================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES
EXCHANGE ACT OF 1934 or
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 30, 2001, 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. 0-32411
-----------
INSIDE HOLDINGS INC.
--------------------
(Exact name of Registrant as specified in its charter)
Yukon Territory, Canada
-----------------------
(Jurisdiction of incorporation organization)
Suite 1260, 609 Granville Street, Vancouver, B.C. Canada, V7Y 1G5
-----------------------------------------------------------------
(Address of principal executive office)
(604) 687-0888
--------------
(Registrant's telephone number, including area code)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
_____________________________________
COMMON SHARES, WITHOUT PAR VALUE
(Title of Class)
_____________________________________
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
As at April 30, 2001 the Company had 4,637,600 issued shares of common stock.
There is no present market for the Company's common shares. Based upon the last
price at which common shares of the Company were purchased from treasury by
arms-length subscribers the market value of common shares held by non-affiliates
is C$54,800.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark which financial statement item the Registrant has elected
to follow. Item 17 [ ] Item 18 [X]
INTRODUCTION
FORWARD-LOOKING INFORMATION
Statements in this form, to the extent that they are not based on historical
events, constitute forward-looking statements. These statements appear in a
number of different places in this Annual Report and include statements
regarding the intent, belief or current expectations of the Company and its
directors or officers, primarily with respect to the future market size and
future operating performance of the Company. When used in this document, the
words "anticipate," "believe," "estimate," "expect," "intend," "plan," and
"project" and similar expressions, as they relate to the Company or its
management, are intended to identify forward-looking statements.
Forward-looking statements include, without limitation, statements regarding the
outlook for future operations, forecasts of future costs and expenditures,
evaluation of market conditions, the outcome of legal proceedings, the adequacy
of reserves, or other business plans. Investors are cautioned that any such
forward-looking statements are not guarantees and may involve risks and
uncertainties, and that actual results may differ from those in the
forward-looking statements as a result of various factors such as general
economic and business conditions, including changes in interest rates, prices
and other economic conditions; actions by competitors; natural phenomena;
actions by government authorities, including changes in government regulation;
uncertainties associated with legal proceedings; technological development;
future decisions by management in response to changing conditions; the ability
to execute prospective business plans; and misjudgments in the course of
preparing forward-looking statements. The Company does not intend or assume any
obligation to update these forward-looking statements.
ACCOUNTING PRINCIPLES
The Company's financial statements included herein were prepared in accordance
with Canadian generally accepted accounted principles. They also comply, in all
material respects, with the accounting principles accepted in the United States
and the rules and regulations of the Securities and Exchange Commission.
CURRENCY TRANSLATION
Unless otherwise indicated, all monetary amounts referred to in this Annual
Report are in Canadian dollars. At April 30, 2001 one U.S. dollar equaled
approximately Canadian $1.5366.
The following table sets forth a history of the exchange rates for the US dollar
vs. Canadian dollar for each month from November 2000 through April 2001.
Month Average Low/High Month End
----- ------- -------- ---------
November 1.5422 1.5275/1.5632 1.5360
December 1.5224 1.4946/1.5531 1.4995
January 1.5032 1.4948/1.5160 1.4989
February 1.5218 1.4936/1.5392 1.5361
March 1.5585 1.5380/1.5774 1.5763
April 1.5575 1.5356/1.5784 1.5366
-2-
The following table sets forth a history of the exchange rates for the US dollar
vs. Canadian dollar during the Company's past five fiscal years.
Year Average Low/High April 30
---- ------- -------- --------
2001 1.5575 1.5336/1.5789 1.5366
2000 1.4694 1.4353/1.5127 1.4772
1999 1.5080 1.4310/1.5795 1.4543
1998 1.4052 1.3663/1.4651 1.4291
1997 1.3640 1.3295/1.4005 1.3957
-3-
TABLE OF CONTENTS
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS . . 5
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE . . . . . . . . . 5
ITEM 3. KEY INFORMATION . . . . . . . . . . . . . . . . . . . . . 5
ITEM 4. INFORMATION ON THE COMPANY. . . . . . . . . . . . . . . . 9
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS. . . . . . . 13
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES. . . . . . . . 16
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS . . . . 19
ITEM 8. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 21
ITEM 9. THE OFFER AND LISTING . . . . . . . . . . . . . . . . . . 22
ITEM 10. ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . 23
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK . . . . . . . . . . . . . . . . . . . . . . . . 25
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES . 25
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. . . . . 26
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 26
ITEM 17. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 26
ITEM 18. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 26
ITEM 19. EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . 26
-4-
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable
ITEM 3. KEY INFORMATION
A. SELECTED FINANCIAL DATA
The following represents selected financial data for the Company for each of the
past five fiscal years ending April 30, prepared in accordance with generally
accepted accounting principles in the United States.
All amounts are expressed in Canadian dollars. Exchange rate information is
presented in the introduction to this Annual Report.
2001 2000 1999 1998 1997
---------------------------------------------------------------
Revenues $ - $ - $ - $ - $ -
Net loss (92,614) (187,526) (94,464) (119,625) (98,949)
Total assets 27,621 299 108,865 153,649 75,467
Total liabilities 77,969 163,546 84,586 34,906 31,199
Shareholders' equity (50,348) (163,247) 24,279 118,743 44,268
Capital stock 3,368,694 3,163,181 3,163,181 3,163,181 2,969,081
Common shares outstanding (1) 4,637,609 500,487 500,487 501,139 423,499
Net loss per share (0.02) (0.38) (0.19) (0.26) (0.32)
Cash dividends - - - - -
<FN>
(1) Adjusted for a reverse split and subsequent forward split that, on net
basis, resulted in the issue of one new share for every ten old shares in
October 2000.
The financial data presented above is only a summary and should be read together
with the Company's financial statements, which are attached hereto.
B. CAPITALIZATION AND INDEBTEDNESS
Not Applicable
-5-
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not Applicable
D. RISK FACTORS
THE COMPANY HAS IDENTIFIED THE FOLLOWING RISK FACTORS AS SIGNIFICANT. THE ORDER
IN WHICH THEY APPEAR IS INTENDED TO REFLECT MANAGEMENT'S OPINION OF THEIR ORDER
OF PRIORITY TO THE COMPANY. READERS SHOULD, HOWEVER, CAREFULLY REVIEW ALL OF THE
RISK FACTORS IN ASSESSING THE COMPANY'S PROSPECTS. SOME INFORMATION IS PRESENTED
AS OF THE DATE HEREOF AND IS SUBJECT TO CHANGE, COMPLETION OR AMENDMENT WITHOUT
NOTICE.
LIQUIDITY AND CAPITAL RESOURCES. As at April 30, 2001, total cash was $6,940;
current liabilities exceeded current assets by $70,348; and total liabilities
exceeded total assets by $50,348. The Company's ability to satisfy projected
working capital requirements is dependant upon its ability to secure additional
funding through public or private sales of securities, including equity
securities of the Company. There is no assurance that the Company will be able
to secure the necessary capital on terms acceptable to the Company or on any
terms.
NO OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS. The Company's intended
business is in its early developmental and promotional stages, and the Company
only recently acquired its Principal Asset. There have been no revenues or
earnings from operations and the Company has no significant tangible assets or
financial resources. The Company will, in all likelihood, sustain operating
expenses without corresponding revenues at least until the Company secures
significant capital and human resources and successfully implements its business
strategies, of which there are no assurances. There is also no assurance that
the Company will generate revenues and be profitable in the future, or that
profitability, if achieved, will be sustained.
SPECULATIVE NATURE OF THE COMPANY'S PROPOSED OPERATIONS. The success of the
Company's proposed plan of operation will depend to a great extent on its
ability to secure interest amongst prospective network affiliates, which are
themselves successful, of which there is no assurance. While management intends
to pursue relationships with enterprises having established operating histories,
it is likely that, at this stage of the Company's development, prospective
affiliates will be start-up enterprises with unproven management, limited
assets, limited potential for earnings or other negative characteristics. The
success of the Company's operations will therefore be dependent, at least in
part, upon the success of such start-up enterprises, which is not assured. As a
consequence, the Company's Board of Directors will closely monitor the Company's
progress and reassess its plans and strategies on a regular basis, which may
result in the Company choosing to discontinue its proposed business in the
future and combine with another business, which may also be highly speculative
in nature. The Company has not engaged in any discussions concerning potential
business combinations and has no immediate plans to identify and negotiate with
prospective businesses.
SIGNIFICANT FUTURE CAPITAL NEEDS. The Company requires significant additional
capital to finance the implementation of its business plans and strategies. The
ability of the Company to secure the necessary capital in the future will depend
in part on the prevailing capital market conditions as well as the Company's
-6-
performance in signing network affiliates to join the network. As a consequence
of these and other factors, there is no assurance that further funding will be
available to the Company on acceptable terms, or at all, to meet future capital
requirements.
NO AGREEMENTS WITH PROSPECTIVE NETWORK AFFILIATES. The Company has no current
arrangement, agreement or understanding with any prospective network affiliate
and there is no assurance that agreements with prospective network affiliates
will be made on terms acceptable to the Company or on any terms. In addition,
the Company has not established a specific length of operating history or a
specified level of earnings, assets, net worth or other criteria, which it will
require a prospective affiliate to have achieved, or without which, the Company
would not consider making an agreement with such prospective affiliate.
Accordingly, the Company may enter into agreements with business entities having
no significant operating history, losses, limited or no potential for earnings,
limited assets, negative net worth or other negative characteristics.
ESTABLISHING AND MAINTAINING BRAND AWARENESS. The Company must establish and
maintain brand awareness for its Principal Asset in order to attract prospective
network affiliates. Name recognition will also be important in the future
because of the growing number of Internet companies that will compete directly
with network affiliates. Promotion and enhancement of the Company's brand names
will depend largely upon the Company's ability to secure relationships with
network affiliates that provide consistently high-quality products, services and
content and the successful implementation of effective marketing strategies in
concert with such affiliates, which are not assured.
COMPETITION. The marketplace for e-commerce solutions and the providers of
online navigational services has numerous competitors. In a particular, the
Company faces significant competition from dominant Internet portal companies
such as Yahoo and Excite and network companies such as America Online and CMGI.
These competitors, among others, have significantly greater financial,
technological, marketing and personnel resources than the Company. There can be
no assurance that the Company's proposed business will be able to compete
successfully or that competition will not have a material adverse effect on the
Company's business plans, financial condition and results of operations.
CONFLICTS OF INTEREST. The directors and officers of the Company will not devote
all their time to the affairs of the Company. They are presently and will
continue to be engaged in other business ventures. As a result, situations may
arise where one or more directors and officers will be in direct or indirect
competition with the Company. Notwithstanding the combined limited experience
and time commitment of management, loss of the services of any of these
individuals would adversely affect development of the Company's business and its
likelihood of continuing operations.
DEPENDENCE ON USE OF INTERNET. The success of the Company depends on increased
use of the Internet for advertising, marketing, providing services and
conducting business. Commercial use of the Internet is currently at an early
stage of development and the future of the Internet, as a means for conducting
commerce, is not clear.
EXCHANGE RATE FLUCTUATIONS. The Company business is operated from its head
office in Vancouver, Canada. Accordingly, most of its costs and assets are in
Canadian dollars. Any significant increase or decrease in the value of the
Canadian dollar compared to the U.S. dollar would have a significant impact on
the financial position of the Company. Similar exchange rate risks will arise
-7-
should the Company's business expand into other markets and its business
involves other currencies. The Company does not engage in any foreign currency
hedging activities.
GOVERNMENTAL REGULATION. The Company is not currently subject to direct
regulation by any government agency, other than applicable securities laws and
regulations applicable to business generally. However, it is possible that a
number of laws and regulations may be adopted with respect to regulating user
privacy, pricing and consumer protection, which may impose additional burdens on
companies in this industry conducting business and thus increase The Company's
cost of doing business. There can be no assurance that any such new legislation
or regulation will not be enacted, nor that the application of laws or
regulations from jurisdictions whose laws do not currently apply to The
Company's business will subsequently become applicable.
REGULATION UNDER INVESTMENT COMPANY ACT. Although the Company will be subject to
regulation under the Securities and Exchange Act of 1934, the Company believes
it will not be subject to regulation under the Investment Company Act of 1940,
insofar as the Company will not be engaged primarily in the business of
investing or trading in securities. The Company may, however, hold minority
interests in a number of affiliates and as a consequence the Company could be
subject to regulation under the Investment Company Act of 1940. In such event,
the Company would be required to register as an investment company and could be
expected to incur significant registration and compliance costs. The Company
has obtained no formal determination from the Securities and Exchange Commission
as to the status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act could subject the Company to material
adverse consequences.
MARKET RISK. The Company's common shares do not presently trade on any
recognized stock exchange or other organized securities market. The Company has
made application to the National Association of Securities Dealers to have its
common shares listed for trading on the NASD OTC Bulletin Board, however, there
is no assurance that such application will be accepted or that a market for the
common shares of the Company will ever develop in the United States or, if such
a market does develop, that it will continue or that the trading price of the
shares will not be subject to significant price fluctuations. Accordingly, an
investment in common shares of the Company should only be considered by those
investors who do not require liquidity and can afford to suffer a total loss of
their investment. An investor should consult with professional advisers before
making such an investment.
NO DIVIDENDS TO BE PAID. The Company has not paid dividends on its common stock
and does not anticipate paying dividends on its common stock in the foreseeable
future. The Board of Directors has sole authority to declare dividends payable
to the Company's stockholders. The fact that it has not and does not plan to
pay dividends indicates that the Company must use all of its funds generated by
operations for reinvestment in operating activities and also emphasizes that the
Company may not continue as a going concern. Prospective shareholders also must
evaluate an investment in the Company solely on the basis of anticipated capital
gains.
-8-
ITEM 4. INFORMATION ON THE COMPANY
A. HISTORY AND DEVELOPMENT OF THE COMPANY
The Company was formed as Coast Falcon Resources Ltd. under the Company Act of
British Columbia, Canada, on July 7, 1992, pursuant to a statutory merger of
McConnell-Peel Resources Ltd. and Sheba Copper Mines Limited (together, the
"Predecessor Companies").
On September 11, 2000, the Company changed its name to Inside Holdings Inc., and
on October 6, 2000 it was continued under the Business Corporations Act of the
Yukon Territory, Canada.
The Company's registered records office is located at Suite 308, 204 Black
Street, Whitehorse, Yukon, Canada, Y1A 2M9, and its head office is located at
Suite 1260, 609 Granville Street, Vancouver, B.C., Canada, V7Y 1G5. Telephone:
(604) 687-0888.
The Predecessor Companies were engaged in the exploration, development and
exploitation of mineral resource properties in Canada, without commercial
success. Each Predecessor Company ceased all such activities and abandoned their
respective resource property interests prior to the formation of the Company by
way of merger of the Predecessor Companies. The balance sheets of the
Predecessor Companies were carried over at historical cost.
Except as described below, the Company did not carry on or acquire any business
or property. All costs associated with identifying, researching and negotiating
with prospective businesses were expensed in the year they were incurred.
In 1996, the Company pursued a plan wherein it would be actively engaged in the
international distribution of a variety of concrete additive products, which
were manufactured in Canada. In addition, the Company entered into a conditional
agreement to acquire, from arms length parties, all of the issued capital stock
of Kryton Products Inc., a Canadian private company ("Kryton") that possessed
certain related product licenses. In contemplation of the proposed acquisition
the Company loaned Kryton the aggregate sum of $104,873 and incurred other
related expenses. The proposed acquisition was never consummated. Prior
management of the Company determined that the loan balance was not collectible
and expensed it during the Company's most recent fiscal year ended April 30,
2000.
The Company entered into an agreement, dated May 1, 2000, to purchase its
Principal Asset and thereupon commenced a new developmental stage. The Company's
proposed business has no prior history of operations.
During the Company's most recent fiscal year end it completed a reorganization,
which was approved by shareholders of the Company at a general meeting of
shareholders held in Vancouver, Canada on September 6, 2000, to better position
the Company to carry on its new business. The reorganization included the
following steps:
-9-
(1) a new Board of Directors of the Company was appointed by shareholders
and new management by the Board of Directors;
(2) the Company changed its name to Inside Holdings Inc. to more properly
describe the new business direction of the Company;
(3) the Company changed its governing jurisdiction from the Province of
British Columbia to the Yukon Territory where there is no requirement
that a majority of directors reside in Canada;
(4) the Company reverse-split and then forward-split its common shares and
issued, on a net basis, one new share for every ten old shares and
eliminated fractional shareholders to reduce otherwise significant
shareholder reporting costs;
(5) the Company issued 3,500,000 post split common shares at approximately
$0.04 per share to settle debts owing to related parties in the
aggregate amount of $140,513;
(6) the Company completed a private placement and issued 650,000 post
split common shares at $0.10 per share to five investors in Canada,
including directors and officers of the Company, for aggregate
proceeds of $65,000. The proceeds from the private placement were used
primarily to pay certain debts, complete the reorganization and to
provide the Company with initial working capital;
(7) the Company registered its common shares pursuant to Section 12(g) of
the Securities act of 1933 in order to qualify them for trading in the
United States secondary market; and
(8) the Company recently made application to the National Association of
Securities Dealers to have its common shares listed for trading on the
NASD OTC Bulletin Board, however, there is no assurance that such
application will be accepted.
B. BUSINESS OVERVIEW
GENERAL
The Company is in its early developmental stage and has not commenced commercial
operations. Since its formation, the Company's only activities have been
organizational in nature directed at acquiring its principal asset, which is
described below, raising capital and developing its business plan. It has no
full time employees and owns no real property or other tangible assets other
than cash.
Should the Company determine that the plan is feasible, and sufficient capital
is made available, it intends to create, brand, market and manage a network of
web-based affiliated businesses and content providers to whom the Company will
offer a range of business consulting and marketing services.
There is no assurance that the Company will secure the necessary capital to
effectively implement its business strategies or be able to attract and secure a
sufficient number of appropriate network affiliates to meet its objective.
-10-
BUSINESS STRATEGIES
To facilitate the creation of a network brand, the Company recently acquired and
is the beneficial owner of 400 Internet domain names all ending with the suffix
"inside.com" (the "Principal Asset"). For example, the Company has the right to
use, sell, lease or license the names "finditinside.com", "investinside.com" and
"newyorkinside.com", among others. The names include many geographical and
subject matter references, which allows for simple navigation of the Internet by
using such generic references as opposed to conventional search means. (See
Schedule "A" attached to Exhibit 4.3 of the Company's Registration Statement on
Form 20-F dated March 23, 2001 for a complete listing of Internet domain names
acquired.) The Company's business strategies include the sale, lease or license
of these domain names to selected network affiliates and then deploying,
together with such affiliates, conventional marketing techniques in traditional
channels to promote and enhance the network brand.
The value of any particular domain name, not presently in use, is generally a
function of its perceived market appeal. Generally, short, generic, intuitive,
easy to spell names are more marketable and hence more valuable than names that
do not share these characteristics. The Company believes the "inside"
designation, is intuitive and easy to bear in mind, making it a superior
branding opportunity.
A network affiliate may be a start-up or an already existing operation that is
directed at a particular niche constituency. In the case of an existing
operation, a domain name having descriptive relevance to such operations, can be
used as a forwarding or directional link and in the case of a start-up as a
destination web address. Each affiliate would be responsible for developing and
managing site content, increasing site 'stickiness' and promoting the network
'brand'.
The Company's intends to promote opportunities for strategic business
relationships among network affiliates within and across industry segments. A
typical website of an affiliate would promote direct links to other affiliates,
with which a strategic relationship has been established, and to the Company,
which would serve as a portal to the entire network. As the network expands, the
Company will attempt to leverage the combined Internet traffic of the network
affiliates and the prospective purchasing power represented by such traffic to
obtain benefits for its network affiliates such as discounts for goods and
services.
In addition, the Company would seek opportunities to generate capital through
the selective sale, from time to time, of its investments in network affiliates
to increase shareholder value and to generate capital for reinvestment.
The Company's main sources of revenues in the future are expected to come from:
1. the sale, license or lease of the Company's domain names;
2. the provision of business consulting and marketing services; and
3. the selective sale of investments in network affiliates.
-11-
PLAN OF OPERATION
In order to pursue the Company's principal business objectives, and because the
Company has limited financial and human resources, the Company proposes to take
an incremental approach towards implementing its business strategies and has
developed the following limited plan of operation.
For the balance of the Company's current fiscal year management's focus will be
to secure necessary human and capital resources and to research, identify and
secure conditional agreements with prospective network affiliates. These
affiliates may be start-up enterprises, in which case the Company expects to
negotiate a minority or majority equity interest, or existing web-based
enterprises. The substantive terms of each agreement with prospective affiliates
will likely vary significantly, particularly at this early stage of the
Company's development.
Management believes the Company must secure agreements with a minimum of ten
prospective network affiliates, with fully operational websites, before a
network launch is feasible and a fully integrated business plan can be
developed, financed and implemented. Should the Company fail to secure such
agreements in a reasonable time period, which shall be determined by the Board
of Directors, the Company may have to discontinue its current business plans and
consider alternate business plans, which may also be highly speculative.
Management of the Company anticipates seeking out prospective network affiliates
that are established web-based businesses through solicitation. Such
solicitation may include newspaper or magazine advertisements, mailings and
other distributions to existing businesses, law firms, accounting firms,
investment bankers, marketers and similar persons, the use of one or more World
Wide Web sites and similar methods. No estimate can be made as to the number of
persons who will be contacted or solicited.
Management may also assist with the organization, development and management of
prospective network affiliates, which are start-up businesses.
The Company has no current arrangement, agreement or understanding with any
prospective network affiliate and there is no assurance that agreements with
prospective network affiliates will be made on terms acceptable to the Company
or on any terms.
The Company has no full time employees to implement its plans. Management has
agreed to allocate a portion of their time to the activities of the Company,
however, it is expected that conflicts of interest will arise with respect to
the limited time commitment by management. As a consequence, the Company intends
to pursue new sources of capital and, if successful in securing such capital,
anticipates hiring one or more full time persons or engaging the services of
outside professionals to work with management to further develop the Company's
plan of operation and pursue agreements with prospective network affiliates. The
amount of new capital, its intended use, and the terms under which it may be
made available are subject to future negotiations and therefore are not
presently determinable.
The Company has recently made application to the National Association of
Securities Dealers to have its common shares listed for trading on the NASD OTC
-12-
Bulletin Board, however, there is no assurance that such application will be
accepted. The Company believes that the listing of the Company's common shares
will make the Company a more attractive vehicle to prospective investors.
COMPETITION
The electronic commerce industry is new, rapidly evolving and intensely
competitive, and the Company expects competition to intensify in the future. The
Company will likely remain an insignificant participant among the many
enterprises, which are attempting to establish or have established a network
presence on the World Wide Web.
The most significant potential for competition facing the Company comes from
dominant Internet portal companies such as Yahoo and Excite and network
companies such as America Online and CMGI, which have already been successfully
branded and are positioned to offer substantially greater benefits to
prospective affiliates. These and many other established companies have
significantly greater financial and personnel resources and technical expertise
than the Company.
The Company believes that its Principal Asset provides it with a unique
competitive position in establishing brand awareness and that the market is
large enough to accommodate many new entrants such as the Company. However, in
view of the Company's combined extremely limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
C. ORGANIZATIONAL STRUCTURE
The Company is majority owned by Pemcorp Management Inc., a Canadian private
company. (See "Item 7. Major Shareholders and Related Party Transactions".)
The Company has no operating subsidiaries.
D. PROPERTY, PLANTS AND EQUIPMENT
The Company owns no property, plant or equipment and there are no current plans
to purchase any in the near future. The Company currently utilizes office space
in a commercial building located in Vancouver, British Columbia, Canada. The
space is shared with several other companies, which share common management.
The Company currently pays no rent. The present facilities are believed to be
adequate for meeting the Company's needs for the immediate future. If required
in the future, the Company does not anticipate that it will have any difficulty
in obtaining additional space at reasonable lease rates.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of the financial condition and operating
results of the Company for the three fiscal years ended April 30, 2001, 2000 and
1999 should be read in conjunction with the financial statements and related
notes attached hereto. (See Item 18 - Financial Statements.)
-13-
The Company's financial statements included herein were prepared in accordance
with Canadian generally accepted accounted principles. They also comply, in all
material respects, with the accounting principles accepted in the United States
and the rules and regulations of the Securities and Exchange Commission.
The Company has received no revenues and has had no active business operations
in any of its last three fiscal years. In the past, the Company has acquired
necessary capital through the limited issuance of its common shares, increasing
indebtedness and through advances from related parties. There is no assurance
that these sources will continue to be available in the future.
Commencing May 1, 2000, the Company entered into a new development stage with
the acquisition of its Principal Asset. In order to carry out its proposed
business plans the Company will need to secure additional capital from the issue
of securities, including equity securities, of the Company. There is no
assurance that the Company will secure the necessary capital on terms acceptable
to the Company or at all. As a consequence of this uncertainty, the Company may
have to discontinue its present business plans and consider alternative business
plans, which may also be highly speculative. The Company has not engaged in any
discussions concerning other potential businesses and has no immediate plans to
identify and negotiate with prospective businesses.
A. OPERATING RESULTS
Year ended April 30, 2001 Compared to Year ended April 30, 2000
The Company's net loss for 2001 was $92,614 compared to a net loss of $187,526
for 2000. The primary reason for the decrease in the Company's net loss from
2000 to 2001 was a one-time write-off of a loan receivable of $104,873 in the
2000 fiscal year. The loan was made in contemplation of a merger with a private
Canadian company. The proposed merger was never consummated and prior management
of the Company determined that the loan balance was not collectible.
Administrative expenses, also included in the determination of the Company's net
loss in each year, increased from $82,653 in 2000 to $92,614 in 2001, primarily
because of an amortization charge in 2001 of $20,000. Management and consulting
fees, included in Administrative expenses, were $37,500 in 2001 as compared to
$60,000 in 2000.
Year ended April 30, 2000 Compared to Year ended April 30, 1999
The Company's net loss for 2000 was $187,526 compared to a net loss of $94,464
for 1999. The primary reason for the increase in the Company's net loss from
1999 to 2000 was a one-time write-off of a loan receivable of $104,873 in the
2000 fiscal year. The loan was made in contemplation of a merger with a private
Canadian company. The proposed merger was never consummated and prior management
of the Company determined that the loan balance was not collectible.
Administrative expenses, also included in the determination of the Company's net
loss in each year, decreased from $94,464 in 1999 to $82,653 in 2000, primarily
because of reduced professional and transfer agent fees. Management and
consulting fees of $60,000 in the aggregate made up the majority of these
administrative expenses in each year.
-14-
Year ended April 30, 1999 Compared to Year ended April 30, 1998
The Company's net loss for 1999 was $94,464 compared to a net loss of $119,625
for 1998. The net loss of each year was entirely as a result of administrative
expenses and decreased from 1998 to 1999 primarily as a consequence of reduced
professional fees. Management and consulting fees of $60,000 in the aggregate
made up the majority of these administrative expenses in each year.
B. LIQUIDITY AND CAPITAL RESOURCES
As at April 30, 2001, total cash was $6,940, current liabilities exceeded
current assets by $70,348, and total liabilities exceeded total assets by
$50,348. Included in current and total liabilities is $64,075 due to related
parties. The Company recently carried out a capital reorganization and derived
its current operating capital from the issuance of common shares and from
increasing indebtedness. (See "Item 4. Information on the Company-History and
development of the company")
The Company has no planned capital expenditures at this time.
The Company is contractually committed to pay $2,500 per month for management
services. (See "Item 7. Major Shareholders and Related Party Transactions").
This contract may be cancelled by the Company at any time on 30 days written
notice. The contracted party has agreed that fees payable under the contract may
be accrued and not paid until such time when the Company has adequate working
capital, as determined by the Board of Directors at its sole discretion. The
balance owing, included in current liabilities, was $24,075 at April 30, 2000.
The Company is obligated to pay the cost of renewing the registration of each
domain name as it comes due. Current registration fees vary between US$15 and
US$35 per name. The registration of 119 of the names expires between April 25
and May 2, 2002. The registration of the remaining 281 names expires between
February and April of 2002. The Board of Directors will decide at the
appropriate time whether or not to renew the registration.
During each of the last three fiscal years, the Company derived most of its
operating capital from increasing indebtedness. As at April 30, 2000, current
assets were $299, compared to $3,292 and $49,076 at April 30, 1999 and 1998
respectively. Current liabilities were $163,546 at April 30, 2000 compared to
$84,586 and $34,906 at April 30, 1999 and 1998 respectively. The increase in the
Company's working capital deficit over the period was primarily the result of
continuing operating losses. In October 2000, the Company issued 3,500,000
common shares in full settlement and satisfaction of a majority of its current
liabilities.
The Company's current working capital is insufficient to meet its business
objectives. The Company's ability to satisfy projected working capital
requirements is dependant upon its ability to secure additional funding through
public or private sales of securities, including equity securities of the
Company. There is no assurance that the Company will be able to secure the
necessary capital on terms acceptable to the Company or on any terms. The Board
of Directors and senior management have agreed that they will advance to the
Company any additional funds, which the Company requires to pay costs associated
with this Annual Report and subsequent regulatory filings over the next twelve
-15-
months while it attempts to secure the necessary capital to carry out its
business plans. Such advances will be made with an expectation of repayment.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
Not applicable
D. TREND INFORMATION
The success of the Company depends on increased use of the Internet for
advertising, marketing, providing services and conducting business. Commercial
use of the Internet is currently at an early stage of development and the future
of the Internet, as a means for conducting commerce, is not clear.
Recently, companies that are dependant upon the use of the Internet have
experienced great difficulty in securing the necessary capital to carry out
their business plans. Many such companies have ceased operations and been forced
into liquidation. The market value of Internet domain names has, as a result,
been significantly reduced over the last twelve months and interest in financing
start-up Internet businesses has diminished. This trend represents a significant
challenge to the Company proposed operations. As a consequence, the Company's
Board of Directors will closely monitor the Company's progress and reassess its
plans and strategies on a regular basis, which may result in the Company
choosing to discontinue its proposed business in the future and combine with
another business, which may also be highly speculative in nature. The Company
has not engaged in any discussions concerning potential business combinations
and has no immediate plans to identify and negotiate with prospective
businesses.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
The following are the names, ages and place of residence of the directors and
executive officers of the Company and their respective positions with the
Company and their principal occupations during the past five years.
Leonard Petersen - Mr. Petersen, age 47, is C.E.O, president and a director
of the Company and has held these positions since September 6, 2000. He is also
secretary and a director of Pemcorp Management Inc. ("Pemcorp"), a Canadian
private management consulting services company, and has held these positions
since 1990. Mr. Petersen is a chartered accountant in the Province of British
Columbia, Canada and a citizen and resident of Canada.
William D. McCartney - Mr. McCartney, age 45, is a director of the Company
and has held this position since September 6, 2000. He is the president and a
director of Pemcorp, and has held these positions since 1990. Mr. McCartney is a
chartered accountant in the Province of British Columbia, Canada and a citizen
and resident of Canada.
-16-
Murray J. Oliver - Mr. Oliver, age 35, is a director of the Company and
held this position since September 6, 2000. He is also the sole proprietor of
North Star Consulting, an unincorporated consulting services business and has
carried on this business since 1993. Mr. Oliver is a citizen and resident of
Canada.
Paul A. Visosky - Mr. Visosky, age 45, is secretary of the Company and has
held this position since September 6, 2000. He has been a practicing attorney
since 1983 and is a principal in the law firm of Nexus Venture Capital Lawyers,
which is licensed to carry on business in the Province of British Columbia,
Canada. Mr. Visosky is a citizen and resident of Canada.
None of the directors or officers of the Company are related and there were no
arrangements or understandings between any director or officer of the Company
and any other person pursuant to which he was selected as a director or officer.
B. COMPENSATION
In the 2001, 2000 and 1999 fiscal years, the Company paid or accrued management
fees of $7,500, $30,000 and $30,000 respectively to its former chief executive
officer, Vernon G. Meyer. Mr. Meyer resigned as chief executive officer on
September 6, 2000 and the Company's agreement to pay management fees to Mr.
Meyer was terminated by mutual consent effective July 31, 2000.
No cash or non-cash compensation was paid or distributed to any officer or
director of the Company during the last three fiscal years under any pension,
stock option or other plans nor is there any plan for such payments or
distributions during the next fiscal year.
No monies were set aside or accrued by the Company during the last three fiscal
years and no plan presently exists to provide pension, retirement or similar
benefits for directors or officers of the Company.
Presently, there are no standard or other arrangements under which directors or
officers of the Company will be compensated directly for their services in their
capacity as directors or officers, except that they are each entitled to be
reimbursed for their out-of-pocket expenses. The Company is party to a
management agreement with Pemcorp (See Exhibit 4.4 of the Company's Registration
Statement on Form 20-F, as amended, filed with the SEC on March 23, 2001), which
is controlled by two directors of the Company.
The Company has no compensatory plan or arrangement to compensate directors or
officers of the Company in the event of their termination or following a change
in control of the Company.
C. BOARD PRACTICES
The Company's directors are elected by the shareholders at each annual general
meeting and typically hold office until the next annual general meeting at which
time they may be re-elected or replaced. The current Board of Directors was
elected at the Company's last annual general meeting held on September 6, 2000.
-17-
The By-laws of the Company permit the directors to appoint directors to fill any
casual vacancies that may occur due to resignation of directors. Individuals
appointed as directors to fill casual vacancies hold office like any other
director until the next annual general meeting at which time they may be
re-elected or replaced.
The chief executive officer and the secretary of the Company were appointed on
September 6, 2000 and hold their respective offices at the discretion of the
Board of Directors.
The Company's audit committee presently includes three directors, two of which
are not officers of the Company, as follows:
Leonard Petersen C.E.O., President and Director
William D. McCartney Director
Murray J. Oliver Director
The audit committee reviews the Company's annual and interim financial
statements, meets with the Company's auditors, when applicable, and makes
recommendations to the Board of Directors.
The Company does not presently have a compensation committee.
There are no director service contracts that provide for benefits upon
termination of service.
D. EMPLOYEES
The Company has no full or part time employees, except for senior management and
the Board of Directors.
E. SHARE OWNERSHIP
As of September 15, 2001, the present directors and senior management of the
Company, as a group own, directly or indirectly a total of 3,689,200 shares
representing approximately 80% of the issued and outstanding common shares, as
follows:
PERCENT
TITLE OWNED
OF CLASS IDENTITY OF PERSON AMOUNT OF CLASS
Common Leonard Petersen 3,039,200 (1) 65.5%
Common William D. McCartney 3,039,200 (1) 65.5%
Common Murray J. Oliver 150,000 3.2%
Common Paul Visosky 100,000 2.1%
(1) Includes 2,639,200 owned by Pemcorp, a private Canadian company, indirectly
controlled 50% by William D. McCartney and 50% by Leonard Petersen, and
400,000 shares owned indirectly by each of McCartney and Petersen.
There are no outstanding options or warrants to purchase securities from the
Company and no present arrangements to grant options to any director, officer or
employee of the Company.
-18-
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
To the best of the Company's knowledge, it is not indirectly owned or controlled
by any other corporation, except as disclosed below, or foreign government.
As of September 15, 2001, there are no persons or groups known to the Company to
be the owners of more than 5% of the Company's issued and outstanding shares
except as disclosed below.
PERCENT
TITLE OWNED
OF CLASS IDENTITY OF PERSON AMOUNT OF CLASS
Common Pemcorp Management Inc. 2,639,200 (1) 56.9%
Common Petersen Management Inc. 400,000 (2) 8.6%
Common WMC Equities Inc. 400,000 (3) 8.6%
Common William D. McCartney 3,039,200 (4) 65.5%
Common Leonard Petersen 3,039,200 (5) 65.5%
(1) Pemcorp, a private Canadian company, is indirectly controlled 50% by
William D. McCartney and 50% by Leonard Petersen, both of whom are
directors of the Company.
(2) Petersen Management Inc., a Canadian private company, is 100% controlled by
Leonard Petersen, a director of the Company.
(3) WMC Equities Inc., a Canadian private company, is 100% controlled by
William D. McCartney, a director of the Company.
(4) The number of shares includes all of the shares held by WMC Equities Inc.
and Pemcorp.
(5) The number of shares includes all of the shares held by Petersen Management
Inc. and Pemcorp.
Pemcorp owned 2,639,200 and 139,200 common shares of the Company at April 30,
2001 and April 30, 2000 respectively. The increase was the result of an issue
from treasury in October 2000 in connection with the Company' reorganization
previously described. (See "Item 4. Information on the Company-History and
development of the company")
Petersen Management Inc. and WMC Equities Inc. each owned 400,000 and nil common
shares of the Company at April 30, 2001 and April 30, 2000 respectively. Both
parties were issued 600,000 common shares in October 2000 in connection with the
Company' reorganization previously described (See "Item 4. Information on the
Company-History and development of the company") and then subsequently sold
200,000 common shares in private transactions to non-U.S. persons in Canada.
-19-
As of April 30, 2001, there were a total of 113 holders of record of the
Company's common shares and a total of 4,637,600 common shares were outstanding.
Approximately 97,500 common shares, or 2% of the Company's total common shares
issued, were held by 23 persons residing in the United States. These numbers do
not include any possible shareholders who are not registered and those holding
shares in street name.
None of the above persons have different voting rights from other shareholders
of the Company.
There are no arrangements, known to the Company, the operation of which could
result in a change in control of the Company.
B. RELATED PARTY TRANSACTIONS
The Company paid or accrued consulting fees of $30,000 to Pemcorp in each of the
last three fiscal years in connection with researching, identifying and
negotiating with prospective business acquisitions on behalf of the Company.
Pemcorp is a private Canadian company controlled by William D. McCartney and
Leonard Petersen both of whom became directors of the Company on September 6,
2000. The Company formalized its relationship with Pemcorp by way of written
agreement made effective August 1, 2000, which provides for the payment of
$2,500 per month for general management services to be provided by Messrs
McCartney and Petersen. The agreement may be cancelled by the Company on 30 days
written notice. Pemcorp has agreed that fees payable under the agreement may be
accrued and not paid until such time when the Company has adequate working
capital, as determined by the Board of Directors at its sole discretion.
The Company has paid or accrued legal fees of $6,878 to Nexus Venture Capital
Lawyers for legal services rendered for the year ended April 30, 2001. Nexus is
a law firm controlled by Paul Visosky, who became secretary of the Company on
September 6, 2000.
The Company entered into an agreement, dated May 1, 2000, to purchase its
Principal Asset from a private company (the "Vendor") controlled by William D.
McCartney, Leonard Petersen, Murray J. Oliver, all of whom became directors of
the Company on September 6, 2000, and/or their respective spouses. The purchase
agreement was approved by shareholders of the Company. The purchase
consideration, which approximated the Vendor's cost, consisted of a note in the
amount of $40,000 payable without interest on the earlier of:
(1) the date on which the Company is in receipt of proceeds totaling
$40,000 from the sale, lease or license of any of the assets
purchased;
(2) the date on which the Company is in receipt of proceeds totaling
$200,000 from the sale and issue of common shares; and
(3) June 30, 2001.
The Vendor has agreed not to demand payment of the note until such time the
Company has sufficient working capital to satisfy its current obligations
including the note. The note remains non-interest bearing.
-20-
In addition, the Company agreed to pay the Vendor a royalty over five years
equal to 15% of the gross proceeds received from the sale, lease or license of
any of the domain names purchased under the agreement to a maximum of $1 million
and to pay the cost of renewing the registration of each domain name as it comes
due. Current registration fees vary between US$15 and US$35 per name. The
registration of 119 of the names expires between April 25 and May 2, 2002. The
registration of the remaining 281 names expires between February and April of
2002.
At July 31, 2000, the Company owed Pemcorp and the Company's former chief
executive officer $80,250 and $81,663 respectively. These amounts were
unsecured, non-interest bearing and without fixed terms of repayment. The
Company entered into agreements, made effective July 31, 2000, with each
creditor to settle and satisfy their respective claims in full in exchange for a
total of 3,500,000 common shares of the Company and the payment of $21,400.
These shares were issued on October 26, 2000.
On October 26, 2000 the Company also issued 450,000 common shares to four
directors and senior officers of the Company in connection with a private
placement of 650,000 common shares to five Canadian resident investors.
C. INTERESTS OF EXPERTS AND COUNSEL
Not Applicable
ITEM 8. FINANCIAL INFORMATION
A. FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
FINANCIAL STATEMENTS
The Company's audited financial statements for the three fiscal years ended
April 30, 2001, 2000 and 1999 together with the auditors' report are included in
this Annual Report under Item 18 and incorporated herein by reference. These
financial statements were prepared in accordance with Canadian generally
accepted accounted principles. They also comply, in all material respects, with
the accounting principles accepted in the United States and the rules and
regulations of the Securities and Exchange Commission.
LEGAL PROCEEDINGS
The Company is not presently involved in, nor is it aware of any pending legal
proceedings, which could have a material adverse effect upon its business or
financial position. To the best of the Company's knowledge, there are no legal
proceedings contemplated by any governmental or regulatory authority.
-21-
DIVIDEND POLICY
The Company has not paid dividends in any of its last five fiscal years and the
Company has no plans to pay dividends in the foreseeable future.
B. SIGNIFICANT CHANGES
During the Company's most recent fiscal year, the Company completed a
reorganization, changed its business and commenced a new development stage. (See
"Item 4. Information on the Company-History and development of the company")
ITEM 9. THE OFFER AND LISTING
A. OFFER AND LISTING DETAILS
The Company is not presently offering securities to the public.
B. PLAN OF DISTRIBUTION
Not Applicable
C. MARKETS
The Company's common shares do not presently trade on any recognized stock
exchange or other organized securities market.
The Company has made application to the National Association of Securities
Dealers ("NASD") to have its common shares listed for trading on the NASD OTC
Bulletin Board ("OTC"), however, there is no assurance that a market for the
common shares of the Company will ever develop in the United States or, if such
a market does develop, that it will continue. The Company believes that having
its common shares eligible to trade on the OTC would enhance its ability to
secure the requisite capital to carry out its business plans and strategies.
The OTC market differs from national and regional stock exchanges in that it (1)
is not situated in a single location but operates through communication of bids,
offers and confirmations between broker-dealers and (2) securities admitted to
quotation are offered by one or more broker-dealers rather than the "specialist"
common to stock exchanges. To qualify for listing on the OTC, an equity security
must have one registered broker-dealer, known as the market maker, willing to
list bid or sale quotations and to sponsor the company for listing on the OTC.
There is no assurance that the Company will successfully engage the services of
a registered broker-dealer to sponsor the Company's application to list its
common shares on the OTC.
D. SELLING SHAREHOLDERS
Not applicable
-22-
E. DILUTION
Not applicable
F. EXPENSES OF ISSUE
Not applicable
ITEM 10. ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not Applicable
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
The information required by this section has been included in the Company's
previously filed registration statement on Form 20-F, as amended, which was
filed with the SEC on March 23, 2001, and is incorporated herein by reference.
C. MATERIAL CONTRACTS
The Company paid or accrued consulting fees to Pemcorp in each of the last three
fiscal years in connection with researching, identifying and negotiating with
prospective business acquisitions on behalf of the Company. Pemcorp is a private
Canadian company controlled by William D. McCartney and Leonard Petersen both of
who became directors of the Company on September 6, 2000. The Company formalized
its relationship with Pemcorp by way of written agreement made effective August
1, 2000, which provides for the payment of $2,500 per month for general
management services to be provided by Messrs McCartney and Petersen. The
agreement may be cancelled by the Company with one month written notice. Pemcorp
has agreed that fees payable under the agreement may be accrued and not paid
until such time when the Company has adequate working capital, as determined by
the Board of Directors at its sole discretion.
The Company entered into an agreement, dated May 1, 2000, to purchase its
Principal Asset. The purchase consideration, which approximated the Vendor's
cost, consisted of a note in the amount of $40,000 payable without interest on
the earlier of:
a. the date on which the Company is in receipt of proceeds totaling
$40,000 from the sale, lease or license of any of the assets
purchased;
b. the date on which the Company is in receipt of proceeds totaling
$200,000 from the sale and issue of common shares; and
-23-
c. June 30, 2001.
The Vendor has agreed not to demand payment of the note until such time the
Company has sufficient working capital to satisfy its current obligations
including the note. The note remains non-interest bearing.
In addition, the Company agreed to pay the Vendor a royalty over five years
equal to 15% of the gross proceeds received from the sale, lease or license of
any of the domain names purchased under the agreement to a maximum of $1 million
and to pay the cost of renewing the registration of each domain name as it comes
due. Current registration fees vary between US$15 and US$35 per name. The
registration of 119 of the names expires between April 25 and May 2, 2002. The
registration of the remaining 281 names expires between February and April of
2002.
D. EXCHANGE CONTROLS
There are no governmental laws, decrees or regulations in Canada relating to
restrictions on the export of capital affecting the remittance of interest,
dividends or other payments to nonresident holders of the Company's shares. Any
such remittances, however, are subject to withholding tax.
There are no limitations under the laws of Canada, the Yukon Territory or in the
charter or any other constituent documents of the Company on the right of
foreigners to hold or vote the shares of the Company. However, under the
provisions of the Investment Canada Act, when control of a Canadian business is
acquired by a non-Canadian, the transaction may be reviewable in certain
circumstances by Investment Canada, an agency of the federal government of
Canada. Reviewable transactions are those in which a non-Canadian acquires the
assets of a Canadian business or the voting shares of a Canadian corporation the
value of which assets or shares exceeds $5 million (Canadian). Also, certain
transactions are specifically exempted from review.
E. TAXATION
TAXATION ON DIVIDENDS
Generally, cash dividends paid by Canadian corporations to nonresident
shareholders are subject to a withholding tax of 25 percent. However, pursuant
to Article X[2] of the Canada-United States tax treaty, dividends paid to a
resident if a company of the United States are only subject to a 15 percent
withholding tax. Further, if the United states resident owns 10 percent or more
of the voting shares of the Canadian company paying the dividends, the
withholding tax is reduced to 10 percent. In addition to dividend withholding,
interest paid to United States residents is subject to a 15 percent withholding
tax pursuant to Article XI[2] of the Canada-United States tax treaty.
TAXATION ON CAPITAL GAINS
A nonresident purchaser who holds shares of the Company as capital property will
not be subject to Canadian tax on capital gains realized on the disposition of
such shares unless such shares are "taxable Canadian property" within the
meaning of the Income Tax Act (Canada) and no relief is afforded under any
applicable tax treaty. The shares of the Company would be taxable Canadian
-24-
property of a nonresident purchaser if the nonresident purchaser used the shares
in carrying on a business in Canada or if at any time during the five-year
period immediately preceding the disposition not less than 25 percent of the
issued shares of any class of the Company belonged to the particular purchaser,
persons with whom the purchaser did not deal at arm's length or any combination
thereof.
Holders of common shares of the Company should seek independent advice from
their own professional tax advisors with respect to the Canadian Income Tax
consequences arising from the holding of Common Shares of the Company.
F. DIVIDENDS AND PAYING AGENTS
Not Applicable
G. STATEMENT BY EXPERTS
Not Applicable
H. DOCUMENTS ON DISPLAY
All documents concerning the Company, which are referred to in this Annual
Report are available for inspection at the offices of Nexus Venture Capital
Lawyers: Suite 3400, 666 Burrard Street, Vancouver, Canada.
I. SUBSIDIARY INFORMATION
None
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a small business issuer as defined in Rule 405 of the Securities
Act of 133, as amended, and Rule 12b-2 of the Securities Exchange Act of 1934,
as amended, and therefore need not provide the information requested by this
item.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133.
"Accounting For Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities.
SFAS No. 133 will be effective for the Company's fiscal year beginning May 1,
2000. Because the Company is not involved in any activities covered by SFAS No.
133, the adoption of SFAS No. 133 is not expected to have a material effect on
the Company's financial position or results of operations.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
None
-25-
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
None
PART III
ITEM 17. FINANCIAL STATEMENTS
Please refer to Item 18. "Financial Statements".
ITEM 18. FINANCIAL STATEMENTS
The Company's Financial Statements, Auditor's Reports, if applicable, and Notes
to the Financial Statements, which are required to be filed hereunder, are
contained on pages 27 through 37 as follows:
Page
----
Auditors' Report dated May 17, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . 28
Balance Sheets as at April 30, 2001 and 2000 (Audited). . . . . . . . . . . . . . . . 29
Statements of Operations and Deficit for the years ended April 30, 2001, 2000 and
1999 (Audited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Statement of Cash Flows the years ended April 30, 2001, 2000 and 1999 (Audited) . . . 31
Statements of Shareholders Equity since inception to April 30, 2001 (audited) . . . . 32
Notes to the Financial Statements for the for the year ended April 30, 2001 (Audited) 33
-26-
INSIDE HOLDINGS INC.
(FORMERLY COAST FALCON RESOURCES LTD.)
FINANCIAL STATEMENTS
(EXPRESSED IN CANADIAN DOLLARS)
(A DEVELOPMENT STAGE COMPANY)
APRIL 30, 2001
-27-
DAVIDSON & COMPANY Chartered Accountants A Partnership of
Incorporated Professionals
AUDITORS' REPORT
To the Shareholders of
Inside Holdings Inc.
(formerly Coast Falcon Resources Ltd.)
(A Development Stage Company)
We have audited the balance sheets of Inside Holdings Inc. (formerly Coast
Falcon Resources Ltd.) as at April 30, 2001 and 2000 and the statements of
operations, cash flows and shareholders' equity for the years ended April 30,
2001, 2000 and 1999 and the period from the start of the development stage on
May 1, 2000 to April 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian and United States generally
accepted auditing standards. Those standards require that we plan and perform
an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at April 30, 2001 and 2000
and the results of its operations and its cash flows for the years ended April
30, 2001, 2000 and 1999 and the period from the start of the development stage
on May 1, 2000 to April 30, 2001 in accordance with generally accepted
accounting principles in Canada.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
May 17, 2001
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA
- U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the expression of
a qualified opinion when the consolidated financial statements are affected by
significant uncertainties such as those referred to in Note 1 to these financial
statements. The above opinion in our report to shareholders dated May 17, 2001
for the year ended April 30, 2001 is not qualified with respect to, and provides
no reference to, these uncertainties since such an opinion would not be in
accordance with Canadian reporting standards for auditors when the uncertainties
are adequately disclosed in the consolidated financial statements.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
May 17, 2001
A Member of SC INTERNATIONAL
============================
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372, Pacific
Centre, Vancouver, BC, Canada, V7Y 1G6
TELEPHONE (604) 687-0947 FAX (604) 687-6172
-28-
INSIDE HOLDINGS INC.
(formerly Coast Falcon Resources Ltd.)
BALANCE SHEETS
(Expressed in Canadian Dollars)
(A Development Stage Company)
AS AT APRIL 30
=====================================================================================
2001 2000
-------------------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ 6,940 $ 299
Receivable 681 -
------------ ------------
7,621 299
INTELLECTUAL PROPERTY (Note 3) 20,000 -
------------ ------------
$ 27,621 $ 299
=====================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 13,894 $ 18,933
Due to related parties (Note 4) 64,075 144,613
------------ ------------
77,969 163,546
------------ ------------
SHAREHOLDERS' EQUITY
Capital stock
Authorized
100,000,000 common shares without par value
Issued
4,637,600 common shares (April 30, 2000 - 487,600) 3,368,694 3,163,181
Deficit accumulated during the development stage (92,614) -
Deficit (3,326,428) (3,326,428)
------------ ------------
(50,348) (163,247)
------------ ------------
$ 27,621 $ 299
=====================================================================================
ON BEHALF OF THE BOARD:
"Leonard Petersen" Director "William McCartney" Director
------------------------ ------------------------------
"Leonard Petersen" "William McCartney"
The accompanying notes are an integral part of these financial statements.
-29-
INSIDE HOLDINGS INC.
(formerly Coast Falcon Resources Ltd.)
STATEMENTS OF OPERATIONS AND DEFICIT
(Expressed in Canadian Dollars)
(A Development Stage Company)
==============================================================================================
Cumulative
Amounts
From the
Start of
Development
Stage on
May 1,
2000 to Year Ended April 30
April 30, ----------------------------------
2001 2001 2000 1999
---------------------------------------------------------- ----------- ---------- ---------
EXPENSES
Amortization $ 20,000 $ 20,000 $ - $ -
Consulting 7,500 7,500 30,000 30,000
Listing and transfer agent fees 13,293 13,293 4,923 8,105
Management fees 30,000 30,000 30,000 30,000
Office and general 6,487 6,487 6,441 10,062
Professional fees 15,334 15,334 11,289 16,297
----------- ----------- ---------- ---------
LOSS BEFORE OTHER ITEM (92,614) (92,614) (82,653) (94,464)
OTHER ITEM
Write-off of loan receivable - - (104,873) -
----------- ----------- ---------- ---------
LOSS FOR THE PERIOD $ (92,614) $ (92,614) $(187,526) $(94,464)
==============================================================================================
BASIC AND DILUTED LOSS PER SHARE $ (0.04) $ (0.38) $ (0.19)
==============================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 2,636,470 487,600 487,886
==============================================================================================
The accompanying notes are an integral part of these financial statements.
-30-
INSIDE HOLDINGS INC.
(formerly Coast Falcon Resources Ltd.)
STATEMENT OF CASH FLOWS
(Expressed in Canadian Dollars)
(A Development Stage Company)
================================================================================================
Cumulative
Amounts
From the
Start of
Development
Stage on
May 1,
2000 to Year Ended April 30
April 30, --------------------------------
2001 2001 2000 1999
-------------------------------------------------------------- --------- ---------- ---------
CASH FLOWS
FROM OPERATING ACTIVITIES
Loss for the period $ (92,614) $(92,614) $(187,526) $(94,464)
Items not involving cash:
Amortization 20,000 20,000 - -
Write-off of loan receivable - - 104,873 -
Change in non-cash working capital items:
Increase in receivable (681) (681) - -
Increase (decrease) in accounts payable (5,039) (5,039) 13,660 5,080
Increase in due to related parties 19,975 19,975 65,300 44,600
----------- --------- ---------- ---------
Cash used in operating activities (58,359) (58,359) (3,693) (44,784)
----------- --------- ---------- ---------
CASH FLOWS
FROM FINANCING ACTIVITIES
Issuance of capital stock 65,000 65,000 - -
----------- --------- ---------- ---------
Cash provided by financing activities 65,000 65,000 - -
----------- --------- ---------- ---------
CASH FLOWS
FROM INVESTING ACTIVITIES
Loan receivable - - 700 (1,000)
----------- --------- ---------- ---------
Cash provided by (used in) investing activities - - 700 (1,000)
----------- --------- ---------- ---------
INCREASE (DECREASE) IN CASH FOR THE PERIOD 6,641 6,641 (2,993) (45,784)
CASH, BEGINNING OF PERIOD 299 299 3,292 49,076
----------- --------- ---------- ---------
CASH, END OF PERIOD $ 6,940 $ 6,940 $ 299 $ 3,292
================================================================================================
CASH PAID FOR INCOME TAXES $ - $ - $ - $ -
================================================================================================
CASH PAID FOR INTEREST $ - $ - $ - $ -
================================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 6)
The accompanying notes are an integral part of these financial statements.
-31-
INSIDE HOLDINGS INC.
(formerly Coast Falcon Resources Ltd.)
STATEMENT OF SHAREHOLDERS' EQUITY
(Expressed in Canadian Dollars)
(A Development Stage Company)
========================================================================================================
Common Common Deficit
Shares Shares Accumulated
Issued and Issued and During
Fully Paid Fully Paid Development
(Number) (Amount) Stage Deficit Total
----------------------------------- ----------- ------------ ------------- ------------ ----------
Balance, April 30, 1998 488,235 $ 3,163,181 $ - $(3,044,438) $ 118,743
Cancellation of shares (635) - - - -
Loss for the year - - - (94,464) (94,464)
----------- ------------ ------------- ------------ ----------
Balance, April 30, 1999 487,600 3,163,181 - (3,138,902) 24,279
Loss for the year - - - (187,526) (187,526)
----------- ------------ ------------- ------------ ----------
Balance, April 30, 2000 487,600 3,163,181 - (3,326,428) (163,247)
Shares issued for cash 650,000 65,000 - - 65,000
Shares issued for debt settlement 3,500,000 140,513 - - 140,513
Loss for the year - - (92,614) - (92,614)
----------- ------------ ------------- ------------ ----------
Balance, April 30, 2001 4,637,600 $ 3,368,694 $ (92,614) $(3,326,428) $ (50,348)
=======================================================================================================
The accompanying notes are an integral part of these financial statements.
-32-
INSIDE HOLDINGS INC.
(formerly Coast Falcon Resources Ltd.)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
(A Development Stage Company)
APRIL 30, 2001
================================================================================
1. NATURE AND CONTINUANCE OF OPERATIONS
The Company was formed under the laws of the province of British Columbia,
Canada, on July 7, 1992 pursuant to a statutory amalgamation of two
predecessor companies previously engaged in the exploration and development
of mineral resource properties in Canada. The balance sheets of the
predecessor companies were carried over at historical cost. Effective
October 6, 2000, the Company changed governing jurisdiction from the
province of British Columbia to the Yukon.
Since the date of formation, the Company raised additional private equity
capital to settle certain indebtedness and for the further purpose of
exploring new lines of business. All costs associated with identifying,
researching and negotiating with prospective businesses have been charged
to earnings in the year they were incurred.
On May 1, 2000, the Company purchased 400 registered internet domain names
each ending with the suffix "inside.com" from a privately held company (the
"Vendor"). Total purchase consideration consists of a note in the amount of
$40,000 payable without interest on the earlier of; (1) the date on which
the Company is in receipt of proceeds totaling $40,000 from the sale or
lease of any of its domain names; (2) the date on which the Company is in
receipt of proceeds exceeding $200,000 from the sale and issue of common
shares; and (3) June 30, 2001. In addition, the Company agrees to pay to
the Vendor a royalty over five years equal to 15% of the gross proceeds
received from the sale or lease of any of its domain names to a maximum of
$1 million. The Company intends to carry on the business of developing a
network of affiliated destination web sites for transacting e-commerce
within several industry segments under a singular brand.
As a consequence of the agreement and the Company's plans, these financial
statements have been prepared to reflect a new development stage commencing
on May 1, 2000.
The Vendor is a related party by virtue of common share ownership.
The Company carried out a reorganization to reflect its change in business
as previously described. Changes include changing the Company's name,
changing the management and the board of directors, and changing the
governing jurisdiction from the province of British Columbia to the Yukon.
The Company's capital stock was consolidated on a 10:1 basis (net). All
share and all per share amounts prior to the date of consolidation have
been retroactively restated to reflect the consolidation. Company debts in
the amount of $140,513 were settled by the issuance of 3,500,000
post-consolidation common shares. The Company issued 650,000
post-consolidation common shares for proceeds of $65,000.
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
As at April 30, 2001, the Company had a working capital deficiency of
$(70,348) and has incurred losses of $92,614 from the start of its new
development stage on May 1, 2000 to April 30, 2001.
The Company's ability to continue as a going concern is dependant upon,
among other things, its ability to raise additional capital and
successfully develop the new line of business, which is not assured. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
-33-
INSIDE HOLDINGS INC.
(FORMERLY COAST FALCON RESOURCES LTD.)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
(A Development Stage Company)
APRIL 30, 2001
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In preparing these financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues and
expenses for the year. Actual results in the future periods could be
different from these estimates made in the current year. The following is a
summary of the significant accounting policies of the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, receivable, accounts
payable and accrued liabilities and due to related parties. Unless
otherwise noted, it is management's opinion that the fair value of these
financial instruments approximate their carrying values and the Company is
not exposed to significant interest currency or credit risks arising from
these financial instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
INTELLECTUAL PROPERTY
Intellectual property is recorded at cost and is amortized over two years.
INCOME TAXES
Future income taxes are recorded for using the asset and liability method.
Under the asset and liability method, future tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Future tax assets and
liabilities are measured using enacted or substantively enacted tax rates
expected to apply when the asset is realized or the liability settled. The
effect on future tax assets and liabilities of a change in tax rates is
recognized in income in the period that substantive enactment or enactment
occurs. To the extent that the Company does not consider it to be more
likely than not that a future tax asset will be recovered, it provides a
valuation allowance against the excess.
LOSS PER SHARE
Basic loss per share is calculated using the weighted average number of
common shares outstanding during the year.
SEGMENTED INFORMATION
The Company currently conducts its operations in Canada in one business
segment.
-34-
INSIDE HOLDINGS INC.
(FORMERLY COAST FALCON RESOURCES LTD.)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
(A Development Stage Company)
APRIL 30, 2001
================================================================================
3. INTELLECTUAL PROPERTY
====================================================
Net Book Value
---------------
Accumulated
Cost Amortization 2001 2000
----------------------------------------------------
Domain names $40,000 $ 20,000 $20,000 $ -
====================================================
4. DUE TO RELATED PARTIES
==================================================================================
2000 1999
----------------------------------------------------------------------------------
Due to a company controlled by directors of the Company. $24,075 $144,613
Due June 30, 2001 and secured on the intellectual property to a
company controlled by directors of the Company 40,000 -
------- --------
$64,075 $144,613
==================================================================================
Unless otherwise noted, amounts due to related parties are non-interest
bearing and unsecured with no fixed terms of repayment.
The fair value of amounts due to related parties are not determinable as
they have no specific repayment terms.
5. INCOME TAXES
Income tax expense varies from the amount that would be computed by
applying the combined federal and provincial income tax rate of 44.6% (2000
- 45.6%; 1999 - 45.6%) to income before income taxes as follows:
======================================================================================
2001 2000 1999
--------------------------------------------------------------------------------------
Loss before income taxes recovery $(92,614) $(187,526) $(94,464)
======================================================================================
Expected income taxes recovered $(41,324) $ (85,549) $(43,094)
Tax effect of expenses not deducted for income tax 8,924 - -
purposes
Unrecognized benefit of net operating losses carried
forward 32,400 85,849 43,094
--------- ---------- ---------
Actual income taxes recovery $ - $ - $ -
======================================================================================
-35-
INSIDE HOLDINGS INC.
(FORMERLY COAST FALCON RESOURCES LTD.)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
(A Development Stage Company)
APRIL 30, 2001
================================================================================
5. INCOME TAXES (cont'd...)
The significant components of the Company's future income tax assets are as
follows:
=======================================================================
2001 2000
-----------------------------------------------------------------------
Future tax assets:
Intellectual property $ 8,924 $ -
Non-capital loss carry forwards 32,400 267,467
--------- ----------
Net future tax assets before valuation allowance 41,324 267,467
Less valuation allowance (41,324) (267,467)
--------- ----------
Net future tax assets $ - $ -
=======================================================================
The Company has losses carried forward for income tax purposes of $72,614,
which can be applied against future years taxable income. Losses of
approximately $586,280, incurred prior to May 1, 2000, have expired and
cannot be applied against future income. These losses have expired due to a
change in control of the Company as well as a change in the core business
of the Company, in accordance with the Income Tax Act of Canada.
6. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
The following non-cash investing and financing transactions occurred during
the year ended April 30, 2001:
a) The Company issued 3,500,000 shares to settle debts in the amount of
$140,513.
b) The Company issued to a related party, a note payable in the amount of
$40,000 for the purchase of the intellectual property during the year.
There were no significant non-cash transactions for the year ended April
30, 2000 and 1999.
7. RELATED PARTY TRANSACTIONS
The Company entered into the following transactions with related parties
during the year ended April 30, 2001:
a) Paid or accrued $30,000 (2000 - $30,000; 1999 - $30,000) in management
fees to a company controlled by directors of the Company.
b) Paid or accrued $7,500 (2000 - $30,000; 1999 - $30,000) in consulting
fees to a significant shareholder of the Company.
These transactions were in the normal course of operations and were
measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
-36-
INSIDE HOLDINGS INC.
(FORMERLY COAST FALCON RESOURCES LTD.)
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
(A Development Stage Company)
APRIL 30, 2001
================================================================================
8. COMMITMENT
The Company entered into a Management Agreement dated August 1, 2000 with a
director of the Company, whereby the Company shall pay management fees of
$2,500 per month for a period of one year.
9. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with generally
accepted accounting principles in Canada. These financial statements also
comply, in all material respects, with accounting principles generally
accepted in the United States and the rules and regulations of the
Securities and Exchange Commission.
NEW UNITED STATES ACCOUNTING STANDARDS
Accounting for derivative instruments and hedging activities
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and
reporting standards for derivative instruments and for hedging activities.
SFAS 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. In June 1999, the FASB issued SFAS 137 to defer the
effective date of SFAS 133 to fiscal quarters of fiscal years beginning
after June 15, 1999. In June 2000, the FASB issued SFAS No. 138, which is a
significant amendment to SFAS 133. The Company does not anticipate that the
adoption of these statements will have a significant impact on its
financial statements.
Comprehensive income
SFAS No. 130, "Reporting Comprehensive Income", addresses standards for the
reporting and display of comprehensive income and its components.
Comprehensive income includes net income and other comprehensive income.
Other comprehensive income represents revenues, expenses, gains and losses
that are excluded from net income under generally accepted accounting
principles.
For the years ended April 30, 2001, 2000 and 1999, there were no other
items of comprehensive income.
-37-
ITEM 19. EXHIBITS
The following exhibits to this Annual Report are attached by reference to Item
19. "EXHIBITS" of the Company's Registration Statement on Form 20-F dated March
23, 2001.
1.1* Amalgamation Agreement dated February 26, 1992 between McConnell-Peel
Resources Ltd. and Sheba Copper Mines Limited
1.2* Amendment to the Memorandum dated September 11, 2000 changing the
Company's name, consolidating, subdividing and increasing its
authorized capital.
1.3* Certificate of Change of Name dated September 11, 2000.
1.4* The Articles of Continuance of the Company dated October 6, 2000.
1.5* Bylaws of the Company
1.6* Certificate of Continuance dated October 6, 2000.
2.1* Specimen Share Certificate.
4.1* Assignment and Settlement Agreement dated July 31, 2000 between the
Company, Vernon Meyer, WMC Equities Inc., Petersen Management Inc. and
Pemcorp Management Inc.
4.2* Settlement Agreement dated July 31, 2000 between the Company and
Pemcorp Management Inc.
4.3* Asset Purchase Agreement dated May 1, 2000 between 596319 B.C. Ltd.
and the Company.
4.4* Management Agreement dated August 1, 2000 between the Company and
Pemcorp Management Inc.
* These exhibits were previously filed with the SEC on March 23, 2001, as
exhibits to the Company's registration statement on Form 20-F, as amended, and
are incorporated herein by reference.
-38-
SIGNATURES
The Company hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this Annual Report on its behalf.
INSIDE HOLDINGS INC.
By: /s/ Leonard Petersen
-------------------------
Name: Leonard Petersen
Title: President & Director
Dated: September 20, 2001
---------------------------
-39-