SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2002; or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
--------------
---------------.
Commission file Number: 0-25136
-------
SUITE101.COM INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0464753
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation of organization) identification no.)
SUITE 210 - 1122 MAINLAND STREET, VANCOUVER, BC, CANADA V6B 5L1
---------------------------------------------------------------
(Address of principal executive offices, zip code)
604-682-1400
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES [X] NO
---------- ----------
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at August 1, 2002
----------------------- -----------------------------
COMMON STOCK, PAR VALUE 13,745,202
$.001 PER SHARE
Transitional Small Business Disclosure Format
YES [ ] NO [X]
SUITE101.COM, INC.
QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements 3
Independent Accountants' Report 3
Consolidated Balance Sheets -- June 30, 2002 and December 31, 2001 4
Consolidated Statements of Operations -- Three-Month and
Six-Month Periods Ended June 30, 2002 and June 30, 2001 5
Consolidated Statements of Cash Flows -- Six-Month Periods Ended
June 30, 2002 and June 30, 2001 6
Notes to Consolidated Financial Statements -- June 30, 2002 and
June 30, 2001 7-14
Item 2. Management's Discussion and Analysis or Plan of Operations 15-22
PART II OTHER INFORMATION 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5 Other Information 23
Item 6. Exhibits and Reports on Form 8-K 24-36
2
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SUITE101.COM, INC.
VANCOUVER, B.C., CANADA
We have reviewed the accompanying consolidated balance sheet of SUITE101.COM,
INC. and subsidiaries as of June 30, 2002, the related consolidated statements
of operations for the six-month and three-month periods then ended, and the
related statement of cash flows for the six-month period then ended. These
financial statements are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
N.I. Cameron Inc. (signed)
VANCOUVER, B.C. CHARTERED ACCOUNTANTS
July 5, 2002
3
SUITE101.COM, INC.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
JUNE 30, DECEMBER 31,
2002 2001
---------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $3,091,285 $4,048,630
Accounts receivable 21,327 42,289
Prepaid expenses 22,638 68,453
---------- ----------
3,135,250 4,159,372
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 2)
Computer equipment 219,848 217,394
Furniture and fixtures 23,481 22,352
Leasehold improvements 8,394 7,990
---------- ----------
251,723 247,736
Less: accumulated amortization 141,603 127,295
---------- ----------
110,120 120,441
---------- ----------
TOTAL ASSETS $3,245,370 $4,279,813
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 23,569 $ 223,531
---------- ----------
CAPITAL STOCK (Notes 4, 5 and 8)
Authorized:
40,000,000 common shares with a par value of $0.001 each
1,000,000 preferred shares with a par value of $0.01 each
Issued:
13,651,402 common shares 13,652 13,155
DEFERRED COMPENSATION -- (14,034)
ADDITIONAL PAID-IN CAPITAL 10,501,169 10,377,576
DEFICIT (7,215,929) (6,233,343)
EQUITY ADJUSTMENT FROM FOREIGN
CURRENCY TRANSLATION (77,091) (87,072)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,221,801 4,056,282
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,245,370 $4,279,813
========== ==========
COMMITMENTS AND SUBSEQUENT EVENTS (Notes 3 and 8)
The accompanying notes are an integral part of these
consolidated financial statements.
4
SUITE101.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTH AND THREE-MONTH PERIODS ENDED
JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
ADMINISTRATIVE EXPENSES $ 75,325 $ 51,597 $ 183,158 $ 94,747
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (75,325) (51,597) (183,158) (94,747)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Forfeited deposit 45,736 -- 45,736 --
Other income, net 12,817 54,573 24,936 128,003
----------- ----------- ----------- -----------
58,553 54,573 70,672 128,003
----------- ----------- ----------- -----------
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS (16,772) 2,976 (112,486) 33,256
LOSS FROM DISCONTINUED
OPERATIONS (Note 10) (102,412) (485,135) (870,100) (938,882)
----------- ----------- ----------- -----------
NET LOSS $ (119,184) $ (482,159) $ (982,586) $ (905,626)
=========== =========== =========== ===========
INCOME (LOSS) PER SHARE FROM
CONTINUING OPERATIONS $ -- $ -- $ (0.01) $ --
=========== =========== =========== ===========
INCOME (LOSS) PER SHARE
Basic and Diluted $ (0.01) $ (0.04) $ (0.07) $ (0.07)
=========== =========== =========== ===========
Weighted average common shares outstanding 13,386,968 13,155,046 13,294,700 13,155,046
=========== =========== =========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
5
SUITE101.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
JUNE 30, JUNE 30,
2002 2001
----------- ----------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss $ (982,586) $ (905,626)
Adjustment to reconcile net loss to net cash used in operating activities
Stock-based compensation 14,034 30,999
Loss on disposal of leasehold improvements -- 7,210
Amortization 17,370 19,190
----------- ----------
(951,182) (848,227)
Changes in operating assets and liabilities
Accounts receivable 22,306 (732)
Prepaid expenses and deposits 47,163 (18,320)
Accounts payable and accrued expenses (201,195) 8,716
----------- ----------
Net cash used in operating activities (1,082,908) (858,563)
----------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property, plant and equipment (2,360) (15,868)
Proceeds on disposal of property, plant and equipment 627 --
----------- ----------
Net cash used in investing activities (1,733) (15,868)
----------- ----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Proceeds from issuance of common stock and warrants 124,089 --
----------- ----------
Net cash provided by financing activities 124,089 --
----------- ----------
EFFECT OF EXCHANGE RATES ON CASH 3,207 (160)
----------- ----------
NET INCREASE (DECREASE) IN CASH (957,345) (874,591)
CASH AT BEGINNING OF PERIOD 4,048,630 5,671,211
----------- ----------
CASH AT END OF PERIOD $ 3,091,285 $4,796,620
=========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
6
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
1 THE COMPANY
Suite101.com Inc. (formerly known as Kinetic Ventures Ltd. (the
"Company")) was incorporated in the State of California, United States
on May 20, 1991, and reincorporated in the State of Delaware, United
States on December 31, 1993. By way of a reverse takeover on December
8, 1998 (see Note 2) the Company acquired a wholly-owned subsidiary
i5ive communications inc. ("i5ive"). Until operations ceased on May 31,
2002 (Note 10) i5ive was engaged in the creation, operation and
maintenance of a World Wide Web based community.
Going Concern
The accompanying consolidated financial statements have been presented
assuming the Company will continue as a going concern. Based on the
current level of expenditures, the Company has sufficient funds to meet
expenses for at least one year. At June 30, 2002, the Company had
accumulated $7,215,929 in losses and had no material revenue producing
operations. At the date of this report, the Company's ability to
continue as a going concern is dependent upon its ability to raise
additional capital or merge with a revenue producing venture partner.
These matters raise doubt about the Company's ability to continue as a
going concern. No adjustments have been made in the accompanying
consolidated financial statements to provide for this uncertainty.
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Endovascular, Inc., a
California corporation and i5ive communications inc., a Canadian
company. All intercompany accounts and transactions have been
eliminated in consolidation. As at June 30, 2002, there were no
operations in Endovascular, Inc.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company have been prepared
in accordance with generally accepted accounting principles. Because a
precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period
necessarily involves the use of estimates which have been made using
careful judgment by management.
The consolidated financial statements have, in management's opinion,
been properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies summarized
below:
(a) Property, Plant and Equipment
Property, plant and equipment are capitalized at original cost
and amortized over their estimated useful lives at the following
annual bases and rates:
Computer equipment 30% declining balance
Furniture and fixtures 20% declining balance
Leasehold improvements 20% straight-line
One-half the normal amortization is taken in the year of
acquisition.
7
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Research and Development
Research and development costs are expensed as incurred.
(c) Foreign Exchange
Unless otherwise stated, all amounts are in United States
dollars. The functional currency of i5ive is the Canadian dollar.
Hence, all asset and liability accounts have been translated
using the exchange rate as at June 30, 2002 and December 31, 2001
and all revenues and expenses have been translated using the
average exchange rate for each period. The rates used were as
follows:
(equivalent CDN$ per U.S.$) June 30, December 31,
2002 2001
-------- ------------
Exchange rate .6595 .6278
(d) Net Loss Per Common Share
The Company computes its loss per share in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share" ("EPS") issued in February, 1997. SFAS No.
128 requires dual presentation of basic EPS and diluted EPS on
the face of the income statement for entities with complex
capital structures. Basic EPS is computed as net income divided
by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that
could occur from common shares issuable through stock options,
warrants and other convertible securities.
3. RELATED PARTY TRANSACTIONS
(a) The Company has incurred salaries, termination payments and
consulting fees of $209,372 during the period ended June 30, 2002
(2001 - $76,101) to three directors of the Company.
(b) Management fees of $104,382 have been paid during the period
ended June 30, 2002 to a corporation controlled by a director of
the Company.
8
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
4. CAPITAL STOCK
(a) In April 1999, the Company completed a private placement of
1,000,000 units for $5,000,000. Each unit was comprised of two
common shares and one warrant entitling the holder to purchase an
additional common share for $4.50 on or before February 29, 2000.
During the year ended December 31, 2000, all 1,000,000 warrants
were exercised to net the Company $4,500,000. The Company
incurred $163,750 in expenses concerning this share issuance and
issued 15,000 warrants entitling the holder to purchase an
additional common share for $5.50 on or before February 29, 2002.
None of these 15,000 warrants were exercised prior to their
expiry date.
(b) During the year ended December 31, 2000, the Company issued
625,000 warrants as part of the private placement of Notes
payable. Each warrant entitled the holder to purchase one common
share at a price of $5.00 up to July 15, 2002. In the event that
at any time prior to July 15, 2002 (a) the shares of common stock
issuable on exercise of the warrants have been registered under
the Securities Act of 1933, as amended (the "Securities Act"),
and (b) the average of the closing bid and asked prices for the
Company's common stock as quoted on the OTC Bulletin Board (or
such other automated trading system or national securities
exchange as is the principal market for the Company's common
stock) exceeds (U.S.) $9.00 per share for a period of ten (10)
business days, then the warrants will expire at 5:00 PM, New York
City time, on a date sixty (60) days thereafter. During the
current period, the exercise price of these warrants was changed
to $0.52 and the expiry date was changed to July 15, 2003. To
date, none of these warrants have been exercised.
(c) During the current period, the Company issued 496,356 common
shares for total proceeds of $124,089 upon exercise of stock
options.
5. STOCK OPTIONS
THE COMPANY'S 1998 STOCK INCENTIVE PLAN
In December 1998, the Company adopted the 1998 Stock Incentive Plan
(the "Plan"). Under the Plan, as amended, 3,900,000 shares of common
stock have been reserved for issuance on exercise of options granted
under the Plan.
On the date of the closing of the transaction with i5ive, outstanding
options granted under i5ive's 1998 Stock Incentive Plan were assumed by
the Company under the Plan and no further option grants will be made
under i5ive's Plan. The assumed options have substantially the same
terms, subject to anti-dilution adjustment, as are in effect for grants
made under the Company's Plan.
The Board of Directors of the Company may amend or modify the Plan at
any time, subject to any required stockholder approval. The Plan will
terminate on the earliest of (i) 10 years after the Plan Effective
Date, (ii) the date on which all shares available for issuance under
the Plan have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with certain
changes in control or ownership of the Company.
9
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
5. STOCK OPTIONS (CONTINUED)
THE COMPANY'S 1998 STOCK INCENTIVE PLAN (CONTINUED)
The following is a table of stock options under the Plan as at June 30,
2002:
Balance
Option Expiry Vesting Balance Granted Expires (Exp) Balance Exercisable
Exercise Date Date December 31, During Exercised (E) June 30, June 30,
Price (mm/dd/yy) (mm/dd/yy) 2001 the Period Cancelled (C) 2002 2002
-------- ---------- ------------------ ------------ ---------- ------------- -------- -----------
$1.50 12/04/03 12/04/99 159,037 -- 25,510 (C) 133,527 133,527
1.50 12/04/03 12/04/00 27,837 -- 11,626 (C) 16,211 16,211
1.50 02/23/09 (1/3) 02/23/00 50,000 -- -- 50,000 50,000
(1/3) 02/23/01
(1/3) 02/23/02
1.50 04/27/09 (1/3) 04/27/00 50,000 -- -- 50,000 50,000
(1/3) 04/27/01
(1/3) 04/27/02
1.50 06/11/09 06/11/00 10,000 -- -- 10,000 10,000
1.50 10/25/05 (1/2) 10/25/00 100,000 -- -- 100,000 100,000
(1/2) 10/25/01
1.50 11/13/04 11/13/99 137,900 -- -- 137,900 137,900
1.50 11/13/04 11/13/00 646,300 -- 34,000 (C) 612,300 612,300
3.53 01/31/02 (1/2) 01/31/00 4,000 -- 4,000 (Exp) -- --
(1/2) 01/31/01
1.50 03/21/05 03/21/01 20,000 -- -- 20,000 20,000
1.50 01/31/05 16,668 - 01/31/01 50,000 -- 6,666 (C) 43,334 43,334
16,666 - 01/31/02
16,666 - 01/31/03
1.50 04/17/05 20,402 - 04/17/00 60,067 -- 6,666 (C) 53,401 53,401
30,137 - 04/17/01
30,133 - 04/17/02
30,133 - 04/17/03
1.50 07/05/05 3,222 - 07/05/00 56,443 -- 6,666 (C) 49,777 49,777
17,740 - 07/05/01
17,740 - 07/05/02
17,741 - 07/05/03
0.25 12/21/05 585,476 - 12/21/00 999,236 -- 335,754 (E) 663,482 663,482
420,677 - 12/21/01
1.50 06/12/10 06/12/00 10,000 -- -- 10,000 10,000
0.25 01/04/06 136,073 - 01/04/01 484,410 -- 58,865 (C) 267,570 267,570
376,507 - 01/04/02 157,975 (E)
50,000 - 01/04/03
0.25 05/10/06 05/10/01 4,268 -- 2,627(E) 1,641 1,641
0.17 06/04/11 06/04/01 10,000 -- -- 10,000 10,000
0.25 10/03/06 2,516 - 10/30/01 15,516 -- -- 15,516 15,516
3,000 - 01/04/02
10,000 - 01/04/03
0.27 02/25/12 50,001 - 02/25/03 -- 150,000 -- 150,000 --
50,001 - 02/25/04
49,998 - 02/25/05
0.27 02/27/07 16,667 - 02/27/03 -- 50,000 -- 50,000 --
16/667 - 02/27/04
16/666 - 02/27/05
0.50 06/11/12 06/11/03 -- 20,000 -- 20,000 --
10
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND JUNE 20, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
5. STOCK OPTIONS (CONTINUED)
THE COMPANY'S 1998 STOCK INCENTIVE PLAN (CONTINUED)
As a result of the termination of certain employees and directors, and
a directors' resolution made during the period, changes have been made
to the expiry dates and vesting dates of the above options as follows:
a) All options other than the $0.27 and $0.50 options became
immediately vested.
b) Of the remaining $1.50 options, the expiry dates are as follows:
July 7, 2002 3,334
July 31, 2002 67,668
June 30, 2003 1,065,110
December 4, 2003 45,138
November 13, 2004 105,200
c) Of the remaining $0.25 options, the expiry dates are as follows:
July 7, 2002 4,075
July 31, 2002 94,138
December 31, 2002 722,426
January 4, 2006 127,570
d) The $0.17 options will expire December 31, 2002.
The above options are granted for services provided to the Company. Of
the above options, the following options are to non-employees and have
been reflected on the financial statements and valued, using the
Black-Scholes model with a risk-free rate of 5% and no expected
dividends:
Number of Exercise Grant Date Value Volatility Expected
Options Price Assumption Options Life
----------------------------------------------------------------------------------------
100,000 1.50 October 25, 1999 $ 99,750 272% 5 years
50,000 3.56 January 6, 2000 99,635 60% 5 years
4,000 3.53 January 31, 2000 5,120 60% 2 years
100,000 7.00 February 15, 2000 203,970 20% 5 years
20,000 7.88 March 21, 2000 45,922 20% 5 years
100,000 0.25 January 4, 2001 23,390 275% 5 years
13,000 0.25 October 3, 2001 3,041 275% 5 years
The remaining options issued were to officers, directors and employees.
As the options were granted at exercise prices based on the market
price of the Company's shares at the dates of the grant, no
compensation cost is recognized. However, under SFAS 123, the impact on
net income and net income per share of the fair value of stock options
must be measured and disclosed on a fair value based method on a pro
forma basis. The fair value of the employees' purchase rights under
SFAS 123 was estimated using the Black-Scholes model with the following
assumptions used for options: risk-free rate was 5.0%, expected
volatility of 279%, 272% 263% and 257% for the $1.50 options, 275% for
the $0.25 and $0.17 options, and 96% for the $0.27 options, an expected
option life of 5 years and no expected dividends.
11
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
5. STOCK OPTIONS (CONTINUED)
THE COMPANY'S 1998 STOCK INCENTIVE PLAN (CONTINUED)
If compensation expense had been determined pursuant to SFAS 123, the
Company's net loss and net loss per share for the period ended June 30,
2002 would have been as follows:
Net loss
As reported $(982,586)
Pro forma $(1,047,100)
Basic net loss per share
As reported $(0.07)
Pro forma $(0.08)
6. INCOME TAXES
At June 30, 2002, there were deferred income tax assets resulting
primarily from operating loss carryforwards for Canadian tax purposes
totaling approximately $2,142,000 less a valuation allowance of
$2,142,000. The valuation allowance on deferred tax assets increased by
$302,000 during the period ended June 30, 2002.
At June 30, 2002, the Company had net operating loss carryforwards for
Canadian tax purposes of approximately $5,380,000. These carryforwards
begin to expire in 2003.
At June 30, 2002, there were deferred income tax assets resulting from
operating loss carryforwards for U.S. income tax purposes totaling
approximately $641,000 less a valuation allowance of $641,000. The
valuation allowance on deferred tax assets increased by $76,000 during
the period ended June 30, 2002. The Company has approximately
$1,500,000 available in operating loss carryforwards, which may be
carried forward and applied against U.S. operating income.
7. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments consist of cash, accounts
receivable and accounts payable. It is management's opinion that the
Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments. The fair value of these
financial instruments approximates their carrying values.
12
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
8. COMMITMENTS AND SUBSEQUENT EVENTS
(a) On March 23, 1999, the Company entered into a twelve-month
agreement with a consultant, which provided for fees of $5,000
per month. In addition, the consultant was issued a one-year
warrant to purchase 50,000 shares of common stock at a price of
$3.06 per share. This warrant has been valued at $33,420 using
the Black-Scholes model as described earlier and is reflected as
compensation on these financial statements. During the year ended
December 31, 2000, this warrant was exercised to net the Company
$153,000. Subsequent to December 31, 1999, this agreement was
amended to increase the fees to $20,900 for the six-month period
beginning August 23, 1999, extend the period of services by
six-months, and to issue a warrant to purchase 25,440 shares of
common stock of the Company at a price of $5.50 per share
expiring February 28, 2002. This warrant has been valued at
$11,750 using the Black-Scholes model and is reflected as
compensation on these financial statements. This warrant expired
during the current period without being exercised.
(b) During the year ended December 31, 2000, the Company entered into
a one-year agreement with a consultant. The consultant was issued
a warrant to purchase 14,000 shares of common stock of the
Company at a price of $5.50 per share, expiring on February 26,
2002. This warrant has been valued at $9,562 using the
Black-Scholes model as described earlier and is reflected as
compensation on these financial statements. This warrant expired
during the current period without being exercised.
(c) The Company has entered into an agreement dated February 17, 2000
for consulting and corporate finance services which provides for
the issue of 2-year warrants at the following milestones:
Upon execution of consulting agreement - 25,000 (issued)
On signed letter of intent with target customer - 25,000
On signed agreement with target customer - 25,000
On signed agency agreement to market similar program
to others in same industry in North America - 25,000
In addition, the agreement provides for additional warrants to be
issued over 3 years based on 10% of any payout to participants
under the plan developed with customer(s) resulting from the
agency agreement. The warrants to be issued are based on the
average price of the Company's stock for the 10-day period prior
to the issuance of the warrants, less a 20% discount.
The initial 25,000 warrants issued had an exercise price of $4.96
per share and expired February 17, 2002 without being exercised.
They have been valued at $115,060 using the Black-Scholes model
as described earlier and have been reflected as compensation on
these financial statements.
13
SUITE101.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 AND JUNE 30, 2001
(UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
8. COMMITMENTS AND SUBSEQUENT EVENTS (CONTINUED)
(d) During the year ended December 31, 2001, the Company entered into
an operating lease for its office space. The lease expires March
31, 2003 and provides for monthly payments commencing May 1, 2001
of $1,992 plus the Company's proportionate share of operating
costs and taxes (currently $1,092 per month). Under the terms of
the lease, the Company has an option to renew the lease for a
further period of three years.
(e) The Company is obligated under the terms of an agreement to make
monthly payments of $1,484 until April 2003 for the hosting of
its server.
9. COMPREHENSIVE INCOME (LOSS)
JUNE 30, JUNE 30,
2002 2001
------------------------
Net loss as reported $(982,586) $(905,626)
Add (deduct)
Foreign currency translation adjustments 9,981 729
------------------------
Comprehensive Income (Loss) $(972,605) $(904,897)
========================
Accumulated other comprehensive income
Foreign currency translation adjustments
Balance at beginning of period $ (87,072) $ (61,890)
Change during the period 9,981 729
------------------------
Balance at end of period $ (77,091) $ (61,161)
========================
10. DISCONTINUED OPERATIONS
On May 31, 2002, the Company decided to discontinue its internet-based
activities and is currently seeking to dispose of its website assets.
As at June 30, 2002, the assets and liabilities of this discontinued
business were comprised of the following:
Assets
Property, plant and equipment $110,120
========
Liabilities
Accounts payable $ 17,175
========
Revenues from discontinued operations are as follows:
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
-----------------------------------------------------------------------------------
$141 $1 $6,799 $262
===================================================================================
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction
with, and is qualified in its entirety by, the more detailed information
including our Financial Statements and the Notes thereto included in our Annual
Report on Form 10-KSB for the year ended December 31, 2001. This Quarterly
Report contains forward-looking statements that involve risks and uncertainties.
Our actual results may differ materially from the results discussed in the
forward-looking statements. Factors that may cause or contribute to such
differences include the Risk Factors set forth below as well as the "Risk
Factors" contained in our Annual Report. See "Cautionary Statement for Purposes
of the `Safe Harbor' Provisions of the Private Securities Litigation Reform Act
of 1995" herein.
A COMPARISON OF OUR OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND
THE SIX MONTHS ENDED JUNE 30, 2001
Administrative expenses were $183,158 during the six months ended June
30, 2002 compared with $94,747 during the six months ended June 30, 2001. This
increase was primarily the result of an increase in professional fees and an
increase in stockholder reporting costs.
Our Loss From Operations was $183,158 during the six-month period ended
June 30, 2002 compared with $94,747 during the six-month period ended June 30,
2001. The increase in our Loss From Operations during the six-month periods
ended June 30, 2002 compared with the six-month period ended June 30, 2001 was
the result of the increase in our administrative expenses.
Other income was $70,672 during the six-month period ended June 30,
2002 compared to $128,003 during the six-month period ended June 30, 2001.
Included in other income is income attributable to interest earned on bank
balances; during the six-month period ended June 30, 2002, net interest income
was $24,936 compared to $128,003 during the comparative six-month period ended
June 30, 2001. The decline in the net interest earned results from the decline
in bank cash balances carried through these periods. Also included in other
income during the six months ended June 30, 2002 is income from forfeited
deposits of $45,000. Effective March 15, 2002, i5ive communications inc.
("i5ive"), our wholly-owned subsidiary, entered into an option agreement with
Double B Holdings, LLC, a privately-owned non-affiliated entity organized for
the purpose of acquiring the option. The option granted Double B the right to
purchase the web site assets owned and operated by i5ive. The terms of the
option agreement provided that Double B, in consideration of a non-refundable
payment of $15,000, had the right to purchase the assets for a period of thirty
days and, in consideration of a further non-refundable payment of an additional
$30,000, had the right to purchase the assets for an additional thirty days.
Both deposits were paid and the option expired on May 14, 2002 and the option
deposits were forfeited.
15
On May 31, 2002, the Company decided to discontinue its internet-based
activities and sought to dispose of its web site assets. During the six months
ended June 30, 2002 our revenue from discontinued operations was $6,799 compared
with $262 during the six months ended June 30, 2001. The revenue during the six
month period ended June 30, 2002 were primarily attributable to revenues
generated from two service contracts that we entered into with Barnes&Noble.com
to provide introductions for a series of e-books and to provide proofreading
services for the related digitized books. During the six month period ended June
30, 2001, the $262 in revenue was primarily attributable to software licensing
revenues of i5ive. The net loss during the six months ended June 30, 2002 from
discontinued operations was $870,100 compared with $938,882 during the six
months ended June 30, 2001. The decrease was primarily the result of a change in
our compensation arrangements with our contributing editors and the cessation of
all our marketing activities focused at promoting our web site activities.
Our Net Loss was $982,586 during the six-month period ended June 30,
2002 compared with $905,626 during the six-month period ended June 30, 2001. The
increase in our Net Loss during this six-month period ended June 30, 2002
compared with the six-month period ended June 30, 2001 was the result of the
increase in our administrative expenditures and a decrease in our other income.
LIQUIDITY AND CAPITAL RESOURCES
The report of our independent auditors on their audit of our financial
statements as of December 31, 2001 contains an explanatory paragraph that
describes an uncertainty as to our ability to continue as a going concern due to
our recurring losses. At June 30, 2002, our cash balance was $3,091,285. The
majority of these funds are currently held as U.S. funds in our bank accounts
earning interest based on the US Base Rate. We believe these cash resources will
be sufficient to meet our ongoing financial commitments through December 31,
2002. Currently, we have no source of revenues.
During the six months ended June 30, 2002 our cash balances decreased
by $957,345 of which approximately $520,000 represents severance costs paid to
our employees and independent contractors upon their termination from the
Company and approximately $200,000 was a reduction in accounts payable. We
estimate our ongoing monthly cash outflow will amount to approximately $30,000.
The terms of the 625,000 outstanding common stock purchase warrants
that were issued during the year ended December 31, 2000 as part of a private
placement were amended effective May 21, 2002. The purchase price was reduced to
$0.52 from $5.00 and the expiration date was extended to July 15, 2003 from July
15, 2002. The warrants were issued in a private sale of securities in 2000.
In December 2001, we announced that our Board of Directors was engaged
in a review of our activities with a view to the possible redirection of our
operations in an effort to enhance and maximize shareholder values. On February
14, 2002, effective January 31, 2002, the Company entered into an agreement with
Creative Marketeam Canada Ltd., a corporation wholly owned by Douglas Loblaw,
our former Chief Operating Officer and, since February 25, 2002, a Director of
our Company, to provide continuing management and operating services, at
Marketeam's expense, for the day-to-day operations of the Suite101 web site,
known as Suite101.com. Subsequently, on February 25, 2002, Mr. Loblaw was
elected a Director of our Company. In consideration of the services performed by
Marketeam, we paid Marketeam a fee of $26,000 per month, plus an amount equal to
our receipts from our contracts
16
with Barnes&Noble.com. This management and operating services agreement was
terminated on May 31, 2002, subsequent to the expiry of the Option with Double
B. On May 31, 2002 the Company decided to discontinue its internet-based
activities and sought to dispose of its web site assets.
On July 17, 2002, effective June 1, 2002, the Company's wholly-owned
subsidiary, i5ive, completed the sale of its web site assets to Creative
Marketeam Canada, Ltd. In consideration for the assets, Marketeam issued to
i5ive a 15% equity interest in Marketeam and agreed that in the event the assets
are resold by Marketeam within one (1) year, a sum equal to the proceeds of the
sale would be paid over to i5ive. The sale of web site assets was a result of
the determination of the Board of Directors made in December 2001 to seek to
redirect the Company's activities. The i5ive assets sold to Marketeam were the
subject of the option agreement entered into in March 2002 with Double B which
option agreement expired in May 14, 2002 without having been exercised. The web
site assets were not producing any material revenues and were contributing to an
outflow of cash. The sale of the i5ive assets to Marketeam was unanimously
approved by Messrs. Blumberg, Campbell and Peters constituting all Suite101's
directors not having any interest in the transaction.
Management of Suite101 is currently seeking to redirect its activities
into another area of business and it is expected that this will involve a
business combination or other material transaction. Our current plan is to
utilize our available cash and other resources, including possibly, shares of
our Common Stock, to redirect our business activities. We believe that these
activities will be unrelated to the operation of an Internet Web site. As of
August 1, 2002, there are no definitive agreements or agreements in principal
relating to the acquisition of any other business activities by us and we are
unable to state the nature of the business activities that may be undertaken in
the future. It is expected that the redirection of our business activities will
involve us in a business combination or other material transaction. Until we
complete a transaction resulting in a redirection of our business activities, we
expect to continue to incur expenses without any material revenues. In addition,
we may incur reductions in the carrying value of our fixed assets in connection
with our efforts to redirect our activities.
As a result of our limited operating history and our efforts to
redirect our activities, we have limited meaningful historical financial data
upon which to base planned operating expenses. Accordingly, our anticipated
expense levels in the future are based in part on our estimates. We expect that
these expense levels will become, to a large extent, fixed. Revenues and
operating results generally will depend on our ability to redirect our business
activities into revenue-producing operations.
We may seek to raise additional funds in order to fund the acquisition
of revenue-producing operations. There can be no assurance that any additional
financing will be available on terms favorable to us, or at all. If adequate
funds are not available or not available on acceptable terms, we may not be able
to fund our efforts to redirect our activities. Any such inability could have a
material adverse effect on future success. Additional funds raised through the
issuance of equity or convertible debt securities, will result in reducing the
percentage ownership of our stockholders and, stockholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the rights of our Common Stock.
17
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed above
and elsewhere in this Quarterly Report are "forward-looking statements" as
defined under the Securities Exchange Act of 1934, as amended, that involve
risks and uncertainties. We intend that such forward-looking statements be
covered by the safe harbor provisions for forward-looking statements contained
in that act and we are including this statement for purposes of complying with
these safe harbor provisions. The forward-looking statements discussed in this
Quarterly Report appear in various places including: "Item 2 - Management's
Discussion and Analysis or Plan of Operations, "Liquidity and Capital
Resources," as well as in "Risk Factors." We caution readers that the risk
factors described in our Annual Report on Form 10-KSB, as well as those
described elsewhere in this Quarterly Report, or in our other filings with the
Commission, in some cases have affected, and in the future could affect our
actual results, could cause our actual results during 2002, 2003 and beyond, to
differ materially from those expressed in any forward-looking statements, and
could cause our development and the development of our business plans to be
different than expressed in those statements. We cannot assure you that our
assumptions in this regard or our views as to the viability of our business
plans will prove to be accurate. Likewise, we cannot assure you that we will be
successful in acquiring any commercial activities. Our ability to realize
revenues cannot be assured. If our assumptions are incorrect or if our plans
fail to materialize, we may be unsuccessful in developing as a viable business
enterprise. Under such circumstance your investment will be in jeopardy. There
can be no assurance that our estimates as to our current rates of cash
expenditures will prove to be accurate or that other factors may not result in
these estimates proving to be incorrect. Our inability to meet our goals and
objectives or the consequences to us from adverse developments in general
economic or capital market conditions could have a material adverse effect on
us. We caution you that various risk factors accompany those forward looking
statements and are described, among other places, under the caption "Risk
Factors" herein, beginning below. They are also described in our Annual Report
on Form 10-KSB, and our Current Reports on Form 8-K. These risk factors could
cause our operating results, financial condition and ability to fulfill our
plans to differ materially from those expressed in any forward-looking
statements made in our Annual Report and could adversely affect our financial
condition and our ability to pursue our business strategy and plans.
RISK FACTORS
An investment in shares of our Common Stock involves a high degree of
risk. You should consider the following factors, in addition to the other
information contained in this quarterly report, in evaluating our business and
proposed activities before you purchase any shares of our common stock. You
should also see the "Cautionary Statement for Purposes of the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1996" regarding
risks and uncertainties relating to us and to forward looking statements in this
quarterly report.
No Material Operations or Revenues. We have no current material operations or
source of revenue. We will sustain continuing administrative expenses
maintaining our office and carrying out our public reporting requirements, as
well as for other possible purposes, at least until the consummation of a
business acquisition. This can be expected to result in us incurring ongoing net
operating losses and an
18
outflow of our cash that could continue until we can consummate a business
acquisition. There can be no assurance that we can identify a suitable business
opportunity and consummate a business acquisition or that any transaction we
consummate will be on favorable terms or result in profitable operations. We are
unable to predict when any such transaction may be completed.
We May Not Be Successful in Entering Into Agreements In Order to Pursue Our
Business Plans. We have no arrangement, agreement or understanding with respect
to engaging in a merger with, joint venture with or acquisition of, a private or
public entity or any interest in such an entity. No assurances can be given that
we will successfully identify and evaluate a suitable business opportunity or
that we will conclude a business acquisition. We cannot guarantee that we will
be able to negotiate any business transactions on favorable terms or be
successful in redirecting our operations.
Possible Future Dilution As A Result Of Business Transaction. Our business plan
is based upon effectuating a business acquisition or other transaction. Any such
acquisition transaction may result in us issuing securities as part of the
transaction. The issuance of previously authorized and un-issued common shares
could result in substantial dilution to our existing stockholders which could
possibly result in a change in control or management of our company. There can
be no assurance that an acquisition can be completed.
Issuance Of Additional Shares. Our Certificate of Incorporation currently
authorizes our Board of Directors to issue up to 40,000,000 shares of Common
Stock and 1,000,000 shares of Preferred Stock, of which, as of August 1, 2002,
13,745,202 shares of Common Stock are issued and outstanding and no shares of
Preferred Stock are outstanding. At our annual meeting of stockholders held on
June 11, 2002 the stockholders approved the increase the number of shares of
common stock we are authorized to issue under our Certificate of Incorporation
from 40,000,000 to 100,000,000 shares. Subject to the filing with the State of
Delaware of the Certificate of Amendment effectuating the increase in our
authorized number of shares, the 86,254,798 shares of Common Stock and 1,000,000
shares of Preferred Stock that will be authorized but are not issued or
outstanding will be able to be issued by action of our Board of Directors in a
transaction resulting in the redirection of our activities without any
requirement of further action being taken by our stockholders to authorize the
issuance of the shares or to approve the transaction or the redirected business
activities. Any additional issuances of any of our securities will not require
the approval of our stockholders and may have the effect of further diluting the
equity interest of stockholders.
Possible Need to Raise Additional Capital. Any transaction we enter into
involving the redirection of our activities may require that we raise additional
capital which may also involve the issuance of shares of our Common Stock and be
dilutive to our existing stockholders.
No Requirement of Stockholder Approval. Any transaction we enter into in
redirecting our business activities may be structured on terms whereby the
approval of our existing stockholders is not required which would result in our
existing stockholders being unable to vote in favor of or against the
transaction and the redirection of our business activities.
Any Business We May Possibly Acquire May Never Become Profitable. There can be
no assurance that we will enter into an acquisition with or acquire an interest
in a business having a significant or successful operating history. Any such
business may have a history of losses, limited or no potential for earnings,
limited assets, negative net worth or other characteristics that are indicative
of development
19
stage companies. There can be no assurance that after any acquisition of a
business that the business will be operated so as to develop significant
revenues and cash flow and become profitable.
Management May Not Devote a Sufficient Amount of Time to Seeking a Target
Business. While seeking a business acquisition, our officers and Directors will
devote only a portion of their time to pursuing these activities. As a result,
we may expend a considerable period of time identifying and negotiating with an
acquisition candidate. This extended period of time may result in continuing
losses to us and an outflow of our cash.
Dependence On Part-Time Management. Currently, we have no fulltime employees.
Our officers and Directors devote only a portion of their time to our
activities. It is our intention to continue to limit our employees until such
time as we find a suitable business opportunity or we complete the acquisition
of another business. Therefore, the day-to-day operations of any company or
business that is acquired by us will have to be performed by outside management
or management of the acquired company. We cannot assure investors that we will
be able to obtain experienced and able outside management to run any company or
business that we may acquire.
Continued Control by Existing Management. Our Directors retain significant
control over our present and future activities and our stockholders and
investors may be unable to meaningfully influence the course of our actions. Our
existing management is able to control substantially all matters requiring
stockholder approval, including nomination and election of directors and
approval or rejection of significant corporate transactions. Any transaction we
engage in resulting in a redirection of our business activities may be
structured so as to not require the approval of our stockholders and,
accordingly, our stockholders may have no opportunity to vote on or influence
the redirection of our activities. Although management has no intention of
engaging in such activities, there is also a risk that the existing management
will be viewed as pursuing an agenda which is beneficial to themselves at the
expense of other stockholders.
There Is No Assurance Of An Active Public Market For Our Common Stock And The
Price Of Our Common Stock May Be Volatile. Given the relatively minimal public
float and trading activity in our securities, there is little likelihood of any
active and liquid public trading market developing for our shares. If such a
market does develop, the price of the shares may be volatile. Since the shares
do not qualify to trade on any exchange or on NASDAQ, if they do actually trade,
the only available market will continue to be through the OTC Bulletin Board or
in the "pink sheets" or a successor trading market. In the light of our
operating history, continuing losses and financial condition, are not
necessarily indicative of our value. Such quotations are inter-dealer prices,
without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions. It is possible that no active public market with
significant liquidity will ever develop. Thus, investors run the risk that
investors may never be able to sell their shares.
Possible Government Regulation. Although we are subject to the periodic
reporting requirements under the Securities Exchange Act of 1934, as amended,
and file annual, quarterly and other reports, management believes it will not be
subject to regulation under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), since it will not be engaged in the business of
investing or trading in securities. If we engage in a business acquisition which
results in us holding passive investment interests in a number of entities, we
could become subject to regulation under the Investment Company Act. If so, we
would be required to register as an investment company and could be expected to
incur significant registration and compliance costs. We have obtained no formal
determination from
20
the Securities and Exchange Commission (the "SEC" or "Commission") or any
opinion of counsel as to our status under the Investment Company Act. A
violation of the Act could subject us to material adverse consequences.
Our Shares Are Subject To Penny Stock Reform Act Of 1990. Our securities are
subject to certain rules and regulations promulgated by the Commission pursuant
to the U.S. Securities Enforcement Remedies and Penny Stock Reform Act of 1990
(the "Penny Stock Rules"). Such rules and regulations impose strict sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and certain "accredited investors." For
transactions covered by the Penny Stock Rules, a broker-dealer must make a
special suitability determination for the purchaser and must have received the
purchaser's written consent for the transaction prior to sale. Consequently,
such rule may affect the ability of broker-dealers to sell our securities and
may affect investors' abilities to sell any shares they acquire.
The Penny Stock Rules generally define a "penny stock" to be any
security not listed on an exchange or not authorized for quotation on the Nasdaq
Stock Market and has a market price (as defined by the rules) less than $5.00
per share or an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transactions by broker-dealers involving a penny stock
(unless exempt), the rules require delivery, prior to a transaction in a penny
stock, of a risk disclosure document relating to the market for penny stocks.
Disclosure is also required to be made about compensation payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stocks.
Control by Directors, Executive Officers, and Principal Stockholders. As of
August 1, 2002, our Directors, executive officers, and stockholders who own
beneficially 5% or more of our Common Stock, and their respective affiliates, in
the aggregate, beneficially owned (including shares that the he or she has the
right to acquire the beneficial ownership within 60 days following August 1,
2002) approximately 3,559,588 shares or 24.51% of our outstanding Common Stock.
As a result, these stockholders possess significant influence over us, giving
them the ability, among other things, to elect a majority of our Board of
Directors and approve significant corporate transactions. Such share ownership
and control may also have the effect of delaying or preventing a change in
control of us, impeding a merger, consolidation, takeover or other business
combination involving us, or discourage a potential acquiror from making a
tender offer or otherwise attempting to obtain control of us which could have a
material adverse effect on the market price of our Common Stock.
No Active Prior Public Market For Common Stock; Possible Volatility Of
Stock Price. Since December 30, 1998, our Common Stock has been quoted on the
OTC Bulletin Board. There can be no assurance that an active trading market for
our Common Stock will be sustained or that the market price of our Common Stock
will not decline based upon market or other conditions. The market price may
bear no relationship to our revenues, earnings, assets or potential and may not
be indicative of our future business performance. The trading price of our
Common Stock has been and can be expected to be subject to wide fluctuations in
response to variations in our quarterly results of operations, delays and
obstacles we encounter in redirecting our business activities, the gain or loss
of significant strategic relationships, unanticipated delays in our development,
other matters discussed elsewhere in this annual report and other events or
factors, many of which are beyond our control.
21
In addition, the stock market in general has experienced extreme price
and volume fluctuations which have affected the market price for many companies
which have been unrelated to the operating performance of these companies. These
market fluctuations, as well as general economic, political and market
conditions, may have a material adverse effect on the market price of our Common
Stock.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such companies. Such litigation, if instituted, and
irrespective of the outcome of such litigation, could result in substantial
costs and a diversion of management's attention and resources and have a
material adverse effect on our business, results of operations and financial
condition.
22
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 11, 2002, the Company held its annual meeting of stockholders.
At the meeting, stockholders were requested to vote on the election of four
persons as Directors of the Company to serve until the next annual meeting of
stockholders in 2003 and until their respective successors are elected and
qualified. The stockholders were also requested to vote on a proposal to approve
the amendment of our Certificate of Incorporation to increase the number of
shares of common stock we are authorized to issue under our Certificate of
Incorporation from 40,000,000 to 100,000,000 shares.
At the meeting, the following persons were elected as Directors and
received the following votes:
-------------------------------------
NUMBER OF VOTES RECEIVED
-------------------------------------
ABSTAINED
NOMINEES IN FAVOR WITHHELD OR NOT VOTED
Mitchell G. Blumberg 8,818,125 167 43,350
John K. Campbell 8,763,371 54,921 43,350
Douglas F. Loblaw 8,763,371 54,921 43,350
Brent J. Peters 8,763,371 54,921 43,350
The proposal to approve the adoption of the amendment in the number of
shares of common stock we are authorized to issue under our Certificate of
Incorporation from 40,000,000 to 100,000,000 shares was approved by the
favorable vote of a majority of the shares present and voting at the meeting
with the following vote:
In favor - 8,651,777 shares
Against - 209,765 shares
Abstained - 100 shares
ITEM 5. OTHER INFORMATION.
On July 17, 2002, our wholly-owned subsidiary, i5ive Communications,
Inc., completed the sale as of June 1, 2002 of its Web site assets to Creative
Marketeam Canada, Ltd. In consideration for the assets, Marketeam issued to
i5ive a 15% equity interest in Marketeam and agreed that in the event the assets
are resold by Marketeam within one (1) year, a sum equal to the proceeds of the
sale would be paid over to i5ive.
Marketeam provided management and operating services to i5ive during
the period February 1, 2002 through May 31, 2002. Marketeam is currently owned
by Douglas F. Loblaw, a Director of Suite101 and former Chief Operating Officer
of Suite101. The i5ive assets sold to Marketeam were the
23
subject of an option agreement entered into in March 2002 with an unaffiliated
party which option agreement expired in May, 2002 without having been exercised.
The sale of the i5ive assets to Marketeam was unanimously approved by Messrs.
Blumberg, Campbell and Peters constituting all Suite101's directors not having
any interest in the transaction. The Web site assets were not producing any
material revenues and were contributing to an outflow of cash. At June 30, 2002,
the Web site assets sold had a net book value of $103,740.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Agreement of Purchase and Sale made and entered into as
of June 1, 2002, by and between Creative Marketeam
Canada Ltd. and i5ive Communications Inc.
99.1 Chief Executive Officer's Certification
99.2 Chief Financial Officer's Certification
(b) Reports on Form 8-K
During the quarter ended June 30, 2002, we filed the following
Current Reports on Form 8-K:
(a) Current Report on Form 8-K for event dated May 15, 2002.
Item 7.
(b) Current Report on Form 8-K for event dated May 21, 2002.
Items 5.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUITE101.COM, INC.
-----------------
(Registrant)
Date: August 13, 2002 /s/ Mitchell G. Blumberg
------------------------
Mitchell G. Blumberg
President and Chief Executive Officer
(Principal Executive Officer, and Director)
/s/ Cara M. Williams
--------------------
Cara M. Williams
(Principal Financial and Accounting Officer)
24