,
a privately-owned non-affiliated entity, granting Double B the right to purchase
the website assets owned and operated by our wholly-owned subsidiary, i5ive
Communications Inc. These assets, which included primarily property, plant and
equipment, had a book value of $120,441, as of December 31, 2001, after
accumulated
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amortization of $127,295. During the three years ended December 31, 2001, these
assets produced revenues of $1,925, $1,620 and $40,067, respectively. During the
three years ended December 31, 2001, the Company had other income, net, which
was primarily interest income, of $145,626, $378,000 and $188,631, respectively.
The terms of the option agreement provided that Double B, in consideration of a
non-refundable payment of $15,000, had the right to purchase the assets for a
period of thirty days and, in consideration of a further non-refundable payment
of an additional $30,000, had the right for an additional thirty days. The
option, including the possible extension, expired on May 14, 2002. The purchase
price for the assets under the option agreement was $155,000 less the
non-refundable payments which were to be applied to the purchase price, plus a
26% interest in Double B and a 5% common stock interest held by Double B in Blue
Frogg Enterprises, Inc., a privately-owned company controlled by the owners of
Double B. In the event the option was exercised, the Company's subsidiary,
i5ive, was required to pay at the closing to Double B $155,000 less a sum equal
to the management fees paid to Creative Marketeam Canada, Ltd. from March 1,
2002 through the closing. Double B was also to be assigned and assume at the
closing i5ive's rights and obligations under various vendor and supplier
contracts and leases. Double B paid the non-refundable payment of $15,000 and
the further non-refundable payment of $30,000 for the 60-day option. On May 14,
2002, the option expired without being exercised.
Thereafter, on July 17, 2002, our wholly-owned subsidiary, i5ive,
completed the sale of its Website assets to Creative Marketeam Canada, Ltd. In
consideration for the assets, Marketeam issued to i5ive a 15% equity interest in
Marketeam and agreed that in the event the assets are resold by Marketeam within
one (1) year, a sum equal to the proceeds of the sale would be paid over to
i5ive. The sale of the i5ive assets to Marketeam was unanimously approved by
Messrs. Blumberg, Campbell and Peters constituting all Suite101's directors not
having any interest in the transaction.
At our annual meeting of stockholders held on June 11, 2002, in
addition to re-electing our four Directors then in office, our stockholders
approved a proposal to amend our Certificate of Incorporation to increase the
number of authorized shares of Common Stock we can issue from 40,000,000 to
100,000,000 shares. Accordingly, upon the filing of a Certificate of amendment
with the Secretary of State of the State of Delaware, the number of shares we
are authorized to issue will be increased. At December 31, 2002, we had
14,086,687 shares of Common Stock issued and outstanding and 2,220,110 shares
reserved for issuance upon the exercise of outstanding options and warrants.
Our Board of Directors intends to continue the efforts begun in
December 2001 to seek to redirect our activities into other areas of business.
We believe that these future activities will be unrelated to the operation of a
Web-based community or Web site.
Our business plan and any resulting transaction may involve the
following:
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o Any such acquisition transaction may result in us issuing
securities, including possibly the issuance of shares of Common
Stock, as part of the transaction. The issuance of previously
authorized and un-issued shares of Common Stock, including the
additional 60,000,000 shares of Common Stock authorized in June
2002, could result in substantial dilution of our existing
stockholders and could possibly result in a change in control or
management of our company.
o The 83,693,213 shares of Common Stock and 1,000,000 shares of
Preferred Stock that we are authorized to issue but that are not
issued or outstanding or reserved for issuance as of March 10,
2003 are able to be issued by action of our Board of Directors in
a transaction resulting in the redirection of our activities
without any requirement under Delaware law or the rules of any
national securities exchange or automated quotation system for
further action being taken by our stockholders to authorize the
issuance of the shares or to approve the transaction or the
redirected business activities. Any additional issuances of any
of our securities will not require the approval of our
stockholders and may have the effect of further diluting the
equity interest of stockholders.
o Any transaction we enter into involving the redirection of our
activities may require that we raise additional capital which may
also involve the issuance of shares of our Common Stock and be
dilutive to our existing stockholders. Issuance of shares to
raise capital can be approved by our Board of Directors and would
not require stockholder approval.
o Any transaction we enter into in redirecting our business
activities may be structured on terms whereby the approval of our
existing stockholders is not required which would result in our
existing stockholders being unable to vote in favor of or against
the transaction and the redirection of our business activities.
o Until we complete a transaction resulting in a redirection of our
business activities, we expect to continue to incur expenses
without any material revenues.
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On March 4, 2003, we announced that we had signed a letter of agreement
to acquire all the outstanding capital stock of GeoGlobal Resources (India) Inc.
(GeoGlobal) in exchange for shares of our common stock. GeoGlobal holds a net 5%
carried interest in the oil and gas exploration block KG-OSN-2001/03, also
referred to as Block 7 under National Exploration Licensing Policy III (NELP
III), offshore the east coast of India covering approximately 457,000 acres.
GeoGlobal's 5% interest reflects its agreement of February 4, 2003 to transfer
to a company wholly owned by Mr. Roy 50% of its initial 10% interest in the
exploration block. GeoGlobal's interest will be carried for 100% of its entire
share of any costs during the exploration phase prior to the start date of
initial commercial production. We and GeoGlobal are each conducting due
diligence and negotiating the terms of a definitive agreement. The completion of
the transaction is subject to the outcome of those due diligence activities and
the successful negotiation, execution and closing of a definitive agreement.
The shares of Geo Global are intended to be acquired from Mr. Jean Paul
Roy in exchange for an aggregate maximum of 34.0 million shares of our Common
Stock. The letter of agreement provides that of such shares, at the closing
under the definitive agreement to be executed, we will issue and deliver to Mr.
Roy 14.5 million shares and also deliver to Mr. Roy our promissory note in the
principal amount of $2.0 million. The note, which bears no interest, is to be
payable $1.0 million on the closing of the transaction but not before March 31,
2003, $500,000 on June 30, 2003 and $500,000 on June 30, 2004. It is to be
secured by GeoGlobal's interest in the exploration block. The letter of
agreement further provides that the remaining 19.5 million shares are to be
issued in the name of Mr. Roy as principal subject to an escrow of the shares
whereby 14.5 million shares will be released for delivery to Mr. Roy only if the
results of a 3D seismic program to be conducted on the exploration block during
the initial exploration phase establishes the existence of a commercial basis
for the commencement of an exploratory drilling program, or upon the actual
commencement of a drilling program. The final 5.0 million shares will be
released only if a commercial discovery is declared on the exploration block.
Shares not released to Mr. Roy from the escrow will be surrendered back to us.
Mr. Roy will retain a 5% carried interest in the Exploration Block and GeoGlobal
will have a right of first refusal to purchase that carried interest. Mr. Roy
will have the voting rights of the shares during the term of the escrow.
The letter of agreement provides that the definitive agreement will
contain numerous other terms and conditions, including, among others, that,
subject to stockholder approval, our corporate name will be changed to GeoGlobal
Resources Inc. or such other name as is selected by our Board and, at the
closing of the transaction, the composition of our Board and our executive
officers will be restructured to include Mr. Jean Paul Roy as a Director and
President, Mr. Graham M. Notman as the interim Chief Executive Officer, and Mr.
Allan J. Kent as Executive Vice President, Chief Financial Officer and Director.
Messrs. John K. Campbell and Brent J. Peters will remain as Directors and
Messrs. Mitchell G. Blumberg and Douglas F. Loblaw will resign from the Board.
The letter of agreement further provides that at the closing
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Mr. Roy is to enter into a three-year consulting contract with the Company at a
salary of $250,000 per year. Options are to be granted under our stock option
plan to officers, Directors, employees and consultants of GeoGlobal to purchase
2.0 million shares of Common Stock exercisable at not less than $1.00 per share.
The letter of agreement contains restrictions on the conduct of each of
the parties business activities until the definitive agreement is executed or
the letter of agreement is terminated and each party has agreed to the
imposition of terms restricting them from dealing with or entertaining offers
from other persons relating to any business combination or material transaction
until April 30, 2003 or the definitive agreement is executed. Other than its 5%
carried interest in the exploration block, GeoGlobal has no revenues, material
operations, assets or material liabilities. If completed, the transaction would
be accounted for as a reverse acquisition.
GeoGlobal, Gujarat State Petroleum Corporation Limited and Jubilant
Enpro Limited are parties to a Production Sharing Contract dated February 4,
2003 with The Government of India which grants to the three contractors the
right to conduct seismic surveying and exploratory drilling activities on
exploration block KG-OSN-2001/03 for a period of up to 6-1/2 years. Under the
first of the three phases of exploration operations, fourteen exploration wells
are to be drilled over a period of up to 2-1/2 years. Under the remaining two
phases of the exploration operations, an additional six exploration wells are to
be drilled.
The letter of agreement also provides that, subject to Board of
Directors' approval, subsequent to the closing under the Agreement and promptly
thereafter, we propose to make an offering of shares of our Common Stock not
registered under the U.S. Securities Act of 1933, as amended, with the amount of
shares offered intended to raise a minimum of $4.0 million. The intended purpose
of the offering is to raise additional working capital. The securities intended
to be offered will not be and have not been registered under the Securities Act
and may not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the Securities Act.
There can be no assurance that the exploratory drilling will result in
any discovery of hydrocarbons or that any hydrocarbons as are discovered will be
in commercially recoverable quantities. In addition, the realization of any
revenues from commercially recoverable hydrocarbons is dependent upon the
ability to deliver, store and market any hydrocarbons that are discovered. The
presence of hydrocarbon reserves on contiguous properties is no assurance or
necessary indication that hydrocarbons will be found on BlockKG-OSN-2001/03.
GeoGlobal's carried interest position arises out of an agreement it
entered into with Gujarat State Petroleum Corporation Limited whereby GeoGlobal
is carried for 100% of its share of any costs incurred during the three-phase
exploration operations. Under the terms of the
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carried interest agreement, GeoGlobal will not receive any share of any
production from the exploration block until Gujarat State Petroleum Corporation
Limited has recovered GeoGlobal's share of the expenses it paid.
EMPLOYEES
As of December 31, 2002, we had no employees.
COMPETITION
As of December 31, 2002, we are not engaged in any revenue-producing
business activities and therefore experience no competition.
In our efforts to redirect our business activities and locate an
attractive opportunity for our redirected operations, we experience intense
competition from others engaged in similar business combination activities in
identifying and completing a transaction. This competition is from other persons
seeking attractive business combination opportunities and others seeking to
diversify their operations.
ITEM 2 - DESCRIPTION OF PROPERTY:
As of March 10, 2003, our executive offices are at 347 Bay Street,
Suite 301, Toronto, Ontario, Canada M5H 2R7. We believe these facilities are
adequate for our purposes.
ITEM 3 - LEGAL PROCEEDINGS:
No material legal proceedings are pending against us.
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ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
No matter was submitted during the fourth quarter of the year ended
December 31, 2002 to a vote of securityholders through the solicitation of
proxies or otherwise.
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PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:
Our Common Stock has been quoted on the OTC Bulletin Board since
December 30, 1998 under the symbol BOWG. The following table sets forth the high
and low bid quotations on the OTC Bulletin Board for our Common Stock for the
period January 1, 2001 through March 10, 2003.
BID
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CALENDAR QUARTER HIGH LOW
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2001: First Quarter $0.39 $0.17
2001: Second Quarter $0.23 $0.14
2001: Third Quarter $0.44 $0.12
2001: Fourth Quarter $0.21 $0.08
2002: First Quarter $0.72 $0.20
2002: Second Quarter $0.80 $0.26
2002: Third Quarter $0.51 $0.17
2002: Fourth Quarter $0.52 $0.18
2003: First Quarter (through March 10) $1.67 $0.35
The foregoing amounts, represent inter-dealer quotations without
adjustment for retail markups, markdowns or commissions and do not represent the
prices of actual transactions. On March 10, 2003, the closing bid quotation for
the Common Stock, as reported on the OTC Bulletin Board was $1.23.
As of March 10, 2003, we had approximately 110 shareholders of record.
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DIVIDEND POLICY
We do not intend to pay any dividends on our Common Stock for the
foreseeable future. Any determination as to the payment of dividends on our
Common Stock in the future will be made by our Board of Directors and will
depend on a number of factors, including future earnings, capital requirements,
financial condition and future prospects as well as such other factors as our
Board of Directors may deem relevant.
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ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
GENERAL
The following discussion and analysis of our financial condition or
plan of operation should be read in conjunction with, and is qualified in its
entirety by, the more detailed information including our Financial Statements
and the related Notes appearing elsewhere in this Annual Report. This Annual
Report contains forward-looking statements that involve risks and uncertainties.
Our actual results may differ materially from the results and business plans
discussed in the forward-looking statements. Factors that may cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere in this Annual Report.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2002 AND 2001
During the year ended December 31, 2002, we had no income from
operations. During the year ended December 31, 2001, we had sales of $40,067,
primarily attributable to revenue generated from service contracts that we
entered into with Barnes & Noble.com. In 2002, our revenues from this source
were $6,799 and were treated as revenues from discontinued operations.
Administrative expenses were $341,932 during the year ended December
31, 2002 compared with $176,665 during the year ended December 31, 2001. The
increase in administrative expenses in 2002 over 2001 was primarily the result
of an increase in professional fees, and an increase in stockholder reporting
costs resulting primarily from our efforts to redirect our operations.
Our Loss From Continuing Operations was $354,061 during the year ended December
31, 2002 compared with income of $11,966 during the year ended December 31,
2001. The increase in our Loss From Operations during 2002 compared with 2001
was the result of the increase in our administrative expenses.
Other net expenses were $12,129 during the year ended December 31, 2002
compared to other income of $188,631 during the year ended December 31, 2001.
Included in other income and expenses is income attributable to interest earned
on bank balances. During the year ended December 31, 2002, net interest income
was $48,027 compared to $188,631 during the year ended December 31, 2001. The
decline in the net interest earned results from the decline in bank cash
balances carried through these periods. Also included in other income and
expenses during
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the year ended December 31, 2002 is income from forfeited deposits of $45,000.
Effective March 15, 2002, i5ive, entered into an option agreement with Double B,
a privately-owned non-affiliated entity organized for the purpose of acquiring
the option. The option granted Double B the right to purchase the web site
assets owned and operated by i5ive. The terms of the option agreement provided
that Double B, in consideration of a non-refundable payment of $15,000, had the
right to purchase the assets for a period of thirty days and, in consideration
of a further non-refundable payment of an additional $30,000, had the right to
purchase the assets for an additional thirty days. Both deposits were paid and
the option expired on May 14, 2002 and the option deposits were forfeited.
Included as other expenses during the year ended December 31, 2002 was
a loss on the disposal of assets amounting to $105,892 with no such loss (or
expense) during the year ended December 31, 2001.
On July 17, 2002, effective June 1, 2002, i5ive completed the sale of
its web site assets to Marketeam which resulted in the loss on the disposal of
assets of $105,892. In consideration for the assets, Marketeam issued to i5ive a
15% equity interest in Marketeam and agreed that in the event the assets are
resold by Marketeam within one (1) year, a sum equal to the proceeds of the sale
would be paid over to i5ive. The sale of web site assets was a result of the
determination of the Board of Directors made in December 2001 to seek to
redirect the Company's activities. The i5ive assets sold to Marketeam were the
subject of the option agreement entered into in March 2002 with Double B which
option agreement expired on May 14, 2002 without having been exercised. The web
site assets were not producing any material revenues and were contributing to an
outflow of cash. The sale of the i5ive assets to Marketeam was unanimously
approved by Messrs. Blumberg, Campbell and Peters constituting all Suite101's
directors not having any interest in the transaction.
On May 31, 2002, the Company discontinued its internet-based
activities. During the year ended December 31, 2002 our revenue from
discontinued operations was $6,799 compared with $40,067 during the year ended
December 31, 2001. The revenues during the years ended December 31, 2002 and
December 31, 2001 were primarily attributable to revenues generated from two
service contracts that we entered into with Barnes&Noble.com to provide
introductions for a series of e-books and to provide proofreading services for
the related digitized books. The net loss during the year ended December 31,
2002 from discontinued operations was $870,100 compared with $1,653,596 during
the year ended December 31, 2001. The decrease was primarily the result of a
change in our compensation arrangements with our contributing editors and the
cessation of all our marketing activities focused at promoting our web site
activities.
Our Net Loss was $1,224,161 during the year ended December 31, 2002
compared with $1,641,630 during the year ended December 31, 2001. The decrease
in our Net Loss during the year ended December 31, 2002 compared with the year
ended December 31, 2001 was the result
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of the increase in administrative expenditures, from the loss on disposal of
assets, a decrease in other income and a decrease in the loss from discontinued
operations.
YEARS ENDED DECEMBER 31, 2001 AND 2000
During the year ended December 31, 2001, our sales were $40,067
compared with sales of $1,620 during 2000. Sales during 2001 were primarily
attributable to revenue generated from two service contracts that we eneterd
into with Barnes&Noble.com to provide introductions for a series of e-books and
to provide proofreading services for the related digitized e-books. During 2001,
$258 in sales and all our sales in 2000 were primarily attributable to software
licensing revenues. These licenses have expired and therefore this source of
revenue has ceased.
Operating expenses decreased during the year ended December 31, 2001 to
$1,843,268 from $2,666,021 during the year ended December 31, 2000. Expenses
during 2001 primarily related to general and administrative expenses of i5ive
and marketing expenses. The decrease in general and administrative expenses was
primarily the result of decrease in consulting fees paid to third parties, a
decrease in professional fees paid and a decline in software purchases. The
decrease in marketing expenses resulted from the decrease in our marketing
activities aimed at increasing Membership and building the Suite101.com brand.
The loss from operations for the year ended December 31, 2001 was $1,823,051
compared with $2,664,401 during 2000.
Other income (net) in 2001 was $181,421 compared with $378,448 in 2000.
The decrease was primarily the result of decreased interest earned on bank cash
balances carried throughout 2001 and the write-off in 2001 of the leasehold
improvements of our former office premises.
Our net loss in 2001 was $1,641,630 compared with a net loss of
$2,285,953 in 2000. The decreased net loss was the result of a decrease in our
general, administrative and marketing expenditures in 2001 compared to 2000.
LIQUIDITY AND CAPITAL RESOURCES
The report of our independent auditors on their audit of our financial
statements as of December 31, 2002 contains an explanatory paragraph that
describes an uncertainty as to our ability to continue as a going concern due to
our recurring losses and because we have no material revenue-producing
operations. At December 31, 2002, our cash balance was $3,030,507. We believe
these cash resources will be sufficient to meet our ongoing financial
commitments through December 31, 2003. At December 31, 2002, we had no source of
material revenues.
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In December 2001, we announced that our Board of Directors was engaged
in a review of our activities with a view to the possible redirection of our
operations in an effort to enhance and maximize shareholder values. Thereafter,
in a series of steps conducted through February 2002, we reduced our staff to
one employee and revised our monthly compensation arrangements with our
Contributing Editors by terminating the payment of the compensation to
Contributing Editors. The changes we made in our staffing and compensation
arrangements we believe were appropriate in the light of our limited revenues
and enhance our ability to enter into a business combination or other
restructuring transaction by reducing current levels of overhead. We believe
that these revised compensation arrangements are in line with current practices
of other Internet communities.
In place of our staff, on February 14, 2002, effective January 31,
2002, we entered into an agreement with Marketeam, a corporation wholly owned by
Douglas Loblaw, our former chief operating officer and, from February 25, 2002,
a Director of our company, to provide continuing management and operating
services, at Marketeam's expense, for the day-to-day operations of the Suite101
Web site, known as Suite101.com. In consideration of the services performed by
Marketeam, we paid Marketeam a fee of $26,000 per month, plus an amount equal to
our receipts from our contracts with BarnesandNoble.com.
Our agreement with Marketeam was terminated by us effective May 31,
2002 and on July 17, 2002, our subsidiary sold its Website assets to Marketeam.
We currently have no revenue-producing operations.
Our current business plan is to utilize our available cash and other
resources, including possibly, shares of our Common Stock, to redirect our
activities out of the operation and maintenance of a Web-based community into
other areas of business. We believe that these future activities will be
unrelated to the operation of an Internet Web site. It is expected that the
redirection of our business activities will involve us in a business combination
or other material transaction. Until we complete a transaction resulting in a
redirection of our business activities, we expect to continue to incur expenses
without any material revenues. In addition, we may incur reductions in the
carrying value of our fixed assets in connection with our efforts to redirect
our activities.
On March 4, 2003, we announced that we had signed a letter of agreement
to acquire all the outstanding capital stock of GeoGlobal Resources (India) Inc.
(GeoGlobal) in exchange for shares of our common stock.
GeoGlobal holds a 5% carried interest in the oil and gas exploration
block KG-OSN-2001/03, also referred to as Block 7 under National Exploration
Licensing Policy III (NELP III), offshore the east coast of India covering
approximately 457,000 acres. GeoGlobal's interest will be carried for 100% of
its entire share of any costs during the exploration phase prior to the start
15
date of initial commercial production. We and Geo Global are conducting due
diligence and negotiating the terms of a definitive agreement. The completion of
the transaction is subject to the outcome of those due diligence activities and
the successful negotiation, execution and closing of a definitive agreement.
The shares of Geo Global are intended to be acquired from Mr. Jean Paul
Roy in exchange for an aggregate maximum of 34.0 million shares of our Common
Stock. The letter of agreement provides that of such shares, at the closing
under the definitive agreement to be executed, we will issue and deliver to Mr.
Roy 14.5 million shares and also deliver to Mr. Roy our promissory note in the
principal amount of $2.0 million. The note, which bears no interest, is to be
payable $1.0 million on the closing of the transaction but not before March 31,
2003, $500,000 on June 30, 2003 and $500,000 on June 30, 2004. It is to be
secured by GeoGlobal's interest in the exploration block. The letter of
agreement further provides that the remaining 19.5 million shares are to be
issued in the name of Mr. Roy as principal subject to an escrow of the shares
whereby 14.5 million shares will be released for delivery to Mr. Roy only if the
results of a 3D seismic program to be conducted on the exploration block during
the initial exploration phase establishes the existence of a commercial basis
for the commencement of an exploratory drilling program, or upon the actual
commencement of a drilling program. The final 5.0 million shares will be
released only if a commercial discovery is declared on the exploration block.
Shares not released to Mr. Roy from the escrow will be surrendered back to us.
Mr. Roy will retain a 5% carried interest in the Exploration Block and GeoGlobal
will have a right of first refusal to purchase that carried interest. Mr. Roy
will have the voting rights of the shares during the term of the escrow.
The letter of agreement provides that the definitive agreement will
contain numerous other terms and conditions, including, among others, that,
subject to stockholder approval, our corporate name will be changed to GeoGlobal
Resources Inc. or such other name as is selected by our Board and, at the
closing of the transaction, the composition of our Board and our executive
officers will be restructured to include Mr. Jean Paul Roy as a Director and
President, Mr. Graham M. Notman as the interim Chief Executive Officer, and Mr.
Allan J. Kent as Executive Vice President, Chief Financial Officer and Director.
Messrs. John K. Campbell and Brent J. Peters will remain as Directors and
Messrs. Mitchell G. Blumberg and Douglas F. Loblaw will resign from the Board.
The letter of agreement further provides that at the closing Mr. Roy is to enter
into a three-year consulting contract with the Company at a salary of $250,000
per year. Options are to be granted under our stock option plan to officers,
Directors, employees and consultants of GeoGlobal to purchase 2.0 million shares
of Common Stock exercisable at not less than $1.00 per share.
The letter of agreement contains restrictions on the conduct of each of
the parties business activities until the definitive agreement is executed or
the letter of agreement is terminated and each party has agreed to the
imposition of terms restricting them from dealing with or
16
entertaining offers from other persons relating to any business combination or
material transaction until April 30, 2003 or the definitive agreement is
executed. Other than its 5% carried interest in the exploration block, GeoGlobal
has no revenues, material operations, assets or material liabilities. If
completed, the transaction would be accounted for as a reverse acquisition.
GeoGlobal, Gujarat State Petroleum Corporation Limited and Jubilant
Enpro Limited are parties to a Production Sharing Contract dated February 4,
2003 with The Government of India which grants to the contractors the right to
conduct seismic surveying and exploratory drilling activities on exploration
block KG-OSN-2001/03 for a period of up to 6-1/2 years. Under the first of the
three phases of exploration operations, fourteen exploration wells are to be
drilled over a period of up to 2-1/2 years. Under the remaining two phases of
the exploration operations, an additional six exploration wells are to be
drilled.
The letter of agreement also provides that, subject to Board of
Directors' approval, subsequent to the closing under the Agreement and promptly
thereafter, we propose to make an offering of shares of our Common Stock not
registered under the U.S. Securities Act of 1933, as amended, with the amount of
shares offered intended to raise a minimum of $4.0 million. The intended purpose
of the offering is to raise additional working capital. The securities intended
to be offered will not be and have not been registered under the Securities Act
and may not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the Securities Act.
There can be no assurance that the exploratory drilling will result in
any discovery of hydrocarbons or that any hydrocarbons as are discovered will be
in commercially recoverable quantities. In addition, the realization of any
revenues from commercially recoverable hydrocarbons is dependent upon the
ability to deliver, store and market any hydrocarbons that are discovered. The
presence of hydrocarbon reserves on contiguous properties is no assurance or
necessary indication that hydrocarbons will be found on BlockKG-OSN-2001/03.
GeoGlobal's carried interest position arises out of an agreement it
entered into with Gujarat State Petroleum Corporation Limited whereby GeoGlobal
is carried for 100% of its share of any costs incurred during the three-phase
exploration operations. Under the terms of the carried interest agreement,
GeoGlobal will not receive any share of any production from the exploration
block until Gujarat State Petroleum Corporation Limited has recovered
GeoGlobal's share of the expenses it paid.
17
We may seek to raise additional funds in order to fund the acquisition
of revenue-producing operations. There can be no assurance that any additional
financing will be available on terms favorable to us, or at all. If adequate
funds are not available or not available on acceptable terms, we may not be able
to fund our efforts to redirect our activities. Any such inability could have a
material adverse effect on future success. Additional funds raised through the
issuance of equity or convertible debt securities, will result in reducing the
percentage ownership of our stockholders and, stockholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the rights of our Common Stock.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1996
With the exception of historical matters, the matters discussed in this
annual report are "forward-looking statements" as defined under the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended,
that involve risks and uncertainties. Forward-looking statements made herein
include, but are not limited to, the statements in this annual report regarding
our plans and objectives of management for our future operations, including
plans or objectives relating to the redirection of our business activities, our
efforts to enter into a transaction relating thereto, and our ability to limit
or curtail our current expenses. These statements appear, among other places,
under the following captions: "Business of the Company", "Risk Factors",
"Dividend Policy", and "Management's Discussion and Analysis of Financial
Condition or Plan of Operation". Forward-looking statements made in this annual
report include the assumptions made by management as to our future business
direction and our ability to redirect our activities. We cannot assure you that
our assumptions in this regard or our views as to the viability of our business
plans discussed herein will prove to be accurate. Likewise, we cannot assure you
that we will be successful in acquiring any commercial activities. We cannot
assure you that our transaction with GeoGlobal will be completed or that any
commercially recoverable quantities of hydrocarbon reserves will be discovered
on the exploration block in which GeoGlobal has an interest. Our ability to
realize revenues cannot be assured. If our assumptions are incorrect or if our
plans fail to materialize, we may be unsuccessful in developing as a viable
business enterprise. Under such circumstance your investment will be in
jeopardy. Our inability to meet our goals and objectives or the consequences to
us from adverse developments in general economic or capital market conditions
could have a material adverse effect on us. We caution you that various risk
factors accompany those forward looking statements and are described, among
other places, under the caption "Risk Factors" herein, beginning below. They are
also described in our Quarterly Reports on Form 10-QSB, and our Current Reports
on Form 8-K. These risk factors could cause our operating results, financial
condition and ability to fulfill our plans to differ materially from those
18
expressed in any forward-looking statements made in this Annual Report and could
adversely affect our financial condition and our ability to pursue our business
strategy and plans.
RISK FACTORS
An investment in shares of our Common Stock involves a high degree of
risk. You should consider the following factors, in addition to the other
information contained in this annual report, in evaluating our business and
proposed activities before you purchase any shares of our common stock. You
should also see the "Cautionary Statement for Purposes of the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1996" regarding
risks and uncertainties relating to us and to forward looking statements in this
annual report.
No Material Operations or Revenues. We have no current material operations or
source of revenue. We will, in all likelihood, sustain continuing operating
expenses maintaining our current activities and seeking to enter into a
transaction without corresponding revenues at least until the consummation of a
business acquisition. This can be expected to result in us incurring ongoing net
operating losses and an outflow of our cash that could continue until we can
consummate a business acquisition. There can be no assurance that we can
identify a suitable business opportunity and consummate a business acquisition
or that any transaction we consummate will be on favorable terms or result in
profitable operations. We are unable to predict when any such transaction may be
completed.
Risks Relating to Proposed GeoGlobal Transaction. As described above, on March
4, 2003 we entered into a letter of agreement with Jean Paul Roy and GeoGlobal
and we are now engaged in due diligence activities with respect to GeoGlobal's
intended exploration activities and are negotiating the terms of a definitive
agreement with GeoGlobal.
There can be no assurance that the outcome of our due diligence
activities with regard to GeoGlobal will be favorable or that we and Mr. Roy
will successfully negotiate a definitive agreement. Pursuing the transaction
will involve material risks to our company and its stockholders and will result
in material dilution to our stockholders.
There can be no assurance that the exploratory drilling to be conducted
on the exploration block in which GeoGlobal holds an interest will result in any
discovery of hydrocarbons or that any hydrocarbons as are discovered will be in
commercially recoverable quantities. In addition, the realization of any
revenues from commercially recoverable hydrocarbons is dependent upon the
ability to deliver, store and market any hydrocarbons that are discovered. The
presence of
19
hydrocarbon reserves on contiguous properties is no assurance or necessary
indication that hydrocarbons will be found on the exploration block in which
GeoGlobal holds an interest.
We May Not Be Successful in Entering Into Agreements In Order to Pursue Our
Business Plans. We have no definitive agreement as of March 28, 2003 with
respect to engaging in a merger with, joint venture with or acquisition of, a
private or public entity or any interest in such an entity. No assurances can be
given that we will successfully identify and evaluate a suitable business
opportunity or that we will conclude a business acquisition. We cannot guarantee
that we will be able to negotiate any business transactions on favorable terms
or be successful in redirecting our operations.
Possible Future Dilution As A Result Of Business Transaction. Our business plan
is based upon effectuating a business acquisition or other transaction. Any such
acquisition transaction may result in us issuing securities as part of the
transaction. The issuance of previously authorized and un-issued common shares
could result in substantial dilution to our existing stockholders which could
possibly result in a change in control or management of our company. There can
be no assurance that an acquisition can be completed. In the event the
transaction with GeoGlobal is completed, our stockholders, prior to the closing
of the transaction, will experience material dilution in their interests.
Issuance Of Additional Shares. Our corporation is currently authorized to issue,
on action of our Board of Directors, up to 100,000,000 shares of Common Stock
and 1,000,000 shares of Preferred Stock, of which, as of March 10, 2003,
14,086,687 shares of Common Stock are issued and outstanding and no shares of
Preferred Stock are outstanding. The 85,913,313 shares of Common Stock and
1,000,000 shares of Preferred Stock that are authorized but are not issued or
outstanding are able to be issued by action of our Board of Directors in a
transaction resulting in the redirection of our activities without any
requirement of further action being taken by our stockholders to authorize the
issuance of the shares or to approve the transaction or the redirected business
activities. Any additional issuances of any of our securities will not require
the approval of our stockholders and may have the effect of further diluting the
equity interest of stockholders.
Possible Need to Raise Additional Capital. Any transaction we enter into
involving the redirection of our activities may require that we raise additional
capital which may also involve the issuance of shares of our Common Stock and be
dilutive to our existing stockholders.
In the event the transaction with GeoGlobal is completed, we will make an
immediate payment of $1,000,000 to Jean Paul Roy and an additional payment of
$500,000 on June 30, 2003. These payments will reduce materially our cash
resources. These payments are in consideration of the purchase of the
outstanding stock of GeoGlobal and are not recoverable if
20
GeoGlobal's exploration activities are unsuccessful and no commercially
recoverable reserves of hydrocarbons are discovered on the exploration block.
Our letter of agreement with JPR and GeoGlobal provides that, subject
to Board of Directors' approval, promptly subsequent to the closing a
transaction with Mr. Paul and GeoGlobal, we propose to make an offering of
shares of our Common Stock not registered under the U.S. Securities Act of 1933,
as amended, with the amount of shares offered intended to raise a minimum of
$4.0 million. The intended purpose of the offering is to raise additional
working capital. The securities intended to be offered will not be and have not
been registered under the Securities Act and may not be offered or sold in the
United States absent registration or an applicable exemption from the
registration requirements of the Securities Act. There can be no assurance that
we will be successful in selling these shares or that such transaction will not
result in further material dilution to our stockholders.
No Requirement of Stockholder Approval. Any transaction we enter into in
redirecting our business activities may be structured on terms whereby the
approval of our existing stockholders is not required which would result in our
existing stockholders being unable to vote in favor of or against the
transaction and the redirection of our business activities.
Any Business We May Possibly Acquire May Never Become Profitable. There can be
no assurance that we will enter into an acquisition with or acquire an interest
in a business having a significant or successful operating history. Any such
business may have a history of losses, limited or no potential for earnings,
limited assets, negative net worth or other characteristics that are indicative
of development stage companies. There can be no assurance that after any
acquisition of a business that the business will be operated so as to develop
significant revenues and cash flow and become profitable.
Management May Not Devote a Sufficient Amount of Time to Seeking a Target
Business. While seeking a business acquisition, our officers and Directors
devote only a portion of their time to pursuing these activities. As a result,
we may expend a considerable period of time identifying and negotiating with an
acquisition candidate. This extended period of time may result in continuing
losses to us and an outflow of our cash.
Dependence On Part-Time Management. Currently, we have no fulltime employees.
Our officers and Directors devote only a portion of their time to our
activities. It is our intention to continue to limit our employees until such
time as we find a suitable business opportunity or we complete the acquisition
of another business. Therefore, the day-to-day operations of any company or
business that is acquired by us will have to be performed by outside management
or management of the acquired company. We cannot assure investors that we will
be able to obtain experienced and able outside management to run any company or
business that we may acquire.
21
Continued Control by Existing Management. Our Directors retain significant
control over our present and future activities and our stockholders and
investors may be unable to meaningfully influence the course of our actions. Our
existing management is able to control substantially all matters requiring
stockholder approval, including nomination and election of directors and
approval or rejection of significant corporate transactions. Any transaction we
engage in resulting in a redirection of our business activities may be
structured so as to not require the approval of our stockholders and,
accordingly, our stockholders may have no opportunity to vote on or influence
the redirection of our activities. Although management has no intention of
engaging in such activities, there is also a risk that the existing management
will be viewed as pursuing an agenda which is beneficial to themselves at the
expense of other stockholders.
In the event the transaction with JPR and GeoGlobal is completed on the
presently-proposed terms, our company will experience a change in control.
There Is No Assurance Of An Active Public Market For Our Common Stock And The
Price Of Our Common Stock May Be Volatile. Given the relatively minimal public
float and trading activity in our securities, the price of our shares may be
volatile. There can be no assurance that there will be an active and liquid
market for our shares. Since the shares do not qualify to trade on any exchange
or on NASDAQ, if they do actually trade, the only available market will continue
to be through the OTC Bulletin Board or in the "pink sheets". It is possible
that no active public market with significant liquidity will ever develop. Thus,
investors run the risk that investors may never be able to sell their shares.
Accordingly, although quotations for shares of our Common Stock have
been, and continue to be, published on the OTC Bulletin Board and the "pink
sheets" published by the National Quotation Bureau, Inc., these quotations, in
the light of our operating history, continuing losses and financial condition,
are not necessarily indicative of our value. Such quotations are inter-dealer
prices, without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.
In addition, the stock market in general has experienced extreme price
and volume fluctuations which have affected the market price for many companies
which have been unrelated to the operating performance of these companies. These
market fluctuations, as well as general economic, political and market
conditions, may have a material adverse effect on the market price of our Common
Stock.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such companies. Such litigation, if instituted, and
irrespective of the outcome of such litigation, could result in substantial
costs and a diversion of management's attention and resources and have a
material adverse effect on our business, results of operations and financial
condition.
22
Possible Government Regulation. Although we are subject to the periodic
reporting requirements under the Securities Exchange Act of 1934, as amended,
and file annual, quarterly and other reports, management believes it will not be
subject to regulation under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), since it will not be engaged in the business of
investing or trading in securities. If we engage in a business acquisition which
results in us holding passive investment interests in a number of entities, we
could become subject to regulation under the Investment Company Act. If so, we
would be required to register as an investment company and could be expected to
incur significant registration and compliance costs. We have obtained no formal
determination from the Securities and Exchange Commission (the "SEC" or
"Commission") or any opinion of counsel as to our status under the Investment
Company Act. A violation of the Act could subject us to material adverse
consequences.
Our Shares Are Subject To Penny Stock Reform Act Of 1990. Our securities are
subject to certain rules and regulations promulgated by the Commission pursuant
to the U.S. Securities Enforcement Remedies and Penny Stock Reform Act of 1990
(the "Penny Stock Rules"). Such rules and regulations impose strict sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and certain "accredited investors." For
transactions covered by the Penny Stock Rules, a broker-dealer must make a
special suitability determination for the purchaser and must have received the
purchaser's written consent for the transaction prior to sale. Consequently,
such rule may affect the ability of broker-dealers to sell our securities and
may affect investors' abilities to sell any shares they acquire.
The Penny Stock Rules generally define a "penny stock" to be any
security not listed on an exchange or not authorized for quotation on the Nasdaq
Stock Market and has a market price (as defined by the rules) less than $5.00
per share or an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transactions by broker-dealers involving a penny stock
(unless exempt), the rules require delivery, prior to a transaction in a penny
stock, of a risk disclosure document relating to the market for penny stocks.
Disclosure is also required to be made about compensation payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stocks.
Control by Directors, Executive Officers, and Principal Stockholders. As of
March 10, 2003, our Directors, executive officers, and stockholders who own
beneficially 5% or more of our Common Stock, and their respective affiliates, in
the aggregate, beneficially owned (including shares that the he or she has the
right to acquire the beneficial ownership within 60 days following March 10,
2003) approximately 2,698,179 shares or 18.35% of our outstanding Common Stock.
As a result, these stockholders possess significant influence over us, giving
them the ability, among other things, to elect a majority of our Board of
Directors and approve significant corporate transactions. Such share ownership
and control may also have the effect of
23
delaying or preventing a change in control of us, impeding a merger,
consolidation, takeover or other business combination involving us, or
discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of us which could have a material adverse effect on
the market price of our Common Stock.
ITEM 7 - FINANCIAL STATEMENTS:
The response to this Item is included in a separate section of this
report. See page F-1.
ITEM 8 - CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
During the two fiscal years ended December 31, 2002, we have not filed
any Current Report on Form 8-K reporting any change in accountants in which
there was a reported disagreement on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
24
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT:
Our Directors and Executive Officers and their ages are as follows:
NAME AGE EMPLOYMENT HISTORY
---- --- ------------------
Mitchell G. Blumberg 59 Mr. Blumberg was elected a Director of our
company in February 1999. He was elected
President and CEO of our company in February
2002. Mr. Blumberg has held several senior
level management positions in the
entertainment business in Los Angeles, CA.
Since June 1994, he has been engaged as a
film producer and talent manager in Los
Angeles, California initially with Blumberg
Productions, then with Blumberg Productions
and Management and thereafter as President
of Ardent Entertainment, a film production
and talent management firm. Prior to June
1994, he was an Executive Vice President of
RKO Pictures, Inc., where he was head of
business and legal affairs for the company.
Mr. Blumberg was also a Director of
eDispatch.com until its merger with AirIQ in
September 2001. Since the merger of
eDispatch.com with AirIQ, Mr. Blumberg
continues as a Director of AirIQ, a publicly
traded company located in Toronto, Ontario,
Canada. He also holds the position of
Managing Director of AirIQ. A native of
Philadelphia, PA, Mr. Blumberg is a graduate
of the University of Pennsylvania, the
University of Pennsylvania Law School, and
Harvard Business School. Mr. Blumberg
received his MBA degree from Harvard with
High Honors where he graduated as a Baker
Scholar (top 5% of class). Mr. Blumberg
resides and has offices in Beverly
Hills, CA.
25
NAME AGE EMPLOYMENT HISTORY
---- --- ------------------
Douglas F. Loblaw 62 Mr. Loblaw was employed as Chief Operating
Officer of our company from January 2001 to
January 2002 and from June to December 2000,
he was employed as our Director of
Operations. He was elected a Director of our
company in February 2002. He has been
employed by Capilano College as in
instructor since 1976. Commencing January
1995 to the present, he has been employed as
a tutor for the B.C. Open College. Since
January 1994 Creative Marketeam Canada Ltd
has engaged him as a marketing consultant.
He received a BA degree from the University
of Toronto with a major in French Language
and Literature.
John K. Campbell 69 Mr. Campbell has been President of
Transamerica Industries Ltd., a natural
resource company, for more than the past
five years. He is a former practicing lawyer
and he is presently a retired member of the
British Columbia Law Society. He was elected
a Director of our company in February 2002
and currently serves as Secretary of our
company.
Brent J. Peters 30 Mr. Peters has been Vice President of
Finance and Treasurer of Northfield Capital
Corporation, a publicly traded investment
company acquiring shares in public and
private corporations since 1997. He was
elected a Director of our company in
February 2002 and in November 2002 became
our Chief Financial Officer at that time.
Mr. Peters has a Bachelor of Business
Administration degree, specializing in
accounting
Unless any of such persons resign prior thereto, each of Mr. Blumberg,
Mr. Loblaw, Mr. Campbell and Mr. Peters will serve as Directors until our annual
meeting of stockholders in 2003 and the election and qualification of his
successor.
26
DIRECTOR AND OFFICER SECURITIES REPORTS
The Federal securities laws require our Directors and executive
officers, and persons who own more than ten percent (10%) of a registered class
of our equity securities to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of any of our
equity securities. Copies of such reports are required to be furnished to us. To
our knowledge, based solely on a review of the copies of such reports and other
information furnished to us, all persons subject to these reporting requirements
filed the required reports on a timely basis with respect to the year ended
December 31, 2002.
ITEM 10 - EXECUTIVE COMPENSATION:
The following table sets forth the annual and long-term compensation
paid during the three fiscal years ended December 31, 2002 to our chief
executive officers who served in that capacity during the year. No other
executive officers received compensation exceeding $100,000 during the year
ended December 31, 2002:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
COMPENSATION
------------------------
OTHER LONG-TERM ALL
NAME AND ANNUAL ANNUAL AWARDS/OPTION OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMP. (#) COMP.
------------------------ ---- ----------- ----- ------- -------------- ------
Peter L. Bradshaw(1) 2000 $113,000(2) $700 Nil 150,000 shares Nil
2001 $114,000(3) Nil Nil 148,545 shares Nil
2002 $131,000 Nil Nil Nil Nil
Mitchell G. Blumberg(4) 2000 $30,000 Nil Nil Nil Nil
2001 Nil Nil Nil Nil Nil
2002 $20,666 Nil Nil Nil Nil
------------------
(1) Mr. Bradshaw resigned as Chairman, Chief Executive Officer and a Director
on February 25, 2002.
(2) In lieu of $16,150 salary, Mr. Bradshaw was granted options to purchase
40,000 shares exercisable at $1.50 per share.
(3) In lieu of $32,000 salary, Mr. Bradshaw was granted options to purchase
254,545 shares exercisable at $0.25 per share.
27
(4) Mr. Blumberg was elected President on February 25, 2002.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 2002.
The following table provides information with respect to the above
named executive officers regarding options granted to such persons during the
year ended December 31, 2002.
% OF TOTAL
NUMBER OF OPTIONS/ MARKET
SECURITIES SARS GRANTED TO EXERCISE OR PRICE ON
UNDERLYING SARS/ EMPLOYEES IN BASE PRICE DATE OF
NAME OPTIONS GRANTED (#) FISCAL YEAR ($/SHARE) EXPIRATION DATE GRANT
---- ------------------- --------------- ----------- ----------------- ---------
Peter L. Bradshaw Nil N/A N/A N/A N/A
Mitchell G. Blumberg 50,000 9.9% $0.27 February 27, 2007 $0.27
5,000 1.0% $0.50 June 11, 2012 $0.50
75,000 14.9% $0.25 November 27, 2007 $0.25
----------------
STOCK OPTION EXERCISES DURING THE YEAR ENDED DECEMBER 31, 2002 AND HOLDINGS AT
DECEMBER 31, 2002.
The following table provides information with respect to the above
named executive officers regarding options exercised during the year ended
December 31, 2002 and options held at the end of the year ended December 31,
2002.
28
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
SHARES AT DECEMBER 31, 2002(1) OPTIONS AT DECEMBER 31, 2002(2)
ACQUIRED ON VALUE ----------------------------- ---------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Peter L. Bradshaw 298,545 $ 120,000(3) -0- -0- -0-
Mitchell G. Blumberg -0- -0- 201,667 33,333 $47,450 $13,000
-----------------
(1) The options are exercisable at prices ranging from $0.25 to $1.50 per
share.
(2) Based on the closing sales price on December 31,2002 of $0.39.
(3) Exercisable at $1.50 per share.
Our Directors do not receive any cash compensation for serving in that
capacity; however, they are reimbursed for their out-of-pocket expenses in
attending meetings. Pursuant to the terms of our 1998 Stock Incentive Plan, each
non-employee Director automatically receives an option grant for 50,000 shares
on the date such person joins the Board. Accordingly, effective February 25,
2002, each of Messrs. Loblaw, Campbell and Peters was granted options to
purchase 50,000 shares exercisable at $0.27 per share. In addition, on the date
of each annual stockholder meeting, provided such person has served as a
non-employee Director for at least six months, each non-employee Board member
who is to continue to serve as a non-employee Board member will automatically be
granted an option to purchase 5,000 shares. Accordingly, on June 11, 2002, Mr.
Blumberg was granted an option to purchase 5,000 shares. Each such option has a
term of ten years, subject to earlier termination following such person's
cessation of Board service, and is subject to certain vesting provisions.
29
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS:
Set forth below is information concerning the Common Stock ownership of
all persons known by us to own beneficially 5% or more of our Common Stock, and
the Common Stock ownership of each of our Directors and all Directors and
officers as a group, as of March 10, 2003. As of March 10, 2003, we had
14,086,687 shares of Common Stock outstanding.
Percentage of
Number of Shares Outstanding
Name and Address of Beneficial Owner(1) Beneficially Owned(2) Common Stock
---------------------------------------- --------------------- --------------
Mitchell Blumberg 290,000(3) 2.03%
1439 Claridge Drive
Beverly Hills, CA 90210
Douglas Loblaw 157,043(4) 1.10%
6111 LeClair Street
Abbotsford, BC V4X 2C9
John Campbell 100,000(5) 0.71%
905 West Pender Street - Suite 500
Vancouver, BC V6C 4S1
Brent Peters 132,000(6) 0.93%
c/o Northfield Capital Corporation
347 Bay Street - Suite 301
Toronto, Ontario M5H 2R7
Northfield Capital Corporation(8) 2,019,136 14.33%
347 Bay Street, Suite 301
Toronto, Ontario, Canada M5H 2R7
All officers and directors as a group
(4 persons) 679,043 4.62%
------------------
(1) Unless otherwise indicated, the address of such person is c/o the Company.
(2) For purposes of the above table, a person is considered to "beneficially
own" any shares with respect to which he or she exercises sole or shared
voting or investment power or of which he or she has the right to acquire
the beneficial ownership within 60 days following March 10, 2003.
(3) Includes 55,000 shares of Common Stock and options to purchase 235,000
shares of Common Stock.
(4) Includes 600 shares of Common Stock and options to purchase 156,443 shares
of Common Stock.
(5) The 100,000 shares are issuable on exercise of a stock option.
30
(6) Includes 7,000 shares of Common Stock and options to purchase 125,000
shares of Common Stock.
(7) Mr. Peters, an officer and a consultant to Northfield Capital Corp.,
disclaims a beneficial interest in the shares held by Northfield Capital
Corp.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We have one equity compensation plan for our employees, Directors and
consultants pursuant to which options, rights or shares may be granted or
issued. It is referred to as our 1998 Stock Incentive Plan. See Note 5 to the
Notes to Financial Statements for further information on the material terms of
these plans.
The following table provides information as of December 31, 2002 with
respect to our compensation plans (including individual compensation
arrangements), under which securities are authorized for issuance aggregated as
to (i) compensation plans previously approved by stockholders, and (ii)
compensation plans not previously approved by stockholders:
Equity Compensation Plan Information
(C)
NUMBER OF SECURITIES
(A) (B) REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
BE ISSUED UPON EXERCISE EXERCISE PRICE OF EQUITY COMPENSATION
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
------------- ----------------------- -------------------- ---------------------------
Equity compensation plans 1,595,110 $1.09 2,304,890
approved by security holders
Equity compensation plans not -0- -0- -0-
approved by security holders
Total 1,595,110 $1.09 2,304,890
31
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
On February 14, 2002, effective January 31, 2002, we entered into a
Management and Operating Services Agreement with Marketeam, a corporation owned
by Douglas Loblaw, our former Chief Operating Officer and currently a Director
of our company. The execution of the agreement was unanimously approved by our
Board of Directors at a meeting held on February 14, 2002. Mr. Loblaw was
elected a Director of our company on February 25, 2002. The management agreement
with Marketeam was for an initial one-month period commencing January 31, 2002
and continued from month to month thereafter and was terminated by us on May 31,
2002. In consideration of the services performed by Marketeam, we paid Marketeam
a fee of $26,000 per month, plus an amount equal to the Company's receipts from
our contracts with BarnesandNoble.com. Marketeam provided continuing management
and operating services, at its expense, over the day-to-day operations of the
Suite101 Web site. An aggregate of $30,200 was paid to Marketeam during the term
of the agreement. Marketeam was responsible to our Board of Directors for all
phases of the day-to-day management and operations of the Suite101.com Web site,
including accounting and bookkeeping, making payments at its expense to Senior
and Managing Editors, providing administration, oversight and fulfillment of our
duties and responsibilities under our agreements with BarnesandNoble.com,
providing Internet access to the Web site, hosting email, property maintenance,
providing postage, implementing software upgrades, and arranging intellectual
property licensing, among other matters.
Thereafter, on July 17, 2002, our wholly-owned subsidiary, i5ive,
completed the sale of its Website assets to Marketeam. In consideration for the
assets, Marketeam issued to i5ive a 15% equity interest in Marketeam and agreed
that in the event the assets are resold by Marketeam within one (1) year, a sum
equal to the proceeds of the sale would be paid over to i5ive. The sale of the
i5ive assets to Marketeam was unanimously approved by Messrs. Blumberg, Campbell
and Peters constituting all our directors not having any interest in the
transaction.
32
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K:
(A) EXHIBITS:
EXHIBIT DESCRIPTION
------- -----------
3.1 Certificate of Incorporation of the Registrant, as amended. (1)
3.2 Bylaws of the Registrant, as amended. (1)
3.3 Certificate of Amendment filed with the State of Delaware on November 25, 1998. (3)
3.4 Certificate of Amendment filed with the State of Delaware on December 4, 1998 (3)
4.1 Specimen stock certificate of the Registrant. (1)
10.1 Restated 1993 Stock Incentive Plan. (1)
10.2 1994 Directors Stock Option Plan. (1)
10.3 1994 Stock Option Plan. (1)
10.4 1993 Stock Incentive Plan. (1)
10.5 Form of Indemnification Agreement between the Registrant and its officers and directors. (1)
10.6 Stock Purchase and Option Agreement dated July 17, 1995 between the Registrant and Ballard
Medical Products, including all exhibits thereto. (2)
10.7 Amendment dated November 18, 1998 to Purchase Agreement among Registrant and Northfield Capital
Corporation, 284085 B.C. Ltd. and i5ive communications inc. (3)
10.8 Amendment dated December 1, 1998 to Purchase Agreement among Registrant and Northfield Capital
Corporation, 284085 B.C. Ltd. and i5ive communications inc. (3)
10.9 Amendment dated December 3, 1998 to Purchase Agreement among Registrant and Northfield
Capital Corporation, 284085 B.C. Ltd. and i5ive communications inc. (3)
10.10 1998 Stock Incentive Plan. (3)
10.11 Management and Operating Services Agreement dated February 14, 2002 with Creative
Marketeam Canada, Ltd. (4)
10.12 Option Agreement dated March 15, 2002 with Double B Holdings, LLC (5)
10.13 Agreement of Purchase and Sale entered into as of June 1, 2002 between creative Marketeam Canada Ltd.
and i5ive. (6)
21.0 Subsidiaries of the Registrant
Name State or Jurisdiction of Incorporation
---- --------------------------------------
i5ive communications inc. British Columbia, Canada
Endovascular, Inc. California (inactive)
33
EXHIBIT DESCRIPTION
------- -----------
23 Consent of experts and counsel:
23.1 Consent of N.I. Cameron, Inc.
99.1 Certification of Mitchell G. Blumberg
99.2 Certification of Brent Peters
-----------------
(1) Filed as an Exhibit to Neuro Navigational Corporation Form 10-KSB No.
0-25136 dated September 30, 1994.
(2) Filed as Exhibit to Neuro navigational Corporation Form 8-K dated July 17,
1995.
(3) Filed as an Exhibit to our Current Report on Form 8-K dated December 10,
1998.
(4) Filed as an Exhibit to our Current Report on Form 8-K dated February 14,
2002.
(5) Filed as an Exhibit to our Current Report on Form 8-K dated March 15, 2002.
(6) Filed with this Annual Report on Form 10-KSB.
(B) REPORTS ON FORM 8-K
During the quarter ended December 31, 2002, we did not file any Current
Reports on Form 8-K.
ITEM 14. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management,
including Mitchell G. Blumberg, our President and Chief Executive Officer, and
Brent Peters, our Chief Financial Officer, we have evaluated the effectiveness
of the design and operation of our disclosure controls and procedures within 90
days of the filing date of this annual report, and, based on their evaluation,
Mr. Blumberg and Mr. Peters have concluded that these controls and procedures
are effective. There were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
Disclosure controls and procedures are our controls and other
procedures that are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act are recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our
management, including Mr. Blumberg and Mr. Peters, as appropriate to allow
timely decisions regarding required disclosure.
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SUITE101.COM, INC.
BY: /s/ Mitchell G. Blumberg
------------------------------------
MITCHELL G. BLUMBERG, PRESIDENT
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Mitchell G. Blumberg President (Principal Executive March 28, 2003
-------------------------- Officer) and Director
Mitchell G. Blumberg
/s/ Brent Peters Director and Principal Financial March 28, 2003
-------------------------- and Accounting Officer)
Brent Peters
/s/ Douglas Loblaw Director March 28, 2003
--------------------------
Douglas Loblaw
/s/ John Campbell Director March 28, 2003
--------------------------
John Campbell
35
CERTIFICATIONS
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
I, Mitchell G. Blumberg, certify that:
1. I have reviewed this annual report on Form 10-KSB of Suite101.com, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
36
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 28, 2003 /s/ Mitchell G. Blumberg
--------------------------------------
Mitchell G. Blumberg
President and Chief Executive Officer
37
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Brent Peters, certify that:
1. I have reviewed this annual report on Form 10-KSB of Suite101.com, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
38
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 28, 2003 /s/ Brent Peters
------------------------------------
Brent Peters
Chief Financial Officer
39
SUITE101.COM, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
SUITE101.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheet F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders' Equity F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 to F-13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Suite101.com, Inc.
We have audited the accompanying consolidated balance sheets of Suite101.com,
Inc. as of December 31, 2002 and December 31, 2001 and the related consolidated
statements of operations, stockholders' equity and cash flows for the two years
then ended. The financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2002 and December 31, 2001, and the results of their operations and
their cash flows for the two years then ended, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has experienced accumulated losses and has had
no material revenue producing operations to date. The Company's ability to
continue as a going concern is dependent upon its ability to raise additional
capital or to merge with a revenue producing venture partner. These matters
raise doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
N.I. Cameron Inc. (signed)
VANCOUVER, B.C. CHARTERED ACCOUNTANTS
March 13, 2003
F-2
SUITE101.COM, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
ASSETS
2002 2001
------------ ------------
CURRENT ASSETS
Cash $ 3,030,507 $ 4,048,630
Accounts receivable 22,111 42,289
Prepaid expenses 66,039 68,453
------------ ------------
3,118,657 4,159,372
------------ ------------
INVESTMENTS, at cost (Note 3(c)) 1 --
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 2)
Computer equipment -- 217,394
Furniture and fixtures -- 22,352
Leasehold improvements -- 7,990
------------ ------------
-- 247,736
Less: accumulated amortization -- 127,295
------------ ------------
-- 120,441
------------ ------------
TOTAL ASSETS $ 3,118,658 $ 4,279,813
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 23,401 $ 223,531
------------ ------------
TOTAL LIABILITIES 23,401 223,531
------------ ------------
CAPITAL STOCK (Notes 4, 5 and 8)
Authorized:
40,000,000 common shares with a par value of $0.001 each
1,000,000 preferred shares with a par value of $0.01 each
Issued:
14,086,687 common shares 14,087 13,155
DEFERRED COMPENSATION -- (14,034)
ADDITIONAL PAID-IN CAPITAL 10,618,715 10,377,576
DEFICIT (7,457,504) (6,233,343)
EQUITY ADJUSTMENT FROM FOREIGN CURRENCY TRANSLATION (80,041) (87,072)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,095,257 4,056,282
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,118,658 $ 4,279,813
============ ============
COMMITMENTS AND SUBSEQUENT EVENTS (NOTE 8)
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
SUITE101.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
2002 2001
------------ ------------
ADMINISTRATIVE EXPENSES $ 341,932 $ 176,665
------------ ------------
LOSS FROM OPERATIONS (341,932) (176,665)
------------ ------------
OTHER INCOME (EXPENSES)
Loss on disposal of property, plant and equipment (105,892) --
Forfeited deposit 45,736 --
Other income, net 48,027 188,631
------------ ------------
(12,129) 188,631
------------ ------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS (354,061) 11,966
------------ ------------
LOSS FROM DISCONTINUED OPERATIONS (NOTE 10) (870,100) (1,653,596)
------------ ------------
NET LOSS $ (1,224,161) $ (1,641,630)
============ ============
INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS $ (0.03) $ --
============ ============
INCOME (LOSS) PER SHARE
Basic and Diluted $ (0.09) $ (0.12)
============ ============
Weighted average common shares outstanding 13,528,778 13,155,046
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
SUITE101.COM, INC.
CONSOLIDATED OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
Equity
Adjustment
From
Common Stock Additional Foreign Total
------------------------- Paid-in Deferred Currency Accumulated Stockholders'
Shares Amount Capital Compensation Translation Deficit Equity
------------ ----------- ------------ ------------ ------------ ----------- ------------
Balances, January 1, 2001 13,155,046 $ 13,155 $10,351,146 $ (41,775) $ (61,890) $(4,591,713) $ 5,668,923
Stock options issued to
non-employees -- -- 26,430 (26,430) -- -- --
Stock compensation vested -- -- -- 54,171 -- -- 54,171
Net loss for the year ended
December 31, 2001 -- -- -- -- -- (1,641,630) (1,641,630)
Translation adjustment for the
year ended December 31, 2001 -- -- -- -- (25,182) -- (25,182)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, December 31, 2001 13,155,046 13,155 10,377,576 (14,034) (87,072) (6,233,343) 4,056,282
Stock options exercised 931,641 932 231,979 -- -- -- 232,911
Stock options issued to
non-employees -- -- 9,160 (9,160) -- -- --
Stock compensation vested -- -- -- 23,194 -- -- 23,194
Net loss for the year ended
December 31, 2002 -- -- -- -- -- (1,224,161) (1,224,161)
Translation adjustment for the
year ended December 31, 2002 -- -- -- -- 7,031 -- 7,031
----------- ----------- ----------- ----------- ----------- ----------- -----------
14,086,687 $ 14,087 $10,618,715 $ -- $ 80,041 $(7,457,504) $ 3,095,257
=========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
SUITE101.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
2002 2001
----------- -----------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss $(1,224,161) $(1,641,630)
Adjustment to reconcile net loss to net cash used in operating activities
Loss on disposition of property, plant and equipment 105,892 7,210
Amortization 17,857 42,005
Stock-based compensation 23,194 54,171
Changes in operating assets and liabilities
Accounts receivable 20,687 (9,558)
Prepaid expenses and deposits 2,956 (19,775)
Accounts payable and accrued expenses (200,425) 15,135
----------- -----------
Net cash used in operating activities (1,254,000) (1,552,442)
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Proceeds on disposal of property, plant and equipment 1,222 --
Purchase of property, plant and equipment (2,360) (43,662)
----------- -----------
Net cash used in investing activities (1,138) (43,662)
----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Proceeds from issuance of common stock 232,911 --
----------- -----------
Net cash provided by financing activities 232,911 --
----------- -----------
EFFECT OF EXCHANGE RATES ON CASH 4,104 (26,477)
----------- -----------
NET DECREASE IN CASH (1,018,123) (1,622,581)
CASH AT BEGINNING OF YEAR 4,048,630 5,671,211
----------- -----------
CASH AT END OF YEAR $ 3,030,507 $ 4,048,630
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
1. THE COMPANY
Suite101.com Inc. (formerly known as Kinetic Ventures Ltd. (the
"Company")) was incorporated in the State of California, United States
on May 20, 1991, and reincorporated in the State of Delaware, United
States on December 31, 1993. By way of a reverse takeover on December
8, 1998, the Company acquired a wholly-owned subsidiary i5ive
communications inc. ("i5ive"). Until operations ceased on May 31, 2002
(Note 10) i5ive was engaged in the creation, operation and maintenance
of a World Wide Web based community.
Going Concern
The accompanying consolidated financial statements have been presented
assuming the Company will continue as a going concern. Based on the
current level of expenditures, the Company has sufficient funds to meet
expenses for at least one year. At December 31, 2002, the Company had
accumulated $7,457,504 in losses and had no material revenue producing
operations. At the date of this report, the Company's ability to
continue as a going concern is dependent upon its ability to raise
additional capital or merge with a revenue producing venture partner.
These matters raise doubt about the Company's ability to continue as a
going concern. No adjustments have been made in the accompanying
consolidated financial statements to provide for this uncertainty.
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Endovascular, Inc., a
California corporation and i5ive communications inc., a Canadian
company. All intercompany accounts and transactions have been
eliminated in consolidation. As at December 31, 2002, there were no
operations in Endovascular, Inc. or i5ive communications inc.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company have been prepared
in accordance with generally accepted accounting principles. Because a
precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period
necessarily involves the use of estimates which have been made using
careful judgment by management.
The consolidated financial statements have, in management's opinion,
been properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies summarized
below:
(a) Property, Plant and Equipment
Property, plant and equipment are capitalized at original cost
and amortized over their estimated useful lives at the following
annual bases and rates:
Computer equipment 30% declining balance
Furniture and fixtures 20% declining balance
Leasehold improvements 20% straight-line
One-half the normal amortization is taken in the year of acquisition.
F-7
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Research and Development
Research and development costs had been expensed as incurred.
(c) Foreign Exchange
Unless otherwise stated, all amounts are in United States dollars. The
functional currency of i5ive is the Canadian dollar. Hence, all asset
and liability accounts have been translated using the exchange rate as
at December 31, 2002 and December 31, 2001 and all revenues and
expenses have been translated using the average exchange rate for each
period. The rates used were as follows:
(equivalent CDN $ per U.S.$) December 31, December 31,
2002 2001
------------ ------------
Exchange rate .6339 .6278
(d) Net Loss Per Common Share
The Company computes its loss per share in accordance with Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share"
("EPS") issued in February 1997. SFAS No. 128 requires dual
presentation of basic EPS and diluted EPS on the face of the income
statement for entities with complex capital structures. Basic EPS is
computed as net income divided by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur from common shares issuable
through stock options, warrants and other convertible securities.
3. RELATED PARTY TRANSACTIONS
(a) The Company has incurred salaries, termination payments and consulting
fees of $222,039 (2001 - $147,174) to three directors of the Company.
(b) Management fees of $104,382 (2001 - $ 0) have been paid to a
corporation controlled by a director of the Company.
(c) During the current year, the Company sold its website assets, as
defined in the sales agreement, to a corporation controlled by a
director of the Company. In consideration for this sale, the Company
received $100 cash and 15% of the issued shares of the acquiring
corporation. In addition, if any of these acquired assets are sold
within one year of the closing date (July 17, 2002), the entire
proceeds of that sale are payable to the Company. As at December 31,
2002, an additional $494 has been received as a result of some of the
acquired assets being sold. As security for this obligation, the
acquiring corporation has issued a promissory note in the amount of
$120,000 to the Company payable on July 17, 2003. This note will be
forgiven by the Company provided the acquiring corporation has
complied with the condition concerning sale of any assets. The Company
has recorded its 15% interest in the acquiring corporation at $1
because there are no material assets in the acquiring corporation
other then those acquired in this transaction.
F-8
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
4. CAPITAL STOCK
(a) In April 1999, the Company completed a private placement of 1,000,000
units for $5,000,000. Each unit was comprised of two common shares and
one warrant entitling the holder to purchase an additional common
share for $4.50 on or before February 29, 2000. During the year ended
December 31, 2000, all 1,000,000 warrants were exercised to net the
Company $4,500,000. The Company incurred $163,750 in expenses
concerning this share issuance and issued 15,000 warrants entitling
the holder to purchase an additional common share for $5.50 on or
before February 29, 2002. None of these 15,000 warrants were exercised
prior to their expiry date.
(b) During the year ended December 31, 2000, the Company issued 625,000
warrants as part of the private placement of Notes payable. Each
warrant entitled the holder to purchase one common share at a price of
$5.00 up to July 15, 2002. In the event that at any time prior to July
15, 2002 (a) the shares of common stock issuable on exercise of the
warrants have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and (b) the average of the closing bid
and asked prices for the Company's common stock as quoted on the OTC
Bulletin Board (or such other automated trading system or national
securities exchange as is the principal market for the Company's
common stock) exceeds (U.S.) $9.00 per share for a period of ten (10)
business days, then the warrants will expire at 5:00 PM, New York City
time, on a date sixty (60) days thereafter. During the second quarter
of 2002, the exercise price of these warrants was changed to $0.52 and
the expiry date was changed to July 15, 2003. To date, none of these
warrants have been exercised.
(c) During the year ended December 31, 2002, the Company issued 931,641
common shares for total proceeds of $232,911 upon exercise of stock
options.
5. STOCK OPTIONS
THE COMPANY'S 1998 STOCK INCENTIVE PLAN
In December 1998, the Company adopted the 1998 Stock Incentive Plan (the
"Plan"). Under the Plan, as amended, 3,900,000 shares of common stock have
been reserved for issuance on exercise of options granted under the Plan.
On the date of the closing of the transaction with i5ive, outstanding
options granted under i5ive's 1998 Stock Incentive Plan were assumed by the
Company under the Plan and no further option grants will be made under
i5ive's Plan. The assumed options have substantially the same terms,
subject to anti-dilution adjustment, as are in effect for grants made under
the Company's Plan.
The Board of Directors of the Company may amend or modify the Plan at any
time, subject to any required stockholder approval. The Plan will terminate
on the earliest of (i) 10 years after the Plan Effective Date, (ii) the
date on which all shares available for issuance under the Plan have been
issued as fully-vested shares or (iii) the termination of all outstanding
options in connection with certain changes in control or ownership of the
Company.
F-9
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
5. STOCK OPTIONS (CONTINUED)
THE COMPANY'S 1998 STOCK INCENTIVE PLAN (CONTINUED)
The following is a table of stock options under the Plan as at December
31, 2002:
Balance
Option Expiry Vesting Balance Granted Expired (Exp) Balance Exercisable
Exercise Date Date December 31, During Exercised (E) December 31, December 31,
Price (mm/dd/yy) (mm/dd/yy) 2001 the Year Cancelled (C) 2002 2002
-------- --------- --------------- ------------- --------- -------------- ------------ ------------
$ 1.50 02/13/03 Vested 60,000 -- -- 60,000 60,000
1.50 06/30/03 Vested 1,237,584 -- 43,800 (Exp) 925,110 925,110
268,674 (C)
1.50 02/23/09 Vested 50,000 -- -- 50,000 50,000
1.50 11/13/04 Vested 20,000 -- -- 20,000 20,000
1.50 06/11/09 Vested 5,000 -- -- 5,000 5,000
1.50 06/12/10 Vested 5,000 -- -- 5,000 5,000
3.53 01/31/02 Vested 4,000 -- 4,000 (Exp) -- --
0.25 12/31/02 Vested 1,483,430 -- 931,641 (E) -- --
184,828 (C)
366,961(Exp)
0.25 01/04/06 Vested 20,000 -- -- 20,000 20,000
0.17 06/04/11 Vested 10,000 -- 5,000 (Exp) 5,000 5,000
0.27 02/25/12 50,001-02/25/03 -- 150,000 -- 150,000 --
50,001-02/25/04
49,998-02/25/05
0.27 02/27/07 16,667-02/27/03 -- 50,000 -- 50,000 --
16,667-02/27/04
16,666-02/27/05
0.50 06/11/12 06/11/03 -- 5,000 -- 5,000 --
0.25 11/27/07 01/01/03 -- 300,000 -- 300,000 --
The above option table reflects the changes made to the expiry dates
and vesting dates as a result of a directors' resolution made during
the year.
The above options are granted for services provided to the Company. Of
the above options, the following options are to non-employees and have
been reflected on the financial statements and valued, using the
Black-Scholes model with a risk-free rate of 5% or 3% and no expected
dividends:
Number of Exercise Volatility Expected
Options Price Grant Date Value Assumption Options Life
---------- -------- ------------------ -------- ---------- ------------
100,000 1.50 October 25, 1999 $ 99,750 272% 5 years
50,000 3.56 January 6, 2000 99,635 60% 5 years
4,000 3.53 January 31, 2000 5,120 60% 2 years
100,000 7.00 February 15, 2000 203,970 20% 5 years
20,000 7.88 March 21, 2000 45,922 20% 5 years
100,000 0.25 January 4, 2001 23,390 275% 5 years
13,000 0.25 October 3, 2001 3,041 275% 5 years
50,000 0.25 November 27, 2002 9,160 220% 1 year
F-10
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
5. STOCK OPTIONS (CONTINUED)
THE COMPANY'S 1998 STOCK INCENTIVE PLAN (CONTINUED)
The remaining options issued were to officers, directors and employees.
As the options were granted at exercise prices based on the market
price of the Company's shares at the dates of the grant, no
compensation cost is recognized. However, under SFAS 123, the impact on
net income and net income per share of the fair value of stock options
must be measured and disclosed on a fair value based method on a pro
forma basis. The fair value of the employees' purchase rights under
SFAS 123 was estimated 5% or 3% using the Black-Scholes model with the
following assumptions used for options: risk-free rate was 5.0%, with
an expected volatility of 279%, 272% 263% and 257% for the $1.50
options, 275% or 220% for the $0.25 and $0.17 options, and 96% for the
$0.27 options, an expected option of 1 to 5 years and no expected
dividends.
If compensation expense had been determined pursuant to SFAS 123, the
Company's net loss and net loss per share for the year ended December
31, 2002 would have been as follows:
Net loss
As reported $(1,224,161)
Pro forma $(1,339,675)
Basic net loss per share
As reported $ (0.09)
Pro forma $ (0.10)
6. INCOME TAXES
At December 31, 2002, there were deferred income tax assets resulting
primarily from operating loss carryforwards for Canadian tax purposes
totaling approximately $2,190,000 less a valuation allowance of
$2,190,000. The valuation allowance on deferred tax assets increased by
$350,000 during the period ended December 30, 2002.
At December 31, 2002, the Company had net operating loss carryforwards
for Canadian tax purposes of approximately $5,850,000. These
carryforwards begin to expire in 2003.
At December 31, 2002, there were deferred income tax assets resulting
from operating loss carryforwards for U.S. income tax purposes totaling
approximately $672,000 less a valuation allowance of $672,000. The
valuation allowance on deferred tax assets increased by $107,000 during
the period ended December 31, 2002. The Company has approximately
$1,570,000 available in operating loss carryforwards, which may be
carried forward and applied against U.S. operating income.
7. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments consist of cash, accounts
receivable and accounts payable. It is management's opinion that the
Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments. The fair value of these
financial instruments approximates their carrying values.
F-11
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
8. COMMITMENTS AND SUBSEQUENT EVENTS
(a) During the year ended December 31, 2000, the Company issued a
warrant to a consultant to purchase 25,440 shares of common
stock of the Company at a price of $5.50 per share expiring
February 28, 2002. This warrant expired during the current year
without being exercised.
(b) During the year ended December 31, 2000, the Company entered into
a one-year agreement with a consultant. The consultant was issued
a warrant to purchase 14,000 shares of common stock of the
Company at a price of $5.50 per share, expiring on February 26,
2002. This warrant expired during the current year without being
exercised.
(c) The Company entered into an agreement dated February 17, 2000 for
consulting and corporate finance services. The Company issued
25,000 warrants under this agreement with an exercise price of
$4.96 per share. These warrants expired February 17, 2002 without
being exercised.
(d) The Company is obligated under the terms of an agreement to make
monthly payments of $1,426 until April 2003 for the hosting of
its former server.
(e) Subsequent to December 31, 2002, the Company signed a letter of
agreement regarding a proposed business transaction. If the
transaction is completed, the Company will purchase 100% of the
issued and outstanding capital stock of GeoGlobal Resources
(India) Inc. ("GeoGlobal"). In consideration, the Company will
issue 34 million shares of common stock and a promissory note of
$2.0 million. Of the 34 million shares, 14.5 million will be
issued upon completion of the transaction and 14.5 million shares
will be held in escrow until the earlier of: i) the completion of
a Work Programme on a specific oil and gas property owned by
GeoGlobal provided the results in that Programme demonstrate a
commercial basis for drilling and the commencement of a Drilling
Programme or ii) the commencement of a Drilling Programme. An
additional 5 million shares will be held in escrow subject to a
Commercial Discovery on the oil and gas property. Of the $2.0
million promissory note, $1.0 million will be payable on closing,
but not before March 31, 2003, $500,000 will be payable June 30,
2003 and $500,000 will be payable June 30, 2004.
If the transaction is completed, it will be accounted for as a
reverse takeover, whereby the consolidated financial statements
are issued under the name of the Company but described in the
notes and elsewhere as a continuation of GeoGlobal and not the
Company.
F-12
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND DECEMBER 31, 2001
(EXPRESSED IN U.S. DOLLARS)
9. COMPREHENSIVE INCOME (LOSS)
DECEMBER 31, DECEMBER 31,
2002 2001
----------- -----------
Net loss as reported $(1,224,161) $(1,641,630)
Add (deduct)
Foreign currency translation adjustments 7,031 (25,182)
----------- -----------
Comprehensive Income (Loss) $(1,217,130) $(1,666,812)
=========== ===========
Accumulated other comprehensive income
Foreign currency translation adjustments
Balance at beginning of period $ (87,072) $ (61,890)
Change during the period 7,031 (25,182)
----------- -----------
Balance at end of period $ (80,041) $ (87,072)
=========== ===========
10. DISCONTINUED OPERATIONS
On May 31, 2002, the Company discontinued its internet-based
activities. As at December 31, 2002, the assets and liabilities of this
discontinued business were comprised of the following:
Assets $ 0
=======
Liabilities
Accounts payable $16,972
=======
Revenues from discontinued operations are as follows:
2002 2001
------ -------
$6,799 $40,067
====== =======
F-13