Historically, we charged new members of our Digital Youth Network a one time non-refundable membership fee of $50 (Canadian). We have since ceased charging membership fees to our subscribers. We believe that our primary source of revenue will be from advertisers, including those desiring access to our more than 25,000 DY member students, using various combinations of text messaging, email, direct mail to students’ homes and via the Internet on one of our web-pages, or to use our members as a market research tool. We also believe that we can increase the size of our membership more easily if we do not charge a membership fee.
We continue to work with Universal Music to promote new artists and their album releases to our subscriber community, and we continue to explore ways to provide our subscribers with access to legally downloadable music through our website while simultaneously providing Universal Music with a new channel for distribution of its products. In return, Universal Music provides us with merchandise for distribution to our members both as incentives for their participation in our market research and as incentives to young people signing up for new memberships in our Digital Youth community. Universal Music, a division of Universal Studios Canada Ltd., produces, manufactures, markets, sells and distributes recorded music and represents artists from Canada and around the world. Our company continues to explore how best to integrate legally downloadable music with our other current products.
We are also continuing to expand our ability to integrate our SMS messaging capability with video advertising in shopping malls across Canada. We recently entered into an arms-length agreement with Digital Advertising Network Inc., an unrelated Canadian company that operates large video screens in shopping malls across Canada, whereby our companies will offer promotions through interactive programs that will enable patrons to interact with the advertisers using SMS messaging in order to receive prizes, coupons and special offers. Our agreement with Digital Advertising Network Inc. anticipates that we will share revenues derived from these interactive campaigns.
In mid-February, 2005, we entered into an agreement with Pacific Newspaper Group Inc in which we agreed that Pacific Newspaper Group will publish a full page “Mobile On Demand” page in its Province newspaper, which is a newspaper of general circulation in the greater Vancouver metropolitan area. We are responsible for all design and content of the Mobile On Demand page, which will be published in each Sunday edition of the Province newspaper from March 3, 2005 until May 30, 2005.
The Mobile On Demand page contains games, prizes, coupons and free content that can be downloaded to a cellular phone and encourages readers to send text messages on their cellular phones. We have agreed with Pacific Newspaper Group to share in the revenue generated from text messages sent by readers in response to advertisements displayed on the Mobile On Demand page and from our sale of advertising space on the Mobile On Demand page.
We will support advertising campaigns on the Mobile On Demand page with direct mail, email, text messaging and online communication with its existing subscriber community of nearly 30,000 Canadian teenagers.
We intend to explore ways to expand this relationship with Pacific Newspaper Group to a national level.
The following discussion of our financial condition, changes in financial condition and results of operations for the three months ended February 28, 2005 and February 29, 2004 should be read in conjunction with our most recent audited annual financial statements, which form part of our annual report on Form 10-KSB filed on January 13, 2005, the unaudited interim financial statements forming part of this quarterly report, and, in each case, the notes thereto.
The following discussion should be read in conjunction with our consolidated audited financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report, particularly in the section entitled “Risk Factors” beginning on page 14 of this quarterly report.
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Our consolidated audited financial statements and the pre-acquisition financial statements of our subsidiary (the predecessor) are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Overview
We are still in our infancy as a viable commercial entity, and consequently our focus has been on the identification of market needs, the development of products and services to meet these needs, and the branding of our company and our services. We anticipate that the expected growth in revenues will assist us in attracting additional financing to allow us to add the needed resources in order to further support the growth of our operations. Despite our expectations, there are no assurances that an increase in our revenues can be achieved, or that we will be able to attract additional financing on acceptable terms, if at all. Should we be unable to achieve the anticipated revenue growth or to attract additional financing on acceptable terms, our ongoing business and future success may be adversely affected.
Results of Operations
Three month periods ended February 28, 2005 and February 29, 2004
We have reported a net loss for the three months ended February 28, 2005 of $200,155 ($165,009 after adjustment for foreign currency translation) or $0.02 per share based on a weighted average number of common shares outstanding of 9,462,574, compared to a net loss of $254,331 ($254,925 after adjustment for foreign currency translation) or $0.04 per share for the three months ended February 29, 2004, based on a weighted average number of common shares outstanding of 6,633,966.
During the three months ended February 28, 2005, we had revenue of $12,651, compared to revenue of $33,247 for the three months ended February 29, 2004. This decrease in revenue is due primarily to our decision to cease the retail sale of telephones and memberships.
We generate our revenues through the sale of market research and advertising and, to a lesser extent, from subscriber referrals to our strategic partner Microcell, Inc.(which we discontinued at December 31, 2004 upon the expiration of our agreement with Microcell, Inc.) . Our advertising services include wireless text messaging, electronic mail, direct mail and internet advertising. The revenues that we derive from the sale of these services vary depending on the nature and scope of the advertising campaign.
Our general and administrative expenses for the three months ended February 28, 2005 were $212,688 compared to $196,011 for the three months ended February 29, 2004. Overall, this increase is due to a substantial increase in the cost of advertising and promotion and an increase in management fees. The cost of advertising and promotion for the three months ended February 28, 2005 was $62,746, compared to $8,229 for the three months ended February 29, 2004. Management fees for the three months ended February 29, 2004 were $34,946, compared to $43,095 for the three months ended February 28, 2005. In contrast, most of our other general and administrative expenses decreased. By way of example, the cost of travel for the three months ended February 29, 2004 was $9,136, while the cost of travel for the three months ended February 28, 2005 was $4,914. The cost of wages and benefits decreased substantially, from $44,165 for the three months ended February 29, 2004 to $18,250 for the three months ended February 28, 2005. The higher costs of advertising and promotion during the quarter ended February 28, 2005 were due primarily to the introduction of a monthly email newsletter, a direct mail campaign and a shift in focus in favour of increased marketing activity. The general decrease in most of our general and administrative expenses is due primarily to our decision to consolidate our operations into one office in downtown Vancouver and discontinue our retail operations, resulting in an overall decrease in our need for office space, personnel and travel.
Liquidity and Capital Resources
As at February 28, 2005
As at February 28, 2005, we had a cash position of $279 and a net working capital deficiency of $825,325.
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We do not have sufficient cash resources to fund our normal operating expenses, which total approximately Cdn $40,000 (US $30,000) per month, for the balance of the fiscal year.
Plan of Operation - Cash Requirements
Over the twelve month period ending February 28, 2006, we anticipate that we will require additional operating capital of approximately $400,000. We plan to raise approximately $150,000 of this operating capital from operations and we plan to raise the balance of approximately $250,000 through private placements of our equity securities and/or debt financing. We plan to use this money to attract and sign-up additional member-subscribers, and to pursue and grow our relationships with Digital Advertising Network Inc., Universal Music, Pacific Newspaper Group and other industry partners and sponsors, and to implement our plan to sell downloadable music through the Digital Youth Network, including the implementation of a working plan whereby our subscribers can easily pay for the music that they download.
Product Research and Development
We do not anticipate that we will expend any significant funds on research and development over the twelve months ending February 28, 2006.
Purchase of Significant Equipment
We do not anticipate that we will need to purchase any significant equipment during the next 12 months.
Employees
Prior to the date of our acquisition of our subsidiary company Digital Youth Network Inc. on October 7, 2003, we had no employees. As at February 28, 2005, we still had no employees but our subsidiary company Digital Youth Network Inc. employed 4 people on a full time basis and a varying number of consultants and casual labour on an as-needed basis. These employees and consultants perform all of the necessary management and accounting functions for our company, in addition to customer service, website design and development, advertising and sales. As at February 28, 2005, we were spending an aggregate of approximately $40,000 per month on consulting fees, wages, benefits, withholdings for all of our employees, rent and general overhead. We do not anticipate an increase in the number of our employees or consultants, other than fluctuations in the normal course of scheduled promotional events for our subscribers, over the next 12 months.
Offices
We currently share office space with our subsidiary. Our principal place of business is located at Suite 302, 1040 Hamilton Street, Vancouver, B.C., Canada V6B 2R9, where we rent approximately 2,300 square feet of office space, together with parking, for a monthly rent of $4,600 (Canadian).
Factors That May Affect Our Future Results
An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this quarterly report in evaluating Digital Youth Network Corp. and its business before purchasing shares of common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The trading price of the shares of our common stock could decline due to any of these risks, and you could lose all or part of your investment.
New Accounting Pronouncements
Our management does not believe that any recently issued but not yet effective accounting standards, if currently adopted, could have a material effect on our company or our operations.
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Application of Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.
Going Concern
Our financial statements have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, our financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.
In order to continue as a going concern, our company requires additional financing to fund its operations. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are unable to continue as a going concern, we would likely be unable to realize the carrying value of our assets.
RISK FACTORS
GENERAL RISKS
We have not generated any significant revenues since May 1999 and our ability to generate revenues and operate at a profit is uncertain.
We have an accumulated deficit of $2,262,657 as at February 28, 2005. We had revenue for the three month period ended February 28, 2005 of $12,651 and expenses, including direct costs, for the same period of $212,688. At February 28, 2005, we had cash in the bank of $279. Our monthly operating expenses are approximately $40,000. We do not currently have the money necessary to continue our operations and our ability to generate any further revenues is uncertain. If we do not begin to generate significant revenues that enable us to operate profitably, our business will fail.
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.
Because we cannot fund the cost of our operations from our revenues, we anticipate that we will require additional financing in order to continue to operate, grow our subscriber base and begin to generate significant revenues. We intend to secure any additional financing necessary through private placements of our common shares, but 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 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.
We require additional financing in order to continue in business as a going concern, the availability of which is uncertain.
Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the annual financial statements for the year ending August 31, 2004, our independent auditors included additional comments in
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their auditors’ report indicating concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our independent auditors. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We have 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. The failure to retain these key persons could harm our business.
We are subject to economic fluctuations within the telecommunications and advertising businesses.
Our current business activities are limited to the business engaged in by our subsidiary, 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 may fail to use our database and our expertise in marketing to our members 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 our generation DY members will be important to our business. If we fail to capitalize on these assets, our business may not be successful.
We rely on third parties for some essential business operations, and disruptions or failures in the services provided by these parties may adversely affect our ability to deliver goods and services to our participating students.
We depend on all of the cellular telephone service providers in Canada for service to the cellular telephones used by our subscribers, and we depend on Impact Mobile for the ability to communicate across the various networks. This is an essential aspect of our business. We have no control over any of these telecommunications carriers or over Impact Mobile. We may not be able to maintain satisfactory relationships with any one or more of them on acceptable commercial terms. Further, we cannot be certain that the quality of products and services that they provide will remain at the levels needed to enable us to conduct our subsidiary’s 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. These continuing technological advances make it difficult to predict the extent of future competition with cellular
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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 through reduced subscriber growth, reduced network usage per subscriber, the threat of product liability lawsuits or reduced availability of financing to the wireless communications industry.
Telecommunications service providers are subject to governmental regulation and licensing requirements, which may increase their operating costs and affect their ownership structure.
The use of radio spectrum is regulated by Industry Canada pursuant to the Radiocommunication Act (Canada). 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 the costs and the operations of the cellular telephone service providers through whom we route all of our text messages.
Canadian carriers are also subject to the Telecommunications Act (Canada), and therefore subject to regulation by the Canadian Radio-television and Telecommunications Commission (“CRTC”). CRTC regulation can materially affect the services and activities of these carriers.
If any telecommunications carrier fails to continue to comply with the applicable provisions of these Canadian statutes, it could lose its license to provide the services that it currently provides to our company. Although the possibility is remote, if this were to occur to some material number of these carriers, it could have a material adverse affect on our ability to operate our business.
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 acquisition of Digital Youth Network, we became engaged in the business of providing advertising products in Canada through various media including telecommunications, though we do not directly provide any telecommunications service. The telecommunications industry is highly regulated in Canada 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 our business.
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” and on August 24, 2004 under the new symbol “DYOUF”, trading has been very limited and sporadic, making it difficult for our shareholders to sell any of their common shares and liquidate their investment.
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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. Our 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 stock 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 that 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.
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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.
Item 3. Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by the quarterly report, being February 28, 2005, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s principal executive officer, principal financial officer and principal operating officer. Based upon that evaluation, our management and our board of directors have concluded that our company’s disclosure controls and procedures, especially with regard to our internal controls over financial reporting, are adequate. We believe that we have cured a weakness that we identified in our quarterly report for the quarter ended November 30, 2004 that was due to a lack of qualified accounting personnel.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our president and chief executive officer as appropriate, to allow timely decisions regarding required disclosure.
As our company is relatively small, our audit committee does not have a member that qualifies as an “audit committee financial expert” as defined in Item 401(e) of Regulation S-B, or “independent” as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended. We believe that the members of our Board of Directors are collectively capable of analyzing and evaluating our financial statements and understanding our internal controls and procedures, including those pertaining to financial reporting. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in light of the current size of our company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
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We have received correspondence putting our company on notice of a claim by Bay Management Ltd. that it believes that it is entitled to receive a finders’ fee from our subsidiary company, Digital Youth Network Inc., as compensation for finders’ services allegedly rendered Digital Youth Network Inc. prior to the date of our acquisition of its shares on October 7, 2003. We do not believe that this claim has any merit and if it is pursued we intend to contest it.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Pursuant to a subscription agreement dated October 8, 2004, we issued 13,000 units to one accredited investor. Each unit is comprised of one common share and one share purchase warrant entitling the holder to acquire one common share at $0.40 per share for each warrant until December 31, 2005. These units were sold in an offshore transaction to a non-US Person relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.
Pursuant to a subscription agreement dated February 21, 2005, we issued 100,000 units to one accredited investor. Each unit is comprised of one common share and one share purchase warrant entitling the holder to acquire one common share at $0.40 per share for each warrant until December 31, 2005. These units were sold in an offshore transaction to a non-US Person relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.
Pursuant to a subscription agreements dated March 17, 2005, we issued an aggregate of 301,688 units to five accredited investors. Each unit is comprised of one common share and one share purchase warrant entitling the holders to acquire one common share at $0.40 per share for each warrant until December 31, 2005. These units were sold in an offshore transaction to non-US Persons relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.
Pursuant to debt settlement and subscription agreements dated January 6, 2005, we have agreed to issue an aggregate of 2,061,720 shares of common stock to eleven accredited investors. These shares of common stock were sold in an offshore transaction to non-US Persons relying on Regulation S and/or Section 4(2) of the Securities Act of 1933, but the certificates have not yet been issued.
Pursuant to a subscription agreement dated March 18, 2005, we have agreed to issue 333,334 units to two accredited investors. Each unit is comprised of one common share and one share purchase warrant entitling the holder to acquire one common share at $0.40 per share for each warrant until April 30, 2007. These units were sold in an offshore transaction to a non-US Person relying on Regulation S and/or Section 4(2) of the Securities Act of 1933, but the certificates have not yet been issued.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits
Exhibit Number and Exhibit Title
(3)Articles of Incorporation and Bylaws
3.1 | Articles of Incorporation, effective November 22, 1996(1) |
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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) | |
3.8 | Certificate of Amendment, effective July 20, 2004(6) | |
(10) | Material Contracts | |
10.1 | Convertible Debenture with Sourcexport, Inc., dated December 5, 2000(1) | |
10.2 | Convertible Debenture Subscription Agreement with Sourcexport, Inc., dated December 1, 2000(1) |
10.3 | Escrow Agreement with Sourcexport, Inc. and Clark, Wilson, dated December 1, 2000(1) | |
| | | | | | | | | | | |
10.4 Share Purchase Agreement dated as of July 21, 2003, with all of the shareholders of Digital Youth Network, Inc.(2)
10.5 | Convertible Debenture dated April 28, 2003, with Digital Youth Network, Inc.(2) |
10.6 Amendment to Share Purchase Agreement dated October 1, 2003, with all of the shareholders of Digital Youth Network Inc.(3)
10.7 | Employment Agreement dated October 1, 2003 between Digital Youth Network Inc. and Daniel Reitzik(3) |
10.8 | Employment Agreement dated October 1, 2003 between Digital Youth Network Inc. and Robert Skoko(3) | |
10.9 | Employment Agreement dated October 7, 2003 between Digital Youth Network Inc. and Jason Jaspar(3) | |
10.10 | Form of Subscription Agreement entered into with the following subscribers(5) | |
| Andrew Macdonald | |
| Salus Systems Ltd. | |
| Eddi Sponza | |
| Monty Reitzik | |
| Scipio Consulting Ltd. | |
| 684634 B.C. Ltd. | |
| 684628 B.C. Ltd. | |
| 684631 B.C. Ltd. | |
| Ghouse Productions (2004) Inc. | |
| Vern Powers | |
| Darryl Flash | |
| Wendy Fuller | |
| | | | | | |
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10.11 | Form of Subscription Agreement entered into with the following subscribers(6) | |
| Synergy Sales & Service Inc. | |
| Medium M Industries Ltd. | |
| Robert Allaire | |
| Steve Skoko Inc. | |
| Robert Balbirnie | |
10.12 | Debt Settlement Agreement and Subscription Agreement dated June 22, 2004 with 310047 B.C. Ltd.(6) |
10.13 | Assignment of Debt dated June 22, 2004 with Clark, Wilson(6) | |
10.14 | Finder’s Fee Agreement dated August 1, 2003 with Austin Rand(6) | |
10.15 | Connectivity Agreement dated June 17, 2004 with Impact Mobile Inc.(6) | |
10.16 | Letter of Agreement dated August 30, 2004 with Microcell Solutions Inc.(6) | |
| | | | | | | | |
10.17 Debt Settlement Agreement and Subscription Agreement dated July 20, 2004 with Wireless With You Corp.(7)
10.18 | Form of Subscription Agreement entered into with the following subscribers(7) |
| Troy Peart | |
| Wendy Fuller | |
| Vice D’Arpino | |
| Antonio Zanetti | |
| Aldo Trinetti | |
| Dario Sponza | |
| Bruce Durnie | |
| Landrock Landscaping & Excavating Ltd. | |
| Landrock Excavating Co. Ltd. | |
| Rosanna Santelli | |
| | | |
10.19 Debt Settlement Agreement and Subscription Agreement dated as of January 6, 2005 with Redwood Enterprises Ltd. (8)
10.20 | Subscription Agreement dated June 27, 2004 entered into with Robert Beiser.(8) | |
10.21 | Agreement dated December 2, 2004 with Digital Advertising Network Inc.(8) | |
10.22* | Form of Debt Settlement and Subscription Agreement entered into with the following investors: |
| Wendy Fuller | |
| Edward Skoko | |
| Jason Coull | |
| Dennis Sinclair | |
| Jason Jaspar | |
| Dan Reitzik | |
| Mel Baillie | |
| Raymond Mol | |
| Anthony Marcera | |
| Forge Marketing Ltd. | |
| Jeffrey Haas | |
| | | | | |
22
10.23* | Subscription Agreement dated March 18, 2005 with Mark Spevakow. | |
10.24* | Subscription Agreement dated March 18, 2005 with Robert Spevakow. | |
(14) | Code of Ethics | |
14.1 | Code of Business Conduct and Ethics(4) | |
(21) | Subsidiaries of our Company | |
21.1 | Digital Youth Network, Inc. | |
(31) | Section 302 Certifications | |
31.1* | Certification by Raymond Mol pursuant to Section 302 under the Sarbanes-Oxley Act of 2002 |
(32) | Section 906 Certifications | |
32.1* | Certification by Raymond Mol and Daniel Reitzik pursuant to Section 906 under the Sarbanes-Oxley Act of 2002 |
| | | | | | | | |
(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.
(3)Incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on October 22, 2003.
(4)Incorporated by reference from our Form 10-KSB filed with the Securities and Exchange Commission on January 12, 2004.
(5)Incorporate by reference from our Form 10-QSB filed with the Securities and Exchange Commission on February 20, 2004.
(6)Incorporated by reference from our Form 10-QSB filed with the Securities and Exchange Commission on August 20, 2004.
(7)Incorporated by reference from our Form 10-KSB filed with the Securities and Exchange Commission on January 13, 2005.
(8)Incorporated by reference from our Form 10-QSB filed with the Securities and Exchange Commission on February 18, 2005.
* Filed herewith
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DIGITAL YOUTH NETWORK CORP.
By: /s/ Raymond Mol
Raymond Mol, President, Chief Executive Officer and Director
April 22, 2005
By: /s/ Daniel Reitzik
Daniel Reitzik, Director
April 22, 2005
By: /s/ William McGinty
William McGinty, Director
April 22, 2005
