United States Securities and Exchange Commission
Washington, D.C. 20549
Amendment No. 1
to
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
EasyWeb, Inc.
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(Name of Small Business Issuer in its charter)
Colorado 84-1475642
--------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6025 South Quebec Street, Suite #150
Denver, Colorado 80111
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (720) 489-8873
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
-------------------- ------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, no par value
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(Title of class)
Item 1. Description of Business.
(a) Business Development.
EasyWeb, Inc. ("EasyWeb"), a development-stage company, was organized under
the laws of the State of Colorado under the name of "NetEscapes, Inc.," on
September 24, 1998. We changed our name to "EasyWeb, Inc." on February 2, 1999.
We design, market, sell and maintain customized and template, turnkey sites on
the worldwide web, or the Internet, hosted by third parties. Our business plan
has been prepared based upon the popularity of the Internet and the growing
number of businesses interested in advertising and marketing online. The
customer pays us a fee for the design and maintenance of its custom or template
web site; which fee may include a portion of the fee paid monthly by the
customer for the hosting of the site. To date, we have sold less than ten web
sites and, accordingly, we have realized only minimal revenue from the design,
sale and maintenance of Internet sites and incurred a loss from operations
through February 8, 2001. Our executive offices are located at 6025 South Quebec
Street, Suite #150, Englewood, Colorado 80111, and our telephone and facsimile
numbers are (720) 489-8873 and (720) 489-8874, respectively.
On March 11, 1999, we issued and sold an aggregate of 3,200,000 shares of
our common stock to our President/Treasurer/director, a director of EasyWeb and
another individual in consideration for an aggregate of $5,500 in cash
(approximately $.002 per share). These three individuals collectively own
3,200,000 shares of common stock, representing approximately 88.7% of our
3,606,200 shares of common stock outstanding as of February 8, 2000. The sales
of common stock to these three individuals were made in reliance upon the
exemptions from registration with the U.S. Securities and Exchange Commission
provided by Section 4(2) of the Securities Act of 1933 and with the Colorado
Division of Securities under Section 11-51-308(1)(p) of the Colorado Uniform
Securities Act.
We received gross proceeds in the amount of $101,050 from the sale of a
total of 404,200 shares of common stock, representing approximately 11.2% of the
outstanding shares of our common stock as of February 8, 2000, to fifty-four
persons in an offering conducted during the period from December 10, 1999,
through April 10, 2000, pursuant to the exemption from registration with the
Commission under Rule 504 of Regulation D under Section 3(b) of the Securities
Act of 1933; via registration by qualification with the Colorado Division of
Securities under Section 11-51-304 of the Colorado Uniform Securities Act; and
pursuant to certain exemptions from registration under the Florida Securities
and Investor Protection Act, the Illinois Securities Law of 1953, the Nevada
Uniform Securities Act and the Utah Uniform Securities Act. We failed to comply
with Section R14-4-102 of the Regulations of the Arizona Corporation Commission,
Title 14, Chapter 4 (the "Regulations"), in connection with the offers and sales
of a total of 16,000 shares of common stock to three residents of the State of
Arizona. We have initiated, but not yet completed, an offer of rescission to
these three investors under Section R14-4-101 of the Regulations. In the event
that all three investors elect to rescind their purchases of our common stock,
we would be liable to pay them a total of $4,000, representing the aggregate
purchase price of their shares, together with interest at the Arizona statutory
rate of interest of 10% per annum.
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See (b) "Business of the Issuer" immediately below for a description of our
current operations and future proposed activities.
(b) Business of Issuer.
General
Commencing February 1999, we marketed, as an independent contractor,
customized, turnkey sites on the worldwide web created and hosted by Big Online,
Inc., an established web site vendor service company located in San Francisco,
California, that maintains an electronic directory of more than eleven million
businesses. Our rights to market and sell Big Online's products and hosting
services and receive compensation for these marketing services was obtained
pursuant to the assignment of the rights in February 1999 under the Marketing
Agreement with Millennium Marketing, Inc., a company then owned and managed by
Mr. David C. Olson, the President, the Treasurer, a director and an
approximately 44.4%-owner of EasyWeb, that was dissolved on May 1, 2000. In June
1999, Millennium Marketing entered into an Independent Consultant Application
and Agreement with Big Online pursuant to which Millennium Marketing obtained
the marketing rights and rights to compensation that it subsequently assigned to
us. While Millennium Marketing received compensation monthly from Big Online for
the sale of five web sites and the sponsorship of sales representatives pursuant
to a discontinued multi-level marketing program, we sold no Big Online Internet
sites and, accordingly, received no revenue from Big Online.
We design, market, sell and maintain customized and template, turnkey
"sites" on the Internet to businesses in the United States that are hosted by
third parties. We have a strategic relationship with Sunstar 2000, Inc.,
Highlands Ranch, Colorado, from which we obtain the template, turnkey web site
models that we offer. The web sites that we design and maintain for customers
are hosted by Sunstar 2000 and others. See "- Products and Services" below for a
description of the template, turnkey web site models and hosting and other
services that Sunstar provides us. For the use of the web site models, we pay
Sunstar a portion of the fee that we receive from the customer for the design
and/or maintenance of each template web site. If we utilize other services, such
as custom design and technical maintenance services, provided by Sunstar, we
negotiate compensation arrangements on a case-by-case basis depending upon the
time required in, and the difficulty of, the performance of the services. We may
receive a portion of the fee paid monthly by the customer to Sunstar 2000 or
other host for the hosting of its web site.
We market our design and maintenance services for customized and template,
turnkey sites, primarily, online via our web site on the Internet located at
www.easywebcorp.com. Since June 2000, we have employed advertising on the radio.
In September 2000, we designed and created a website located at
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www.AJOnTheTown.com for AJ Indoors, Inc., a Denver, Colorado, indoor sign
company, in exchange for featuring EasyWeb on approximately 2,000 indoor signs
throughout the Denver and Colorado front range areas. Our long-range marketing
plans include the development of an intensive advertising program involving
newspapers and local periodicals in the Denver metropolitan area and other
cities along the front range of Colorado. We are currently negotiating with one
potential customer for a custom web site who learned of us from one of AJ
Indoors advertisements.
As of April 30, 2001, we had sold less than ten web sites and realized
$5,591 in revenue. We bartered, in exchange for the design and ongoing
maintenance services in connection with one of the custom web sites, for the
advertising services described above. As compensation for the design and ongoing
maintenance services and costs relating to another customized site for Euthenics
International, Inc., a company engaged in marketing and distributing dietary
supplements, we have entered into a Letter of Understanding and Terms dated
November 1, 2000, providing for Euthenics to pay us an ongoing royalty of $.50
per each bottle of product sold for a period five years from December 1, 2000,
through 2005. Thereafter, the agreement is renewable annually commencing
December 1, 2005, subject to termination by either party within thirty days
prior to December 1 of each year. Commencing in January 2001, Euthenics is
running infomercials on national television advertising its dietary supplements.
We have agreed to upgrade and integrate Euthenics' "Mail Order Management"
("MOM") system with a secure e-commerce site in connection with Euthenics'
national infomercial marketing campaign. We have also agreed to train Euthenics
International employees on the MOM system by hiring and compensating a mutually
acceptable expert consultant. We cannot be certain that we will achieve
profitability by designing, marketing, selling and maintaining customized and
template, turnkey sites on the Internet hosted by third parties. Further, we may
not receive adequate compensation for our products and services as a result of
the non-traditional compensation arrangements we make with companies such as AJ
Indoors and Euthenics.
Products and Services
Custom Web Sites. An increasing number of businesses have retained web site
vendor service companies like us to create and maintain customized web sites to
advertise their business, products and or services. The reasons for selecting a
customized site vary greatly, but include the enhanced customer impact
anticipated from a custom web site and the extra features that are not available
in a template site. The custom sites we design are usually from one to twelve
pages in length and include all of the basic features, such as identifying
information, business logo, photographs and or graphics submitted by the
customer and text, included in the design of a template web site. The additional
features available with each customized web site include, among others,
streaming audio and video, flash movies, custom graphic design, complete design
control and framed web sites. We also offer services relating to web site
promotion, marketing and e-commerce, including, among others, promotional and
advertising packages, shopping cart technology, e-commerce merchant accounts and
payment gateways and e-commerce solutions.
We have competed for and entered bids on a number of custom web sites. The
majority of this business eventually has been lost to internet companies that
are better-financed than EasyWeb. Although our initial bids are normally for
less money, competitors have undercut bids to a level that we believe would lose
them money.
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Template Turnkey Web Sites. Sunstar 2000, Inc., 1177 Mulberry Lane,
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Highlands Ranch, Colorado 80126, provides EasyWeb with the template web site
models it offers. Design of the template web sets is usually completed and the
site is customarily available on the Internet within ten business days from the
date of purchase. The customer that selects a template web site can develop its
site based on one of Sunstar 2000's models at a much lower cost than the cost of
a customized site. The web sites are hosted by Sunstar 2000 or other hosts on a
month-to-month basis or pursuant to an annual contract at a reduced rate. A
potential client may select a one-page promotional site or a multi-page web site
created from templates. The one-page web site includes: (i) the company name,
address, telephone number and other contact information; (ii) the company logo;
(iii) one photograph or graphic; and (iv) up to 200 words of text describing the
company or its products.
There is no size limitation on the multi-page site except the current
storage limit of 10MB for the entire site, and additional pages can be added at
any time. The typical pages on a multi-page web site include one or more of the
following pages: (i) home page; (ii) products or services page; (iii) contact
information; (iv) mission statement; (v) frequently asked questions; (vi)
technical support; and (vii) customer testimonials or references. At a minimum,
each multi-page web site includes the following: (i) the company name, address,
telephone number and other contact information; (ii) the company logo; (iii) up
to four photographs or graphics per page; (iv) up to 200 words of text
describing the company or its products per page; (v) three e-mail addresses; and
(vi) search engine registration. Optional features include a map to the
company's location, capability to use the company's own custom domain name;
monthly search engine re-registration; metatag inclusion; and maintenance
contracts.
The visitor to EasyWeb's Internet site contemplating the purchase of a
template one-page starter or multi-page site can view the templates in their
full size from three basic samples. The potential customer can then navigate
through the sample to view the various page options. Before making his final
selection, the visitor can download and print blank worksheets to be completed
and submitted to EasyWeb.
Maintenance Services. We offer a number of options for web site maintenance
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for partial and complete changes to the web sites we create for our customers.
Our "bolt-on e-commerce solutions" include monthly changes for products, prices,
etc. For customers with e-commerce web sites consisting of hundreds or thousands
of products, we offer individualized programs enabling self-management of
changes. We depend upon outside consultants, primarily Sunstar 2000, to assist
us with programming work in connection with complex maintenance services.
Hosting Services. Sunstar 2000, primarily, and other third party providers
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will provide hosting services for our customers. Sunstar 2000 outsources its
hosting services to a 5,000 square foot, state-of-the-art, all fiber optic data
center that provides services 24 hours per day. The features include dual OC-192
fiber optic connectivity, multiple DS-3 backbones, dual OC-12 Lucent and Alcatel
multiplexers, bay switchs and hubs, Cisco 7000 series routers, ultra-fast,
multi-processor RAID servers, SONET technology for maximum redundancy, fault
tolerance and load balancing and routing of IP traffic using BGP4 protocol. The
facility does not share space or co-locate and is restricted by steel-wire
barriers and armed personnel. For customers that use Sunstar 2000 for hosting,
we
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offer, for one monthly fee, access to a number of services in a "Value Pack,"
including a real-time chat program, auction capability, a banner rotation
system, web-based e-mail, an online calendar accessible from any browser and a
bulletin board feature that may be used to post messages.
Competition
The market for web site design and maintenance services is intensely
competitive. Additional companies are expected to enter the competition in the
future. We anticipate that we will be in competition with companies of all sizes
located in the United States that offer Internet web site design, hosting and
maintenance services to business customers. A number of these companies offer
essentially the same products and services as EasyWeb and compete in the areas
of price and service. Because we obtain the template web sites that we offer
from Sunstar 2000, we are in direct competition with Sunstar 2000 in the
marketing and sale of these products and services. We must make changes on a
timely basis in the nature, price, quality and other aspects of our products and
services in response to changes in the market. With regard to template websites,
we are dependent upon Sunstar 2000 to make these changes on a timely basis. We
expect to compete by marketing our products and services online and via radio,
newspaper and indoor sign advertising. We intend, through the use of online
marketing and independent contractors, to minimize the our weaknesses,
including, among others, our undercapitalization, cash shortage, limitations
with respect to personnel, technological, financial and other resources and lack
of a customer base and market recognition, and to eliminate the need for a
sizeable retail facility and marketing staff. Many of the companies and other
organizations with which we will be in competition are established and have far
greater financial resources, substantially greater experience and larger staffs
than EasyWeb. Additionally, many of these organizations have proven operating
histories, which we lack. We expect to face strong competition from both
well-established companies and small independent companies like us. In addition,
in the future, A T & T, Qwest Communications and other "Baby Bell" and other
telecommunications companies may offer customers assistance in establishing web
sites at costs lower than those available from us. Additionally, out business
may be subject to decline because of generally increasing costs and expenses of
doing business, thus further increasing anticipated competition. Further, it is
anticipated that there may be significant technological advances in the future
and we may not have adequate creative management and resources to enable us to
take advantage of these advances. The effects of any of these technological
advances on EasyWeb, therefore, cannot be presently determined.
Marketing
We believe that there are a large and growing number of businesses that
would purchase our web site design and maintenance services if contacted and
informed about the opportunity. We market our products and services online,
primarily, from our web site located at www.easywebcorp.com. Since June 2000, we
have employed advertising on the radio on KTLK's "Business for Breakfast" and
"Hard Core Sports" programs. In September 2000, we designed and created a
website for AJ Indoors, Inc., a Denver, Colorado, indoor sign company, in
exchange for featuring EasyWeb on approximately 2,000 indoor signs throughout
the Denver and Colorado front range areas. Our long-range marketing plans
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include the development of an intensive advertising program involving newspapers
and local periodicals in the Denver metropolitan area and other cities along the
front range of Colorado. Mr. David C. Olson, the President, the Treasurer, a
director and a principal shareholder of EasyWeb, contacts potential customers
from the leads generated from our advertising via newspapers and indoor signs,
leads generated from his own sales efforts and referrals of potential customers.
While we employed two full-time, door-to-door salespersons for a short time, we
terminated them because of the lack of performance in relation to the expense.
We have sold only a limited number of Internet sites and, accordingly, we
have a very small customer base. While management believes, we cannot be
certain, that our plan to market and sell our products and services online and
via advertising will enable us to develop a customer base more quickly and
cost-effectively than the employment of traditional marketing methods involving
a sales staff and facility, among other things. If our marketing plan utilizing
online marketing and advertising fails, we may be required to employ sales
personnel and/or compensate them via salary in addition to commission. Such
change(s) in our marketing plan could adversely affect revenues in the
short-term and necessitate the formulation of additional marketing strategies,
with attendant delays and expenses.
Employees and Consultants
As of the date hereof, we employ two individuals, including Mr. David C.
Olson and Ms. Barbara Pentrinsky, the President/Treasurer and the Secretary,
respectively, of EasyWeb, on a part-time basis. Both Mr. Olson and Ms. Petrinsky
are considered to be key to our business success. No cash compensation has been
awarded to, earned by or paid to either of the foregoing or Mr. Robert J. Zappa,
a director of EasyWeb together with Mr. Olson, for all services rendered in all
capacities through April 30, 2001. For the foreseeable future, Messrs. David C.
Olson and Robert J. Zappa and Ms. Barbara Petrinsky will receive no compensation
in any form for their services performed in the capacities of our executive
officers and/or directors. It is anticipated that at such time, if ever, as
EasyWeb's financial position permits, assuming that we are successful in raising
additional funds through equity and/or debt financing and/or generating a
sufficient level of revenue from operations, Mr. Olson and Ms. Petrinsky will
receive reasonable salaries and other appropriate compensation, such as bonuses,
coverage under medical and/or life insurance benefit plans and participation in
stock option and/or other profit sharing or pension plans, for services as
executive officers of EasyWeb and Messrs. Olson and Zappa may receive fees for
their attendance at meetings of the Board of Directors. Mr. Olson and Ms.
Petrinsky devote up to 25% of their time and effort to the business and affairs
of EasyWeb and Mr. Zappa devotes only such time as is necessary for him to
perform his responsibilities as a director of EasyWeb. See Part I., Item 3.
"Description of Property," for a description of the Agreement for Administrative
Support dated March 11, 1999, between EasyWeb and Summit Financial Relations,
Inc., an affiliated company of which Mr. Olson is the President, a director and
a controlling shareholder, pursuant to which we paid Summit the sum of $17,321
through April 30, 2001, for use of office space and administrative and technical
support services at Summit Financial Relation's offices. As the sole shareholder
of Summit Financial Relations, Mr. Olson benefited indirectly from these
payments. See Part I, Item 7. "Certain Relationships and Related Transactions,"
and Part II, Item 4. "Recent Sales of Unregistered Securities," for detailed
information relating to our issuance on March 11, 1999, to Messrs. Olson and
Zappa of 1,600,000 shares and 800,000 shares, of our common stock, respectively,
in consideration for the payment of $2,500 and $1,500 in cash (approximately
$.002 per share), respectively.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
General
- -------
EasyWeb's business plan is to design, market, sell and maintain customized
and template, turnkey sites on the Internet hosted by third parties. Our
business plan has been prepared based upon the popularity of the Internet and
the growing number of businesses interested in advertising and marketing online.
We have generated only $5,251 in revenue and a net loss from operations through
the date hereof. For the three months ended March 31, 2001, the year ended
December 31, 2000, and the year ended December 31, 1999, we realized total
revenue of $340 (unaudited), $5,251 and $-0-, respectively, and a net loss of
$(9,153) (less than $.01 per share) (unaudited), $(74,484) ($(.02) per share)
and $(16,548) (less than $.01 per share), respectively. The increased net loss
realized by EasyWeb for the year ended December 31, 2001, as compared to the
year ended December 31, 2000, was the result of increased operating expenses,
including, primarily, salaries and payroll taxes, professional fees, web site
consulting and maintenance and advertising.
We anticipate that our arrangement in September 2000 with AJ Indoors, Inc.,
an indoor sign company, to feature EasyWeb on approximately 2,000 indoor signs
throughout the Denver and Colorado front range areas, may assist us in obtaining
an increased customer base in the future. Also, we hope to receive revenue in
the near future from our arrangement with Euthenics International, Inc., to
design and maintain the company's web site in exchange for an ongoing royalty of
$.50 per each bottle of product sold for a period five years. Commencing in
January 2001, Euthenics is running infomercials on national television
advertising its dietary supplements.
Additionally, we intend to generate increased revenue in the future through
the expenditure of additional funds for marketing, advertising and/or promotion.
The implementation of these plans is dependent upon our ability to raise
additional capital from equity and/or debt financing and/or achieve profitable
operations. We believe that the revenue generated from our business may not be
sufficient to finance these and other future activities and that it may be
necessary to raise additional funds through equity and/or debt financing in the
next twelve months. Although we intend to explore all available alternatives for
debt and/or equity financing, including, but not limited to, private and public
securities offerings, there can be no assurance that we will be able to generate
additional capital for marketing, advertising and promotion and/or other
purposes. In the event that only limited additional financing is received, we
expect our opportunities in the design, marketing and sale of Internet web sites
to be limited. Further, even if we succeed in obtaining the level of funding
necessary to increase sales through the expenditure of additional funds for
marketing, advertising and/or promotion, this will not ensure that operations
will be profitable.
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Results of Operations
Three Months Ended March 31, 2001, Versus Three Months Ended March 31, 2000
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Total revenue was $340 (unaudited) from the sale of one web site for the
three months ended March 31, 2001, as compared to total revenue of $-0- for the
three months ended March 31, 2000.
We incurred a net loss of $(9,153) (unaudited) during the three months
ended March 31, 2001, as compared to a net loss of $(5,363) (unaudited) during
the three months ended March 31, 2000, because of the factors described below.
Operating expenses increased approximately 177%, from $5,363 (unaudited) for the
three months ended March 31, 2000, to $9,493 (unaudited) for the three months
ended March 31, 2001. We experienced a sizeable increase in professional fees
and other. However, rent and administrative support decreased substantially.
Additionally, we incurred web site consulting and maintenance of $216
(unaudited) for the three months ended March 31, 2001, as compared to $-0-
(unaudited) for this item for the three months ended March 31, 2001. On the
other hand, we incurred $153 (unaudited) for advertising during the three months
ended March 31, 2000, as compared to $-0- (unaudited) for advertising during the
three months ended March 31, 2001.
Year Ended December 31, 2000, Versus Year Ended December 31, 1999
- -----------------------------------------------------------------
Total revenue was $5,251 for the year ended December 31, 2000, as compared
to total revenue of $-0- for the year ended December 31, 1999. The limited
revenue realized during the year ended December 31, 2000, is the result of our
sale of a limited number of web sites.
We incurred a net loss of $(74,484) during the year ended December 31,
2000, as compared to a net loss of $(16,548) during the year ended December 31,
1999, because of the factors described below. Operating expenses increased from
$16,548 for the year ended December 31, 1999, to $79,735 for the year ended
December 31, 2000. We experienced a sizeable increase in all operating expenses
except rent and administrative support for the year ended December 31, 2000, as
compared to the year ended December 31, 1999. Additionally, we incurred salaries
and payroll taxes of $20,729 for the year ended December 31, 2000, as compared
to $-0- salaries and payroll taxes for the year ended December 31, 1999. In
addition, we incurred $8,299 in costs associated with the Letter of
Understanding and Terms dated November 1, 2000, with Euthenics International.
See Part I, Item 1. "Description of Business," (a) "Business Development," for a
description of this document.
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
As of March 31, 2001, and December 31, 2000, we had total assets,
consisting of cash of $16,451 (unaudited) and $26,707, respectively, and
intangible assets, net of accumulated amortization of $719 (unaudited) and $531,
respectively, of $1,531 (unaudited) and $1,719, respectively. We had total
current liabilities of $9,617 (unaudited) and $10,908, respectively, as of March
31, 2001, and December 31, 2000. Working capital was $6,834 (unaudited) at March
31, 2001. Our total shareholders' equity was $8,365 (unaudited) and $17,518,
respectively, as of March 31, 2001, and December 31, 2000, respectively.
As a result of our inability to generate significant revenue to date
together with the sizeable increase in our operating expenses, access to capital
may be unavailable in the future except from affiliated persons. If we are able
to obtain access to outside capital in the future, it is expected to be
9
necessarily costly because of high rates of interest and fees. To date, we have
been funded through the sale of common stock for gross proceeds in the amount of
$101,050. We expect that we may experience working capital shortages in the
future until such time as we are successful in raising additional capital and/or
achieving profitable operations. While our independent auditor has presented our
financial statements on the basis that we are a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business over a reasonable length of time, it has noted
that our significant operating losses raise a substantial doubt about our
ability to continue as a going concern. Our future success will be dependent
upon our ability to increase sales of our Internet products and services. Should
our efforts to raise additional capital through equity and/or debt financing
fail, management is expected to provide the necessary working capital so as to
permit us to continue as a going concern.
Net cash used in operating activities was $(10,256) (unaudited) for the
three months ended March 31, 2001, primarily, because of the net loss of
$(9,153) (unaudited) incurred. Net cash used in operating activities was
$(72,784) for the year ended December 31, 2000, primarily, because of the net
loss of $(74,484) incurred, offset, primarily, by the value of office space and
administrative support contributed by an affiliated company ($5,000). For the
three months ended March 31, 2001, net cash used in investing activities and net
cash provided by financing activities was $-0- (unaudited) and $-0- (unaudited),
respectively. Cash decreased by $10,256 (unaudited), from $26,707 at the
beginning of the period to $16,451 (unaudited) at the end of the period, because
of the above-described factors. For the year ended December 31, 2000, net cash
used in investing activities was $(2,650) and net cash provided by financing
activities was $101,050. Cash increased by $25,616, from $1,091 at the beginning
of the year to $26,707 at the end of the year, because of the above-described
factors.
Inflation
- ---------
We believe that inflation has not had a material impact on our business.
Seasonality
- -----------
We do not believe that our business is seasonal.
Item 3. Description of Property.
We maintain our offices at the business offices located at 6025 South
Quebec Street, Suite #150, Englewood, Colorado 80111, of Summit Financial
Relations, Inc. ("Summit"), an affiliated corporation of which Mr. David C.
Olson, the President, the Treasurer, a director and a controlling shareholder of
EasyWeb, is the President, a director and the sole shareholder. Summit leases
its offices from an unaffiliated company and shares the offices with that
company and a number of other affiliated companies. We entered into the
Agreement for Administrative Support with Summit dated March 11, 1999, for use
of office space, administrative support (including reception, secretarial and
bookkeeping services) and technical support (including use of office, computer
and telecommunications equipment) at Summit's offices. The agreement provides
for us to pay Summit for these services the amount of $1,500 per month
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commencing in the month in which we receive the minimum proceeds from our
offering of common stock. During the period following the closing of our common
stock offering through April 30, 2001, we paid Summit the sum of approximately
$17,321. For the year ended December 31, 2000, and the three months ended March
31, 2001, we recorded $13,027, including $5,000 that was contributed, and $294
as rent and administrative support expense, respectively, with a corresponding
credit to additional paid-in capital. We have made arrangements with Summit to
continue to utilize office space and administrative and technical support
services pursuant to the Agreement for Administrative Support free of charge
until our financial condition improves. The office space we currently occupy is
expected to be adequate to meet our foreseeable future needs while we are in the
development stage. We own no real property. Our telephone and facsimile numbers
are (720) 489-8873 and (720) 489-8874, respectively.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the ownership
of our common stock as of April 30, 2001, by each shareholder known by us to
be the beneficial owner of more than five per cent of our outstanding shares of
common stock, each of our directors and all of our executive officers and
directors of as a group. Under the General Rules and Regulations of the
Commission, a person is deemed to be the beneficial owner of a security if the
person has or shares the power to vote or direct the voting, or dispose or
direct the disposition, of the security. Each of the shareholders named in the
table has sole voting and investment power with respect to the shares of common
stock beneficially owned.
Shares Percentage
Beneficially of
Beneficial Owner Owned (1) Class (1)
----------------- ------------ -----------
David C. Olson (2) (3) 1,600,000 44.37%
6025 South Quebec Street, Suite #150
Englewood, Colorado 80111
Robert J. Zappa (3) 800,000 22.18%
2740 Kendrick Street
Golden, Colorado 80401
Steven E. Muth 800,000 22.18%
6463 South Malaya Street
Aurora, Colorado 80016
Barbara Petrinsky (2)
6025 South Quebec Street, Suite #150 -0- 0.00%
Englewood, Colorado 80111
All executive officers and directors 2,400,000 66.55%
as a group (three persons)
- ------------------
11
(1) Represents the number of shares of common stock owned of record and
beneficially by each named person or group, expressed as a percentage of
3,606,200 shares of the Company's Common Stock outstanding as of February 8,
2000.
(2) Executive officer of the Company.
(3) Member of the Board of Directors of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Executive Officers and Directors
Set forth below are the names, ages, positions with EasyWeb and business
experience of our executive officers and directors.
Name Age Position
David C. Olson* 40 President, Treasurer and Director
Robert J. Zappa* 57 Director
Barbara Petrinsky 58 Secretary
- ------------------
*May be deemed to be a "parent" and "promoter" of EasyWeb, as those terms
are defined in the General Rules and Regulations promulgated under the
Securities Act of 1933.
General
Directors hold office until the next annual meeting of EasyWeb's
shareholders and until their respective successors have been elected and
qualify. Officers serve at the pleasure of the Board of Directors. Mr. Olson and
Ms. Petrinsky devote up to 25% of their time and effort to the business and
affairs of EasyWeb and Mr. Zappa devotes only such time as is necessary for him
to perform his responsibilities as a director of EasyWeb. Set forth below under
"Business Experience" is a description of the business experience of Messrs.
Olson and Zappa and Ms. Petrinsky.
Family Relationship
No family relationship exists between or among our executive officers and
directors.
12
Business Experience
David C. Olson has served as the President, the Treasurer and a director of
--------------
EasyWeb since March 11, 1999. He has served, since August 1997, as the
President, the Chief Executive Officer, the Treasurer, a director and the sole
shareholder of Summit Financial Relations, Inc. Summit Financial Relations is a
corporate financial consulting firm that specializes in making introductions to
sources of capital for private and publicly-traded companies. Summit Financial
Relations also acts as an investor relations firm, representing public companies
to the marketplace. Summit Financial Relations, which was founded by Mr. Olson,
is located in the Denver Technological Center, Englewood, Colorado, and provides
EasyWeb with office space and administrative and technical support. Also, since
August 1997, he has served as the President, the Chief Executive Officer, the
Treasurer, a director and the sole shareholder of Associate Capital Consulting,
Inc., an Englewood, Colorado, company also founded by Mr. Olson, which is
engaged in the business of investing in private and publicly-held companies. Mr.
Olson has, since April 28, 1998, served as the President/Chief Executive Officer
and, since April 15, 1999, served as the Secretary, the Chief Financial Officer
and the sole director of Max Development, Inc., Englewood, Colorado, a
publicly-held company co-founded by him in September 1998 that is engaged in the
business of marine diamond mining off the west coast of the Republic of South
Africa. He has served as a director and a controlling shareholder, since May
1999, and as the Secretary and the Treasurer, since August 1999, of Mile High
Foliage, Inc., Englewood, Colorado, a privately-held wholesale tree nursery
business that he founded in May 1999. From January 1993 to May 1997, he held
various positions, including National Sales Manager, Vice President and Branch
Office Manager of Cohig's top producing branch, for Cohig and Associates, Inc.
("Cohig," now part of Global Capital Securities, Inc.), Englewood, Colorado. At
that time, Cohig, a full-service brokerage firm, specialized in NASDAQ SmallCap
and growth stocks and initial and secondary public securities offerings. During
his tenure as National Sales Manager, the firm's sales force peaked to
approximately 265 registered representatives at twenty-three offices across the
U.S., up from 140 when he accepted the position. Mr. Olson also served on the
firm's Corporate Finance Commitment Committee and Cohig was involved in public
and private financing involving hundreds of millions of dollars and numerous
companies while at Cohig. From April 1987 to January 1993, he was associated
with Kober Financial Corp., Denver, Colorado, a regional broker-dealer
specializing in NASDAQ SmallCap and growth securities that was acquired by Cohig
in January 1993. During this period, Mr. Olson advanced to Executive Vice
President, Sales and Syndication. During the period from 1982 to 1987, he was a
registered representative associated with a number of NASD-member
broker-dealers.
Robert J. Zappa has served as a director of EasyWeb since February 2, 1999.
Since September 2000, he has been the managing member and principal interest
holder of K-Jump Health Co. USA, LLC, a Golden, Colorado, company founded by Mr.
Zappa that purchased the assets of PolyMedica Health Co., a subsidiary of
PolyMedica Corp. K-Jump Health Co. USA manufactures and imports consumer home
healthcare products with a joint venture partner in Asia and distributes the
products under a private label to such major U.S. retailers as WalMart, Target,
Safeway, Albertsons, Eckerd Drug, Rite-Aid, McKesson Wholesale and Bergin
Brunswick. K-Jump Health Co. USA is the largest manufacturer and distributor of
private label digital/electronic thermometers in the U.S. Mr. Zappa, since
January 1999, has been the sole owner and the President of Unitech
International, L.L.C., a Golden, Colorado, import-export company. Since October
15, 1999, Mr. Zappa has been a director and a controlling shareholder of Mile
High Foliage. From 1992 until his retirement in January 1999, he served as
President of PolyMedica Healthcare, Inc., a wholly-owned subsidiary of
PolyMedica Corp., and as Vice President of PolyMedica Corporation, Inc. Mr.
Zappa, from 1991 to 1992, served as the President and Chief Operating Officer of
Clinical Diagnostics, Inc., which merged with PolyMedica Corporation in the fall
13
of 1992. He secured a sizable equity position in Clinical Diagnostics and, as
President of the company, rebuilt it to profitability and successfully spun
Clinical Diagnostics off to PolyMedica Corp. Mr. Zappa was the President and
sole owner of R.J. Zappa Distributors, Inc., a leading wholesale appliance and
electronics distributor in the Rocky Mountain region, from 1982 until the sale
of the company in 1990. From 1974 to 1981, Mr. Zappa was a co-owner and served
as the Vice-President of S & A Distributors, Inc., until he left to form R.J.
Zappa Distributors. Mr. Zappa was employed, from 1965 to 1974, as a salesman,
then a District Manager and finally a Regional Manager for Graybar Electric.
During the term of his employment by Graybar Electric, Mr. Zappa was named
Salesman of the Year for two years and District Manager of the Year for two
years. He attended Colorado State University, concentrating his course of study
in business and economics, from 1962 to 1965.
Barbara Petrinsky has served as the Secretary of Easyweb since July 26,
------------------
1999. She has been employed by Summit Financial Relations, an affiliated
company, since November 1998. From April 1990 to July 1998, Mrs. Petrinsky was
employed by, and from September 1996 to July 1998 during this period, she served
as the Director of, the Montessori School at the Denver Technological Center.
Item 6. Executive Compensation
Executive Compensation
No cash compensation has been awarded to, earned by or paid to Messrs.
David C. Olson and Robert J. Zappa, President/Treasurer/director and a director
of EasyWeb, respectively, and Ms. Barbara Petrinsky, our Secretary, for all
services rendered in all capacities to EasyWeb since our inception on September
24, 1998. It is anticipated that, for the foreseeable future, Messrs. Olson and
Zappa and Ms. Petrinsky and any other executive officer and/or director of
EasyWeb, will receive no compensation in any form for services to EasyWeb in the
capacities of executive officer and/or director.
See Part I., Item 3. "Description of Property," for a description of the
Agreement for Administrative Support dated March 11, 1999, between EasyWeb and
Summit Financial Relations, Inc., an affiliated company of which Mr. Olson is
the President, a director and the sole shareholder, pursuant to which we paid
Summit the sum of approximately $17,321 through April 30, 2001, for use of
office space and administrative and technical support services at Summit's
offices. As the sole shareholder of Summit, Mr. Olson benefited indirectly from
these payments.
See Part I, Item 7. "Certain Relationships and Related Transactions," and
Part II, Item 4. "Recent Sales of Unregistered Securities," for detailed
information relating to our issuance on March 11, 1999, to Messrs. Olson and
Zappa of 1,600,000 shares, and 800,000 shares, of our common stock,
respectively, in consideration for the payment of $2,500 and $1,500 in cash
(approximately $.002 per share), respectively. None of our executive officers
and/or directors holds any option to purchase any of our securities.
14
Effective March 11, 1999, our Board of Directors and shareholders approved
the adoption of the Incentive Stock Option Plan (the "Plan") reserving 175,000
shares of our common stock for issuance upon the exercise of stock options
received by optionees under the Plan. Except for this Plan described in this
section captioned "Executive Compensation" and elsewhere in this Registration
Statement on Form 10-SB, we do not provide our officers or employees with
pension, stock appreciation rights, long-term incentive or other plans and have
no intention of implementing any such plans for the foreseeable future. In the
future, we may offer stock options to prospective employees and/or consultants;
however, no options have been granted as of the date hereof. It is possible that
in the future we may establish various executive incentive programs and other
benefits, including reimbursement for expenses incurred in connection with our
operations, company automobiles and life and health insurance, for our executive
officers and directors, but none has yet been granted. The provisions of any of
these plans and benefits will be at the discretion of our Board of Directors.
Under Colorado law and pursuant to our Articles of Incorporation, the
officers and directors of EasyWeb may be indemnified for various expenses and
damages resulting from their acting in such capacity. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to our
officers or directors pursuant to those provisions, EasyWeb has been informed by
our counsel that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
Incentive Stock Option Plan
Effective as of March 11, 1998, Mr. David C. Olson, our then sole director
and shareholder, approved the Incentive Stock Option Plan (the "Plan") reserving
an aggregate of 175,000 shares of common stock for issuance upon the exercise of
stock options granted to our employees, consultants and non-employee members of
the Board of Directors under the Plan. The purpose of the Plan is to promote the
growth and general prosperity of EasyWeb by permitting us to grant options
exercisable to purchase shares of common stock to our employees, consultants and
non-employee members of the Board of Directors.
Pursuant to the Plan, we may grant incentive stock options within the
meaning of Section 422A of the Internal Revenue Code of 1986, as amended, to
employees as well as non-qualified stock options to employees, officers,
directors and consultants. The Plan provides for administration by our Board of
Directors or by a committee that comprises disinterested members of the Board of
Directors. The Board or the committee selects the optionees, authorizes the
grant of options and determines the number of underlying shares of common stock,
the exercise price, the term (not to exceed ten years) and any other terms and
conditions of the options. The Board of Directors expects to administer the plan
initially.
The exercise price of each stock option under the Plan must be at least
100% of the fair market value of the shares of common stock on the date of grant
as determined by the Board of Directors. Each incentive stock option may be
exercisable for a period, as determined by the Board of Directors, but not in
excess of ten years from the date of grant. The exercise price of all incentive
stock options granted under the Plan to shareholders possessing more than 10% of
the total combined voting power of all classes of our stock must be less than
15
110% of the fair market value of the shares of common stock on the date of grant
and those options may be exercisable for a period not in excess of five years
from the date of grant. All options granted under the Plan are non-transferable
and may be exercised only by the optionee or the optionee's estate.
There is no limit on the number of shares with respect to which options may
be granted under the Plan to any participating employee. However, the aggregate
fair market value of shares of common stock (determined on the date the option
is granted) with respect to which incentive stock options become exercisable for
the first time by an individual option holder during any calendar year (under
all such plans maintained by EasyWeb) may not exceed $100,000.
Options granted under the Plan may be exercised within twelve months after
the date of an optionee's termination of employment by reason of his death or
disability, or within three months after the date of termination by reason of
retirement or voluntary termination approved by the Board of Directors, but only
to the extent the option was otherwise exercisable on the date of termination.
In the event an optionee's employment is terminated for any reason other than
death, disability, retirement or voluntary termination approved by the Board of
Directors, the optionee's option terminates thirty days after the date of such
termination.
The Plan will terminate on February 24, 2009. The Plan may be amended by
the Board of Directors without shareholder approval, except that no amendment
that increases the maximum aggregate number of shares that may be issued under
the Plan or changes the class of employees who are eligible to participate in
the Plan, can be made without the approval of our shareholders. As of February
8, 2001, no options have been granted, and there are no arrangements to grant
any options, under the Plan. Options granted under the Plan, and shares of
common stock issued upon the exercise of any those options, will not be
registered with the U.S. Securities and Exchange Commission under the Securities
Act of 1933. These securities will be offered pursuant to the exemption from
registration provided by Rule 504 of Regulation D promulgated under Section 3(b)
of, or other available exemption under, the Securities Act of 1933. Accordingly,
resales of the securities will be subject to the registration requirements of
Section 5 of, and Rule 144 of the General Rules and Regulations promulgated
under, the Securities Act of 1933.
The Plan provides that the number of shares of common stock underlying each
option and the exercise price of the option shall be proportionately adjusted in
the event of a stock split, reverse stock split, stock dividend or similar
capital adjustment that is effected without receipt of additional consideration
by EasyWeb.
Compensation of Directors
Directors of EasyWeb receive no compensation pursuant to any standard
arrangement for their services as directors. However, directors who are not
officers may be paid an annual fee or a fee per meeting of the Board of
Directors in an amount(s) to be determined in the future by the Board of
Directors.
16
Item 7. Certain Relationships and Related Transactions.
On March 11, 1999, we issued and sold 1,600,000 shares of our common stock
to Mr. David C. Olson, the President, the Treasurer and a director of EasyWeb,
in consideration for the sum of $2,500 in cash (approximately $.0016 per share).
Mr. Olson serves as one of our two executive officers and directors and owns of
record and beneficially 44.4% of the issued and outstanding shares of our common
stock. Also on March 11, 1999, we issued and sold 800,000 shares of common stock
to each of Mr. Robert J. Zappa, a company director, and Mr. Steven Muth in
consideration for the payment by each individual of the amount of $1,500 in cash
(approximately $.0019 per share).
On March 11, 1999, we entered into the Agreement for Administrative Support
with Summit Financial Relations, Inc., an affiliated company of which Mr. Olson
is the President, a director and the sole shareholder, for use of office space,
administrative support (including reception, secretarial and bookkeeping
services) and technical support (including use of office, computer and
telecommunications equipment) at Summit's offices located at 6025 South Quebec
Street, Suite #150, Englewood, Colorado 80111. The agreement provides for us to
pay Summit for these services the amount of $1,500 per month commencing in the
month in which we receive the minimum proceeds from our offering of common
stock. During the period following the closing of our common stock offering in
April 2000 through April 30, 2001, we paid Summit, pursuant to the Agreement for
Administrative Support, the sum of approximately $17,321 for the use of office
space and administrative and technical support services at Summit's offices. Mr.
Olson, as the sole shareholder of Summit, benefited indirectly from these
payments. For the three months ended March 31, 2001, and the year ended December
31, 2000, we recorded $294 and $13,027, including $5,000 that was contributed as
rent and administrative support expense, respectively, with a corresponding
credit to additional paid-in capital. We have made arrangements with Summit to
continue to utilize office space and administrative and technical support
services pursuant to the Agreement for Administrative Support for the
foreseeable future free of charge until our financial condition improves.
Because of their management positions, organizational efforts and/or
percentage share ownership in EasyWeb, Messrs. Olson, Zappa and Muth may be
deemed to be "parents" and "promoters" of the Company, as those terms are
defined in the Securities Act of 1933 and the applicable Rules and Regulations
under the Securities Act of 1933. Because of the above-described relationships,
transactions between and among EasyWeb and Messrs. Olson, Zappa and Muth, such
as the sale of our common stock to each of them as described above, should not
be considered to have occurred at arm's-length.
Item 8. Description of Securities.
Description of Capital Stock
Our authorized capital stock consists of 30,000,000 shares of common stock,
no par value per share.
17
Description of Common Stock
All shares of common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share on all matters to be
voted upon by shareholders. The shares of common stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and nonassessable shares. Cumulative voting in the election of
directors is permitted. In the event of liquidation of EasyWeb, each shareholder
is entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities. All shares of our
common stock issued and outstanding are fully-paid and nonassessable.
Dividend Policy. Holders of shares of the common stock are entitled to
-----------------
share pro rata in dividends and distributions with respect to the common stock
when, as and if declared by the Board of Directors out of funds legally
available therefor. We have not paid any dividends on our common stock and
intend to retain earnings, if any, to finance the development and expansion of
our business. Future dividend policy is subject to the discretion of the Board
of Directors and will depend upon a number of factors, including future
earnings, capital requirements and our financial condition.
Transfer Agent and Registrar. The Transfer Agent and Registrar for our
-------------------------------
common stock is Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South,
Suite #430, Denver, Colorado 80209.
Part II
Item 1. Market Price of and Dividends on Registrant's Common Equity and Related
Shareholder Matters.
(a) Market Information.
There has been no established public trading market for the common
stock since our inception on September 24, 1998.
(b) Holders.
As of April 30, 2001, we had fifty-eight shareholders of record of
our 3,606,200 issued and outstanding shares of common stock.
(c) Dividends.
We have never paid or declared any dividends on our common stock and
do not anticipate paying cash dividends in the foreseeable future.
18
Item 2. Legal Proceedings.
We know of no legal proceedings to which EasyWeb is a party or to which any
of our property is the subject that are pending, threatened or contemplated or
any unsatisfied judgments against EasyWeb.
Item 3. Changes in and Disagreements with Accountants.
We had no independent accountant prior to the retention of Cordovano and
Harvey, P.C., 201 Steele Street, Suite #300, Denver, Colorado 80206, in May
1999. There has been no change in our independent accountant during the period
commencing with the retention of Cordovano and Harvey, P.C., through February 8,
2001.
Item 4. Recent Sales of Unregistered Securities.
On March 11, 1999, we issued and sold 1,600,000 shares of our common stock
to Mr. David C. Olson, the President, the Treasurer and a director of EasyWeb,
in consideration for the sum of $2,500 in cash (approximately $.0016 per share).
Mr. Olson serves as one of the two executive officers and directors of EasyWeb
and owns of record and beneficially approximately 44.4% of the issued and
outstanding shares of our common stock. Also, on March 11, 1999, we issued and
sold 800,000 shares of common stock to each of Mr. Robert J. Zappa, a director
of EasyWeb, and Mr. Steven Muth in consideration for the payment by each
individual of the amount of $1,500 in cash (approximately $.0019 per share). We
relied, in connection with the sales of the shares, upon the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933 and Section
11-51-308(1)(p) of the Colorado Uniform Securities Act (the "Colorado Act"). We
relied upon the fact that our issuance and sale of the shares did not constitute
a public securities offering together with the fact that Messrs. Olson, Zappa
and Muth were executive officers, directors, controlling shareholders and/or
founders of EasyWeb at the time of the sales, to make the exemptions available.
On November 9, 1999, we issued and sold 2,000 shares of our common stock to
Associate Capital Consulting, Inc., an affiliated company of which Mr. Olson is
the President, the Chief Executive Officer, the Treasurer, a director and a
controlling shareholder, in consideration for the sum of $500 in cash
(approximately $.25 per share). In connection with the sales of the shares, we
relied upon the exemption from registration provided by Section 4(2) of the
Securities Act of 1933 and Section 11-51-308(1)(p) of the Colorado Act. To make
the exemptions available, we relied upon the fact that our issuance and sale of
the shares did not constitute a public securities offering together with the
fact that Mr. Olson was an executive officer, director, controlling shareholder
and founder of EasyWeb at the time of the sale.
During the period from December 10, 1999, through April 10, 2000, we issued
and sold an aggregate of 404,200 shares of our common stock to a total of
fifty-four persons, all of whom are either residents of the states of Arizona,
Colorado, Florida, Illinois, Nevada or Utah, for cash consideration totaling
$101,050. We made the sales in reliance upon the exemption from registration
with the U.S. Securities and Exchange Commission provided under Rule 504 of
Regulation D under Section 3(b) of the Securities Act of 1933 and via
19
registration by qualification with the Colorado Division of Securities under
Section 11-51-304 of the Colorado Act. Our Application for Registration by
Qualification became effective with the Colorado Division of Securities on
December 10, 1999. No underwriter was employed in connection with the offering
and sale of the shares. We relied upon the following, among other, facts to make
the Federal exemption available:
(i) The aggregate offering price for the offering of the shares of common
stock did not exceed $1,000,000, less the aggregate offering price for
all securities sold within the twelve months before the start of and
during the offering in reliance on any exemption under Section 3(b)
of, or in violation of Section 5(a) of, the Securities Act of 1933;
(ii) The required number of manually executed originals and true copies of
Form D were duly and timely filed with the U.S. Securities and
Exchange Commission;
(iii)We conducted no general solicitation or advertising in connection
with the offering of any of the shares; and
(iv) The fact that we have not been since our inception:
(a) Subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934;
(b) An "investment company" within the meaning the Investment Company
Act of 1940; or
(c) A development stage company that either has no specific business
plan or purpose or has indicated that our business plan is to
engage in a merger or acquisition with an unidentified company or
companies, or other entity or person.
We sold shares of common stock in the States of Florida, Illinois, Nevada
and Utah in reliance upon the exemptions from registration provided under
Section 517.061 of the Florida Securities and Investor Protection Act, Section
4.G of the Illinois Securities Law of 1953, Section 90.530 of the Nevada Uniform
Securities Act and Section 61-1-14 of the Utah Uniform Securities Act,
respectively. We failed to comply with Section R14-4-102 of the Regulations of
the Arizona Corporation Commission, Title 14, Chapter 4 (the "Regulations"), in
connection with the offers and sales of a total of 16,000 shares of common stock
to three residents of the State of Arizona. We have initiated, but not yet
completed, an offer of rescission to these three investors under Section
R14-4-101 of the Regulations. In the event that all three investors elect to
rescind their purchases of our common stock, we would be liable to pay them a
total of $4,000, representing the aggregate purchase price of their shares,
together with interest at the Arizona statutory rate of interest of 10% per
annum.
Item 5. Indemnification of Directors and Officers.
The last paragraph of Article Twelfth of our Articles of Incorporation
contains provisions providing for the indemnification of our directors and
officers as follows:
20
"In addition, the corporation shall have full authority to indemnify
its current or former directors, officers, employees, fiduciaries and
agents as now or hereinafter is permitted by Section 7-109-101 of the
Colorado Business Corporation Act, to the full extent permitted by that
section, or its successor provisions."
We have no agreements with any of our directors or executive officers
providing for indemnification of any of those persons with respect to liability
arising out of his or her capacity or status as an officer and/or director.
At present, there is no pending litigation or proceeding involving a
director or executive officer of EasyWeb as to which indemnification is being
sought.
PART F/S
The Financial Statements of EasyWeb, Inc., required by Regulation SB
commence on page F-1 hereof in response to Part F/S of this Registration
Statement on Form 10-SB and are incorporated herein by this reference.
PART III
Item 1. Index to Exhibits.
Item
Number Description
3.1* Articles of Incorporation of NetEscapes, Inc., filed September 24, 1998.
3.2* Articles of Amendment to the Articles of Incorporation for
NetEscapes, Inc., filed February 2, 1999.
3.4* Original Bylaws of NetEscapes, Inc.
10.0 Letter of Understanding and Terms dated November 1, 2000 between
EasyWeb, Inc., and Euthenics International, Inc.
- ------------------
* Filed Previously
21
Item 2. Description of Exhibits.
The documents required to be filed as Exhibit Number 2 in Part III of Form
1-A filed as part of this Registration Statement on Form 10-SB are listed in
Item 1 of this Part III above. No documents are required to be filed as Exhibit
Numbers 3, 5, 6 or 7 in Part III of Form 1-A, and the reference to such Exhibit
Numbers is therefore omitted. No additional exhibits are filed hereto.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
EASYWEB, INC.
(Registrant)
Date: April 30, 2001 By: /s/ David C. Olson
--------------------------
David C. Olson, President
22
EASYWEB, INC.
(A Development Stage Company)
Index to Financial Statements
Page
-----
Independent auditors' report ............................................ F-2
Balance sheets, December 31, 2000 and March 31, 2001 (unaudited) ........ F-3
Statements of operations, for the years ended December 31, 2000,
and 1999, from September 24, 1998 (inception) through
December 31, 2000, for the three months ended
March 31, 2001 (unaudited) and 2000 (unaudited), and from
September 24, 1998 (inception) through March 31, 2001 (unaudited) .... F-4
Statement of shareholder's equity, September 24, 1998 (inception)
through March 31, 2001 (unaudited) ................................. F-5
Statements of cash flows, for the years ended December 31, 2000
and 1999, from September 24, 1998 (inception) through
December 31, 2000, for the three months ended
March 31, 2001 (unaudited) and 2000 (unaudited), and from
September 24, 1998 (inception) through March 31, 2001 (unaudited) .... F-6
Notes to financial statements ........................................... F-7
Independent Auditors' Report
To the Board of Directors and Shareholders
EasyWeb, Inc.
We have audited the accompanying balance sheet of EasyWeb, Inc. (a development
stage company) as of December 31, 2000, and the related statements of
operations, shareholders' equity and cash flows for the years ended December 31,
2000 and 1999, and the period from September 24, 1998 (inception) through
December 31, 2000. These 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 auditing standards generally accepted
in the United States. 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 financial statements referred to above present fairly, in
all material respects, the financial position of EasyWeb, Inc. as of December
31, 2000, and the related statements of operations and cash flows for the years
ended December 31, 2000 and 1999, and from September 24, 1998 (inception)
through December 31, 2000 in conformity with accounting principles generally
accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has a working capital deficit at December 31, 2000 and
has suffered significant operating losses during the periods from September 24,
1998 (inception) through December 31, 2000. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans regarding those matters are also described in Note A. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Cordovano and Harvey, P.C.
- ------------------------------
Cordovano and Harvey, P.C.
Denver, Colorado
April 20, 2001
F-2
EASYWEB, INC.
(A Development Stage Company)
Balance Sheets
December 31, March 31,
2000 2001
------------ -----------
(Unaudited)
Assets
Current assets:
Cash ............................................................... $ 26,707 $ 16,451
------------ -----------
Total current assets 26,707 16,451
Web site development costs, net of accumulated amortization
of $531 and $719 (unaudited), respectively (Note A) ................ 1,719 1,531
------------ -----------
$ 28,426 $ 17,982
============ ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities ........................... $ 4,762 $ 3,480
Due to affiliate (Note B) .......................................... 146 137
Indebtedness to related parties (Note B) ........................... 6,000 6,000
------------ -----------
Total current liabilities 10,908 9,617
------------ -----------
Shareholders' equity (Note B & D):
Common stock, no par value; 30,000,000 shares authorized;
3,606,200 and 3,606,200 (unaudited) shares issued and
outstanding, respectively ....................................... 93,050 93,050
Additional paid-in capital ......................................... 17,000 17,000
Deficit accumulated during development stage ....................... (92,532) (101,685)
------------ -----------
Total shareholders' equity 17,518 8,365
------------ -----------
$ 28,426 $ 17,982
============ ===========
See accompanying notes to the financial statements.
F-3
EASYWEB, INC.
(A Development Stage Company)
Statements of Operations
September 24, September 24,
1998 For the Three 1998
For the Years Ended (Inception) Month Ended (Inception)
December 31, through March 31, through
--------------------------- December 31, --------------------------- March 31,
2000 1999 2000 2001 2000 2001
----------- ----------- ------------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
Revenue:
Commissions, related party (Note B) $ 4,000 $ - $ 4,000 $ - $ - $ 4,000
Commissions, other ................. 1,251 - 1,251 340 - 1,591
----------- ----------- ------------- ----------- ----------- -----------
Total revenue 5,251 - 5,251 340 - 5,591
----------- ----------- ------------- ----------- ----------- -----------
Operating expenses:
Rent and administrative support
(Note B) ........................ 13,027 12,000 25,027 294 4,500 25,321
Salaries and payroll taxes ......... 20,729 - 20,729 - - 20,729
Professional fees .................. 12,797 2,892 17,189 8,009 710 25,198
Web site consulting and maintenance 9,135 1,000 10,135 216 - 10,351
Information technology agreement
(Note E) ........................ 8,299 - 8,299 - - 8,299
Advertising ........................ 11,662 252 11,914 - 153 11,914
Depreciation and amortization ...... 672 17 689 188 - 877
Other .............................. 3,414 387 3,801 786 - 4,587
----------- ----------- ------------- ----------- ----------- -----------
Total operating expenses (79,735) (16,548) (97,783) (9,493) (5,363) (107,276)
----------- ----------- ------------- ----------- ----------- -----------
Operating loss (74,484) (16,548) (92,532) (9,153) (5,363) (101,685)
Income taxes (Note C) .................. - - - - - -
----------- ----------- ------------- ----------- ----------- -----------
Net Loss $ (74,484) $ (16,548) $ (92,532) $ (9,153) $ (5,363) $ (101,685)
=========== =========== ============= =========== =========== ===========
Basic and diluted loss per common share $ (0.02) $ * $ * $ *
=========== =========== =========== ===========
Basic and diluted weighted average
common shares outstanding .......... 3,505,150 2,586,783 3,606,200 3,202,000
=========== =========== =========== ===========
See accompanying notes to the financial statements.
F-4
EASYWEB, INC.
(A Development Stage Company)
Statement of Shareholders' Equity
September 24, 1998 (Inception) through March 31, 2001 (Unaudited)
Deficit
Accumulated
Common Stock Additional During
---------------------- Paid-in Offering Development
Shares Amount Capital Costs Stage Total
--------- --------- --------- --------- --------- ---------
Balance, September 24, 1998 (inception) .... - $ - $ - $ - $ - $ -
Net loss, September 24, 1998 (inception)
through December 31, 1998 ............... - - - - (1,500) (1,500)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1998 - - - - (1,500) (1,500)
March 11, 1999, shares sold to officers
($.0017/share) (Note B) ................. 2,400,000 4,000 - - - 4,000
March 11, 1999, shares issued to director in
exchange for expenses paid on behalf of
the Company ($.0019/share) (Note B) ..... 800,000 1,500 - - - 1,500
Offering costs deferred .................... - - - (14,000) - (14,000)
November 9, 1999, shares sold to affiliate
at $0.25 per share (Note B) ............. 2,000 500 - - - 500
Office space and administrative support
contributed by an affiliate (Note B) .... - - 12,000 - - 12,000
Net loss, year ended December 31, 1999 ..... - - - - (16,548) (16,548)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1999 3,202,000 6,000 12,000 (14,000) (18,048) (14,048)
March 2000, shares sold in a private
offering at $0.25 per share, net of
$14,000 of offering costs (Note D) ...... 404,200 87,050 - 14,000 - 101,050
Office space and administrative support
contributed by an affiliate (Note B) .... - - 5,000 - - 5,000
Net loss, year ended December 31, 2000 ..... - - - - (74,484) (74,484)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 2000 3,606,200 93,050 17,000 - (92,532) 17,518
Net loss, three months ended March 31,
2001 (unaudited) ........................ - - - - (9,153) (9,153)
--------- --------- --------- --------- --------- ---------
Balance, March 31, 2001 (unaudited) 3,606,200 $ 93,050 $ 17,000 $ - $(101,685) $ 8,365
========= ========= ========= ========= ========= =========
See accompanying notes to the financial statements.
F-5
EASYWEB, INC.
(A Development Stage Company)
Statements of Cash Flows
September 24,
1998
For the Years Ended (Inception)
December 31, through
-------------------------- December 31,
2000 1999 2000
----------- ----------- -------------
Cash flows from operating activities:
Net loss ................................................ $ (74,484) $ (16,548) $ (92,532)
Transactions not requiring cash:
Depreciation and amortization ........................ 672 17 689
Equipment and intangible assets
exchanged for services ............................ 450 - 450
Office space and administrative support
contributed by an affiliate (Note B) .............. 5,000 12,000 17,000
Changes in operating liabilities:
Increase in accounts payable and accrued liabilities,
net of a $1,500 liability satisfied with stock .... (4,422) 9,330 6,408
----------- ----------- -------------
Net cash provided by (used in) operating activities (72,784) 4,799 (67,985)
----------- ----------- -------------
Cash flows from investing activities:
Equipment purchase ...................................... (400) - (400)
Payments for intangible assets .......................... (2,250) (208) (2,458)
----------- ----------- -------------
Net cash (used in) investing activities (2,650) (208) (2,858)
----------- ----------- -------------
Cash flows from financing activities:
Proceeds on advances from related parties (Note B) ...... - 6,000 6,000
Proceeds from the sale of common stock (Note D) ......... 101,050 4,500 105,550
Payments for offering costs (Note D) .................... - (14,000) (14,000)
----------- ----------- -------------
Net cash provided by (used in) financing activities 101,050 (3,500) 97,550
----------- ----------- -------------
Net change in cash ......................................... 25,616 1,091 26,707
Cash, beginning of period .................................. 1,091 - -
----------- ----------- -------------
Cash, end of period $ 26,707 $ 1,091 $ 26,707
=========== =========== =============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ............................................. $ - $ - $ -
=========== =========== =============
Income taxes ......................................... $ - $ - $ -
=========== =========== =============
Non-cash financing activity:
Stock issued for satisfaction of debt ................ $ - $ 1,500 $ 1,500
=========== =========== =============
EASYWEB, INC.
(A Development Stage Company)
Statements of Cash Flows
(Continued)
September 24,
For the Three 1998
Month Ended (Inception)
March 31, through
------------------------ March 31,
2001 2000 2001
----------- ----------- -------------
Cash flows from operating activities: (Unaudited) (Unaudited)
Net loss ................................................ $ (9,153) $ (5,363) $(101,685)
Transactions not requiring cash:
Depreciation and amortization ........................ 188 - 877
Equipment and intangible assets
exchanged for services ............................ - - 450
Office space and administrative support
contributed by an affiliate (Note B) .............. - 4,500 17,000
Changes in operating liabilities:
Increase in accounts payable and accrued liabilities,
net of a $1,500 liability satisfied with stock .... (1,291) (110) 5,117
----------- ----------- -------------
Net cash provided by (used in) operating activities (10,256) (973) (78,241)
----------- ----------- -------------
Cash flows from investing activities:
Equipment purchase ...................................... - - (400)
Payments for intangible assets .......................... - - (2,458)
----------- ----------- -------------
Net cash (used in) investing activities - - (2,858)
----------- ----------- -------------
Cash flows from financing activities:
Proceeds on advances from related parties (Note B) ...... - - 6,000
Proceeds from the sale of common stock (Note D) ......... - - 105,550
Payments for offering costs (Note D) .................... - - (14,000)
----------- ----------- -------------
Net cash provided by (used in) financing activities - - 97,550
----------- ----------- -------------
Net change in cash ......................................... (10,256) (973) 16,451
Cash, beginning of period .................................. 26,707 1,091 -
----------- ----------- -------------
Cash, end of period $ 16,451 $ 118 $ 16,451
=========== =========== =============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ............................................. $ - $ - $ -
=========== =========== =============
Income taxes ......................................... $ - $ - $ -
=========== =========== =============
Non-cash financing activity:
Stock issued for satisfaction of debt ................ $ - $ - $ 1,500
=========== =========== =============
See accompanying notes to the financial statements.
F-6
EASYWEB, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies with basis
of presentation
- --------------------------------------------------------------------------------
Organization
- ------------
EasyWeb, Inc. (the "Company") was incorporated in Colorado on September 24, 1998
under the name NetEscapes, Inc. The name of the Company was changed to EasyWeb,
Inc. on February 2, 1999. The Company is a development stage enterprise in
accordance with Statement of Financial Accounting Standard (SFAS) No. 7. The
Company markets web sites on the Internet, which are built by a third party,
Sunstar 2000. During 2000, the Company entered a verbal agreement with Sunstar
2000, whereby the Company receives a sales commission for all templated web
sites and web site products sold by the Company. The Company also pays Sunstar
2000 an hourly rate or negotiated fee for work on custom web sites sold by the
Company.
As of December 31, 2000, the Company has a working capital deficit and has
suffered significant operating losses during the periods from September 24, 1998
(inception) through December 31, 2000, which raises substantial doubt about its
ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's ability to
continue as a going concern is dependent upon its ability to generate sufficient
cash flow to meet obligations on a timely basis and ultimately to attain
profitability. The Company's management intends to obtain working capital
through operations and to seek additional funding through equity offerings to
help fund the Company's operations as it expands. There is no assurance that the
Company will be successful in its efforts to raise additional working capital or
achieve profitable operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Summary of significant accounting policies
- ------------------------------------------
Cash equivalents and fair value of financial instruments
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
The carrying amounts of cash and accounts payable approximate fair value due to
the short-term maturity of the instruments.
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Year-end
The Company operates on a calendar year.
F-7
EASYWEB, INC.
(A Development Stage Company)
Notes to Financial Statements
Equipment and depreciation
Equipment is stated at cost. Equipment is depreciated over its estimated useful
life using the straight-line method. Depreciation expense totaled $89, $-0-, and
$89, respectively, for the years ended December 31, 2000 and 1999, and the
period from September 24, 1998 (inception) through December 31, 2000.
Depreciation expense totaled $-0- (unaudited), $-0- (unaudited), and $89
(unaudited), respectively, for the three months ended March 31, 2001 and 2000,
and the period from September 24, 1998 (inception) through March 31, 2001. As of
December 31, 2000, the Company had disposed of its equipment. There was no gain
or loss on the disposal of the equipment.
Upon retirement or disposition of the furniture and equipment, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations. Repairs and maintenance are charged to expense
as incurred and expenditures for additions and improvements are capitalized.
Web site development costs and amortization
The Company capitalizes internal and external costs incurred to develop its web
site during the application development stage in accordance with Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use". Capitalized web-site development costs are amortized
over an estimated life of three years commencing on the date the software is
ready for its intended use. The Company commenced amortizing its web-site
development costs on April 11, 2000. Amortization expense totaled $531, $-0-,
and $531, respectively, for the years ended December 31, 2000 and 1999, and the
period from September 24, 1998 (inception) through December 31, 2000.
Amortization expense totaled $188 (unaudited), $-0- (unaudited), and $719
(unaudited), respectively, for the three months ended March 31, 2001 and 2000,
and the period from September 24, 1998 (inception) through March 31, 2001.
In addition, the Company adopted the Emerging Issues Task Force Issue No. 00-2
("EITF 00-2"), "Accounting for Web Site Development Costs," during the year
ended December 31, 2000. EITF 00-2 requires the implementation of SOP 98-1 when
software is used by a vendor in providing a service to a customer but the
customer does not acquire the software or the right to use it.
Impairments on long-lived assets
The Company evaluates the recoverability of long-lived assets in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS No. 121 requires recognition of impairment of long-lived assets in the
event the net book value of such assets exceeds the future undiscounted cash
flows attributable to such assets.
Deferred offering costs
Costs related to common stock offerings are deferred and recorded in
shareholders' deficit until offering proceeds are received, at which time they
are recorded as a reduction of gross proceeds. If an offering is not successful,
the costs are charged to operations at that time.
Start up costs
Costs related to the organization of the Company have been expensed as incurred.
F-8
EASYWEB, INC.
(A Development Stage Company)
Notes to Financial Statements
Loss per common share
The Company reports earnings (loss) per share using a dual presentation of basic
and diluted earnings per share. Basic earnings (loss) per share exclude the
impact of common stock equivalents. Diluted earnings (loss) per share utilize
the average market price per share when applying the treasury stock method in
determining common stock equivalents. However, the Company has a simple capital
structure for the period presented and, therefore, there is no difference
between the basic and diluted earnings (loss) per share.
Revenue recognition
In accordance with Securities and Exchange Commission Staff Accounting Bulletin
No. 101, "Revenue Recognition," the Company recognizes revenue once all of the
following are met:
a) Persuasive evidence of an arrangement exists;
b) Delivery has occurred;
c) The buyer's purchase price is fixed; and
d) Collectibility is reasonably assured.
All of the Company's income is reported as commission revenue, the total sale
price of each web site is not recorded. Revenues through related party
transactions are recognized when the service has been performed and the cash has
been received.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and the tax
basis of assets and liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
Unaudited interim financial information
The financial information presented herein as of March 31, 2001, for the three
months ended March 31, 2001 and 2000, and for the period from September 24, 1998
(inception) through March 31, 2001, is unaudited. In the opinion of management,
all adjustments (consisting only of normal recurring adjustments), which are
necessary to provide a fair presentation of operating results for the interim
periods presented, have been made. The results of operations for the three
months ended March 31, 2001 are not necessarily indicative of the results to be
expected for the year.
F-9
EASYWEB, INC.
(A Development Stage Company)
Notes to the Financial Statements
Note B: Related party transactions
- ----------------------------------
Liabilities
At December 31, 2000 and March 31, 2001, the Company owed an affiliate $146 and
$137 (unaudited), respectively, for postage, telephone and administrative
expenses paid on behalf of the Company.
During the year ended December 31, 1999, an officer and two directors advanced
the Company a total of $6,000 ($2,000 each) for working capital. The advances
are unsecured, bear no interest and are due on demand.
Common stock
On March 11, 1999, the Company sold 2,400,000 shares of its no par value
restricted common stock to two officers for a total of $4,000.
On March 11, 1999, the Company issued 800,000 shares of its no par value
restricted common stock to a director in exchange for legal expenses paid on
behalf of the Company totaling $1,500.
On November 9, 1999, the Company sold 2,000 shares of its no par value
restricted common stock to an affiliate company for $500. The company is
affiliated through common control.
Revenue
During the year ended December 31, 2000, the Company earned commission revenues
totaling $4,000 for the sale of a web site to an affiliate. The $4,000
commission totaled 76 percent of the revenue generated by the Company for the
period from September 24, 1998 (inception) through December 31, 2000.
Rent and administrative support
On March 11, 1999, the Company entered an Administrative Support Agreement with
an affiliate, which provides for the use of the affiliate's office space, and
administrative and technical support by the Company. The Company agreed to pay
the affiliate $1,500 per month for these services beginning in the month when
the minimum proceeds from the stock offering were received by the Company. The
Company began paying the affiliate for rent and administrative support during
April of 2000.
Prior to the Company's receipt of minimum proceeds from its stock offering, the
affiliate contributed its office space, and administrative and technical support
to the Company. Contributed rent and administrative support was calculated from
May 1999 (the first month the Company conducted operating transactions) through
April 10, 2000. The Company recorded $12,000 and $5,000 as rent and
administrative support expense with a corresponding credit to additional paid-in
capital for the year ended December 31, 1999 and the period from January 1, 2000
through April 10, 2000, respectively.
Following the Company's receipt of minimum proceeds from its stock offering, the
Company paid the affiliate $1,000 in April 2000 and $1,500 each month from May
through August of 2000.
F-10
EASYWEB, INC.
(A Development Stage Company)
Notes to the Financial Statements
In September of 2000, the Company and affiliate amended the Administrative
Support Agreement. Commencing in September 2000, the affiliate began charging
the Company an hourly rate for administrative support rather than the $1,500
flat fee. The fees charged to the Company for the period from September 1, 2000
through December 31, 2000 totaled $1,027. Rent and administrative support billed
by the affiliate for the three months ended March 31, 2001 totaled $294
(unaudited).
Marketing agreement
On February 24, 1999, an affiliate assigned all of its rights and privileges in
a marketing agreement to the Company. The Agreement assigns the affiliate's
rights to market Big Online, Inc.'s products and services to the Company. The
products and services consist of the development and maintenance of "web sites"
on the Internet for business and professional customers. On May 1, 2000, the
Company's affiliate was dissolved and the marketing agreement was terminated.
The Company conducted no transactions under the agreement.
Note C: Income taxes
A reconciliation of U.S. statutory federal income tax rate to the effective rate
is as follows:
Years Ended Three Months Three Months
December 31, Ended Ended
----------------------- March 31, March 31,
2000 1999 2001 2001
--------- --------- ------------- -------------
(Unaudited) (Unaudited)
U.S. statutory federal rate....................... 17.45% 15.00% 15.00% 15.00%
State income tax rate, net of federal benefit..... 3.92% 4.04% 4.04% 4.04%
Permanent differences............................. -1.44% -0.07% 0.00% -15.98%
Net operating loss for which no tax
benefit is currently available................. -19.93% -18.97% -19.04% -3.06%
--------- --------- ------------- -------------
0.00% 0.00% 0.00% 0.00%
========= ========= ============= =============
At December 31, 2000, deferred taxes consisted of a net tax asset of $18,270,
due to operating loss carryforwards of $92,532, which was fully allowed for, in
the valuation allowance of $18,270. The valuation allowance offsets the net
deferred tax asset for which there is no assurance of recovery. The changes in
the valuation allowance for the years ended December 31, 2000 and 1999, and for
the period from September 24, 1998 (inception) through December 31, 1998 were
$14,846, $3,139 and $285, respectively. Net operating loss carryforwards will
expire through 2020.
At March 31, 2001, deferred taxes consisted of a net tax asset of $20,013
(unaudited), due to operating loss carryforwards of $101,685 (unaudited), which
was fully allowed for, in the valuation allowance of $20,013 (unaudited). The
valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The changes in the valuation allowance for the three
months ended March 31, 2001 and 2000 were $1,743 (unaudited) and $164
(unaudited), respectively. Net operating loss carryforwards will expire through
2021.
F-11
EASYWEB, INC.
(A Development Stage Company)
Notes to the Financial Statements
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
Note D: Shareholders' deficit
- -----------------------------
Confidential offering of common stock
During the months from December 1999 through March 2000, the Company conducted a
private placement offering whereby it sold 404,200 shares of its no par value
common stock for $.25 per share pursuant to an exemption from registration
claimed under Rule 504 of Regulation D of the Securities Act of 1933, as
amended. The shares were sold through the Company's officers and directors. The
Company received $87,050 after deducting offering costs totaling $14,000. The
Company relied upon exemptions from registration believed by it to be available
under federal and state securities laws in connection with the offering.
Rescission offer
On July 5, 2000, the Company notified the State of Arizona that it had collected
proceeds from the common stock offering prior to meeting all Blue Sky laws
required by that State. The Company may be contingently liable to certain
shareholders who purchased common stock in the above private offering if they
elect to have the transactions rescinded pursuant to the offer of rescission to
be made by the Company. To remedy this situation, the Company intends to file a
registration statement with the State of Arizona, which would include a
rescission offer to those shareholders who purchased the securities under an
offering that was deemed to be in violation of the Blue Sky laws of Arizona. The
Company sold 16,000 shares of its no par value common stock to three Arizona
residents for $4,000 through the private stock offering. Management believes
that the amount of the ultimate liability as a result of the offer to rescind
will be minimal. The amount or probability of any financial liability could not
be reasonably estimated at December 31, 2000.
Stock option plan
The Company has adopted an incentive stock option plan for the benefit of key
personnel and others providing significant services. An aggregate of 175,000
shares of common stock has been reserved under the plan. Options granted
pursuant to the plan will be exercisable at a price no less than 100% of fair
market value of a common share on the date of grant. There were no options
granted under this plan as of December 31, 2000.
F-12
EASYWEB, INC.
(A Development Stage Company)
Notes to the Financial Statements
Note E: Information technology agreement
- ----------------------------------------
On November 1, 2000, the Company entered into an information technology
agreement with Euthenics International, Inc. ("EII"). The Company agreed to
design, develop and pay for a web site that would allow EII to sell its products
over the Internet. The Company also agreed to assist EII with the implementation
of its Mail Order Management system and to train EII employees by hiring and
paying for a mutually acceptable consultant. In exchange for these services, the
Company will receive a royalty of $.50 per bottle of any EII product sold for
the five year period from December 1, 2000 through December 1, 2005. The
contract is renewable on a year-to-year basis following December 1, 2005. Costs
associated with the agreement have been expensed to the period incurred in the
accompanying financial statements. Revenue will be recognized under the
agreement, in accordance with the Company's revenue recognition policy. No
revenue was recognized under the agreement as of December 31, 2000 or March 31,
2001 (unaudited).
F-13