U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
--------------
OR
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission File No. 0-25151
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Fetchomatic Global Internet Inc.
--------------------------------
(Exact name of registrant as specified in its charter)
Nevada 52-212549
------ ---------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
444 Victoria Street, Suite 370, Prince George, British Columbia, Canada V2L 2J7
- ----------------------------------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (250) 564-6868
Forest Glade International Inc.
-------------------------------
(Former name or former address, if changed since last report.)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No ___
As of June 1, 2000, there were issued and outstanding 49,568,500 shares of
common stock, par value $.001 per share, of the registrant issued and
outstanding.
Transitional small business disclosure format
Yes ___ No X
Fetchomatic Global Internet Inc.
Quarterly Report on Form 10-QSB
Table of Contents
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 2
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 14
PART II OTHER INFORMATION 18
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
FetchOmatic Global Internet Inc.
(formerly Forest Glade International Inc.)
(A Development Stage Company)
Consolidated Interim Financial Statements
For the Nine-Month Period Ended
April 30, 2000
- --------------------------------------------------------------------------------
Contents
Consolidated Interim Financial Statements
Balance Sheets
Statements of Operations
Statement of Changes in Stockholders' Equity (Deficit)
Statements of Cash Flows
Notes to the Financial Statements
2
FetchOmatic Global Internet Inc.
(formerly Forest Glade International Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
April 30 July 31
2000 1999 (a)
- --------------------------------------------------------------------------------
(Unaudited)
Assets
Current
Cash $ 208,344 $ 49,725
Prepaid expenses and deposits (Note 6) 336,271 4,174
-----------------------------
544,615 53,899
Property and equipment 144,396 3,448
Software development costs (Note 4) 284,598 -
Net assets held for sale (Note 3) 233,298 -
-----------------------------
$ 1,206,907 $ 57,347
================================================================================
Liabilities and Stockholders' Equity (Deficit)
Liabilities
Current
Accounts payable $ 160,816 $ 117,635
Accrued expenses 598,279 -
Due to stockholders 42,590 -
-----------------------------
801,685 117,635
-----------------------------
Stockholders' equity (deficit)
Capital stock
Authorized
200,000,000 common shares, par value $0.001
Issued
40,756,000 (July 31, 1999 - 19,000,000)
common shares 40,756 19,000
Additional paid-in capital 8,279,884 156,066
Accumulated deficit (6,646,464) (235,354)
Accumulated other comprehensive losses -foreign
Currency translation (7,097) -
-----------------------------
1,667,079 (60,288)
Stock subscriptions receivable (1,261,857) -
-----------------------------
405,222 (60,288)
-----------------------------
$ 1,206,907 $ 57,347
================================================================================
a) Represents the financial position of FetchOmatic.com Online Inc. (formerly
SSA Coupon Ltd.)
See the accompanying notes to the consolidated interim financial statements.
================================================================================
FetchOmatic Global Internet Inc.
(formerly Forest Glade International Inc.)
(A Development Stage Company)
Consolidated Interim Statements of Operations
(Unaudited)
Three months ended Nine months ended
April 30 April 30
----------------------------------------------------------------------
2000 1999 (a) 2000 1999 (a)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Administration $ 54,730 $ 23,940 $ 98,341 $ 35,910
Advertising and promotion 613,398 - 696,276 -
Depreciation 11,521 - 21,180 -
Investor relations (including stock option compensation
of $3,800,000) (Note 8) 611,939 - 4,550,939 -
Management fees 256,341 - 309,206 -
Professional fees 30,560 - 70,694 840
Research and development - 11,970 - 17,955
----------------------------------------------------------------------
1,578,489 35,910 5,746,636 54,705
Write-down of advances (Note 5) - - 95,235 -
----------------------------------------------------------------------
Loss from continued operations (1,578,489) (35,910) (5,841,871) (54,705)
Loss from discontinued operations, net of tax (Note 3) (521,097) - (569,239) -
----------------------------------------------------------------------
Net loss for the period $ (2,099,586) $ (35,910) $ (6,411,110) $ (54,705)
====================================================================================================================================
Loss per share - basic and diluted
From continued operations $ (0.04) $ (0.00) $ (0.18) $ (0.00)
Discontinued operations (Note 3) (0.01) - (0.02) -
----------------------------------------------------------------------
After discontinued operations $ (0.05) $ (0.00) $ (0.20) $ (0.00)
====================================================================================================================================
Weighted average shares outstanding 39,403,067 19,000,000 31,849,766 19,000,000
====================================================================================================================================
Period from
September 24
1998
(Inception)
to April 30
2000
- -----------------------------------------------------------------------------------
Expenses
Administration $ 178,074
Advertising and promotion 696,276
Depreciation 21,180
Investor relations (including stock option compensation
of $3,800,000) (Note 8) 4,550,939
Management fees 309,273
Professional fees 71,534
Research and development 39,900
---------------------
5,867,176
Write-down of advances (Note 5) 210,049
---------------------
Loss from continued operations (6,077,225)
Loss from discontinued operations, net of tax (Note 3) (569,239)
---------------------
Net loss for the period $ (6,646,464)
===================================================================================
Loss per share - basic and diluted
From continued operations
Discontinued operations (Note 3)
After discontinued operations
==============================================================
Weighted average shares outstanding
==============================================================
a) Represents the results of operations of FetchOmatic.com Online Inc. (formerly
SSA Coupon Ltd.)
See the accompanying notes to the consolidated interim financial statements.
================================================================================
FetchOmatic Global Internet Inc.
(formerly Forest Glade International Inc.)
(A Development Stage Company)
Consolidated Interim Statement of Changes in Stockholders' Equity (Deficit)
(Unaudited)
For the nine-month period ended April 30, 2000
Common Shares Additional
--------------------------------- Paid-in Accumulated
Number Amount Capital Deficit
---------------- ---------------- --------------- ----------------
Balance, August 1, 1999 - SSA Coupon Ltd. 100 $ 66 $ 175,000 $ (235,354)
Adjustment for the issuance of common stock on reverse
Acquisition 18,999,900 18,934 (18,934) -
---------------- ---------------- --------------- ----------------
19,000,000 19,000 156,066 (235,354)
Issuance of common stock by SSA Coupon Ltd. prior to
Acquisition - - 14 -
Adjustment for the stockholders' equity of the Company
at the acquisition date 17,800,000 17,800 (193,080) -
Stock option compensation (Note 8) - - 3,800,000 -
Issuance of common stock on exercise of stock options at
$1.09 per share (Note 8) 3,856,000 3,856 4,199,184 -
Issuance of common stock for services in January 2000 at
$1.25 per share (Note 6) 100,000 100 124,900 -
Issuance of warrants for services (Note 6) - - 192,800 -
---------------- ---------------- --------------- ----------------
40,756,000 40,756 8,279,884 (235,354)
---------------- ---------------- --------------- ----------------
Net loss for the period - - - (6,411,110)
Foreign currency translation adjustments - - - -
---------------- ---------------- --------------- ----------------
Total comprehensive loss - - - (6,411,110)
---------------- ---------------- --------------- ----------------
Balance, April 30, 2000 40,756,000 $ 40,756 $ 8,279,884 $ (6,646,464)
============================================================ ================ ================ =============== ================
Accumulated
Other Total
Comprehensive Subscriptions Stockholders'
Income Receivable Equity (Deficit)
---------------- ----------------- ----------------
Balance, August 1, 1999 - SSA Coupon Ltd. $ - $ - $ (60,288)
Adjustment for the issuance of common stock on reverse
Acquisition - - -
---------------- ----------------- ---------------
- - (60,288)
Issuance of common stock by SSA Coupon Ltd. prior to
Acquisition - - 14
Adjustment for the stockholders' equity of the Company
at the acquisition date - - (175,280)
Stock option compensation (Note 8) - - 3,800,000
Issuance of common stock on exercise of stock options at
$1.09 per share (Note 8) - (1,261,857) 2,941,183
Issuance of common stock for services in January 2000 at
$1.25 per share (Note 6) - - 125,000
Issuance of warrants for services (Note 6) - - 192,800
---------------- ----------------- ---------------
- (1,261,857) 6,823,429
---------------- ----------------- ---------------
Net loss for the period - - (6,411,110)
Foreign currency translation adjustments (7,097) - (7,097)
---------------- ----------------- ---------------
Total comprehensive loss (7,097) - (6,418,207)
---------------- ----------------- ---------------
Balance, April 30, 2000 $ (7,097) $ (1,261,857) $ 405,222
============================================================ ================ ================= ===============
See the accompanying notes to the consolidated interim financial statements.
================================================================================
FetchOmatic Global Internet Inc.
(formerly Forest Glade International Inc.)
(A Development Stage Company)
Consolidated Interim Statements of Cash Flow
(Unaudited)
Period from
September 24
1998
Nine months ended (Inception)
April 30 to April 30
-----------------------------
2000 1999 (a) 2000
- -----------------------------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net loss for the period $ (6,411,110) $ (54,705) $ (6,646,464)
Adjustments to reconcile net loss to net cash
used in operating activities
Amortization and depreciation 86,543 - 86,543
Write-off of goodwill 339,632 - 339,632
Loss on disposal of property and equipment 301,488 - 301,488
Deferred income tax recovery (158,105) - (158,105)
Stock option compensation 3,800,000 - 3,800,000
(Increase) decrease in assets
Prepaid expenses and other 75,279 - 71,105
Increase (decrease) in liabilities
Accounts payable (37,712) 54,705 79,923
Accrued expenses 578,279 - 578,279
-------------- -------------- --------------
(1,425,706) - (1,547,599)
-------------- -------------- --------------
Investing activities
Software development costs (284,598) - (284,598)
Cash acquired on reverse acquisition of SSA
Coupon Ltd. 145,757 - 145,757
Purchase of property and equipment (173,028) - (176,476)
-------------- -------------- --------------
(311,869) - (315,317)
-------------- -------------- --------------
Financing activities
Proceeds on issuance of common stock, net
of subscriptions receivable (Note 7) 2,051,652 - 2,226,718
Repayment of advances from directors (7,519) - (7,519)
Repayment of note payable on acquisition of
discontinued operations (138,000) - (138,000)
Repayment of long-term debt from discontinued
Operations (11,260) - (11,260)
-------------- -------------- --------------
1,894,873 - 2,069,939
-------------- -------------- --------------
Increase in cash for the period 157,298 - 207,023
Effect of foreign exchange on cash 1,321 - 1,321
Cash, beginning of period 49,725 - -
-------------- -------------- --------------
Cash, end of period $ 208,344 $ - $ 208,344
================================================================================================
a) Represents the cash flows of FetchOmatic.com Online Inc. (formerly SSA
Coupon Ltd.)
See the accompanying notes to the consolidated interim financial statements.
================================================================================
FetchOmatic Global Internet Inc.
(formerly Forest Glade International Inc.)
(A Development Stage Company)
Notes to the Consolidated Interim Financial Statements
(Unaudited)
April 30, 2000
- --------------------------------------------------------------------------------
1. Basis of Presentation
The consolidated interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that
these consolidated interim financial statements be read in conjunction with
the financial statements of the Company and the financial statements of SSA
Coupon Ltd. for the year ended July 31, 1999 and notes thereto included in
the Company's 10-KSB annual report and in the Form 8-K current report filed
in respect of the Company's acquisition of SSA Coupon Ltd. The Company
follows the same accounting policies in the preparation of interim reports.
Results of operations for the interim periods are not indicative of annual
results.
Previously, the Company carried on operations in two business segments: the
development of an Internet search engine and the operation of a mobile home
park. In May 2000, the Company entered an agreement to sell all the assets
constituting its mobile home park business. (Note 3) The sale closed in
June 2000 and as a result, the Company is solely involved in the
development and marketing of a geographically enabled internet web search
engine and smart source data base and internet portal and personalized
internet communications tool. In connection with its business focus, the
Company changed its legal name to Fetchomatic Global Internet Inc. on June
2, 2000.
These accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. As at April 30, 2000, the Company has recognized no revenues and
has accumulated operating losses from the Internet business of
approximately $6,600,000 since its inception. The continuation of the
Company is dependent upon the successful completion of development of the
Company's web-site, fetchomatic.com, the continuing financial support of
creditors and stockholders and obtaining long-term financing as well as
achieving a profitable level of operations.
Subsequent to April 30, 2000, the Company issued $3.5 million of
convertible debentures (Note 9) and plans to raise additional equity
capital as necessary to finance the operations and capital requirements of
the Company. Amounts raised will be used to continue development of the
Company's web-site, to provide financing for the marketing, promotion and
launch of its web-site, to secure products and for other working capital
purposes including operational hardware and software upgrades. While the
Company is expending its best efforts to achieve the above plans, there is
no assurance that any such activity will generate sufficient funds for
operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might arise from this uncertainty.
2. Acquisition of SSA Coupon Ltd.
On November 3, 1999, the Company closed the share exchange agreement with
the stockholders of SSA Coupon Ltd. ("SSA", now renamed Fetchomatic.com
Online Inc.), a company that was incorporated in British Columbia, Canada
on September 24, 1998 for the purpose of developing, exploiting and
marketing a geographically enabled internet web search engine and smart
source data base and internet portal and personalized internet
communications tool. The Company acquired 100% of the issued and
outstanding shares of SSA in exchange for 19 million restricted shares of
the Company's common stock. Restrictions on these shares will be removed at
the rate of 10% each year after their issuance. Additionally, the Company
has agreed to pay, or cause SSA to pay to the three founding shareholders
of SSA, in perpetuity, royalties aggregating to 7% of the gross revenues of
SSA and/or the Company relating to the technology created by SSA. Such
royalties will be paid on a quarterly basis.
Effective as of the closing date, the transaction was accounted for using
the purchase method of accounting as applicable for reverse acquisitions.
Following reverse acquisition accounting, financial statements subsequent
to the closing of this acquisition are presented as a continuation of SSA.
The operations of the Company are consolidated with those of SSA from the
date of acquisition. The fair value of the net assets of the Company at
November 3, 1999 was as follows:
Current assets $ 9,440
Property and equipment and other long-term assets 1,652,326
-------------
1,661,766
Current liabilities (274,421)
Deferred income taxes (156,843)
Long-term debt (1,607,870)
-------------
Goodwill $ (377,368)
=============
2
Goodwill was being amortized on a straight-line basis over five years. The
value assigned to the common stock issued on the transaction was $Nil based
on the estimated fair value of the net assets of the Company at the
acquisition date. The net book value of goodwill at April 30, 2000 of
$339,632 was written off on that date as part of the Company's loss from
discontinued operations. (Note 3)
3. Disposal of Mobile Home Park Operations
On December 1, 1998, as amended on August 31, 1999, the Company acquired
100% of the common shares of 514592 BC Ltd. (a company 50% owned by a
director of the Company) the beneficial owner of the assets and liabilities
comprising the Mountain View Park (the "Park") in British Columbia, Canada.
On May 1, 2000, the Company made the decision to dispose of all of the
assets constituting its mobile home park business, the sale of which was
completed in June 2000. Total proceeds on the sale were approximately
$675,000, with $135,000 received on closing, $98,000 due on July 15, 2000
and the balance due in installments of $4,500 per month including interest
at prime plus 1% per annum with the balance due on May 15, 2002. The
balance due is collateralized by equipment and an unconditional guarantee
by the purchaser. Immediately following the sale, the Company transferred
the shares of 514592 BC Ltd. to its four directors for nominal
consideration. Prior to the sale of the shares of 514592 BC Ltd., 514592 BC
Ltd. transferred all of its remaining assets and liabilities to the Company
except for the mortgage obligation on the Park of approximately $442,000
and a portion of the installments receivable equal to the balance of the
mortgage payable outstanding.
The financial results of the Park have been segregated and presented as a
discontinued operation and the Balance Sheets and Statements of Operations
and Cash Flows have been reclassified to reflect this presentation. The
Statement of Operations for the nine-month period ended April 30, 2000
includes a writedown to net realizable value. The results of discontinued
operations were as follows:
Statement of Operations
For the nine-month period ended April 30 2000
---------------------------------------------------------------------------
Revenue $ 68,941
---------------
Loss from operations (86,224)
---------------
Loss on disposal of property and equipment (301,488)
Write-off of goodwill (339,632)
Deferred tax recovery 158,105
---------------
Loss on disposal of discontinued operations (483,015)
---------------
Loss from discontinued operations $ (569,239)
===============
3
Loss per share from discontinued operations is summarized
as follows:
- from operations $ -
- on disposal of the net assets (0.02)
---------------
$ (0.02)
===============
3. Disposal of Mobile Home Park Operations - Continued
The Company's net assets held for sale are comprised of the following at
April 30, 2000:
Property and equipment $ 675,300
Mortgage payable (442,002)
--------------
Net assets held for sale $ 233,298
==============
4. Software Development Costs
The Company has adopted Statement of Position ("SOP") 98-1, "Accounting for
the Costs of Computer Software Development or Obtained for Internal Use".
Accordingly, direct internal and external costs associated with the
development of the features, content and functionality of the Company's
internet software, incurred during the application development stage, will
be capitalized and amortized over the estimated useful life of three years
once development is complete.
During the period prior to July 31, 1999, SSA carried out procedures in the
preliminary project stage including the research and evaluation of ideas
and determination of an implementation plan as well as certain activities
relating to the application software development. The Company commenced the
capitalization of costs associated with software development on August 1,
1999.
5. Contingent Liability
SSA, along with its three founding stockholders, was the defendant in an
action filed in the Supreme Court of British Columbia in October 1999 by a
former consultant to the Company. The action claimed breach of contract and
sought unspecified damages. On November 17, 1999, the Company commenced an
action against the consultant seeking compensation for $235,000 allegedly
misappropriated by the consultant as well as general damages.
Amounts advanced by the Company subsequent to July 31, 1999 to the
consultant and not received by SSA totalling $95,235 were written off in
the first quarter. On February 28, 2000, SSA reached a settlement with the
former consultant to release both parties from damages claimed in the
action and from future claims associated with the action.
4
6. Prepaid Expenses
In December 1999, the Company entered into a promotional agreement with a
company for a one-year term in exchange for 175,000 shares of common stock
plus 200,000 warrants to purchase common stock. 100,000 of the warrants are
exercisable at a price of $1.09 with the balance exercisable at $3 for a
four-year period. The value assigned to the common stock based on the
trading price of the stock on the agreement date was $218,750. Using a
Black-Scholes option-pricing model, a value of $192,800 was assigned to the
warrants. The expenses are amortized to the Statement of Operations over
the term of the contract.
100,000 shares of common stock were issued by the Company while a
stockholder provided 75,000 shares to satisfy the balance. Amounts due to
the stockholder were settled during the third quarter of fiscal 2000. The
warrants remain outstanding at April 30, 2000.
7. Supplemental Cash Flow Information
Required disclosures of supplemental information on the Statements of Cash
Flows include:
a) Supplemental disclosure of non-cash investing and financing activities:
2000 1999
------------------- -----------------
i) issuance of common stock and warrants
in satisfaction of promotional expenses,
including obligation to stockholder (Note 6). $ 411,550 $ -
ii) acquisition of the shares of SSA in
exchange for 19 million shares of common
stock $ - $ -
iii) issuance of common stock for
subscription proceeds received prior to
acquisition of SSA $ 889,545 $ -
b) Interest paid for the nine-month periods ended April 30, 2000 and 1999
included in the loss from discontinued operations was $19,382 and $Nil.
8. Stock Options
On November 5, 1999, the Company adopted its 1999 Stock Option Plan (the
"Plan") to offer an inducement to obtain services of key employees,
directors and consultants of the Company. The maximum number of shares
issuable under the Plan shall not exceed 5 million. Under the Plan, the
Company's Board of Directors determines the exercise price and terms of the
options not, however, to exceed five years from the date of grant.
The Company's Board of Directors approved the grant of five million options
to consultants on November 5, 1999 vesting immediately at an exercise price
of $1.09 per share. During the period, 3,856,000 options were exercised for
total proceeds of $4,203,040 less amounts receivable from the optionees of
$1,261,857 for net proceeds of $2,941,183 as follows:
5
Options
Exercised
-----------------
December 1999 995,000
January 2000 215,000
February 2000 806,000
March 2000 780,000
April 2000 1,060,000
-----------------
3,856,000
=================
Subsequent to April 30, 2000, an additional 575,000 options were exercised.
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-based Compensation", in accounting for stock
options granted to non-employees. Under SFAS No. 123, compensation cost is
recognized based upon the fair value based method prescribed using the
Black-Scholes option pricing model. The fair value of these options of
$0.76 was estimated at the date of grant using the following assumptions:
- No dividends.
- Risk-free interest rate of 4.4%.
- Volatility of the expected market price of the Company's common stock
of 380%.
- Weighted average expected life of the options of 6 months.
Compensation expense of $3.8 million has been recorded in the nine-month
period ended April 30, 2000 in connection with the grant of these options.
9. Commitments and Subsequent Events
a) On March 30, 2000, the Company entered into an agreement to acquire
public relations and advertising services from Sivla Inc. in exchange
for $100,000 cash (paid in May 2000) plus up to approximately $43.5
million of the Company's common stock of which 25% will be registered
to remove trading restrictions. The first $23,500,000 due in common
stock is based upon a $2 imputed value with the balance due based upon
a 35% discount to the average of the previous month's closing trading
price. For advertising contracts signed to date, 8,812,500 shares of
common stock were issued in connection with this agreement for future
advertising and promotion on May 15, 2000 with the balance of 2,937,500
shares to be issued upon completion of the registration statement
qualifying these shares.
An accrual has been provided at April 30, 2000 with respect to the cost
of advertising completed to April 30, 2000 in the amount of $561,579.
The cost of sponsorship of a Championship Auto Racing Team ("CART") car
for the 2000 race season is being amortized over the race season.
6
b) On May 25, 2000, the Company entered into an agreement to obtain an
Internet profile of the Company for a period of ninety days in exchange
for the issuance of 100,000 shares of common stock.
c) In June 2000, the Company ordered approximately $700,000 of new
computer hardware.
d) On May 9, 2000, the Company issued $3.5 million of convertible
debentures due May 1, 2003 and bearing interest at 7% per annum due
annually. Four million shares of common stock owned by directors
collateralize the convertible debenture. The debentures are convertible
at the option of the holder into shares of common stock of the Company
at the lesser of (1) $2.295 and (2) 80% of the average of the lowest
three per share market values (not necessarily consecutive) during the
twenty trading days immediately preceding the conversion date. As a
result, a beneficial conversion amount will be recorded as interest
expense in the fourth quarter of the Company's 2000 fiscal year. The
Company has the option to pay annual interest in cash or shares of its
common stock.
The convertible debentures also contain 521,765 detachable warrants
exercisable to purchase shares of the Company's common stock at any
time until May 1, 2005 at a price of $2.295 per share. The warrants
will be assigned a value on issuance, which will be amortized over the
three-year term of the convertible debentures.
The debenture agreement contains provisions to adjust conversion
privileges in connection with certain changes to the Company's capital
structure and provides an option available to the debenture-holder to
acquire an additional $6,500,000 of convertible debentures. $350,000
was deducted from proceeds of the convertible debentures and 175,000
shares of common stock were issued as a finder's fee. The finder's fee
attributable to the common stock will be determined based upon the
market value of the common stock on the issuance date.
10. New Accounting Pronouncement
In June 1998, the Financial Accounting Standards board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No.
133 requires companies to recognize all derivatives contracts as either
assets or liabilities on the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of
gain or loss recognition on the hedging derivative with the recognition of
(I) changes in the fair value of the hedged assets or liability that are
attributable to the hedged risk or (ii) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000.
7
Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standards on August 1, 2000 to
affect its financial statements.
Safe Harbor Statement
Certain statements in this Form 10-QSB, including information set forth
under Item 2 "Management's Discussion and Analysis" constitute or may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Act"). We desire to avail ourself of certain
"safe harbor" provisions of the Act and is therefore including this special note
to enable it to do so. Forward-looking statements included in this Form 10-QSB
or hereafter included in other publicly available documents filed with the
Securities and Exchange Commission, reports to our stockholders and other
publicly available statements issued or released by us involve known and unknown
risks, uncertainties, and other factors which could cause our actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) achievements expressed or implied
by such forward-looking statement. Such factors include, but are not limited to:
(i) our insignificant historical revenues; (ii) our ability to expand and
commercially exploit our web-site and search engine; (iv) our ability to manage
growth; (v) our ability to develop our brand; (vi) competition; (vii) our
ability to adapt evolving technologies; and (viii) governmental regulation of
the Internet. Such future results are based upon management's best estimates
based upon current conditions and the most recent results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
We were formed under the laws of the State of Nevada on August 27, 1998
under the name "Forest Glade International Inc." Our change of name to
"Fetchomatic Global Internet Inc." was approved by the State of Nevada on June
2, 2000. Until the acquisition of 100% of the issued and outstanding shares of
SSA Coupon Ltd. ("SSA") on November 3, 1999, we were principally engaged in the
ownership and operation of a mobile home park in Sparwood, British Columbia,
Canada. ("Mountainview"). SSA (now FetchOmatic.com Online Inc.), incorporated in
British Columbia, Canada on September 24, 1998 is developing
www.fetchomatic.com, a web-site with an integrated search engine and portal that
utilizes a geographical searching capability. With divestiture of Mountainview
in June 2000, our primary business focus is the development and launch of
www.fetchomatic.com.
We intend, through our wholly-owned subsidiary Fetchomatic.com Online Inc.
("Fetchomatic.com Online") to become a leading brand in on-line search services
for Internet users seeking businesses and services. By utilizing the unique
search capabilities of our search technology, consumers will be able to locate
categorized businesses in specific geographic locations and view a detailed map
of the neighborhood where the business is located. Our management believes that
www.fetchomatic.com will be fully launched in July 2000.
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To increase the general public's awareness of our company and our
web-site, we will embark on an extensive marketing program that will include
mass media advertising and sponsorships throughout the United States and Canada.
In connection therewith, we signed an agreement with Sivla, Inc. ("Sivla") on
March 30, 1999, whereby Sivla would arrange media advertising (including print,
radio, billboard, television and sponsorships) and production thereof for our
company in exchange for shares of our common stock up to a value of $43.5
million to cover the initial launch of www.fetchomatic.com.
We expect that our initial revenues will be derived from (1) advertising
on our web page, (2) use of a merchant banking system to allow us to process
online purchases, (3) commissions or royalties paid by strategic partners and
third party retailers for orders placed through us or from links to such third
parties provided on our web page; and (4) an expected affiliation with an
Internet Service Provider. To date, we have not earned any revenue from
development of www.fetchomatic.com and are considered to be in the development
stage. Our only historical source of revenue was from the Mountainview
operations, which have now been divested.
Results of Operations
Discussion of the results of operations below compares the nine months
ended April 30, 2000 and 1999. We acquired 100% of the issued and outstanding
common shares of Fetchomatic.com Online on November 3, 1999 in exchange for 19
million shares of our common stock. The acquisition of Fetchomatic.com Online
was accounted for as a reverse acquisition, as the former stockholders of
Fetchomatic.com Online controlled approximately 52% of our common stock
immediately after the acquisition. Pursuant to the accounting requirements for
reverse acquisitions, the financial statements subsequent to the acquisition are
presented as a continuation of Fetchomatic.com Online. The operations of
Fetchomatic.com Online prior to the acquisition were limited to services
provided by its founders. The acquisition by us provided Fetchomatic.com Online
with financing necessary to rapidly expand development of the web site. As a
result, comparisons of results of operations to the corresponding period in 1999
do not provide a meaningful analysis due to the limited activity in 1999.
Therefore, the discussion below focuses upon expenditures during the nine-month
period ended April 30, 2000 and upon our plans of operation.
We incurred a net loss of $6,411,110 for the nine-month period ended April
30, 2000 (including $569,239 from operations of the mobile home park and a
write-down of net assets to net realizable value, which have been classified in
the April 30, 2000 financial statements as discontinued operations). Some of the
significant components to the composition of the loss for the nine-month period
were:
o Administration expense of $98,341, consisting of fees to
administrative personnel and rent on our offices in Prince George
and Delta, British Columbia;
o Advertising and promotion of $696,276, relating to various marketing
efforts with respect to our search engine, including an accrual of
$561,579 as the estimated portion of the cost of the DellaPenna
Motorsports entry in the Championship Auto
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racing team ("CART") Fed Ex Championship 2000 acing season
pertaining to the period ended April 30, 2000;
o Investor relation fees of $4,550,939 incurred to create awareness of
us in the public markets as we first became listed for trading in
July 1999. This amount includes stock option compensation of
$3,800,000 consisting of the imputed value assigned under United
States accounting principles to 5 million fully vested stock options
granted to consultants during the period as determined using the
Black-Scholes option pricing model. The model uses historical market
values of our stock as a key assumption in determining the value of
the options granted. The imputed value of the options was $0.76 per
option. Additional amounts for investor relations include the
payment of fees for personnel and consultants involved in investor
relations activity and the cost of the preparation and dissemination
of news releases;
o Management fees of $309,206 with respect to fees paid to certain
officers and consultants for management services provided to us;
o Professional fees of $70,694, consisting of legal and accounting
services provided to us;
o A loss from discontinued operations of $569,239 in connection with
the operations of the mobile home park to April 30, 2000 which
yielded a loss of $86,224 on revenue of $68,941 and the
corresponding write-down to net realizable value of $483,015
relating to the property and equipment (net of a $158,105 income tax
recovery) and goodwill.
During the nine-month period ended April 30, 20000, Fetchomatic.com Online
continued its research and development program and hired additional
programmer-consultants and purchased of new equipment. In support of our ongoing
effort to enhance the "Fetchomatic" brand, we entered into a media and
advertising services agreement that permits us to receive advertising, public
relations and promotional services in exchange for shares of our common stock.
As a result of the media agreement, we expect to participate in a series of
advertising campaigns and sponsorships with a total cost of up to $43.5 million
(fully payable in our common stock using prices specified in the agreement,
except for $100,000 payable in cash) through September 30, 2000. To May 15,
2000, we committed for advertising of approximately $16 million including
sponsorships of racecars on the CART and NASCAR circuits and various print,
radio, billboard and television media. On May 15, 2000, we issued 8,812,500
shares of restricted common stock in connection with this agreement for future
media advertising and publicity.
Upon conclusion of our initial advertising agreement, we expect to
continue to incur significant costs for advertising, marketing, and promotional
activities. In connection with our initial advertising and promotional efforts,
common stock was used to preserve cash flow for development of the technology.
Financing alternatives for future marketing efforts will be evaluated based on
their particular merits and our cash flow situation
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Product and technology development costs consist principally of payroll
and related expenses for product development, systems and operations personnel
and consultants, and systems infrastructure. We believe that continued
investment in product development is critical to achieving strategic objectives.
In addition to ongoing investments in our web site, search engine and
infrastructure, we intend to increase investments in products and services. In
June 2000, we ordered approximately $700,000 of new computer hardware and
software as required for the expected launch of www.fetchomatic.com in July
2000. Further expenditures for computer hardware will allow www.fetchomatic.com
to handle a very large volume of "hits." Proposed new equipment is capable of
handling 1,000 simultaneous transactions and will be able to receive up to
2,000,000 "hits" per day.
We expect to hire up to forty (40) additional employees and/or consultants
in the next six months as our needs may require to sustain growth and to remain
competitive.
As of the date of this quarterly report, we have no source of revenue from
continuing operations. We have incurred operating losses since inception. The
continuation of our business is dependent upon the continuing financial support
of our creditors and stockholders and long term financing as well as the
successful development of our web-site and achieving a profitable level of
operations. There are, however, no assurances that any such activity will
generate funds that will be available for operations. Accordingly, our financial
statements contain note disclosure describing the circumstances that lead there
to be doubt over our ability to continue as a going concern. Our auditors have
also expressed a reservation of their opinion on the July 31, 1999 financial
statements in this regard.
Liquidity and Capital Resources
Our principal capital requirements to date have been to fund (1) the
development of our search engine and (2) the promotion and investor relation
programs in place to disseminate information about our company and
www.fetchomatic.com. Net cash used in operating activities for the nine-month
period ended April 30, 2000 was $1,425,706. Net cash used in investing
activities during the nine-month period ended April 30, 2000 was $311,869,
consisting of $284,598 directly spent in the development of our web-site and
$173,028 for the acquisition of fixed assets, primarily computer equipment. Net
cash used in investing activities was reduced by $145,757 as a result of our
company's cash on hand existing as of the date of the reverse acquisition of
Fetchomatic.com Online. Net cash provided from financing activities for the
nine-month period ended April 30, 2000 was $1,894,873. Our primary financing
activity during the nine-month period ended April 30, 2000 was the exercise of
sock options at $1.09 per share for shares of our common stock. At April 30,
2000, subscriptions receivable in connection with the exercise of options total
$1,261,857 resulting in net proceeds to us of $2,941,183. Of that amount,
approximately $890,000 was received by us prior to the date of acquisition of
Fetchomatic.com Online.
The net increase in cash during the nine-month period ended April 30, 2000
was $157,298. During the period, we also issued common stock and warrants to a
consultant in consideration for a contract to provide us with investor relation
services for a twelve-month
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period. The total value of the contract is approximately $410,000, which was set
up as a prepaid expense at the date of issuance and is being amortized to
operations on a straight-line basis over the term of the agreement. We will also
issue common stock to purchase advertising and publicity as discussed above.
In May 2000, we completed the private placement of $3.5 million of our 7%
convertible debentures which transaction included the sale of common stock
purchase warrants to acquire 521,765 shares of common stock at an exercise price
of $2.295 per warrant until expiry on May 1, 2005. The debentures are
convertible into shares of our common stock at the lesser of $2.295 and 80% of
the average of the lowest three per share market values during the last twenty
trading days (not necessarily consecutive) immediately preceding the conversion
date. A finder's fee of $350,000 plus 175,000 shares of common stock was paid in
connection with the private placement. We and the investor agreed that, in the
event that certain conditions are met, the private placement would include two
additional tranches of convertible debentures (and common stock purchase
warrants) in the principal amount of $3,250,000 each. Net proceeds from the
private placement transactions, which we expect to be approximately $9,000,000,
will be used for working capital, research and development, and equipment
purchases.
We believe, based on currently proposed plans and assumptions relating to
its operations, that the net proceeds from the private placement financings and
the disposal of Mountainview, together with anticipated revenues from
operations, will be sufficient to fund our operations and working capital
requirements for at least twelve months. In the event that our plans or
assumptions change or prove inaccurate (due to unanticipated expenses, increased
competition, unfavorable economic conditions, or other unforeseen circumstances)
we would be required to seek additional financing sooner than currently
expected. There can be no assurance that such additional funding would be
available to us, or if available, that the terms of such additional financing
will be acceptable to us.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Our wholly owned subsidiary, Fetchomatic.com Online, was a defendant in a
action filed in the Supreme Court of British Columbia in October 1999, by Trevor
Kray. The action also named Maurice Simpson (a director of Fetchomatic Global
Internet Inc.), William Murray (an officer and director of Fetchomatic.com
Online) and Dana Shaw (an officer and director of Fetchomatic.com Online) as
defendants. The action claimed a breach of contract by the Defendants and sought
unspecified damages. Trevor Kray was a consultant engaged by Fetchomatic.com
Online to assist it with corporate development and financing. On November 17,
1999 Fetchomatic.com Online commenced an action against Trevor Kray, Shannon
Kray and Kray & Company Consulting ("the Krays"), alleging misappropriation and
conversion to their personal use of approximately $235,000 advanced to them as
consultants on behalf of Fetchomatic.com Online. It is also alleged the Krays
misrepresented the amount of funding provided by a financier on behalf of
Fetchomatic.com Online and thus caused delays in the development and completion
of Fetchomatic.com Online projects. Fetchomatic.com Online sought compensation
for monies
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misappropriated by the Krays as well as general damages. In February 2000, we
entered into a settlement agreement with the Krays that resulted in dismissal of
both actions. No additional amounts are payable or receivable by us in
connection with the settlement.
Item 2. Changes in Securities.
Not applicable .
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
By Consent in Lieu of a Meeting of the Shareholders, dated April 24, 2000, the
holders of a majority of the outstanding shares of our common stock adopted and
approved an amendment to our company's Articles of Incorporation to change the
name of the company to Fetchomatic Global Internet Inc.
Item 5. Other Information.
On February 4, 2000, our Board of Directors elected Ted Kozub to the
Board. On March 30, 2000 our Board of Directors elected Maurice Simpson to the
Board. On April 20, 2000, our Board of Directors elected Lindsay Melbourne Lent
to the Board.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 4.1 7% Convertible Debenture Purchase Agreement(1)
Exhibit 4.2 7% Convertible Debenture(1)
Exhibit 4.3 Registration Rights Agreement(1)
Exhibit 4.4 Warrant No.1(1)
Exhibit 4.5 Letter Agreement, dated as of May 1, 2000(1)
Exhibit 10.1 Contract of Purchase and Sale(2)
Exhibit 10.2 Land Title Act Form C, registered on June 2, 2000(2)
Exhibit 10.3 Purchase and Sale Agreement, dated the __ day of
May, 2000(2)
Exhibit 10.4 Media Agreement between Forest Glade International
Inc. and Sivla, Inc., dated March 30, 2000*
Exhibit 27.1 Financial Data Schedule*
* Filed herewith
(1) Incorporate by reference from our Current Report on Form 8-K as filed
with the Securities and Exchange Commission on May 23, 2000.
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(2) Incorporate by reference from our Current Report on Form 8-K as filed
with the Securities and Exchange Commission on June 16, 2000.
(b) Current Report(s) on Form 8-K
On May 23, 2000, we filed a Current Report on Form 8-K regarding the sale
of our 7% Convertible Debentures and a Common Stock Purchase Warrant.
On June 16, 2000, we filed a Current Report on Form 8-K regarding the
sale of our mobile home park business; the change of our name; and the
transfer by our wholly owned subsidiary Forest Glade Properties Inc. of its
sole asset, the common stock of 514592 B.C. Ltd., to four of our directors.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Fetchomatic Global Internet Inc.
Date: June 19, 2000 By: /s/ Wayne E. Loftus
------------------------------------
Name: Wayne E. Loftus
Title: Chief Executive Officer and President
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