UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K<R>/A</R>
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)October 7, 2003
OCEAN VENTURES INC.
(Exact name of registrant as specified in its charter)
Alberta
(State or other jurisdiction of incorporation)
000-32715
(Commission File Number)
98-03443194
(IRS Employer Identification No.)
#110 - 10851 Shellbridge Way, Richmond, British Columbia, Canada V6X 2W8
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code604.231.0135
Item 2. Acquisition or Disposition of Assets.
DESCRIPTION OF BUSINESS
Introduction
FORWARD-LOOKING STATEMENTS
This current report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
As used in this current report, the terms "we", "us", "our", and "Ocean" mean Ocean Ventures Inc. and our majority-owned subsidiary, Digital Youth Network Inc., unless otherwise indicated.
All dollar amounts refer to US dollars unless otherwise indicated.
Corporate History.
Ocean Ventures Inc. was incorporated under the laws of the Province of Alberta on November 22, 1996 under the name "CallDirect Capital Corp.". We changed our name to "Ocean Ventures Inc." on January 31, 2000, and at the same time completed a consolidation of our then issued and outstanding common shares on a 5:1 basis, effective January 27, 2001. We are also registered as an extra-provincial company in the Province of British Columbia, and are a reporting issuer under the securities laws of both the province of Alberta and the province of British Columbia.
From our incorporation until May, 1999, we were a direct reseller of telecommunication products. Pursuant to the terms of an Asset Purchase Agreement (the "Asset Purchase Agreement") between CallDirect Enterprises Inc., formerly our wholly-owned subsidiary, and Healthtrac, Inc., CallDirect sold its direct marketing assets to Healthtrac, Inc. in exchange for 1,200,000 shares in the capital of Healthtrac, Inc. On September 8, 1999, we sold all of the issued and outstanding stock of CallDirect, and certain intercompany advances owed by CallDirect, to one of our former directors and officers for nominal consideration.
Our Current Business
Once we sold all of the issued and outstanding stock of CallDirect, and certain intercompany advances owed by CallDirect, to one of our former directors and officers for nominal consideration, we no longer had an active operating business to pursue. Accordingly, we sought to either identify a suitable business opportunity or enter into a suitable business combination, until which time we would operate as a "blank check" company.
We entered into a share purchase agreement dated July 21, 2003 with all of the shareholders of Digital Youth Network Inc., being Daniel Reitzik, Jason Jaspar, Robert Skoko, Murray Smith, Chris Sargent, Monty Reitzik, George and Sophie Spurr, Robert Foo, Jan Drake, Eddi Sponza, Jon Peters, Raymond Mol, Megan McKenzie, Jennifer McKenzie, Louise Shaw, Debra Mol, Carmol Business Management Ltd. and Conquest Consulting Inc., pursuant to which we agreed to acquire all of the 10,697,008 issued and outstanding shares of Digital Youth Network in exchange for 100,000 non-transferable share purchase warrants (to be issued to Jon Peters) and 2,674,252 shares of the common stock of our company to be shared, pro-rata according to their interest in Digital Youth Network, among all of the Digital Youth Network shareholders other than Mr. Jon Peters. Subsequently, we entered into an amendment to share purchase agreement dated as of October 1, 2003, in which we agreed to attach certain schedules to the share purchase agree ment that were inadvertently omitted when we signed the original share purchase agreement, and to make certain other changes to the original document. This amendment to the share purchase agreement was signed by all of the shareholders of Digital Youth Network except Jon Peters, who holds 400, or approximately .00003739%, of the issued and outstanding common shares of Digital Youth Network.
The transaction closed on October 7, 2003, at which time we acquired all but Mr. Peters' 400 shares of Digital Youth Network and we issued an aggregate of 2,674,252 common shares of our company to all of the shareholders of Digital Youth Network except Mr. Peters. As a result, we now own 10,696,608, or approximately .9999626%, of the issued and outstanding common shares of Digital Youth Network, and Mr. Peters continues to own 400 shares, or approximately .00003739%, of the issued and outstanding common shares of Digital Youth Network.
In the share purchase agreement dated as of July 21, 2003, which Mr. Peters signed, Mr. Peters agreed to exchange his 400 common shares of Digital Youth Network Inc. for 100,000 share purchase warrants to be issued by our company on the closing date. Each of these share purchase warrants will, if issued, grant to Mr. Peters the right to purchase one share of our company's common stock for a period of one year after the closing date of October 7, 2003, at an exercise price of $0.25. Mr. Peters refused to sign the amendment to the share purchase agreement dated as of October 1, 2003, and he refused to tender his 400 common shares of Digital Youth Network at the closing of the transaction on October 7, 2003. As at the date of this current report we have not decided what, if anything, we will do about Mr. Peters' refusal to complete this transaction on October 7, 2003.
Pursuant to the share purchase agreement, as amended, and at the closing of the transaction on October 7, 2003, we increased the number of our directors from four to six and we appointed Daniel Reitzik and Roland Sartorius to our board of directors. Although not required to do so by the terms of the share purchase agreement, Mr. Greyson Hand and Dr. Dennis Sinclair resigned from our Board on October 7, 2003. Also, at closing, Jerry McKenzie, who continues to be a member of our board of directors, resigned from the office of Secretary of our company and we appointed Daniel Reitzik to the office of Chief Operating Officer and Jason Jaspar to the office of Secretary of our company.
About Digital Youth Network
Digital Youth Network is a federally incorporated Canadian corporation with its principal place of business in the Province of British Columbia, Canada. Digital Youth Network was originally formed as a British Columbia corporation on October 4, 2001, under the name PCS Media Inc. On November 12, 2002 it was continued under the federal laws of Canada under the name Digital Youth Network Inc. Digital Youth Network's principal place of business is located at Suite 302, 1040 Hamilton Street, Vancouver, B.C. V6B 2R9.
Digital Youth Network integrates wireless and Internet technologies and print media to provide services and advertising to North American teenagers. Digital youth, or generation "DY", refers to the generation currently 13 to 18 years of age. With parental permission, Digital Youth Network provides cellular telephones to high school students in participating school districts. These cellular telephones provide participating students with free access to 24-hour crisis lines and 911 service, free incoming text messaging from parents and friends when sent through the Digital Youth Network system, and low cost prepaid airtime. Participating schools can send safety alerts and emergency text messages to participating students when necessary. Digital Youth Network sells to advertisers the opportunity to deliver advertising messages to its member students using text messaging, magazine, email, direct mail to students' homes and via the Internet on one of Digital Youth Networks' web-pages. Low cost prepaid airtime i s available to the students through Digital Youth Network's retail store network and we are currently working to make it available online at the company's website located at www.digitalyouth.ca.
On November 19, 2002, Digital Youth Network Inc. implemented its pilot program in Surrey, British Columbia, enrolling 4,000 students out of the total target population of 20,000 students. On June 15, 2003, Digital Youth Network completed a distribution agreement with the Toronto School Board that will permit Digital Youth Network Inc. to distribute promotional materials to the approximately 125,000 generation DY students enrolled in Toronto schools.
Digital Youth Network derives its revenues from the sale of targeted text message advertising, cellular telephone accessories and air-time, market research and direct mail.
Our Business Strategy
As at October 15, 2003, we had signed up approximately 13,000 subscribers to our Digital Youth Network program. We are currently negotiating distribution agreements with the City of Burnaby, which has a total target population of 20,000 students, the City of Vancouver, which has a total target population of 20,000 students, and the Simcoe District, which has a total target population of 10,000 students. During the balance of the current financial year ending August 31, 2004, we plan to introduce our program to the Peel District, which has a total target population of 50,000 students, the Toronto Catholic School Board, which has a total target population of 70,000 students, Ottawa Carleton, which has a total target population of 30,000 students, and the Calgary School District, which has a total target population of 40,000 students.
As we open each new location and we begin to bring subscribers 'on'line', we will need to locate and staff retail space from which we can sign-up and distribute products to local subscribers. To date, we have been successful in locating these operations in shopping centres. Digital Youth Network currently has 5 retail distribution centres, two in British Columbia and three in Ontario. All five locations are pursuant to month to month lease agreements. The two locations in BC are located in shopping centres. The first Digital Youth Network store was opened in November 2002 in Surrey Place Mall in Surrey, B.C. The second location was opened in October 2003 in Brentwood Town Centre, in Burnaby, B.C.. All three locations in Ontario were opened in July 2003. One in Erin Mills Town Centre located in Mississauga, the second in Shoppers World located in Brampton and the third in Toronto. DY is currently leasing its head office space at 302 - 1040 Hamilton Street, Vancouver, BC V6B 2R9 on a month-to-month basis wi th the option of renewing for long term.
Our Sales & Marketing Strategy
Digital Youth Network pays participating School Districts to promote its Digital Youth Network program to their students and parents.
Digital Youth Network sells memberships in its Digital Youth Network program to students in participating school districts. Included in its membership package are a wireless telephone handset and a number of prepaid minutes of talk time. The prepaid minutes are provided by Microcell Inc., while the handset is provided by Digital Youth Network. Digital Youth Network also sells to advertisers the ability to send advertising messages to its community of youth members. This includes text message advertising messages sent directly to members' handsets, Internet presence at the Digital Youth Network Website located at www.DigitalYouth.ca, direct mail to members' homes and polling and market research through Internet and wireless channels.
Our Supply Strategy
Digital Youth Network works with its subscribers and schools to promote its program. To date, Digital Youth Network's supply strategy consists of building demand for the phones before distributing them, with distribution delayed until some minimum number of subscribers (this number varies by area) have signed up and are waiting for their phones.
Competition
Digital Youth Network is a media and marketing company selling wireless telephone airtime and advertising. We compete with various wireless carriers and with other youth media and marketing companies. We use a promotional price point on our handsets in order to entice students to enroll in the program. As our price point is based on other factors besides airtime revenue, DY can offer our services at a much lower cost, due to our other revenue streams including advertising, market research, etc. Digital Youth Network has an agreement with Microcell Inc., which runs the Fido Wireless Network, that enables Digital Youth Network to target the youth customers on what we believe are competitive terms. In addition to this, we believe that our work with various School Districts gives us a competitive edge over other companies offering similar products.
Product Research and Development
We do not anticipate that we will expend any significant funds on research and development over the ten months ending August 31, 2004.
Purchase of Significant Equipment
We anticipate that we will be required to purchase an inventory of cellular telephones and related accessories sufficient to supply new members signing up with Digital Youth Network. Digital Youth Network currently uses the Siemens A56 handset for its wireless network. The Siemens A56 handset has a cost of approximately Cdn $60 (approximately U.S. $46). Although there can be no assurance that Digital Youth Network will sign up any particular number of new members, Digital Youth will need to purchase sufficient inventory to supply all new customers with wireless handsets and accessories.
RISK FACTORS
GENERAL RISKS
We are a company with a limited operating history which makes it difficult to evaluate whether we will operate profitably.
We have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies seeking to establish a new business opportunity. We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse affect on our financial condition. In addition, our operating results are dependent to a large degree upon factors outside of our control. There are no assurances that we will be successful in addressing these risks, and failure to do so may adversely affect our business.
The loss of some of our present directors and officers could harm our business.
Some of our present officers and directors, who are also officers of our new subsidiary Digital Youth Network, are key to our continuing operations and we rely upon the continued service and performance of these officers and directors and their knowledge and ability to maintain our current level of business and to expand our business, which is key to our future success. Although these officers or directors are parties to written employment agreements with our company, any of them could leave with little or no prior notice. We cannot be assured that we can persuade these people to continue their employment with our company, or that we can do so on terms that are satisfactory to our company.
We expect that our business will expand rapidly over the near future. This will result in a need for additional employees to staff new locations and to handle the increased flow of our inventory. If we are unable to hire and retain technical, sales and marketing and operational personnel, our business could be materially adversely affected. Competition for these individuals in the technology sector - especially in the telecommunications field - is intense, and we may not be able to attract, assimilate, or retain additional highly qualified personnel in the future. The failure to attract, integrate, motivate and retain these employees could harm our business.
In addition, there can be no assurance that we will be able to manage successfully any business opportunity or business combination. Failure to manage anticipated growth effectively and efficiently could have a materially adverse effect on our business.
If we are unable to obtain additional capital to finance the development of our business, we may be required to delay, scale back or eliminate the development of our business.
We anticipate that we will require additional financing now that we have completed our business combination with Digital Youth Network. We would likely secure any additional financing necessary through a private placement of our common shares.
There can be no assurance that any such financing will be available upon terms and conditions acceptable to us, if at all. Our inability to obtain additional financing in a sufficient amount when needed and upon terms and conditions acceptable to us could have a materially adverse effect upon our company. In addition, if additional funds are raised by issuing equity securities, further dilution to existing or future shareholders will likely result. If adequate funds are not available on acceptable terms when needed, we may be required to delay, scale back or eliminate the development of our business. Inadequate funding could also impair our ability to compete in the marketplace, which may result in the dissolution of our company.
As a consequence of our business combination with Digital Youth Network, we are now subject to economic fluctuations within the telecommunications and advertising businesses, which could increase the risks associated with our operations.
Our current business activities are limited to the business engaged in by Digital Youth Network. Our lack of diversification may subject us to economic fluctuations within the telecommunications and the advertising businesses, which may increase the risks associated with our operations.
We have not yet received audited financial statements from Digital Youth Network. If the audited financial statements of Digital Youth Network differ materially and adversely from the financial statements prepared by Digital Youth Network's management, our business could be adversely affected.
Our company's management evaluated the opportunity to enter into a business combination with Digital Youth Network by, among other things, a review of Digital Youth Network's financial statements for the period ending May 31, 2003. These financial statements, which were attached as a schedule to the share purchase agreement, were prepared by Digital Youth Management and were neither reviewed nor audited by an independent accounting firm. Our company's auditors are currently conducting a review and audit of the financial statements of Digital Youth Network for the periods ended May 31, 2003 and August 31, 2003, respectively. If the results of the audit show that the financial condition of Digital Youth Network differs materially and adversely from the financial condition shown by the management prepared statements that were attached to the share purchase agreement, this could have a material adverse impact on our company and our business.
We may fail to use our Digital Youth Network database and our expertise in marketing to Generation DY students successfully, and we may not be able to maintain the quality and size of our database.
The effective use of our Digital Youth database and our expertise in marketing to Generation DY students will be important to our business. If we fail to capitalize on these assets, our business will not be successful.
We rely on third parties for some essential business operations, and disruptions or failures in service may adversely affect our ability to deliver goods and services to our participating students.
We depend on Microcell, Inc. for service to the cellular telephones that we provide to our participating students. This is an essential aspect of our business. We will have no control over Microcell, Inc., and we are not their only client. We may not be able to maintain a satisfactory relationship with Microcell, Inc. on acceptable commercial terms. Further, we cannot be certain that the quality of products and services that Microcell, Inc. provides will remain at the levels needed to enable us to conduct our business effectively.
Rapid changes to the technology used in our Digital Youth Network business may make our technology obsolete or require us to make large capital expenditures.
The wireless telecommunications industry is experiencing significant technological change, as evidenced by evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new products and enhancements and changes in end-user requirements and preferences. Such continuing technological advances make it difficult to predict the extent of future competition with cellular and other services. As a result, there can be no assurance that existing, proposed or as yet undeveloped technologies will not become dominant in the future and render the use of cellular telephones less profitable or even obsolete.
The actual or perceived health risks of wireless communications devices could have a material adverse effect on our business.
Reports have suggested that certain radio frequency emissions from wireless communications transmission equipment and handsets may be linked to certain medical conditions, such as cancer. Scientific investigations are ongoing to review whether radio emissions from wireless handsets and radio transmitters used in connection with wireless technologies pose health concerns, including interference with hearing aids, pacemakers and other medical equipment and devices. There can be no assurance that the findings from such studies will not have a material adverse effect on our Digital Youth Network business or will not lead to changes in government regulation. The actual or perceived health risks of wireless communications devices could adversely affect wireless communications service providers, including Microcell, Inc., our third party provider, through reduced subscriber growth, reduced network usage per subscriber, the threat of product liability lawsuits or reduced availability of financing to the wirel ess communications industry.
Microcell, Inc., a principal third party provider for Digital Youth Network, is subject to governmental regulation and licensing requirements, which may increase its operating costs and affect its ownership structure
The use of radio spectrum is regulated by Industry Canada pursuant to the Radiocommunication Act (Canada) (the "Radiocommunication Act"). Radio and spectrum licenses are issued for a term and may be renewed at Industry Canada's discretion. They may be suspended or revoked for cause, including failure to comply with the conditions of license, although revocation is rare, and licenses are usually renewed upon expiration. Industry Canada regulation can materially affect Microcell, Inc.'s costs and operations.
Microcell, Inc. is a "Canadian carrier" pursuant to the Telecommunications Act (Canada) (the "Telecommunications Act"), and therefore subject to regulation by the Canadian Radio-television and Telecommunications Commission ("CRTC"). CRTC regulation can materially affect Microcell, Inc.'s services and activities.
Microcell, Inc. is required, as a radiocommunication carrier and by the conditions of its license, to comply with the Canadian ownership and control provisions established in the Telecommunications Act and the Radiocommunication Act (the "Canadian Ownership and Control Provisions"). The Canadian Ownership and Control Provisions must also be respected by Microcell, Inc. to maintain its eligibility as Canadian carrier under the Telecommunications Act. It must also comply with the Canadian Ownership and Control Provisions, and failure to do so may affect its ability to operate as a Canadian carrier and to hold and renew its Licenses.
We are not currently subject to any direct federal, state or local regulation in the United States, other than regulations applicable to businesses generally.
To the best of our knowledge, we are not currently subject to any direct federal, state or local regulation in the United States, other than regulations applicable to businesses generally. Upon our recent acquisition of Digital Youth Network, we became engaged in the business of providing advertising and telecommunications products and services. The telecommunications industry is highly regulated and we do not have any direct experience operating in this industry. Our lack of expertise and knowledge concerning this regulatory framework could have an adverse impact on the future development of the Digital Youth Network business.
We have not generated any revenues since May 1999 and our ability to generate revenues is uncertain.
For the year ended August 31, 1999, we incurred net income from discontinued operations of $194,784. We sold this business effective May 15, 1999 and we will no longer receive any revenues from this business. We have not generated any revenues since May 1999. We have an accumulated deficit of $987,724 as at May 31, 2003. Digital Youth Network's unaudited and unreviewed financial statements show that it had revenue for the nine months ended May 31, 2003 of $44,054 and expenses for the same period of $308,162. At this time, our ability to generate any further revenues is uncertain.
We voluntary delisted from the TSX Venture Exchange (formerly the Canadian Venture Exchange) and trading in our common shares on the National Association of Securities Dealers Inc.'s OTC Bulletin Board is limited and sporadic, making it difficult for our shareholders to sell their shares or liquidate their investments.
On June 21, 2002, we voluntarily delisted our common shares from the TSX Venture Exchange (formerly the Canadian Venture Exchange). Although our common shares were approved for trading on the National Association of Securities Dealers Inc.'s OTC Bulletin Board on January 29, 2002, under the symbol "OVNIF", trading has been very limited and sporadic, making it difficult for our shareholders to sell any of their common shares and liquidate their investment.
Trading prices of our common shares may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common shares will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common shares, regardless of our operating performance.
In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.
Trading of our stock may be restricted by the SEC's "Penny Stock" regulations which may limit a stockholder's ability to buy and sell our stock.
The U.S. Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Ocean's securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny sto ck market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock tha t is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
Our By-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.
Our By-laws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been one of our directors or officers.
Investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.
Our constating documents authorize the issuance of an unlimited number of common shares and an unlimited number of preferred shares. In the event that we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change in our control.
Our by-laws do not contain anti-takeover provisions which could result in a change of our management and directors if there is a take-over of our company.
We do not currently have a shareholder rights plan or any anti-takeover provisions in our by-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.
As a result of all of our assets being located outside the United States and a majority of our directors and officers residing outside of the United States, investors may find it difficult to enforce, within the United States, any judgments obtained against our company or our directors and officers.
All of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States. In addition, a majority of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our company or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.
MANAGEMENT
As at the date of this annual report, our officers and directors, their ages, positions held and duration of positions held are as follows:
Name | Age | Position with | Date Position First Held |
Raymond Mol | 56 | President and Director | October 31, 2000 (President) |
Daniel Reitzik | 30 | Director and Chief Operating Officer | October 7, 2003 |
Roland Sartorius | 50 | Director | October 7, 2003 |
Jason Jaspar | 31 | Secretary | October 7, 2003 |
Jerry McKenzie | 48 | Director | October 31, 2000 |
Business Experience
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee, indicating the principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Raymond Mol
Mr. Mol became a Director on September 21, 1999 and our President on October 31, 2000
Mr. Mol has over 30 years' experience in the teleconstruction industry. Mr. Mol was a promoter for CallDirect Capital Corp. between January and October, 1996, and was the Chief Financial Officer and founding partner of Lifestart Multimedia from April 1993 to October 1995. Mr. Mol is a director of Healthtrac, Inc., a public company whose common shares are registered under the Securities Exchange Act of 1934. Mr. Mol previously acted as the Chief Operating Officer of Healthtrac, Inc., a position he held until June 20, 1997.
Jerry McKenzie
Mr. McKenzie became a Director on October 31, 2000.
Mr. McKenzie is the co-founder and President of Digitel Systems Inc., a privately held interconnection company established in 1984, which sells, installs and services business telephone systems and related equipment in the British Columbia marketplace. He has been a member of the Vancouver Executive Association since 1990.
Daniel Reitzik
Mr. Reitzik became a Director and Chief Operating Officer on October 7, 2003.
Mr. Reitzik has 10 years experience in the wireless industry. Mr. Reitzik founded Digital Youth Network in March 2001. From January 2000 to February 2001 Mr. Reitzik was the President of Outdoor Impressions Media, an outdoor advertising company in Nevada specifically targeting casino clients. From January 1999 to December 2000 Mr. Reitzik was a Corporate Account Manager with Telus Mobility (Regional Cellular) where he handled large accounts in education, transportation and forestry and negotiated long term wireless contracts. Mr. Reitzik began his wireless career as a sales representative with Rogers AT & T (Skyline Telecom) in June 1992. He continued with Rogers AT & T until December 1998 becoming a dealer and opening the first of three retail mall wireless locations. Mr. Reitzik is a graduate of Ampleforth College in England.
Roland Sartorius
Mr. Sartorius became a Director on October 7, 2003.
Jason Jaspar
Mr. Jaspar will became our Secretary on October 7, 2003.
Mr. Jaspar co-founded "Isitaboyorgirl.com Enterprises Inc." in 2000 an online baby photography services for new parents. In 2002 Mr. Jaspar sold this company to a public company. Mr. Jaspar was involved with A&B Sound in many different capacities from 1991 to 2000 including playing a key role in introducing improved management practices to human resources, training and education, sales manager and retail sales. Mr. Jaspar is a graduate of Trend College (a small business college) with a degree in Sales and Marketing and Business Management Graduate of the Dale Carnegie Management Program.
Management of Digital Youth Network, Inc.
Daniel Reitzik is the President of Digital Youth Network Inc. Jason Jaspar is the Secretary.
Committees of the Board
Currently our audit committee consists of Raymond Mol and Roland Sartorius. We currently do not have nominating, compensation committees or committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.
Family Relationships
There are no family relationships between any of our directors or executive officers.
Involvement in Certain Legal Proceedings
Other than as discussed below, none of our directors, executive officers, promoters or control persons have been involved in any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of theSecurities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish our company with copies of all Section 16(a) reports they file.
To the best of our knowledge, all executive officers, directors and greater than 10% shareholders filed the required reports in a timely manner, with the exception of the following:
Name | Number of | Number of Transactions Not | Failure to File |
Raymond Mol | 21 | -0-1 | 2 |
Jerry McKenzie | 21 | -0-1 | 2 |
(1) The named officer and director failed to file a Form 3 - Initial Statement of Beneficial Ownership and a Form 4 Statement of Changes in Beneficial Ownership.
Executive Compensation
The following table summarizes the compensation of our executive officers during the three years ended August 31, 2003. No other officers or directors received annual compensation in excess of $100,000 during the last three complete fiscal years.
SUMMARY COMPENSATION TABLE | ||||||||
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Name and Principal | Year | Salary | Bonus | Other | Securities | Restricted | LTIP | All Other |
Raymond Mol, | 2003 | Nil | Nil | Nil | Nil | Nil | Nil | $12,000(4) |
Richard Haderer(5) | 2003 | Nil | Nil | Nil | Nil | Nil | Nil | Nil |
Gregory Burnett(6) | 2003 | Nil | Nil | Nil | Nil | Nil | Nil | $5,000(7) |
Jerry McKenzie(8) | 2003 | Nil | Nil | Nil | Nil | Nil | Nil | Nil |
(1) Other than indicated below or otherwise in this annual report, we have not granted any restricted shares or restricted share units, stock appreciation rights or long term incentive plan payouts to the named officers and directors during the fiscal years indicated.
(2)The value of perquisites and other personal benefits, securities and property for the named officers that do not exceed the lesser of $50,000 or 10% of the total of the annual salary and bonus are not reported herein.
(3) These figures are reported in Canadian dollars.
(4)We pay Raymond Mol CDN$1,000 per month for consulting services which include general corporate maintenance and business consulting services.
(5)Richard Haderer resigned as our Secretary on January 25, 2002 and as a director of our company on September 11, 2002.
(6)Gregory Burnett resigned as our Secretary on February 18, 2003.
(7)During the year ended August 31, 2003, we paid Gregory Burnett CDN$1,000 per month for consulting services which include general corporate maintenance and business consulting services.
(8) Jerry McKenzie was our Secretary from February 27, 2003 to October 7, 2003.
Employment/Consulting Agreements
Pursuant to the Share Exchange Agreement with the shareholders of Digital Youth Network Inc. we have entered into written employment agreements with each of Daniel Reitzik, our Chief Operating Officer and director, Jason Jaspar, our Secretary, and Robert Skoko, director of Digital Youth Network. Pursuant to these employment agreements Mr. Reitzik is currently entitled to monthly compensation of $7,000, Mr. Jaspar is currently entitled to monthly compensation of $6,000 and Mr. Skoko is currently entitled to monthly compensation of $6,000. We have also entered into employment contracts with certain of our employees pursuant to which we pay monthly compensation in various amounts to each employee. We have also entered into a consulting agreement with Jan Drake pursuant to which Mr. Drake is entitled to monthly compensation of $6,000.
Each of these employment agreements with Messrs. Reitzik, Jaspar and Skoko and Mr. Drake's consulting agreement require us to issue 112,500 bonus shares to each of Daniel Reitzik, Jason Jaspar, Robert Skoko and Jan Drake in the event that Digital Youth Network meets or exceeds certain pro-forma financial criteria specified in each of the agreements.
We also pay Raymond Mol CDN$1,000 per month for consulting services which include general corporate maintenance and business consulting services. Mr. Mol provide these services pursuant to oral contracts with our company.
During the year ended August 31, 2003, we paid Gregory Burnett a total of CDN$5,000 for consulting services which include general corporate maintenance and business consulting services.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers may receive stock options at the discretion of our board of directors. Other than the management agreements discussed above, we do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.
Stock Options/SAR Grants
There were no grants of stock options or stock appreciation rights to any officers, directors, consultants or employees of our company during the year ended August 31, 2003. However, on October 7, 2003, we granted stock options to officers and directors of our company as follows:
Name | Number of Securities Underlying Options/ SARs Granted (#) | % of Total Options/ SARs Granted to Employees in Fiscal Year | Exercise Price | Expiration Date |
Raymond Mol | 50,000 | 20% | $0.25 | October 7, 2008 |
Jerry McKenzie | 50,000 | 20% | $0.25 | October 7, 2003 |
Grayson Hand | 50,000 | 20% | $0.25 | October 7, 2008 |
Greg Burnett | 50,000 | 20% | $0.25 | October 7, 2008 |
Dennis Sinclair | 50,000 | 20% | $0.25 | October 7, 2008 |
No options were exercised by our officers, directors or employees during the year ended August 31, 2003 or subsequent thereto.
Directors Compensation
We reimburse our directors for expenses incurred in connection with attending board meetings and other than indicated below, we did not pay director's fees or other cash compensation for services rendered as a director in the year ended August 31, 2003.
We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected to receive in the future options to purchase shares of common stock as awarded by our board of directors or (as to future options) a compensation committee which may be established in the future. The board of directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director. Other than indicated in this annual report, no director received and/or accrued any compensation for his services as a director, including committee participation and/or special assignments.
Security Ownership of Certain Beneficial Owners and Management.
Principal Stockholders
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as at October 7, 2003, certain information with respect to the beneficial ownership of our common stock by each shareholder known by us to be the beneficial owner of more than five percent (5%) of our common stock, and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
Name and Address of Beneficial Owner | Amount and Nature of | Percentage |
Raymond Mol | 619,231 common shares(2) | 12.30% |
Daniel Reitzik | 750,000 common shares | 15.05% |
Jerry McKenzie | 179,039 common shares(3) | 3.56% |
Roland Sartorius | Nil | N/A |
Jason Jaspar | 250,000 common shares | 5.02% |
Chris Sargent | 390,729 common shares(4) | 7.84% |
Stephen Barley | 300,000 common shares(5) | 6.02% |
Robert Skoko | 250,000 common shares | 5.02% |
Directors and Executive Officers as a Group | 1,798,270 common shares | 35.39% |
(1) Based on 4,981,814 shares of common stock issued and outstanding as of October 7, 2003. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.
(2) 113,333 of these shares are registered to Carmol Business Management Ltd., of which 100% of the shares are owned by Raymond Mol. 26,666 shares are registered to the Mol Family Trust and 100,000 shares are registered to Debra Mol, wife of Raymond Mol, and Raymond Mol exercises sole voting and dispositive control over such shares. Also includes options to purchase 50,000 shares of common stock of our company exercisable at a price of $0.25 per share until October 7, 2008.
(3) 49,560 of these shares are held by Digitel Systems Inc., a closely held company of which Mr. McKenzie holds 50% of the issued and outstanding shares. 21,333 of these shares are held in trust over which Mr. McKenzie exercises sole voting and dispositive control. 29,073 shares are held by Megan McKenzie, daughter of Jerry McKenzie, and 29,073 shares are held by Jennifer McKenzie, daughter of Jerry McKenzie, over which Jerry McKenzie exercises sole voting and dispositive control. Mr. McKenzie disclaims voting or dispositive control over the shares held in trust and the shares held by this daughters. Also includes options to purchase 50,000 shares of common stock of our company exercisable at a price of $0.25 per share until October 7, 2008.
(4)290,729 of these shares are held by Conquest Consulting Inc., a company wholly owned by Chris Sargent and Chris Sargent exercises sole voting and dispositive control over such shares.
(5) 150,000 of these shares are held by CHM Consulting Inc., a company wholly owned and controlled by Stephen Barley and Stephen Barley exercises sole voting and dispositive control over such shares and 150,000 of these shares are held by 634008 B.C. Ltd., a company wholly owned and controlled by Stephen Barley and Stephen Barley exercises sole voting and dispositive control over such shares.
Changes in Control
A change of control occurred as the result of a share exchange transaction in which our company has acquired all of the shares of Digital Youth Network Inc. and the former shareholders of Digital Youth Network Inc. have acquired 2,674,252 common shares and 100,000 share purchase warrants of our company, representing, in the aggregate, approximately 59.67% of the voting shares of our company. Digital Youth Network Inc. is a Canadian corporation incorporated under the federal laws of Canada, through which we will conduct our future business operations. Daniel Reitzik and Jason Jaspar, as a group, now own 1,000,000 shares of the common stock of our company, representing approximately 20.07% of the voting shares of our company.
Securities Authorized for Issuance Under Equity Compensation Plans
We do not currently have any compensation plans pursuant to which we are authorized to issue securities.
Certain Relationships and Related Transactions.
We have not been a party to any transaction, proposed transaction, or series of transactions in which the amount involved exceeds $60,000, and in which, to its knowledge, any of its directors, officers, five percent beneficial security holder, or any member of the immediate family of the foregoing persons has had or will have a direct or indirect material interest.
Item 7. Financial Statements and Exhibits.
<R>The following financial statements are included in this current report.
(a) Audited Financial Statements of Digital Youth Network Inc.
Independent Auditor's Report of Amisano Hanson dated January 23, 2004
Balance Sheets as at August 31, 2003 and 2002
Statements of Loss for the year ended August 31, 2003 and for the period October 4, 2001 (Date of Inception) to August 31, 2002
Statements of Cash Flows for the year ended August 31, 2003 and for the period October 4, 2001 (Date of Inception) to August 31, 2002
Statements of Stockholders' Equity for the period October 4, 2001 (Date of Inception) to August 31, 2003
Notes to the Financial Statements
(b) Pro Forma Consolidated Statement of Operations of Ocean Ventures Inc.
Pro Forma Consolidated Statement of Operations for the year ended August 31, 2003
Pro Forma Consolidated Statement of Operations for the three months ended November 30, 2003
Notes to the Pro Forma Consolidated Statements of Operations for the year ended August 31, 2003 and the three months ended November 30, 2003
DIGITAL YOUTH NETWORK INC.
REPORT AND FINANCIAL STATEMENTS
August 31, 2003 and 2002
(Stated in US Dollars)
TerryAmisano Ltd. | AmisanoHanson |
KevinHanson,CA, CPA (Nevada) | CharteredAccountants and |
| CertifiedPublicAccountant |
INDEPENDENT AUDITORS' REPORT
To the Stockholders,
Digital Youth Network Inc.
We have audited the accompanying balance sheets of Digital Youth Network Inc. as of August 31, 2003 and 2002 and the related statements of loss, cash flows and stockholders' equity for the year ended August 31, 2003 and for the period October 4, 2001 (Date of Inception) to August 31, 2002. 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 of America. Those standards require that we plan and perform an audit to obtain reasonable assurance 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 audit provides a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material respects, the financial position of Digital Youth Network Inc. as of August 31, 2003 and 2002 and the results of its operations and its cash flows for the year ended August 31, 2003 and for the period October 4, 2001 (Date of Inception) to August 31, 2002 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared using accounting principles generally accepted in the Unites States of America assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a working capital deficiency and has incurred substantial losses since inception, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to their planned financing and other matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Vancouver, Canada | "AMISANO HANSON" |
January 23, 2004 | CharteredAccountants and |
| CertifiedPublicAccountant (Nevada) |
DIGITAL YOUTH NETWORK INC.
BALANCE SHEETS
August 31, 2003 and 2002
(Stated in US Dollars)
ASSETS |
| 2003 |
| 2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash | $ | 13,955 | $ | 1,012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goods and services taxes receivable | 15,980 | 2,981 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share subscriptions receivable | - | 9,623 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | 17,966 | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses |
| 45,140 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 93,041 |
| 13,616 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital assets - Note 3 |
| 171,505 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 264,546 | $ | 13,616 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LIABILITIES |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank indebtedness | $ | 27,694 | $ | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued liabilities - Note 7 |
| 149,442 |
| 10,613 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible debenture - Note 4 |
| 18,041 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advances payable - Note 5 |
| 340,622 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Due to shareholders - Note 6 |
| 54,061 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 589,860 |
| 10,613 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY (DEFICIENCY) |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital stock |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Authorized: |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unlimited Common shares without par value |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issued: |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10,697,008 Common shares (2002: 7,270,285) |
| 248,688 |
| 91,784 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) |
| (30,783) |
| 508 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated deficit |
| (543,219) |
| (89,289) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| (325,314) |
| 3,003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 264,546 | $ | 13,616 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
Subsequent Event and Commitments - Note 10
DIGITAL YOUTH NETWORK INC.
STATEMENTS OF LOSS
for the year ended August 31, 2003
and for the period October 4, 2001 (Date of Inception) to August 31, 2002
(Stated in US Dollars)
|
|
|
| October 4, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | $ | 114,497 | $ | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of Sales |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Merchandise |
| 8,921 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Text messaging |
| 27,396 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization - cellular phones | 96,071 | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 132,388 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and Administrative Expenses |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advertising and promotion |
| 28,294 |
| 12,159 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization |
| 2,838 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank charges and interest |
| 3,142 |
| 212 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consulting fees - Note 7 |
| 144,166 |
| 2,859 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance |
| 1,127 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Licenses and dues |
| 3,550 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Management fees - Note 7 |
| 101,690 |
| 44,323 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Office, telephone and miscellaneous |
| 24,994 |
| 3,139 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Professional fees |
| 6,375 |
| 5,502 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rent |
| 22,979 |
| 4,577 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Travel and entertainment |
| 14,843 |
| 3,796 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wages and benefits |
| 72,296 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Website costs |
| 9,745 |
| 12,722 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 436,039 |
| 89,289 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period |
| (453,930) |
| (89,289) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss: |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment |
| (31,291) |
| 508 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss for the period | $ | (485,221) | $ | (88,781) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and diluted loss per share | $ | (0.05) | $ | (0.01) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average number of common shares outstanding |
| 9,405,825 |
| 5,982,745 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DIGITAL YOUTH NETWORK INC.
STATEMENTS OF CASH FLOWS
for the year ended August 31, 2003
and for the period October 4, 2001 (Date of Inception) to August 31, 2002
(Stated in US Dollars)
|
|
|
| October 4, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Activities |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | $ | (453,930) | $ | (89,289) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Items not affecting cash: |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization |
| 98,909 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consulting fees |
| 48,325 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in non-cash working capital balances related to operations: |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goods and services taxes receivable |
| (12,999) |
| (2,981) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory |
| (17,966) |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses |
| (45,140) |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued liabilities |
| 138,829 |
| 10,613 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| (243,972) |
| (81,657) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investing Activity |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital assets acquired |
| (270,414) |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing Activities |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank indebtedness |
| 27,694 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued |
| 118,202 |
| 82,161 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible debenture issued |
| 18,041 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advances payable |
| 340,622 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholder advances |
| 54,061 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 558,620 |
| 82,161 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of foreign currency translation on cash |
| (31,291) |
| 508 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net increase in cash |
| 12,943 |
| 1,012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, beginning of period |
| 1,012 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, end of period | $ | 13,955 | $ | 1,012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental disclosures with respect to cash flows - Note 9
DIGITAL YOUTH NETWORK INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
for the period October 4, 2001 (Date of Inception) to August 31, 2003
(Stated in US Dollars)
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number |
| Amount |
| Income (Loss) |
| Deficit |
| (Deficiency) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued on incorporation | 5,000,000 | $ | 32 | $ | - | $ | - | $ | 32 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issued for cash pursuant to: |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
- Private placement - at $0.16 per share | 100,000 |
| 15,911 |
| - |
| - |
| 15,911 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
- Share purchase agreement | 2,170,285 |
| 82,205 |
| - |
| - |
| 82,205 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less: finders fee | - |
| (6,364) |
| - |
| - |
| (6,364) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | - |
| - |
| - |
| (89,289) |
| (89,289) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - |
| - |
| 508 |
| - |
| 508 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, August 31, 2002 | 7,270,285 |
| 91,784 |
| 508 |
| (89,289) |
| 3,003 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issued for cash pursuant to: |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
- Share purchase agreement | 1,318,863 |
| 47,541 |
| - |
| - |
| 47,541 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
- Private placement - at $0.06 per share | 407,860 |
| 27,281 |
| - |
| - |
| 27,281 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
- Private placement - at $0.03 per share | 1,000,000 |
| 34,882 |
| - |
| - |
| 34,882 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less: finders fee | - |
| (1,125) |
| - |
| - |
| (1,125) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share issued in exchange for services rendered | 700,000 |
| 48,325 |
| - |
| - |
| 48,325 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the year | - |
| - |
| - |
| (453,930) |
| (453,930) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - |
| - |
| (31,291) |
| - |
| (31,291) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, August 31, 2003 | 10,697,008 | $ | 248,688 | $ | (30,783) | $ | (543,219) | $ | (325,314) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DIGITAL YOUTH NETWORK INC.
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2003
(Stated in US Dollars)
Note 1Nature and Continuance of Operations
The Company was incorporated on October 4, 2001, under the Company Act of the Province of British Columbia as PCS Media Inc. On November 12, 2002, the Company was granted continuance under the Canada Business Corporation Act and changed its name to Digital Youth Network Inc. The Company's operations focus on the distribution of cellular phones to the 18 years of age and under age group so as to be able to communicate with and, in the future, generate advertising revenue via text messaging to this group. At August 31, 2003, substantially all of the Company's assets and operations are located in Canada.
These financial statements have been prepared on a going concern basis. As at August 31, 2003, the Company has a working capital deficiency of $496,819 and has accumulated a deficit of $543,219 since inception. Subsequent to August 31, 2003, the Company was involved in a reverse acquisition of a public company quoted for trading on the Over-The-Counter Bulletin Board in the United States of America (Note 10). Management plans to finance the Company through equity financings until operations can generate positive cash flow. The Company's ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
Note 2Summary of Significant Accounting Policies
These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involved the use of estimates, which have been made using careful judgement. Actual results may differ from these estimates.
The financial statements, in management's opinion, have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
Inventory
The Company's inventory consists of cellular phone parts and accessories and is recorded at the lower of cost and market value.
Capital Assets and Amortization
Capital assets are recorded at cost. Amortization is provided using the following methods at the following annual rates:
Computer and office equipment | 30% declining balance |
Cellular phones | 12 months straight-line |
Note 2Summary of Significant Accounting Policies - (cont'd)
Revenue
Revenue is recorded as a membership fees are paid or cell phone accessories and access time are sold. Advertising revenue is recognized when the advertisement is provided.
Cellular phones are given to members and are returnable upon cessation of membership. Membership payments are one time payments and are non-refundable. Due to the short term nature and turnover of cellular phone users in the industry, membership fees are recognized in full at time of payment.
Foreign Currency Translation
The Company translates amounts from the functional currency, Canadian dollars, into the reporting currency, United States dollars in accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation". At each balance sheet date, recorded balances that are denominated in a currency other than US dollars are adjusted to reflect the current exchange rate which may give rise to a cumulative translation adjustment.
Monetary assets and liabilities are translated into the reporting currency at the exchange rate in effect at the end of the period. Non-monetary assets and liabilities are translated at the exchange rate prevailing when the assets were acquired or the liabilities assumed. Revenues and expenses are translated at the rate approximating the rate of exchange on the transaction date. All related exchange gains and losses are included in the determination of net income (loss) for the period.
Income Taxes
The Company uses the liability method of accounting for income taxes pursuant to Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("FAS 109"). Under the assets and liability method of FAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Basic and Diluted Earnings (Loss) Per Share
The Company reports basic earnings or loss per share in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings or loss per share is computed using the weighted average number of shares outstanding during the year. Diluted loss per share has not been provided as it would be anti-dilutive.
Fair Value of Financial Instruments
The carrying values of the Company's financial instruments, consisting of cash, bank indebtedness, accounts payable and accrued liabilities, convertible debenture, advances payable and due to shareholders approximate their fair values due to the short-term maturity of such instruments. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Note 2Summary of Significant Accounting Policies - (cont'd)
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted could have a material effect on the accompanying financial statements.
Note 3Capital Assets
|
|
|
| 2003 |
|
|
| 2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| Accumulated |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Cost |
| Amortization |
| Net |
| Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computer and office equipment | $ | 39,846 | $ | 2,838 | $ | 37,008 | $ | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cellular phones |
| 230,568 |
| 96,071 |
| 134,497 |
| - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 270,414 | $ | 98,909 | $ | 171,505 | $ | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 4Convertible Debenture
On March 25, 2003, the Company issued a convertible debenture in the amount of $16,938. The convertible debenture bears interest at 6% per annum and is secured by a general security agreement. The principal sum of this debenture is convertible, at the option of the holder into common shares of the Company at a price of $0.02 per share. This debenture was assigned to Ocean Ventures Inc. ("Ocean") subsequent to August 31, 2003.
Note 5Advances Payable - Note 10
Advances payable at August 31, 2003 consists of the following advances from Ocean as follows:
|
| 2003 |
| 2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible debenture, bearing interest at 6% per annum, secured by all of the property of the Company, convertible into common shares of the Company at CDN$0.02 per share at the option of the debenture holder. |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advance, unsecured, non-interest bearing with no specific terms for repayment. |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 340,622 | $ | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6Due to Shareholders
The amounts due to shareholders are unsecured, non-interest bearing and have no specific terms for repayment.
Note 7Related Party Transactions - Note 10
The Company incurred the following expenses charged by companies with common directors:
|
|
|
|
| October 4, 2001 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consulting fees |
| $ | 29,704 | $ | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Management fees |
|
| 101,690 |
| 44,323 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| $ | 131,394 | $ | 44,323 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The charges were measured by the exchange amount, which is the amount agreed upon by the transacting parties.
Accounts payable and accrued liabilities as at August 31, 2003 includes $26,920 (2002: $1,076) due to directors of the Company or companies with common directors.
Note 8Income Taxes and Deferred Tax Assets
No provision for income taxes has been provided in these financial statements as the Company has incurred losses. At August 31, 2003, the Company has net operating losses, which expire commencing in 2009 totalling approximately $542,000. The tax benefit of these losses, if any, has not been recorded in the financial statements.
The following table summarizes the significant components of the Company's deferred tax assets:
|
| 2003 |
| 2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Tax Assets |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-capital losses carried forward | $ | 203,900 | $ | 34,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation allowance |
| (203,900) |
| (34,000) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | - | $ | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The amount taken into income as deferred tax assets must reflect that portion of the income tax loss carryforwards, which is likely to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax loss carryforwards, regardless of their time of expiry.
Note 9
Other Supplemental Disclosures |
|
| 2003 |
| 2002 |
Cash paid during the year for interest |
$
-
$
-
Cash paid during the year for income taxes
$
-
$
-
Non-cash Transactions
During the year ended August 31, 2003, 700,000 shares were issued for services valued at $48,325.
Note 10Subsequent Event and Commitments - Note 4
Reverse Acquisition of Ocean Ventures Inc.
Pursuant to a share purchase agreement dated July 21, 2003 and amended October 1, 2003, with Ocean, a public company quoted for trading on the Over-The-Counter Bulletin Board in the United States of America, Ocean issued 2,674,252 common shares and it has agreed to issue 100,000 share purchase warrants, exercisable at $0.25 per warrant for one common share until October, 2003, for all of the outstanding shares of the Company. As a result of this share exchange, the shareholders of the Company will acquire control of Ocean and consequently the Company is deemed to be the acquirer. The acquisition will be accounted for using the purchase method of accounting, as a reverse acquisition. A finders' fee of 500,000 common shares of Ocean at a value of $0.25 per share has been paid.
Note 11Economic Dependence
The Company is dependent on one supplier of cellular phones and their airtime network.
OCEAN VENTURES INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
August 31, 2003 and November 30, 2003
(Stated in US Dollars)
(Unaudited)
OCEAN VENTURES INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended August 31, 2003
(Stated in US Dollars)
(Unaudited)
| Digital Youth | Ocean | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | $114,497 | $- | $114,497 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Direct costs |
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cellular phones and accessories | 8,921 | - | 8,921 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Text messaging | 27,396 | - | 27,396 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization - cellular phones | 96,071 | - | 96,071 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 132,388 | - | 132,388 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and Administrative Expenses |
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting and audit | - | 14,700 | 14,700 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advertising and promotion | 28,294 | - | 28,294 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization - equipment | 2,838 | 200 | 3,038 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank charges and interest | 3,142 | 424 | 3,566 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business investigations | - | 22,226 | 22,226 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consulting fees | 144,166 | - | 144,166 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Filing fees | - | 2,050 | 2,050 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange loss | - | 5,283 | 5,283 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance | 1,127 | - | 1,127 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal fees | 6,375 | 38,889 | 45,264 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Licences and dues | 3,550 | - | 3,550 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Management fees | 101,690 | 12,151 | 113,841 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Office and miscellaneous | 24,994 | 2,956 | 27,950 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rent | 22,979 | - | 22,979 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transfer agent | - | 3,911 | 3,911 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Travel and entertainment | 14,843 | - | 14,843 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wages and benefits | 72,296 | - | 72,296 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Website | 9,745 | - | 9,745 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 436,039 | 102,790 | 538,829 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss before other item | (453,930) | (102,790) | (556,720) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other item: |
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | - | 1,702 | 1,702 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | $(453,930) | $(101,088) | $(555,018) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pro forma loss per share |
|
| $(0.09) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average number of shares |
|
| 6,226,670 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
OCEAN VENTURES INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the three months ended November 30, 2003
(Stated in US Dollars)
(Unaudited)
| Digital Youth | Ocean | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | $51,809 | $- | $51,809 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Direct costs |
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cellular phones and accessories | 2,643 | - | 2,643 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Text messaging | 70,564 | - | 70,564 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization - cellular phones | 75,537 | - | 75,537 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 148,744 | - | 148,744 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and Administrative Expenses |
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting and audit | - | 15,006 | 15,006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advertising and promotion | 63,941 | - | 63,941 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization - equipment | 3,382 | 95 | 3,477 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank charges and interest | 2,607 | 104 | 2,711 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consulting fees | 36,244 | - | 36,244 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Courier | 5,194 | - | 5,194 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign exchange | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest on convertible debenture | 1,125 | - | 1,125 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Licences and dues | 263 | - | 263 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Legal fees | 536 | 28,054 | 28,590 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Management fees | 19,422 | 4,502 | 23,924 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Office and miscellaneous | 13,014 | 401 | 13,415 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rent | 32,425 | - | 32,425 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repairs and maintenance | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | - | 7,503 | 7,503 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transfer agent | - | 1,409 | 1,409 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Travel and entertainment | 26,558 | 5,124 | 31,682 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wages and benefits | 67,574 | - | 67,574 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Website | 1,936 | - | 1,936 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 274,221 | 62,198 | 336,419 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | $(371,156) | $(62,198) | $(433,354) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pro forma loss per share |
|
| $(0.07) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average number of shares |
|
| 6,226,670 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
OCEAN VENTURES INC.
NOTES TO THE PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
for the year ended August 31, 2003
and the three months ended November 30, 2003
(Stated in US Dollars)
(Unaudited)
Note 1Basis of Presentation
The accompanying unaudited pro forma consolidated statements of operations give effect to the acquisition of Ocean Ventures Inc. ("Ocean") by Digital Youth Network Inc. ("DYNI"), a Canada Business Corporation, on October 7, 2003 pursuant to a reverse acquisition.
The unaudited pro forma consolidated statements of operations of Ocean included herein have been prepared by management of Ocean in accordance with the accounting principles generally accepted in the United States of America. They have been prepared from information derived from the August 31, 2003 audited and the November 30, 2003 unaudited statements of operations of Ocean, and the August 31, 2003 audited and the November 30, 2003 unaudited statements of operations of DYNI, together with other information available to the corporations. In the opinion of management of Ocean, these unaudited pro forma consolidated statements of operations include all adjustments necessary for fair presentation of the acquisition of DYNI by Ocean as described below.
In preparing the pro forma consolidated statements of operations, no adjustments have been made to reflect the additional costs or savings that could have resulted from combining the operations of Ocean and DYNI.
The unaudited pro forma consolidated statements of operations should be read in conjunction with the historical statements of operations and notes thereto referred to above. The unaudited pro forma consolidated statements of operations gives effect to the acquisition of Ocean as if it had occurred at the start of the fiscal period beginning on September 1, 2002. These unaudited pro forma statements of operations are not necessarily indicative of the results of operations, which would have resulted if the combination and related transactions had actually occurred on those dates. </R>
Exhibits
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-B.
SEC Ref. No. Title of Document
(3) Articles of Incorporation and Bylaws
3.1 Articles of Incorporation, effective November 22, 1996(1)
3.2 Certificate of Incorporation, effective November 22, 1996(1)
3.3 By-Laws, effective November 30, 1996(1)
3.4 Articles of Amendment, dated February 22, 1997(1)
3.5 Certificate of Amendment of Articles of Incorporation, effective February 27, 1997(1)
3.6 Certificate of Amendment and Registration of Restated Articles, effective January 31, 2000(1)
3.7 Certificate of Change of Name (British Columbia), dated January 16, 2001(1)
(10) Material Contracts
**Exhibits 10.1 through 10.3 are incorporated by reference from our Form 10-SB Registration Statement (as amended), originally filed on May 11, 2001
10.1 Convertible Debenture between the Company and Sourcexport, Inc., dated December 5, 2000(1)
10.2 Convertible Debenture Subscription Agreement between the Company and Sourcexport, Inc., dated December 1, 2000(1)
10.3 Escrow Agreement between the Company, Sourcexport, Inc. and Clark, Wilson, dated December 1, 2000(1)
10.4 Share Purchase Agreement dated as of July 21, 2003, between the Company and all of the shareholders of Digital Youth Network, Inc. (2)
10.5 Convertible Debenture dated April 28, 2003, between the Company and Digital Youth Network, Inc. (2)
10.6 <R>Amendment to Share Purchase Agreement dated October 1, 2003, between the Issuer and all of the shareholders of Digital Youth Network Inc.(3) </R>
10.7 <R>Employment Agreement dated October 1, 2003 between Digital Youth Network Inc. and Daniel Reitzik(3) </R>
10.8 <R>Employment Agreement dated October 1, 2003 between Digital Youth Network Inc. and Robert Skoko(3) </R>
10.9 <R>Employment Agreement dated October 7, 2003 between Digital Youth Network Inc. and Jason Jaspar(3) </R>
(1)Incorporated by reference from our Form 10-SB Registration Statement (as amended), originally filed with the Securities and Exchange Commission on May 11, 2000.
(2)Incorporated by reference from our Form 10-QSB filed with the Securities and Exchange Commission on August 14, 2003.
<R> (3)Incorporated by reference from our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 10, 2003. </R>
(21) Subsidiaries
21.1 Digital Youth Network, Inc.
<R> (23) Consent
23.1 Consent of Amisano Hanson dated February 19, 2004</R>
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 hereunto duly authorized.
OCEAN VENTURES INC.
<R>/s/ Raymond Mol</R>
Raymond Mol, President and Director
Date: <R>February 19, 2004. </R>