United States Securities and Exchange Commission
Washington, D.C. 20549
Amendment No. 4
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
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(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
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Securities to be registered under Section 12(g) of the Act:
Common Stock, no par value
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(Title of class)
DOCUMENTS INCORPORATED BY REFERENCE
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2001,
filed November 6, 2001.
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. We refer to the
template web sites as "turnkey" because the customer receives, for the purchase
price paid, a fully-operational site on the Internet from which to advertise its
business, products and/or services. Each of these template sites includes the
basic features such as identifying information, business logo, photographs,
graphics and/or text provided by the customer. The template is a simple,
"fill-in-the-blank" form that can be completed by the customer with handwritten
information about the business. There is no additional cost for technical
assistance or infrastructure. Common web site options can be added to the
template site on an as-needed basis.
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 of
$6,164 from the design, sale and maintenance of Internet sites and incurred a
loss from operations of $(123,184) through June 30, 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.
We are obligated to file periodic and current reports under Section 13 of
the Securities Exchange Act of 1934; which reports are public documents. We
intend to furnish our shareholders, after the close of each fiscal year, an
annual report that will contain financial statements that will be examined by
independent public accountants and a report thereon, with an opinion expressed,
by our independent public accountants. We may furnish to shareholders unaudited
quarterly or semi-annual reports.
You may read and copy any materials that we file with the SEC at the SEC's
Public Reference Room located at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information regarding the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site,
http://www.sec.gov, that contains reports, proxy and information statements
regarding issuers, such as EasyWeb, that file electronically with the SEC.
See (b) "Business of the Issuer" immediately below for a description of our
current operations and future proposed activities.
(b) Business of Issuer.
General
From February 1999 through May 2000, 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
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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 approximate
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.
The agreement was non-exclusive and provided for Millennium Marketing to receive
fees from the sale of each web site, including a sales commission representing a
portion of the purchase price of the site and a portion of the hosting fee paid
monthly by the customer for the maintenance of the site. EasyWeb, as Millennium
Marketing's assignee, enjoyed status at the highest level of "executive
consultant" in Big Online's commission structure because of Millennium
Marketing's payment to Big Online of a fee of $1,000 pursuant to the agreement.
Because of its status of "executive consultant," EasyWeb had the right to
receive, as its commission on the sale of each Internet site, 100% of the
purchase price paid by the customer to Big Online for the creation and
development of the site. The agreement was terminable by Big Online upon the
commission of any act deemed to be detrimental to Big Online in any manner;
failure to abide by the agreement and Big Online's Policies and Procedures; the
assignment of the agreement without Big Online's consent; six months of
continuous inactivity; and the utilization of non-Big Online literature. 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 ceased marketing and
selling Big Online's products and services as the assignee of Millennium
Marketing, a marketing agent for Big Online, when we severed our relationship
with Millennium Marketing in May 2000. No business was ever transacted among
EasyWeb, Big Online and Millennium Marketing.
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. A customer who purchases a turnkey, template "site" receives a
pre-designed, fully-operational web site from which to advertise its business,
products and/or services without the necessity of incurring additional cost for
technical services or infrastructure. The only elements of the site required to
be provided by the customer are identifying information, the business logo,
photographs and, if desired, graphics and/or text. We are dependent on Sunstar
2000, Inc., Highlands Ranch, Colorado, for the template, model web sites that we
market, sell and maintain. We design and develop the customized web sites that
we market, sell and maintain on behalf of our customers. Either Mr. David C.
Olson, our President/Treasurer, or third party suppliers, including only Sunstar
2000 to date, perform the actual design work and provide the content for the web
sites. In instances where Mr. Olson is the site design and content provider, a
third party supplier implements and incorporates his designs and content into
the Internet site in accordance with his specific instructions. The third party
site designer is paid hourly by us for its web site designs and content. We
presently depend upon third party suppliers for technical assistance in
implementing and incorporating our designs, concepts and content into the site.
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We have or have had a number of relationships with Sunstar 2000, including
marketing, third party supply and consulting relationships. With regard to the
template, turnkey web site models that we offer, these models were initially
designed and developed by Sunstar 2000. Alterations to the original designs are
the result of research and development by Mr. Olson and Mr. Terry Romero,
President of Sunstar 2000, to make them compatible with EasyWeb's business plan.
Sunstar has verbally granted us the right to market these model templates for so
long as the relationship is mutually beneficial. The three customized web sites
that we have sold to date have been designed and developed by Mr. Olson or
Sunstar, with technical assistance in their implementation and/or maintenance
provided by Sunstar or Richard Bagdonis, Cedar Park, Texas. Accordingly, Sunstar
2000 has served as a third party provider of design and development services for
one custom site and technical assistance for all three custom sites. The web
sites that we design and maintain for customers are hosted by Sunstar 2000 and
others. The only company other than Sunstar 2000 that has served as a third
party host of a customer's web site is Richard Bagdonis. We determine who will
host a customer's site based on two factors, the cost of the services and the
level of service available. We paid Mr. Romero a total of $9,000 at the rate of
$1,500 per month from May through October 2000 to provide consulting services
relating to our door-to-door sales personnel. Also, on December 7, 2001, we
issued Mr. Romero 100,000 options to purchase shares of our common stock at an
exercise price of $.25 per share in consideration for continuing consulting
services he has provided to EasyWeb since October 2000. Our agreement with
Sunstar 2000 is verbal and non-exclusive and has evolved since May 2000 to
accommodate a number of relationships and projects. The agreement is terminable
by either party at any time. The compensation and/or revenue sharing provisions
of the agreement are flexible so as to accommodate the parties' various
relationships and the variety in EasyWeb's customer projects to date, including
those for Euthenics International, Inc., and AJ Indoors, Inc., described below.
Generally, however, Sunstar 2000 charges EasyWeb and others for template web
sites and basic services in accordance with its price list also described below.
See "- Products and Services" below for a description of the template,
turnkey web site models and hosting and other services that Sunstar 2000
provides us. For the use of the web site models, we pay Sunstar 2000 a portion
of the fee that we receive from the customer for the design and/or maintenance
of each template web site in accordance with the Sunstar 2000 Price List. 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
www.AJOnTheTown.com for AJ Indoors, Inc., a Denver, Colorado, indoor sign
company, in exchange for featuring EasyWeb on approximately 100 indoor signs
throughout the Denver and Colorado front range areas. This advertising did not
commence until February 2001 and we have sold only one turnkey, template web
site to date as a result of the arrangement. Although the results of this
arrangement have been disappointing, AJ Indoors has agreed to add EasyWeb to
additional indoor signs in the future. 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 may also host a booth at the 2002 business show held
in Denver, Colorado, by the Denver Chamber of Commerce.
4
As of June 30, 2001, we had sold less than ten web sites and realized
$6,164 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 International 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 has run infomercials from time-to-time on national television
advertising its dietary supplements with limited success. We have agreed to
upgrade and integrate Euthenics International's "Mail Order Management" ("MOM")
system with a secure e-commerce site in connection with Euthenics
International's 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 expect to receive
revenue in the near future from our royalty arrangement with Euthenics
International. Euthenics International currently averages sales of approximately
ten bottles of supplements per week from its web site. We plan to bill Euthenics
International when the sum of $100 in royalties is owed to us from dietary
supplement sales from the company's web site. Commencing in January 2001,
Euthenics International has occasionally run infomercials on national television
advertising its dietary supplements with limited success. Euthenics
International intends to initiate a major infomercial campaign to advertise it
dietary supplements commencing in September 2001. We cannot be certain that the
new infomercial campaign will be more successful than previous campaigns or that
we will realize significant revenue or achieve profitability as a result of our
royalty arrangement with Euthenics International. Further, 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. 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 International.
Dependence on a Few Major Customers
All of our revenue (100%) to date has been received from one customer,
Creative Host Services. As a result, Creative Host Services must be considered
to be a major customer on whom we are dependent. Because of our royalty
agreement with Euthenics International providing for us to receive a royalty per
each bottle of product sold by Euthenics International through November 30,
2005, we expect Euthenics International to be the single major customer on which
we are dependent if the infomercial campaign Euthenics International has planned
to commence in September 2001 is successful.
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Products and Services
Custom Web Sites. Until recently, an increasing number of businesses have
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retained web site vendor service companies like us to create and maintain
customized web sites to advertise their business, products and/or services.
Although the market has softened, the web site design, hosting and maintenance
business remains sizeable. 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.
Mr. David C. Olson, our President/Treasurer, and/or a third party supplier,
such as Sunstar 2000, perform the actual design, development and maintenance
work on the custom web sites that we sell. Mr. Olson has limited experience in
web site design and development because the business is in its infancy. However,
he has significant experience, as the owner of Summit Financial Relations since
August 1997, in the design, drafting, development and publication of advertising
and promotional materials for private and publicly-traded companies.
Mr. David C. Olson, our President/Treasurer, and/or a third party supplier,
such as Sunstar 2000, perform the actual design, development and maintenance
work on the custom web sites that we sell. Mr. Olson has limited experience in
web site design and development because the business is in its infancy. However,
he has significant experience, as the owner of Summit Financial Relations since
August 1997, in the design, drafting, development and publication of advertising
and promotional materials for private and publicly-traded companies.
We have sold only three customized sites to date. In each case, we
negotiated compensation arrangements with the customer and revenue allocation
arrangements with Sunstar 2000 that differ from the retail prices and revenue
allocation provisions indicated on Sunstar 2000's Price List. For two of the
three custom web sites, Mr. Olson performed the design work and provided the
content and Sunstar 2000 provided the technical services and infrastructure in
accordance with Mr. Olson's instructions to implement and incorporate his
designs and content. See Part I, Item 1. "Description of Business, (b) "Business
of Issuer - General" for a description of the royalty arrangement we negotiated
with Euthenics International in exchange for EasyWeb's design, development,
hosting and maintenance of Euthenics International's web site. Our revenue
allocation arrangements with Sunstar 2000 with regard to Euthenics
International's custom site include a payment of $.125 per order sold from the
web site. Sunstar 2000 designed and developed, and provided the content for, the
custom web site we sold to AJ Indoors. We paid Sunstar 2000 hourly for these
services. Mr. Olson is providing the content upgrades in connection with
maintenance of the site. For an hourly fee of $45 per hour, Richard Bagdonis is
performing technical assistance to implement and incorporate Mr. Olson's content
upgrades in accordance with his directions. To date we have paid Mr. Bagdonis a
total of $337.50 for his technical assistance with such content upgrades.
Additionally, Mr. Bagdonis recently replaced Sunstar 2000 as the host of
Creative Host Services' customized web site. We charge Creative Host Services a
higher monthly fee than we pay to Mr. Bagdonis to host Creative Host Services'
site on the Internet.
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We intend to continue to negotiate the compensation arrangements with each
customer on a case-by-case basis for design, development, hosting and
maintenance services performed on customized web sites sold by EasyWeb. We
believe, but cannot assure, that Sunstar 2000 will continue to remain flexible
in its revenue allocation arrangements with us for these sites. However, if we
are unable to negotiate acceptable arrangements with Sunstar 2000 on any
project, we will retain others, such as Mr. Bagdonis, to perform the requisite
services. There is no prescribed formula based upon which we determine the
fee(s) payable to Sunstar and/or others on any particular custom web site
development project.
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. The retail price for the one-page template site is
$100, of which amount $60 is received by EasyWeb and $40 is received by Sunstar
2000.
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; meta-tag inclusion, i.e., the imbedding
of a code that links a web site to a search engine or another site; and
maintenance contracts. The retail price and the revenue allocation with Sunstar
2000 for the first page of the multi-page template site are identical to the
retail price and revenue allocation for the one-page template site; i.e., a
retail price of $100, with the sum of $60 payable to EasyWeb and the amount of
$40 payable to Sunstar 2000. The retail price of each additional page of the
multi-page web site is $50; $31 of which sum is payable to EasyWeb and $19 of
which amount is payable to Sunstar 2000.
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.
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Template web sites are available separately or in a package together with
hosting, domain name registration, meta-tag inclusion and/or a maintenance plan.
There are two packages available, including a three-page and a five-page web
site package. The three-page web site package includes up to four pictures, six
links per page, one year of hosting, domain name registration for two years,
three e-mail addresses, meta-tag inclusion and monthly registration in over
3,000 search engines. In addition to the foregoing, the five-page web site
package includes a maintenance plan covering twelve complete web page makeovers
available at any time. The retail price for the three-page web site package is
$695 and the retail price for the five-page package is $1,095. EasyWeb receives
the sum of $275 out of the $695 retail price for each three-page package it
sells and the sum of $403 out of the $1,095 retail price for each five-page web
site package sold. Sunstar 2000 receives the balance of the retail price.
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," or the linking of a web site to a secure
e-commerce server to permit secure online e-commerce transactions, include
monthly charges 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 charges fees in a
range from $14.95 to $34.95, out of which we receive the sum of $6.50 to $17,
per month for web hosting. The fees for bolt-on e-commerce hosting range from
$49.95 to $69.95, out of which we receive $16.50 to $22, per month. 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 switches 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 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. Sunstar
2000's web site value pack installation fee is $49.95, out of which we receive
the sum of $20, and the monthly value pack hosting fee is $34.95, $10 of which
is paid to us.
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
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from Sunstar 2000, we are in direct competition with Sunstar 2000 in the
marketing and sale of these products and services. Sunstar 2000 provides its
template web sites to third parties in addition to EasyWeb. 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. Additionally, should Sunstar 2000 decide to stop supplying us with
template websites, this would have a material adverse affect on our business. 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 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, our 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
Although activity in the entire Internet sector has subsided substantially
as the public has begun to realize the limitations on the Internet and other
online services as a medium of commerce, the number of companies that offer
Internet services has also decreased. We believe that a market still exists for
businesses and individuals who need customized websites or the more cost
effective templated websites. Despite competition from companies with greater
resources than EasyWeb, we believe EasyWeb offers a viable selection of products
and services to the marketplace which we hope will be accepted in the future.
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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 100 indoor signs throughout the Denver and Colorado front range
areas. Although the results from this program have been disappointing since
advertisements first started appearing in February 2001, we believe that we may
still obtain potential customers from this arrangement as a result of additional
advertisements on indoor signs to appear in the future. 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 and possibly hosting a booth at the
2002 business show held in Denver, Colorado, by the Denver Chamber of Commerce.
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.
Research and Development
We have been actively engaged in research and development in order to
enhance our existing, and produce new, products. We have been engaged, utilizing
Mr. David C. Olson, our President/Treasurer, in research and development
activities related to the design, development and operation of our web site and,
utilizing Mr. Olson together with Mr. Terry Romero, President of Sunstar 2000,
in the design, development and operation of the line of model, template web
sites that we offer. Currently there are no agreements between Mr. Olson and Mr.
Romero or EasyWeb and Sunstar 2000 regarding ownership of any products or
services developed as a result of the parties' collaborative efforts. We
currently anticipate that any new products or services developed by Mr. Olson
and Mr. Romero as a result of their joint efforts would be shared between
EasyWeb and Sunstar equitably. However, because we have no formal agreement with
Sunstar or Mr. Romero, any dispute between Mr. Olson and Mr. Romero or EasyWeb
and Sunstar 2000 could have an adverse affect on our continued research and
development activities. All of these activities have been performed byMr. Olson
free of charge to EasyWeb. Although, Mr. Romero has not received any cash
compensation for these services, on December 7, 2001, we issued 100,000 options
to Mr. Romero to purchase shares of our common stock at an exercise price of
$.25 per share in consideration for the various services he has provided to
EasyWeb since October 2000. Accordingly, we have spent no cash on research and
development activities during the fiscal year ended December 31, 2000, and the
period from inception on September 24, 1998, through December 31, 1999. We will
spend no funds on research and development until we are able to generate
sufficient revenue from operations to pay for our research and development
needs. Therefore, for the foreseeable future, Messrs. Olson and/or Romero will
perform research and development, if any, to enhance our existing, and produce
new, products at no out-of-pocket cost to EasyWeb. We have no research and
development activities planned for the next twelve months or thereafter.
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Employees and Consultants
As of the date hereof, we employ two individuals, including Mr. David C.
Olson and Ms. Barbara Petrinsky, 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. Thomas M.
Vickers, a director of EasyWeb together with Mr. Olson, for all services
rendered in all capacities through December 28, 2001. Mr. Vickers has received
200,000 shares of our common stock in consideration for agreeing to serve as a
director of EasyWeb. We do not anticipate that he will be awarded any cash
compensation for the foreseeable future. For the foreseeable future, Mr.
David C. Olson and Ms. Barbara Petrinsky will receive no compensation in any
form for their services performed in the capacities as 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 Vickers 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. Vickers 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, and subsequent agreements pursuant to which we paid
Summit Financial Relations the sum of $12,088 through June 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 Mr. Olson and Robert Zappa, a former
director of EasyWeb, 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, as well as the issuance on
December 7, 2001, of 200,000 shares to Mr. Thomas M. Vickers as consideration
for his agreement to serve on the board of directors of EasyWeb.
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 $6,164 in revenue and a net loss from operations of
$(123,184) through June 30, 2001. For the six months ended June 30, 2001, the
year ended December 31, 2000, and the year ended December 31, 1999, we realized
total revenue of $913 (unaudited), $5,251 and $-0-, respectively, and a net loss
of $(25,185) (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.
11
We initially anticipated that our arrangement in September 2000 with AJ
Indoors, Inc., an indoor sign company, to feature EasyWeb on approximately 100
indoor signs throughout the Denver and Colorado front range areas, would assist
us in obtaining an increased customer base in the future. However, this
advertising did not commence until February 2001 and we have sold only one
turnkey, template web site to date as a result of the arrangement. Although the
results of our arrangement with AJ Indoors have been disappointing, AJ Indoors
has agreed to add EasyWeb to additional indoor signs in the future and AJ
Indoors has agreed to start paying the monthly hosting fees for its web site at
our cost. Nevertheless, we no longer regard our arrangement with AJ Indoors as a
source of a steady stream of potential customers. Also, we expect 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 from the site for a period five
years. Euthenics International currently averages sales of approximately ten
bottles of supplements per week from the web site. We plan to bill Euthenics
International when the sum of $100 in royalties is owed to us from dietary
supplement sales from Euthenics International's web site. Commencing in January
2001, Euthenics International has occasionally run infomercials on national
television advertising its dietary supplements with limited success. Euthenics
International intends to initiate a major infomercial campaign to advertise it
dietary supplements commencing in September 2001. We cannot be certain that the
new infomercial campaign will be more successful than previous campaigns or that
we will realize significant revenue or achieve profitability as a result of our
royalty arrangement with Euthenics International.
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. We estimate that we will need at least an additional
approximately $45,000 in capital during this period in order to fully implement
our plans to increase revenue through increased marketing, advertising and
promotion and to continue in operation as a going concern. 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.
12
Plan of Operation
- -----------------
Our plan of operation for the next twelve months is to focus upon the
marketing and sale of our web site design, development, hosting and maintenance
services. We do not expect to perform any additional product research and
development during the term of this plan. In any event, any additional research
and development to enhance our existing products or otherwise, would be
performed by Mr. David C. Olson, our President/Treasurer, with the possible
assistance of Mr. Terry Romero, President of Sunstar 2000, at no out-of-pocket
cost to us. Our plan of operation for the next twelve months is to focus upon
the marketing and sale of our web site design, development, hosting and
maintenance services. We do not expect to perform any additional product
research and development during the term of this plan. In any event, any
additional research and development to enhance our existing products or
otherwise, would be performed by Mr. David C. Olson, our President/Treasurer,
with the possible assistance of Mr. Terry Romero, President of Sunstar 2000, at
no out-of-pocket cost to EasyWeb. We are unable to calculate the cost of our
plan of operations over the next twelve months. We expect to be able to satisfy
our cash requirements for at least the next three months if we do not increase
our marketing, advertising or promotional activities. This is because we have no
salaried employees, no additional office rent due until April 2002, and no
additional research and development planned. We currently do not intend to hire
any additional employees for the foreseeable future and Mr. Olson has verbally
agreed not to seek any remuneration from EasyWeb until the company has been
profitable for a period of time acceptable to EasyWeb's Board of Directors. To
date, Mr. Olson has not accrued, nor does he plan to accrue any salary from
EasyWeb. However, see Part I, Item 7. "Certain Relationships and Related
Transactions," of this report for a description of our payments to Summit
Financial Relations, Inc., from which Mr. Olson, as the sole owner of Summit
Financial Relations, benefits indirectly. If we are successful in our efforts to
raise additional funding from equity and/or debt financing, we intend to
allocate the bulk of those funds for marketing, advertising and promotion.
Because the results of our advertising with AJ Indoors have been disappointing,
Mr. Olson intends to renew his sales efforts and we have plans to advertise in
small regional newspapers and periodicals and possibly host a booth at the 2002
business show held in Denver, Colorado, by the Denver Chamber of Commerce. We
have no organized plan to raise additional capital and our fund-raising efforts
have been minimal since the successful completion of our securities offering on
April 10, 2000, for the receipt of gross proceeds of $101,050. We intend to
increase our efforts to raise capital, exploring all available alternatives for
debt and/or equity financing, including, but not limited to, a private placement
of securities that we are contemplating. We cannot be certain that these efforts
will be successful. We do not expect the purchase or sale of any significant
equipment or a significant change in the number of employees for the next twelve
months.
Results of Operations
- ---------------------
Nine Months Ended September 30, 2001, Versus Nine Months Ended
September 30, 2000
- --------------------------------------------------------------
Total revenue was $1,456 (unaudited) for the nine months ended September
30, 2001, as compared to total revenue of $4,000 for the nine months ended
September 30, 2000.
We incurred a net loss of $(32,113) (unaudited) during the nine months
ended September 30, 2001, as compared to a net loss of $(34,490) (unaudited)
during the nine months ended September 30, 2000, because of the factors
described below. Operating expenses decreased approximately 13%, from $38,490
(unaudited) for the nine months ended September 30, 2000, to $33,569 (unaudited)
for the nine months ended September 30, 2001. We experienced sizeable decreases
in administrative support, salaries and payroll taxes, web site consulting and
maintenance and advertising as a result of the ineffectiveness of our original
marketing approach of door to door sales. Because our original marketing
approach did not generate any significant revenues we have been forced to
reevaluate our business model. Management currently plans to re-establish
advertising efforts in the future, provided it is able to procure additional
financing for EasyWeb in order to support such efforts. However, professional
fees and contributed administrative support increased substantially. The
increase in professional fees are a result of the additional legal and
accounting fees the Company incurred as a result of our filing to become a
reporting company. Additionally, we incurred rent of $1,333 (unaudited) for the
nine months ended September 30, 2000, as compared to $2,000 (unaudited) for this
item for the nine months ended September 30, 2001. On the other hand, we
incurred $1,667, $247 and $1,718 (unaudited) for contributed rent, depreciation
and amortization and other during the nine months ended September 30, 2000, as
compared to $2,500, $563 and $2,724 (unaudited) for these items during the nine
months ended September 30, 2001.
13
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 September 30, 2001, and December 31, 2000, we had total assets,
consisting of current assets of $3,289 (unaudited) and $26,707, respectively,
and net intangible assets of $1,156 (unaudited) and $1,719, respectively. We had
total current liabilities of $8,402 (unaudited) and $10,908, respectively, as of
September 30, 2001, and December 31, 2000. Working capital was $(5,113)
(unaudited) at September 30, 2001. Our total shareholders' equity (deficit) was
$(7,957) (unaudited) and $13,518, respectively, as of September 30, 2001, and
December 31, 2000, respectively.
As a result of our inability to generate significant revenue to date
together with sizeable continuing 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 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.
14
Unless we achieve profitable operations, management will be forced to raise
funds from private and/or public equity and/or debt financing in order to
continue in operation long term. We expect our access to capital to continue to
be severely restricted on a long-term basis because of the anticipated low
market value of our common stock if it becomes publicly traded combined with our
unstable operating performance. Even if capital is obtained, it is expected to
involve extremely high management fees, interest rates and related loan fees
and/or require significant discounts and incentives. We expect that management
will not continue to fund EasyWeb on a long term basis and that any other
financing may not be available on acceptable terms, if at all. If we fail to
achieve profitable operations and we are unable to obtain capital from sources
other than affiliates over the long term, we would be forced to cease
operations.
Net cash used in operating activities was $(25,883) (unaudited) for the
nine months ended September 30, 2001, primarily, because of the net loss of
$(32,113) (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 September 30, 2001, net cash used in investing activities and
net cash provided by financing activities was $-0- (unaudited) and $-0-
(unaudited), respectively. Cash decreased by $25,883 (unaudited), from $26,707
at the beginning of the period to $824 (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 with Summit dated April 1, 2001, 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 rent in the amount of $4,000 in advance for a period of one year
from April 1, 2001, to April 1, 2002, and the sum of $15 per hour for
bookkeeping services. Pursuant to the agreement, all other services, including
administrative and technical support and web site design, development and sales,
15
are provided by Summit free of charge until our Board of Directors determines
that we have sufficient cash flow or earnings to pay Summit cash for the
services. Pursuant to the agreement, we paid Summit $4,000 for rent on April 1,
2001, and a total of $263 for bookkeeping services from April 1, 2001, through
June 30, 2001. We anticipate that the Board will make its determination based on
our ability to pay Summit reasonable rates for these services based on current
market conditions while at the same time maintaining sufficient capital to pay
for ongoing operations, including the costs of marketing our products and
services. During the period from March 11, 1999, through August 31, 2000, we
were parties to the Agreement for Administrative Support with Summit dated March
11, 1999, for use of office space, administrative support and technical support
at Summit's offices. The agreement provided for us to pay Summit for these
services the amount of $1,500 per month commencing in the month of April 2000 in
which we received the minimum proceeds of at least $100,000 from our offering of
common stock that occurred between December 10, 1999, and April 10, 2000. During
the period following the closing of this common stock offering for the receipt
of gross proceeds of $101,050 on April 10, 2000, through August 31, 2000, we
paid Summit the sum of approximately $7,000 for rent and administrative and
technical support services pursuant to the agreement. On September 1, 2000,
EasyWeb and Summit abandoned the agreement because of EasyWeb's failure to
realize significant revenues from operations. During the period from September
1, 2000, through March 31, 2001, we paid no rent and a total of $825 at the rate
of $15 per hour to Summit for administrative and technical support services
pursuant to a verbal agreement. 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 November 15, 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 42.04%
6025 South Quebec Street, Suite #150
Englewood, Colorado 80111
Robert J. Zappa 800,000 21.02%
2740 Kendrick Street
Golden, Colorado 80401
Steven E. Muth 800,000 21.02%
6463 South Malaya Street
Aurora, Colorado 80016
16
Barbara Petrinsky (2)
6025 South Quebec Street, Suite #150 -0- 0.00%
Englewood, Colorado 80111
Thomas M. Vickers (3) 200,000 5.25%
All executive officers and directors 1,800,000 47.29%
as a group (three persons)
- ------------------
(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
3,806,200 shares of the Company's Common Stock outstanding as of December 28,
2001.
(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
Thomas M. Vickers 62 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 share-
holders 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. Vickers 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 Vickers and Ms. Petrinsky.
17
Family Relationship
- -------------------
No family relationship exists between or among our executive officers and
directors.
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.
18
Thomas M. Vickers has served as a director of EasyWeb since December 7,
-----------------
2001. Since 1984, Mr. Vickers has been the owner and president of Thomas Vickers
Investments located in Englewood, Colorado. His company is primarily active in
real estate and private investments. Mr. Vickers is presently semi-retired but
stays active in the area of private investments and venture capital
opportunities. Prior to moving to Denver, Colorado from Witchita, Kansas in
1984, Mr. Vickers was employed in the investment business with New York Stock
Exchange firm A.G. Edwards and Sons (1961-1973) where he was a vice president
and later, Dean Witter Reymolds (1973-1983) where he was a vice president and
district manager. Mr. Vickers attended Wichita State University from 1956 to
1960, at which time he was recruited into the first "on Wall Street Training
Program" in its history by Bache and Company. In addition to his other
activities, Mr. Vickers has served on the boards of directors of several
companies through out his business career.
Barbara Petrinsky has served as the Secretary of the Company since July 26,
-----------------
1999. She has been employed by Summit Financial Relations, an affiliated
company, as operations manager since November 1998. In this position, her
responsibilities include bookkeeping, payroll, investor/client relations,
preparation of press releases, telephone answering, filing and general office
management. 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 Thomas M. Vickers, 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,Mr. Olson
and Ms. Petrinsky, will receive no compensation in any form for services to
EasyWeb in their capacities of executive officer and/or director. Mr. Thomas M.
Vickers has been awarded 200,000 shares of our common stock in consideration for
his agreement to serve as a director of EasyWeb. We do not anticipate awarding
him any cash compensation for his services in the foreseeable furture.
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 $12,088 through June 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.
19
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, as well as the December 7, 2001,
issuance of 200,000 shares of our common stock to Thomas M. Vickers in
consideration for his agreeing to serve as a director of EasyWeb. None of our
executive officers and/or directors holds any option to purchase any of our
securities.
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
20
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
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.
21
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. Thomas M. Vickers was awarded 200,000 shares of our common stock on
December 7, 2001, in consideration for his agreement to serve as a director of
EasyWeb.
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 former 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 April 1, 2001, we entered into the Agreement with Summit 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 rent in the amount of $4,000 in advance for a period of one
year from April 1, 2001, to April 1, 2002, and the sum of $15 per hour for
bookkeeping services. Pursuant to the agreement, all other services, including
administrative and technical support and web site design, development and sales,
are provided by Summit free of charge until our Board of Directors determines
that we have sufficient cash flow or earnings to pay Summit cash for the
services. Pursuant to the agreement, we paid Summit $4,000 for rent on April 1,
2001, and a total of $263 for bookkeeping services from April 1, 2001, through
June 30, 2001. During the period from March 11, 1999, through August 31, 2000,
we were parties to 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 and technical support at Summit's offices located at 6025
South Quebec Street, Suite #150, Englewood, Colorado 80111. The agreement
provided for us to pay Summit for these services the amount of $1,500 per month
commencing in the month of April 2000 in which we received the minimum proceeds
of at least $100,000 from our offering of common stock that occurred between
December 10, 1999, and April 10, 2000. During the period following the closing
of this common stock offering for the receipt of gross proceeds of $101,050 on
April 10, 2000 through August 31, 2000, we paid Summit, pursuant to the
Agreement for Administrative Support, the sum of approximately $7,000 for the
use of office space and administrative and technical support services at
Summit's offices. On September 1, 2000, EasyWeb and Summit abandoned the
agreement because of EasyWeb's failure to realize
22
significant revenues from operations. During the period from September 1, 2000,
through March 31, 2001, we paid no rent and a total of $825 at the rate of $15
per hour to Summit for administrative and technical support services pursuant to
a verbal agreement. Mr. Olson, as the sole shareholder of Summit, benefited
indirectly from these payments.
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.
On December 7, 2001, Thomas M. Vickers, was awarded 200,000 shares of our
common stock in consideration for his agreement to serve as a director of
EasyWeb.
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.
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.
23
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 August 24, 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.
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 July 31,
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
24
and owns of record and beneficially approximately 42.04% 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 former
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. These persons include the following: (1) Alpine Communications, LLC,
(2) Vicki D. E. Barone, (3) Edward W. Bellerose, (4) Black Marlen, Inc., (5)
Craig M. Blake, (6) Darrell J. Brunken, (7) Scot A. Bryant, (8) Karen A.
Cleaver, (9) Columbine Financial Solutions, Inc., (10) William D. Cronin, (11)
Michael M. Edmonds, (12) Doyle S. Elliot, (13) Gerdz Investments, RLLLP, (14)
William R. Going, (15) Allen R. Goldstone, (16) Kathleen B. Goldstone, (17)
Michael J. Gundzik, (18) Mark A. Hatsis, (19) Anderson J. Henshaw, (20) Brad
Henshaw, (21) Brent Henshaw, (22) Al L. Hoff, (23) Anton E. Hosch, (24) James E.
Hosch, (25) Gladys Jensen, (26) Bryant Kligerman, (27) Harvey Levin, (28)
Mallory Construction, Inc., (29) Matthew B. Meister, (30) Gary B. Mendenhall,
(31) Jeffrey D. Myers, (32) Morri L. Namaste, (33) Michael J. Norris, (34)
Robert E. Ohman, (35) Barbara M. Petrinsky, (36) Bradley Rhodes, (37) Jeff C.
Rodriguez, (38) Randy J. Sasaki, (39) Lamar F. Schild, (40) Sanford L. Schwarz,
(41) Susan A. Schwartz, (42) Scott Shovea, (43) Don F. Sims, (44) Carlene Smith,
(45) Michael Stallone, (46) James H. Swalwell, (47) James J. Trainor, (48)
T.S.G. Inc., (49) Thomas M. Vickers, (50) V.L.A., LLP, (51) Douglas and Leola
Wilkerson, (52) Lynn C. Wilkerson, (53) Robert J. Zappa, and (54) Albert J.
Zirkelbach. 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
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:
25
(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.
On December 7, 2001, we issued 200,000 shares to Thomas M. Vickers in
consideration for his agreeing to serve as a director of EasyWeb. Additionally,
we granted 100,000 options to purchase shares of our common stock at an exercise
price of $.25 per share to Terry Romero in consideration for the work he has
provided to EasyWeb since October 2000. These shares and options were granted
pursuant to the exemption from the registration requirements of the Securities
Act of 1933, as amended, provided by Section 4(2) thereunder for transactions
not involving a public offering.
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:
"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."
26
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.
3.3* Original Bylaws of NetEscapes, Inc.
10.0* Agreement for Administrative Support dated March 11, 1999, between
EasyWeb, Inc., and Summit Financial Relations, Inc.
10.1* Independent Application and Agreement dated June 1, 1999, between
Bigonline, Inc., and Millennium Marketing, Inc.
10.2* Letter of Understanding and Terms dated November 1, 2000, between
EasyWeb, Inc., and Euthenics International, Inc.
10.3* Agreement dated April 1, 2001, between EasyWeb, Inc., and Summit
Financial Relations, Inc.
- ------------------
* Filed previously
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. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
EASYWEB, INC.
(Registrant)
Date: December 28, 2001 By: /s/ David C. Olson
--------------------------
David C. Olson, President
27
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
------------ -----------
Liability for common stock subject to rescission,
16,000 shares (March 2000) (Note D) ................................ 4,000 4,000
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 ....................................... 89,050 89,050
Additional paid-in capital ......................................... 22,467 26,675
Deficit accumulated during development stage ....................... (97,999) (111,360)
------------ -----------
Total shareholders' equity 13,518 4,365
------------ -----------
$ 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) Months 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 (Note B) ....................... 2,333 - 2,333 - - 2,333
Contributed rent (Note B) ........... 3,667 4,000 7,667 1,500 1,500 9,167
Administrative support (Note B) ..... 5,200 - 5,200 292 - 5,492
Contributed administrative support
(Note B) ........................ 6,800 8,000 14,800 2,708 3,000 17,508
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) ........................ 8,269 - 8,269 - - 8,269
Advertising ........................ 11,662 252 11,914 - 153 11,914
Depreciation and amortization ...... 672 17 689 188 - 877
Other .............................. 3,938 387 4,325 788 - 5,113
----------- ----------- ------------- ----------- ----------- -----------
Total operating expenses (85,202) (16,548) (103,250) (13,701) (5,363) (116,951)
----------- ----------- ------------- ----------- ----------- -----------
Operating loss (79,951) (16,548) (97,999) (13,361) (5,363) (111,360)
Income taxes (Note C) .................. - - - - - -
----------- ----------- ------------- ----------- ----------- -----------
Net Loss $ (79,951) $ (16,548) $ (97,999) $ (13,361) $ (5,363) $ (111,360)
=========== =========== ============= =========== =========== ===========
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 Development
Shares Amount Capital 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 ........................ - - - - -
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 (18,048) (48)
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 - - 87,050
July 2000, stock subject to rescission
(Note D) .................................... (16,000) (4,000) - - (4,000)
Office space and administrative support
contributed by an affiliate (Note B) ........ - - 10,467 - 10,467
Net loss, year ended December 31, 2000 ......... - - - (79,951) (79,951)
----------- ----------- ---------- ---------- ----------
Balance, December 31, 2000 3,590,200 89,050 22,467 (97,999) 13,518
Office space and administrative support
contributed by an affiliate (Note B) ........ - - 4,208 - 4,208
Net loss, three months ended March 31,
2001 (unaudited) ............................ - - - (13,361) (13,361)
----------- ----------- ---------- ---------- ----------
Balance, March 31, 2001 (unaudited) 3,590,200 $ 89,050 $ 26,675 $ (111,360) $ 4,365
=========== =========== ========== ========== ==========
See accompanying notes to the financial statements.
F-5
EASYWEB, INC.
(A Development Stage Company)
Statements of Cash Flows
September 24,
For the Three 1998
Months Ended (Inception)
March 31, through
----------------------- March 31,
2001 2000 2001
--------- ---------- ----------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss ................................................ $ (79,951) $ (16,548) $ (97,999)
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) .............. 10,467 12,000 22,467
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) ......... 97,050 4,500 101,550
Proceeds from the sale of common stock subject
subject to rescission (Note D)........................ 4,000 - 4,000
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
Months Ended (Inception)
March 31, through
----------------------- March 31,
2001 2000 2001
--------- ---------- ----------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss ................................................ $ (13,361) $ (5,363) $ (111,360)
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) .............. 4,208 4,500 26,675
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) ......... - - 101,550
Proceeds from the sale of common stock subject
subject to rescission (Note D)....................... - - 4,000
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.
If circumstances indicate that the carrying amount of an asset may not
recoverable, the Company must estimate the future cash flows expected to result
from the use of the assets and its eventual disposition. Future cash flows are
the future cash inflows expected to be generated by the asset less any future
cash outflows expected to be necessary to obtain those inflows.
Deferred offering costs
Costs related to common stock offerings are recorded initially as a deferred
asset until the offering is successfully completed, at which time they are
recorded as a reduction of gross proceeds in shareholders' equity. If an
offering is not successful, the costs are charged to operations at that time.
F-8
Start up costs
Costs related to the organization of the Company have been expensed as incurred.
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
The Company's sales are reported on a net basis in accordance with EITF 99-19,
"Reporting Revenue Gross as a Principal Versus Net as an Agent". All of the
Company's revenues are reported as commissions. The Company recognizes revenue
only after its service has been performed and collectibility of its fee is
reasonably assured. Revenues through related party transactions are recognized
when the service has been performed and the cash has been received.
Advertising barter transactions
The Company reports its advertising barter transactions in accordance with EITF
99-17, "Accounting for Advertising Barter Transactions". Under EITF 99-17,
revenue and expense should be recognized at fair value from an advertising
barter transaction only if the fair value of the advertising surrendered in the
transaction is determinable based on the entity's own historical transactions
involving cash. The Company did not recognize any revenues or expenses in
connection with its advertising barter transactions for the periods presented.
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.
Office space
Prior to the Company's receipt of minimum proceeds from its stock offering, the
affiliate contributed its office space to the Company. Contributed rent was
calculated from May 1999 (the first month the Company conducted operating
transactions) through April 10, 2000 based on a rate of $500 per month in
accordance with the Agreement. The Company recorded $4,000 and $1,667 as rent
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 rent of $333 in April 2000 and $500 each month from
May through August of 2000.
F-10
EASYWEB, INC.
(A Development Stage Company)
Notes to the Financial Statements
On September 1, 2000, the affiliate began contributing the office space to the
Company. The Company recorded $2,000 and $1,500 (unaudited) as rent expense with
a corresponding credit to additional paid-in capital for the period from
September 1, 2000 through December 31, 2000 and for the three months ended March
31, 2001, respectively.
Rent expense totaled $6,000, $4,000, and $1,500 (unaudited) for the years ended
December 31, 2000 and 1999, and for the three months ended March 31, 2001,
respectively. Of the $11,500 incurred for rent expense, $2,333 was paid in cash
and $9,167 was contributed.
Administrative and technical support
Prior to the Company's receipt of minimum proceeds from its stock offering, the
affiliate contributed its administrative and technical support to the Company.
Contributed administrative support was calculated from May 1999 (the first month
the Company conducted operating transactions) through April 10, 2000. The
Company recorded $8,000 and $3,333 as 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 $667 in April 2000 and $1,000 each month from May
through August of 2000.
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 $1,000
monthly rate. However, the Company continued to record administrative support
expense at the rate of $1,000 per month. Administrative support fees billed at
less than $1,000 per month were recorded as contributed support to increase the
expense to $1,000 per month. The fees charged to the Company for the period from
September 1, 2000 through December 31, 2000 totaled $533. Administrative support
billed by the affiliate for the three months ended March 31, 2001 totaled $292
(unaudited).
Administrative support expense totaled $12,000, $8,000, and $3,000 (unaudited)
for the years ended December 31, 2000 and 1999, and for the three months ended
March 31, 2001, respectively. Of the $23,000 incurred for administrative support
expense, $5,492 was paid in cash and $17,508 was contributed.
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.
F-11
EASYWEB, INC.
(A Development Stage Company)
Notes to the Financial Statements
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.
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.
F-12
EASYWEB, INC.
(A Development Stage Company)
Notes to the Financial Statements
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. 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.
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.
Management estimates that the total costs associated with this contract will not
exceed the $8,269 recognized for the three months ended March 31, 2001. Costs
incurred under this contract may exceed the amount of royalty revenues realized.
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