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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
(Mark One)
_X_ Registration statement pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934 or
Annual report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the fiscal year ended or
----------- --------------
Transition report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the transition period from to
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Commission file number
PRINTLUX.COM INC.
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(Exact name of registrant as specified in this charter)
Province of Alberta, Canada
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(Jurisdiction of incorporation or organization)
1282 Vernon Drive Vancouver, BC Canada V6A 4C9
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(Address of principal executive offices)
Securities registered or to be registered pursuant to section 12(b) of the Act:
None None
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(Title of each class) (Name of each exchange
on which registered)
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares Without Par Value
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(Title of Class)
<page>
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
None
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(Title of Class)
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
registration statement.
13,191,624
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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 No .
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Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 X Item 18 .
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<page>
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Identity of Directors, Senior Management and Advisors.......1
1.1 Directors and Senior Management................1
1.2 Advisors.......................................2
1.3 Auditors.......................................2
ITEM 2. Offer Statistics and Expected Timetable..............................2
ITEM 3. Key Information 2
3.1 Selected Financial Data........................2
3.2 Capitalization and Indebtedness................4
3.3 Reasons for the Offer and Use of Proceeds......5
3.4 Risk Factors...................................5
ITEM 4. Information on the Company...........................................8
4.1 History and Development........................8
4.2 Business Overview..............................9
4.3 Competition...................................11
4.4 Property & Equipment..........................11
4.5 Management & Employees........................12
4.6 Office Space..................................12
ITEM 5. Operating and Financial Review and Prospects...............13
5.1 Results of Operations.........................13
5.2 Liquidity.....................................15
ITEM 6. Directors, Senior Management and Employees.................16
6.1 Directors and Senior Management...............16
6.2 Compensation of Directors.....................18
6.3 Board Practices...............................18
6.4 Employees.....................................19
6.5 Share Ownership of Directors and Officers.....19
ITEM 7. Major Shareholders and Related Party Transactions..........20
7.1 Beneficial Ownership..........................20
7.2 Related Party Transactions....................21
7.3 Interests of Experts and Counsel..............22
ITEM 8. Financial Information......................................23
8.1 Legal Proceedings.............................23
8.2 Significant Changes...........................23
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ITEM 9. The Offer and Listing......................................23
9.1 Offering and Listing Details..................23
ITEM 10. Additional Information.....................................24
10.1 Share Capital................................24
10.2 Bylaws and Articles..........................27
10.3 Material Contracts...........................28
10.4 Exchange Controls and other Limitations
Affecting Security Holders...................29
10.5 Certain Canadian Federal Income Tax
Consequences to U.S. Investors...............29
10.6 Documents on Display.........................30
ITEM 11. Quantitative and Qualitative Disclosures About Market Risk..........30
ITEM 12. Descriptions of Securities Other than Equity Securities.............30
12.1 Warrants.....................................30
12.2 Stock Options................................31
PART II
ITEM 13. Defaults, Dividend Arrearages and Delinquencies.....................32
ITEM 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds............................................................32
PART III
ITEM 17. Financial Statements
ITEM 18. Financial Statements
ITEM 19. Exhibits
SIGNATURE
<page>
FORWARD-LOOKING STATEMENTS
We caution you that certain important factors (including without limitation
those set forth in this Form 20-F) may affect our actual results and could cause
such results to differ materially from any forward-looking statements that may
be deemed to have been made in this Form 20-F registration statement, or that
are otherwise made by or on our behalf. For this purpose, any statements
contained in this registration statement that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may," "except," "believe,"
"anticipate," "intend," "could," estimate," or "continue," or the negative or
other variations of comparable terminology, are intended to identify
forward-looking statements.
PART I
Item 1. Identity of Directors, Senior Management and Advisors
1.1. Directors and Senior Management:
The following table sets forth the name, business address and position of each
of the directors and executive officers of the Company:
Name & Address............. Position
-------------- --------
Raffi Khorchidian President, Chief Executive
1282 Vernon Drive.......... Officer and Director
Vancouver, BC, Canada V6A 4C9
Garo Deyrmenjian........... Director
#318-470 Granville St.
Vancouver,B.C, Canada, V6C 1V5
Hagop (Jack) Khorchidian... Chief Technology Officer
1282 Vernon Drive.......... and Director
Vancouver, BC, Canada V6A 4C9
Shay Prasad................ Director
Suite 400-601 Sixth Street
Vancouver, BC, Canada V3L 3C1
1
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1.2. Advisors:
The following table sets forth the name, business address and position of each
of the advisors to the Company:
Name & Address............. Position
-------------- --------
HSBC Bank Canada Banker
2735 Granville Street
Vancouver, B.C. Canada V6H 3J1
Gregory S. Yanke Law Corporation Legal Counsel
200 - 675 West Hastings Street
Vancouver, B.C., Canada V6B 1N2
1.3. Auditors
Name & Address Position
Morgan & Company Auditor
P.O Box 10007 Pacific Centre
Suite 1488 - 700 West Georgia Street
Vancouver, B.C. V7Y 1A1
Item 2. Offer Statistics and Expected Timetable
Not applicable
Item 3. Key Information
3.1. Selected Financial Data
The following tables set forth the data of the Company for the fiscal years
ended July 31, 2003, 2002, 2001, 2000 and 1999, in addition to the nine-month
periods ended April 30, 2003 and 2004. We derived all figures from our fiscal
year end financial statements which were examined by our independent auditor and
the unaudited nine-month period interim financial statements which were prepared
by our management. This information should be read in conjunction with our
financial statements included in this registration statement.
Our financial statements included in this registration statement and the table
set forth below have been prepared in accordance with accounting principles
generally accepted in Canada. A reconciliation to United States generally
accepted accounting principles is included in Note 16 to our audited financial
statements. All amounts are expressed in Canadian dollars. The first table
presents this financial data in accordance with United Statements generally
accepted accounting principles. The second table presents the data in accordance
with Canadian generally accepted accounting principles.
2
<page>
U.S. Generally Accepted Accounting Principles
<table>
<caption>
- ---------------------------------------------------------------------------------------------------------------------
Nine-months Nine-months Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
ended April ended April ended July ended July ended July ended July ended July
30, 2004 30, 2003 31, 2003 31, 2002 31, 2001 31, 2000 31, 1999
Unaudited Unaudited
- ---------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Revenue $1,034,368 $1,266,887 $1,705,498 $ 801,111 $ 728,092 $1,203,772 $ 695,239
- ---------------------------------------------------------------------------------------------------------------------
Gross Profit $ 304,818 $ 523,498 $ 700,510 $ 211,727 $ 225,986 $ 255,737 $ 148,871
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) ($ 74,244) $ 134,544 $ 9,346 ($ 726,151) ($ 609,339) ($ 205,682) ($ 184,953)
from operations
- ---------------------------------------------------------------------------------------------------------------------
Net Income ($ 225,689) $ 4,119 $ 12,291 ($ 616,453) ($ 610,563) ($ 207,767) ($ 185,920)
(Loss)
- ---------------------------------------------------------------------------------------------------------------------
Income ($ .02) $ .001 $ (0.01) $ (0.05) $ (0.28) $ (0.10) $ (0.09)
(Loss)per
common share
- ---------------------------------------------------------------------------------------------------------------------
Total assets $ 550,165 $ 665,959 $ 662,950 $ 596,498 $ 491,976 $ 731,398 $1,127,501
- ---------------------------------------------------------------------------------------------------------------------
Net assets ($ 32,135) $ 185,382 $ 193,554 $ 181,263 ($ 767,365) ($ 156,802) $ 50,965
- ---------------------------------------------------------------------------------------------------------------------
Long term debt $ 1,974 $ 39,758 $ 3,410 $ 62,906 $ 767,134 $ 376,158 $ 608,056
- ---------------------------------------------------------------------------------------------------------------------
Cash dividends Nil Nil Nil Nil Nil Nil Nil
per common
share
- ---------------------------------------------------------------------------------------------------------------------
Deficit ($1,597,226) ($1,379,709) ($1,371,537) ($1,383,828) ($ 767,375) ($ 156,812) $ 50,955
- ---------------------------------------------------------------------------------------------------------------------
Share Capital $1,565,091 $1,565,091 $1,565,091 $1,565,091 $ 10 $ 10 $ 10
- ---------------------------------------------------------------------------------------------------------------------
Weighted 13,191,624 13,191,624 13,191,624 12,495,851 2,150,000 2,150,000 2,150,000
average number
of common
shares
- ---------------------------------------------------------------------------------------------------------------------
</table>
3
<page>
Canadian Generally Accepted Accounting Principles
<table>
<caption>
- ----------------------------------------------------------------------------------------------------------------------
Nine-months Nine-months Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
ended April ended April ended July ended July ended July ended July ended July
30, 2004 30, 2003 31, 2003 31, 2002 31, 2001 31, 2000 31, 1999
Unaudited Unaudited
- ----------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Revenue $1,034,368 $1,266,887 $1,705,498 $ 801,111 $ 728,092 $1,203,772 $ 695,239
- ------------------------------------------------------------------------------------------------------------------------
Gross Profit $ 304,818 $ 523,498 $ 700,510 $ 211,727 $ 225,986 $ 255,737 $ 148,871
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) ($ 74,244) $ 134,544 $ 9,346 ($ 726,151) ($ 609,339) ($ 205,682) ($ 184,953)
from
operations
- ------------------------------------------------------------------------------------------------------------------------
Net Income ($ 225,689) $ 4,119 $ 12,291 ($ 616,453) ($ 610,563) ($ 207,767) ($ 185,920)
(Loss)
- ------------------------------------------------------------------------------------------------------------------------
Loss per ($ .02) $ .001 $ (0.01) $ (0.05) $ (0.28) $ (0.10) $ (0.09)
common share
- ------------------------------------------------------------------------------------------------------------------------
Total assets $ 550,165 $ 662,950 $ 662,950 $ 596,498 $ 491,976 $ 731,398 $1,127,501
- ------------------------------------------------------------------------------------------------------------------------
Net assets ($ 32,135) $ 193,554 $ 185,382 $ 181,263 ($ 767,365) ($ 156,802) $ 50,965
- ------------------------------------------------------------------------------------------------------------------------
Long term debt $ 1,974 $ 39,758 $ 3,410 $ 62,906 $ 767,134 $ 376,158 $ 608,056
- ------------------------------------------------------------------------------------------------------------------------
Cash Nil Nil Nil Nil Nil Nil Nil
dividends per
common share
- ------------------------------------------------------------------------------------------------------------------------
Deficit ($ 1,597,226) ($1,379,709) ($1,371,537) ($1,383,828) ($ 767,375) ($ 156,812) $ 50,955
- ------------------------------------------------------------------------------------------------------------------------
Share Capital $ 1,565,091 $1,565,091 $1,565,091 $1,565,091 $ 10 $ 10 $ 10
- ------------------------------------------------------------------------------------------------------------------------
Weighted 13,191,624 13,191,624 13,191,624 12,495,851 2,150,000 2,150,000 2,150,000
average number
of common
shares
- ------------------------------------------------------------------------------------------------------------------------
</table>
4
<page>
Since June 1, 1970, the government of Canada has permitted a floating exchange
rate to determine the value of the Canadian dollar as compared to the United
States dollar. On June 25, 2004 the exchange rate in effect for Canadian dollars
exchanged for United States dollars, expressed in terms of Canadian dollars was
$1.3484. This exchange rate is based on the noon buying rates in New York City,
for cable transfers in Canadian dollars, as certified for customs purposes by
the Federal Reserve Bank of New York. For the past fiscal years ended July 31
and for the six month period between January, 2004 and June 30, 2004, the
following exchange rates were in effect for Canadian dollars exchanged for
United States dollars, calculated in the same manner as above:
Period Average
Year ended July 31, 1999 $1.5120
Year ended July 31, 2000 $1.4714
Year ended July 31, 2001 $1.5235
Year ended July 31, 2002 $1.5729
Year ended July 31, 2003 $1.4921
Low-High
Month ended Jan. 31, 2004 $1.2690 - $1.3340
Month ended Feb. 28, 2004 $1.3108 - $1.3442
Month ended Mar. 31, 2004 $1.3080 - $1.3437
Month ended April 30, 2004 $1.3095 - $1.3711
Month ended May 31, 2004 $1.3580 - $1.3970
Month ended June 30, 2004 $1.3430 - $1.3752
5
<page>
3.2. Capitalization and Indebtedness
The following table sets forth our capitalization and indebtedness as
at May 31, 2004.
<table>
<caption>
====================================================================================================
As at May 31, 2004
----------------------------------------------------------------------------------------------------
<s> <c>
$ 580,326
Short term debt (unsecured and not guaranteed)
----------------------------------------------------------------------------------------------------
Long term debt $ 1,974
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Total debt $ 582,300
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----------------------------------------------------------------------------------------------------
Shareholder's deficiency ($ 32,135)
----------------------------------------------------------------------------------------------------
Common shares 13,191,624
----------------------------------------------------------------------------------------------------
Retained earnings ($ 1,597,226)
----------------------------------------------------------------------------------------------------
Total shareholders' deficiency ($ 32,135)
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Total capitalization $ 1,565,091
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</table>
3.3. Reasons for the Offer and Use of Proceeds
Not Applicable
3.4. Risk Factors
Any investment in our common shares involves a high degree of risk. You should
consider carefully the following information before you decide to buy our common
shares. If any of the events discussed in the following risk factors actually
occurs, our business, financial condition or results of operations would likely
suffer. In this case, the market price of our common shares could decline, and
you could lose all or part of your investment in our shares. In particular, you
should consider carefully the following risk factors:
We Have a History of Losses.
We have incurred losses in our business operations since inception. From our
incorporation on April 25, 1994 to April 30, 2004, we have incurred losses
totalling $1,597,226. Failure to achieve and maintain profitability may
adversely affect the market price of our common shares.
6
<page>
If We Are Unable Retain Key Personnel, Our Business Operations Could be
Adversely Affected.
Our success depends, to a significant extent, upon the efforts and abilities of
the senior management team of Raffi Khorchidian and Jack Khorchidian. The loss
of any key personnel, or the inability to attract and retain additional skilled
employees could have a material adverse effect on our business, operating
results and financial condition.
If We Are Not Able To Effectively Respond to Competition, Our Business May Fail.
The internet based printing industry is a new and emerging market. As a member
of this industry, our competitors include a large number of traditional printing
companies. As there are no substantial barriers to entry, we expect competition
will continue to intensify. There can be no assurance that competitors will not
be able to duplicate any of our technology, or provide similar services more
efficiently, which would erode any competitive advantage that we may possess.
Many of our current and potential competitors have greater financial, marketing,
service, customer support and research and development resources. Competitors
include larger printing companies which have longer operating histories, better
name recognition, a reputation for reliability and an established customer base.
These competitors may be able to respond more quickly to changes in customer
requirements or to devote greater resources to the development, promotion and
sale of their products and services. There can be no assurance that we will be
able to compete successfully in the future.
Competitors Have Access to Our On-Line Ordering System Which May Allow Them to
Duplicate Our Information Technology and Adversely Affect Our Business
Operations.
Our on-line ordering system is available to the public and may be viewed by
competitors. No assurances exist that this information technology cannot be
materially duplicated by a competitor.
If Our Marketing Efforts to Attract Users Are Unsuccessful, Funds That We Spend
on Promotion Will Be Lost.
To attract users, we must develop a brand identity and increase public awareness
for the services we offer. To increase brand awareness, traffic and revenue, we
intend to substantially increase our offline and on-line advertising and
promotional efforts. Our marketing activities may, however, not result in
increased revenue and, even if they do, any increased revenue may not offset the
expenses incurred in building brand recognition. The promotional efforts
required to successfully implement our business plan may require expenditures
beyond our available financial resources. Moreover, despite these efforts, we
may be unable to increase the public awareness of our brands, which would have
an adverse effect on our results of operations.
If We Experience System Interruptions, We May Not Be Able to Attract and Retain
Customers and Our Business Will Fail.
Our ability to attract and retain customers depends on the performance,
reliability and availability of our services and network infrastructure. We may
experience periodic service interruptions caused by temporary problems in our
7
<page>
own systems or software or in the systems or software of third parties upon whom
we rely on to provide service or support. Fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events could damage these
systems and interrupt our services. Computer viruses, electronic break-ins or
other similar disruptive events also could disrupt our services. System
disruptions could result in the unavailability or slower response times of our
web site, which would lower the quality of customers' experience. Service
disruptions could adversely affect our revenue and, if they were prolonged,
would seriously harm our business and reputation. We do not carry business
interruption insurance to compensate for losses that may occur as a result of
these interruptions. Our customers depend on Internet service providers and
other Web site operators for access to our Web site. These entities have
experienced significant outages in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
Moreover, the Internet network infrastructure may not be able to support
continued growth. Any of these problems could adversely affect our business.
If We Are Unable to Develop Strategic Alliances With Other Companies in the
Industry, Our Sales Efforts May be Unsuccessful.
Our success also depends, to a significant extent, upon the ability to develop
strategic alliances. Furthermore, the initial market penetration for our
products and services will heavily depend on the level of success of sales
efforts. There can be no assurance that such alliances will develop or that they
will prove successful over the course of our future operations.
If We Are Unable to Obtain Web Domain Names in Foreign Countries, Our Ability to
Expand Business Operations May Be Negatively Impacted.
We may be unable to acquire or maintain Web domain names in the countries in
which we may conduct business. The acquisition and maintenance of domain names
generally is regulated by governmental agencies and their designees and are
subject to change. The relationship between regulations governing domain names
and laws protecting trademarks and similar proprietary rights is unclear.
Therefore, we could be unable to prevent third parties from acquiring or using
domain names that infringe or otherwise decrease the value of our brand name,
trademarks and other proprietary rights.
If Our On-line Security Measures Fail, We Will Likely Lose Customers.
Our relationship with customers would be adversely affected if the security
measures that we use to protect their personal information are ineffective. We
cannot predict whether events or developments will result in a compromise or
breach of the technology we use to protect a customer's personal information.
The infrastructure relating to our services is vulnerable to unauthorized
access, physical or electronic computer break-ins, computer viruses and other
disruptive problems. Internet service providers have experienced, and may
continue to experience, interruptions in service as a result of the accidental
or intentional actions of Internet users, current and former employees and
others. Anyone who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our operations.
8
<page>
Security breaches relating to our activities or the activities of third-party
contractors that involve the storage and transmission of proprietary information
could damage our reputation and relationship with subscribers and strategic
partners. We could be liable to subscribers for the damages caused by such
breaches and could incur substantial costs as a result of defending claims for
those damages. We may need to expend significant capital and other resources to
protect against such security breaches or to address problems caused by such
breaches. Security measures taken by us may not prevent disruptions or security
breaches.
The Internet is Subject to Rapid Changes, Which Could Result in Significant
Additional Costs.
The market for Internet products and services is characterized by rapid change,
evolving industry standards and frequent introductions of new technological
developments. These new standards and developments could make the existing or
future services obsolete. Keeping pace with the introduction of new standards
and technological developments could result in significant additional costs or
prove difficult or impossible to maintain. The failure to keep pace with these
changes and to continue to enhance and improve the responsiveness, functionality
and features of our services could harm our ability to attract and retain
customers. Among other things, we will need to license or develop leading
technologies, enhance our existing services and develop new services and
technologies that address the varied needs of customers.
Because the Market For Our Services is Relatively New, Our Operations Are
Subject to a Higher Level of Uncertainty.
Our business is focused on a market niche that has never been fully addressed,
and hence operations are subject to a high level of uncertainty and risk. In
particular, our on-line ordering system is relatively new in the industry and as
such may face some resistance to customer acceptance. Considerable time,
training, and commitment by the customer may be required in some cases. No
assurances exist that potential customers will make this commitment.
The market for our services is new and evolving, it is difficult to predict the
size of the market, the future growth rate, if any, or the level of premiums the
market will pay for our services (i.e. the market's price elasticity). There can
be no assurance that the market for our services will emerge to a profitable
level or be sustainable. There can be no assurance that any increase in
marketing and sales efforts will result in a larger market or increase in market
acceptance for our services. If the market fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if our proposed
services do not achieve or sustain market acceptance, our proposed business,
results of operations and financial condition will be materially and adversely
affected.
If the Technology We Rely Upon Becomes Obselete, We May Not Be Able to Market
Our Services.
The technical features of our online print service will in large part determine
the speed and accuracy, and hence marketability of our product. New market
9
<page>
entrants may succeed in developing and introducing new or enhanced systems
having technologies and features superior to, or more effective than, any
technologies which have been or are being developed rendering our proposed
services obsolete or less marketable. Accordingly, the ability for us to compete
will be dependent on the timely enhancement of our existing products as well as
the development of future products. There can be no assurance that we will be
able to keep pace with technological developments, or that our products will not
become obsolete. Technological obsolescence of the existing technology remains a
possibility, which would have a material adverse affect on our operations.
Because Our Chief Executive Officer Owns 57.2% of Our Outstanding Common Stock,
He Could Make and Control Corporate Decisions That May Be Disadvantageous to
Minority Shareholders.
Our Chief Executive Officer, Mr. Raffi Khorchidian, own approximately 57.2% of
our outstanding common shares. Accordingly, he will have a significant influence
in determining the outcome of all corporate transactions or other matters,
including mergers, consolidations, and the sale of all or substantially all of
our assets. He will also have the power to prevent or cause a change in control.
The interests of Mr. Khorchidian may differ from the interests of the other
stockholders and thus result in corporate decisions that are disadvantageous to
other shareholders.
The Trading Market For Our Shares is Not Always Liquid.
Although our shares trade on the TSX Venture Exchange and the NASD OTC Bulletin
Board, the volume of shares traded at any one time can be limited, and, as a
result, there may not be a liquid trading market for our shares.
Our Securities May Be Subject to Penny Stock Regulation.
If a market for our securities develops and the price of our common stock falls
below $5.00 per share, then we will be subject to "penny stock" regulation.
"Penny stock" rules impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with a
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a
disclosure schedule prescribed by the Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. Consequently, the "penny
stock" rules may restrict the ability of broker-dealers to sell our shares of
common stock. The market price of our shares would likely suffer as a result.
10
<page>
Enforcement of legal process may be difficult.
All members of our Board of Directors and management reside in Canada. As well,
our address for service is a Canadian address. Accordingly, service of process
upon us, or upon individuals related to us, may be difficult or impossible to
obtain within the United States.
All of our assets are located outside of the United States. Any judgment
obtained in the United States against us may not be collectible within the
United States.
As we are incorporated pursuant to the laws of Alberta, duties of our directors
and officers, and the ability of shareholders to initiate a lawsuit on our
behalf, are governed by the Alberta Business Corporations Act.
Item 4. Information on the Company
4.1. History and Development
We were incorporated on December 4, 1994 under the name 677072 Alberta Inc. by
way of a Certificate of Incorporation issued pursuant to the provisions of
Alberta's Business Corporations. On June 27, 1996, we filed a Certificate of
Amendment changing our name to Corniche Capital Inc. By Certificate of
Amendments dated October 9, 1997 and July 25, 2000 respectively, we amended our
articles to remove certain restrictions that apply to private companies and
permitted shareholder meetings to be held in the Greater Vancouver, British
Columbia area, in addition to anywhere in Alberta.
Our common shares currently trade on the TSX Venture Exchange. We were
originally listed on the Canadian Venture Exchange, a predecessor to the TSX
Venture Exchange, as a capital pool company. Our sole asset at this time was
cash on hand. As a capital pool company, our objective was to identify and
acquire a significant asset, known as a major transaction, in order to graduate
to a full Canadian Venture Exchange listing.
On August 23, 2001, we completed our major transaction through the acquisition
of 100% of the issued and outstanding common shares of Graffico Printers &
Design Inc. Concurrent with the acquisition, we changed our name to Printlux.com
Inc. In consideration of the acquisition, we issued 7,016,624 common shares in
our capital to the shareholders of Graffico Printers & Design Inc.
Our head office is located at 1282 Vernon Drive, Vancouver, British Columbia,V6A
4C9 Our registered and records office is located at 700 2nd Street, S.W., Suite
1400, Calgary, Alberta, T2P 4V5.
We have not been involved in any bankruptcy, receivership or similar
proceedings, nor have we been a party to any material reclassification, merger,
consolidation or purchase or sale of a significant amount of assets.
11
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Since our incorporation on December 4, 1995, we have incurred an accumulated
deficit of $1,597,226 as at April 30, 2004. We have incurred net income of
$12,291 for the year ended July 31, 2003. As we have a working capital
deficiency of $328,294 as at April 30, 2004, our ability to continue as a going
concern is dependent upon successful completion of additional financing,
continuing support of creditors and upon our ability to attain profitable
operations.
4.2. Business Overview
We are a full-service print company that provides up-to-the-minute innovations
in print, promotional and warehouse management services. We also provide the
associated services of warehousing both printed and unprinted items such that
customers can order the number and combination of items on an as-needed basis.
We will then collate, pack, wrap and prepare the items for shipping either
locally or internationally. Our subsidiary's business began in 1990 as a
printing business operated by Raffi Khorchidian as a sole proprietorship.We have
since expanded operations to meet the needs of clients by adding database
management, warehousing, distribution, fulfillment, and inventory management to
our services. Our services include:
o ePOISE - an exclusive online review and ordering system o Imaging and
plate preparation o Offset and digital printing o Bindery and finishing
capabilities o Line of promotional items o Warehousing and fulfillment
services o Customized shipping and inventory management systems
These services simplify our clients' printing needs by providing one-stop
shopping, consistent job quality and customer service. We have developed and are
continuing to test and improve technology to deliver online print services to
existing and future clientele that require automated, customized and fully
integrated solutions for their printing needs. Over the past five years, our
clients have been using our on-line ordering software called ePOISE (electronic
Print Ordering and Imaging System for the Enterprise).
We are continuing to upgrade the software's features, automation and integration
as well as add robustness and scalability. ePOISE is currently at version 4 with
many new features and capabilities. We intend to serve as an Internet based
business-to-business print production and procurement/purchasing service in the
North American commercial printing industry. We will offer an electronic
commerce solution that automates the traditional commercial printing process and
connects with the management systems of its customers. With our solutions,
businesses will be able to access a customized, secure website, created solely
for them, that contains a digital catalogue of all of their graphic materials.
Interfacing through their custom websites, customers will be able to create,
order, modify, proof, and financially manage their printed business products
from any Internet enabled personal computer. Our solution will reduce the time
associated with ordering printed business materials to a few minutes and
typically deliver ordered materials to customers within six to ten working days.
The highly automated nature of the customized website purchasing interface will
also reduce the margin for human error involved in the purchase of custom
products and result in further savings of time and money for our customers.
12
<page>
We do not anticipate abandoning the traditional business to focus strictly on
business received through the online ordering channel. New online business is
meant to augment the method in which orders are processed, while at the same
time adding additional revenue from fulfillment services, distributed printing
and print project management.
Integrated Processes for Efficiency and Performance
We intend to integrate business, production and communication processes across
the entire supply network to give customers the full benefit of moving their
graphic purchases online. Integration will allow both the suppliers of materials
in the print process and clients to access our database. Suppliers can bid on
job materials such as paper and the customer can access account balance and
order history. We intend to incorporate direct payment methods such as
Electronic Data Interchange into future versions of ePOISE.
Integration will be our core competency and is a competitive advantage over
printers who have not developed similar or more advanced technologies. Advanced
software programming to allow for integration with our online ordering solution
is currently in development. We intend to unite the total supply network, which
facilitates communication and collaboration. Our complete project creation and
management processes keep information current and readily available, improving
control and reducing errors. Furthermore, integrating product creation and
product manufacturing allows users to manage change cycles efficiently. This
ability to monitor changes up until the last minute before the production,
speeds time to market while reducing errors at the same time.
Flexibility
Print buyers can start with a pilot project using low cost, low risk items such
as business stationery. This allows them to audit the benefits first before
moving to more complicated print applications or to additional business
locations. Print buyers will be able to tailor the configuration of their
Printlux.com ePOISE-enabled online ordering web application to meet the specific
needs of individual offices, by turning capabilities on or off for specific
product categories.
Products and Services
We employ the traditional order process for our bricks-and-mortar business. We
are creating the technology necessary to let customers use the power of the
Internet to automate their print ordering process. We provide an innovative,
efficient and reliable way for businesses to order all of their diverse graphic
materials. The efficiency of online ordering allows customers to initiate jobs
with just a few keystrokes. Customers are able to access up-to-the-minute order
status of reports at any time through any Internet enabled computer.
13
<page>
The web application software, ePOISE, is going through its evolutionary stages.
Version I of this web application takes orders online. Alpha testing proved that
the business and logical processes would work and development was completed in
November, 1999 Under the Version I capability, once a company has been qualified
as an ePOISE client, printed pieces are digitally catalogued on the customized
client website, the online customer is then able to check print pricing, place
an order, upload digital files, add type changes and view a text proof online.
This can be completed in minutes. In the traditional order process this can take
from one to five days.
Version II of the web application, which was to make the application scalable so
that this solution can be offered to any size organization without exceeding the
limitation of the web application. By adding scalability, extensive manual
programming is not required every time a new client or a new feature is added to
the web application. This reduced the cost of programming and brought new
customers online within days instead of within weeks.
Version III of the web application adds soft proofing technology. This
technology allows customers to instantly see a rendered representation of the
finished printed product, so as to eliminate the time lag during the approval
process prior to printing the job.
Version IV of the web application was designed to integrate the business
processes of the bricks-and-mortar print shop with the digital front-end of the
web application, with the objective of eliminating all of the errors associated
with employees inputting orders.
In Version V of the web application, we will add data asset management
technology. This technology will give clients the ability to store, manage and
organize their digital files that are used for print product creation, for
example digital files of corporate logos, brochure images and illustrations. The
targeted date of completion for Version V will be the first quarter of 2005.
In Version VI of the web application we will add reporting features. These
reporting features will include order history, buying patterns, cost analysis
and budgeting reports. The targeted date of completion for Version VI will be
the second quarter of 2005.
No industry regulatory approvals are required to achieve any of our stated
business objectives. Approvals from securities regulatory authorities will be
required for activities such as acquisitions and financings. Under our model,
each client will access ePOISE web application as if they were accessing a
secure and private website, custom designed and developed to reflect their
unique ordering requirements and patterns. We will create an online catalogue of
all customers' digital graphic assets and manage these assets for our clients.
ePOISE will become the main contact with the client.
Our online print procurement model will offer many advantages over traditional
print buying processes:
14
<page>
<table>
<caption>
- -----------------------------------------------------------------------------------------------------------------------
<s> <c>
Traditional Print Purchasing Printlux.com Print Procurement
- -----------------------------------------------------------------------------------------------------------------------
Rely on telephone & personal contact Order placement at any time
- -----------------------------------------------------------------------------------------------------------------------
Disjointed manual use of information Brand control of digital assets
- -----------------------------------------------------------------------------------------------------------------------
Fax or courier proofs Online job editing & proofing reduces time lag
- -----------------------------------------------------------------------------------------------------------------------
Printer must set type Direct customer input will reduce errors
- -----------------------------------------------------------------------------------------------------------------------
Client relies on printer for order history Real-time tracking & reporting
- -----------------------------------------------------------------------------------------------------------------------
Paper based ordering from multiple locations Central order management
- -----------------------------------------------------------------------------------------------------------------------
Remote printing requires manual processing North American wide production & distribution
- -----------------------------------------------------------------------------------------------------------------------
Costs proportionate to growth Scalability at small incremental cost
- -----------------------------------------------------------------------------------------------------------------------
</table>
Our web-based solutions incorporate several services that address specific
customer needs and inefficiencies in the traditional print industry supply
chain. These services can be implemented individually or on an integrated basis,
streamlining and reducing the cost of ordering, manufacturing and print
procurement, being the process of tracking and replenishing printed material and
products which have been previously inventoried.
We intend to populate future versions of ePOISE with corporate clients data.
This will enable the customer's employees to access, modify, proof, procure and
manage their printed materials online from any Internet-enabled personal
computer. Through ePOISE, customers can purchase business cards, stationary,
envelopes and general office materials, as well as color marketing materials.
Future versions of ePOISE will be built using proprietary automated tools and
will provide a secure environment for storing the underlying graphic files and
employee data that are needed to procure printed materials on a repeat basis. In
addition, they will incorporate customer-defined ordering and authorization
rules, as well as standardization procedures. These future versions of ePOISE
will simplify purchasing, automate specific pre-press processes, and reduce
opportunities for errors. This will result in the rapid delivery of consistent,
high-quality printed business materials. Our in-house programming team intends
to incorporate many unique benefits to gain a competitive advantage.
Intellectual Property and Other Proprietary Rights
We will rely primarily on a combination of copyright and trade secret laws,
confidentiality procedures and contractual provisions to protect proprietary
rights in our technology. Factors such as the technological skills of personnel,
new product developments, frequent product enhancements, name recognition and
reliable product maintenance are essential to establishing and maintaining a
technological leadership position. We will seek to protect our software,
documentation and other written materials under trade secret, copyright and
patent laws, which afford only limited protection. We have not filed any
copyright, trademark or patent applications with any agencies.
All employees are required to execute non-disclosure and non-competition
agreements. Management believes that our current intellectual property rights
are sufficient to carry on business as currently conducted. Management believes
that there is a limited market for our software and that the majority of
printers do not have the software competency or financial ability to effectively
pirate our software codes.
15
<page>
Despite our efforts to protect any proprietary rights, unauthorized parties may
attempt to copy aspects of its products or obtain and use information that we
regard as proprietary. Policing unauthorized use of our products will be
difficult and while we are unable to determine the extent to which piracy of our
products exists or will exist, software piracy is not expected to be a
persistent problem. In addition, the laws of some foreign countries do not
protect proprietary rights as fully as do the laws of Canada and the United
States. There can be no assurance that our efforts to protect its proprietary
rights in Canada and the United States or abroad will be adequate or that
competition will not independently develop similar technology.
4.3 Competition
The market for printed business materials is intensely competitive. We will
compete primarily with local and regional printers, which are either independent
or owned by print industry consolidators, and with other Internet-based print
providers. The North American commercial industry is highly fragmented, with an
estimated 32,000 local and regional commercial printers operating in 2004. These
printers compete aggressively for business printing orders in the markets they
serve. Traditional commercial printers often have long-standing relationships
with customers. We face substantial challenges in convincing businesses to
consider alternatives to their traditional printer. Printers typically have
extensive local sales forces that regularly canvass and solicit business in the
areas they serve. Commercial printers compete primarily on product pricing,
product and service quality and, to a lesser extent, on innovation in printing
technologies and techniques. To attract new customers and retain existing
customers, we must compete effectively in each of these areas.
There is also substantial and growing competition from printing services
brokers, which are companies that contract with businesses to select and procure
printing services from a variety of printers. Brokers are able to offer
customers a relatively wide variety of products and services and are often able
to obtain favorable pricing for their clients by soliciting bids from a variety
of printers. Like local and regional printers, printing services brokers often
have long-standing customer relationships and extensive local direct sales
sources.
There is increasing competition from other Internet-based companies that offer
business printing services, as well as from others who may develop such services
in the future. Potential developers of competing electronic commerce services
may include consumer printing services providers, office service providers,
equipment manufacturers and financial printers and publishers.
Certain other printers claim to offer online services, however the order they
receive from their client stops as an email. Our online ordering solution is
automated to integrate directly with the digital workflow of the print shop.
We are relying on public financing to implement its technology. Currently in the
Vancouver area, the market for printed business materials is dominated by Rhino
Prepress & Printing, Benwell Atkins Printing, Rainbow Press and Fedex Kinko's.
iPrint.com, based near Silicon Valley, California, is an online print
intermediary, meaning its technology is designed to automate and aggregate
customer orders of any size. iPrint.com also private labels its print services
technology for the business market to such companies as 3M, OfficeMax and Sir
Speedy.
16
<page>
4.4 Property and Equipment
We lease sales offices situated at 1282 Vernon Drive, Vancouver, British
Columbia and manufacturing facilities situated at 1263 Clark Drive, Vancouver,
British Columbia. Both premises are located in the same "light industrial
complex" located outside the perimeter of the downtown area in Vancouver. Both
premises are leased from 585272 B.C. Ltd. on a nine-year term expiring on April
30, 2009. The current monthly base rent is $6,271 per month. The lease is
currently in good standing.
We own all of our printing equipment
4.5 Management & Employees
As of the date of filing of this statement, we have 15 full-time employees.
Item 5. Operating and Financial Review and Prospects
5.1. Results of Operations
Although we were incorporated on December 4, 1995, we were essentially dormant
until our common shares commenced trading on the Canadian Venture Exchange. We
were listed on the Canadian Venture Exchange as a capital pool company on
November 28, 1997. We did not commence business operations as a printing company
until August 23, 2001, when we completed the acquisition of Graffico Printers &
Design Inc.
Our financial statements have been prepared in accordance with Canadian
Generally Accepted Accounting Principles on a going concern basis.
Revenue, Cost of Sales and Gross Margin
We derive substantially all our revenue from receiving orders through our online
print services and traditional methods. We charge customers for the printed
products they order in accordance with customer-specific pricing arrangements
negotiated with each account. Orders ar e fulfilled through our network of
approximately 12 vendors and our own facilities and shipped directly to
customers under the Printlux brand. To date, we have derived the majority of
our revenues from our online print services and traditional methods.
Total revenue from operations for the fiscal year ended July 31, 2003 was $
1,705,498, while our costs of sales, consisting primarily of paper expenses and
labor costs, was $1,004,988. In the fiscal year ended July 31, 2002, our revenue
was $801,111 with cost of sales of $589,384. The dramatic increase in net
revenue was a result of an increase in customers and orders in the current
fiscal year.
17
<page>
As a percentage of revenue, our cost of sales decreased from 73.6% in fiscal
2002 to 58.9% in fiscal 2003. This was primarily a result of our labor costs
remaining constant in 2003 , a decrease in equipment repairs and maintenance and
economies of scale created by the efficient utilization of available capacity.
In the nine-month period ended April 30, 2004 we generated $1,034,368 in revenue
with a cost of sales of 729,550, for gross margin from operations of $304,818.
As compared to the same period in fiscal 2003, revenue in the current fiscal
year has fallen $232,519 and the cost of sales has fallen $13,839 due to a
decrease in business due to general economic conditions. As a result, gross
margin fell from $523,498 in the nine-month period ended April 30, 2003 to
$304,818 in the comparative period in 2003.
General and Administrative Expenses
General and administrative expenses include the costs of sales and marketing
efforts, rent and occupancy, salaries and employee benefits. These expenses
for for the fiscal year ended July 31, 2003 totaled $691,164 and included
$157,599 in administrative wages, $120,000 in management compensation, $72,625
in rent expense and $50,724 in amortization expense relating to our printing
equipment, computer equipment, web page and office furniture.
In the fiscal year ended July 31, 2002, our general and administrative expenses
totaled $937,878. These expenses decreased substantially in fiscal 2003
primarily due to a reduction in accounting and legal expenses (from $100,879 in
2002 to $22,840 in 2003) management compensation (from $187,824 in 2002 to
$120,000 in 2003), advertising and promotion costs (from $43,147 in 2002 to
$1,310 in 2003), bad debts (from $56,352 in 2002 to $29,188 in 2003). The
reduction in legal and accounting costs in 2003 was primarily due to costs we
incurred in fiscal 2002 in connection with the completion of our acquisition of
our subsidiary.
Net Income (Loss)
For the fiscal year ended July 31, 2003, we realized a net income of $ 12,291 or
$0. 01 per share as compared to a net loss of $ 616,453 or $0.05 per share as
recorded in the previous fiscal year ended July 31, 2002. The realization of net
income in fiscal 2003 was primarily due to an increase in gross margin from
operations of $488,783 due to an expansion of our business operations, as well
as a $246,714 decrease in general and administrative expenses.
In the nine-month period ended April 30, 2004, we incurred a net loss of
$225,689, or $0.02 per share, as compared to net income of $4,119 or $0.001 per
share in the comparative period in fiscal 2002. The negative change in our
financial results was primarily due to a decrease in revenue from $1,266,887 in
the nine-month period ended April 30, 2003 to $1,034,368 in the same period in
2004.
18
<page>
Assets and Liabilities
At July 31, 2003, we had current assets of $360,870 (2002 - $227,704) consisting
of cash on hand of $20,261, accounts receivable of $310,023 and inventory
recorded at $30,586. We also held equipment, furniture and leasehold
improvements recorded at $258,359 and goodwill recorded at $41,693. Our total
assets were recorded at $662,950 (2002 - $596,498). At the same date, our
liabilities totaled $469,396 (2002 - $415,235) and consisted of accounts payable
and accrued liabilities of $339,396, bank indebtedness of $61,552, loans payable
to a related party of $46,098, the current portion of an obligation under
capital leases of $9,496, taxes payable of $9,444 and $3,410 in obligations
under capital leases.
At April 30, 2004, our current assets totaled $550,165 (2003 - $662,950) and
consisted of cash on hand of $28,501, accounts receivable of $189,801, inventory
recorded at $30,586 and taxes recoverable of $3,144. We also held equipment,
furniture and leasehold improvements recorded at $256,440 and goodwill recorded
at $41,693. Our total assets were recorded at $550,165 (2003 - $662,950). At the
same date, our liabilities totaled $582,300 (2002 - $469,396) and consisted of
accounts payable and accrued liabilities of $422,760, bank indebtedness of
$57,489, loans payable to a related party of $97,243, the current portion of an
obligation under capital leases of $2,834, and $1,974 in obligations under
capital leases.
5.2. Liquidity and Capital Resources
Since our incorporation, we have funded our operations primarily through the
sale of shares.
As at April 30, 2004, we had negative working capital of $328,294. Our viability
is dependent on our ability to secure sufficient funding to finance operations
to profitability, combined with our ability to increase revenues and improve
operational and production efficiency.
On July 2, 2004, we announced that we were proceeding with a private placement
consisting of the sale of 1,000,000 units in our capital at a price of $0.10
each. Each unit will consist of one common share and one 12-month
non-transferable share purchase warrant. Each warrant will entitle the holder to
acquire an additional common share of the Corporation for $0.12. The proceeds of
the private placement will be used for general working capital. The private
placement is subject to TSX Venture Exchange acceptance for filing.
Item 6. Directors, Senior Management and Employees
6.1. Directors and Senior Management
Directors:
Name of Director Age
- ---------------------- -----
Raffi Khorchidian 38
Hagop Khorchidian 31
Garo Deyrmenjian 39
Shay Prasad 36
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<page>
Executive Officers:
Name of Officer Age Office
- -------------------- ----- -------
Raffi Khorchidian 38 President & Chief Executive Officer
Hagop Khorchidian 31 Chief Technology Officer
The following describes the business experience of our directors and executive
officers, including other directorships held in reporting companies:
Raffi Khorchidian
Mr. Khorchidian was the founder, sole director and sole shareholder of our
subsidiary, Graffico Printers & Design Inc. from its formation in 1990 until we
acquired it on August 23, 2001. He Has acted as our president, chief executive
officer and as a director since this date and devotes substantially all of his
business time to our affairs. Mr. Khorchidian is also the founder and president
of rMedia Communications Inc., a private e-business company that has been in
business since January 21, 1998.
Hagop Khorchidian
From February 1996 to present, Jack Khorchidian has acted as the chief
technology officer of our subsidiary. After the acquisition of our subsidiary
was completed on August 23, 2001, he became our chief technology officer as
well. He presently devotes 80% to 100% of his business time to our affairs.
Shay Prasad
Mr. Prasad currently serves as a director of Printlux. Since November 1999, Mr.
Prasad has been the vice-president of mergers, acquisitions and corporate
finance of Look Communications Inc., a wireless broadband carrier company. From
January 1999 to November 1999, he was vice-president of finance with Internet
service provider, I.D. Internet Direct Ltd., an Internet service provider. From
November 1995 to January 1999, he was vice-president of finance with Canada
Internet Direct Inc., the sole operating unit of I.D. Internet Direct Ltd. Look
Communications Inc., I.D. Internet Direct Ltd. and Canada Internet Direct Inc.
are all reporting companies in British Columbia and Alberta.
Mr. Prasad is a Certified Management Accountant and member of the Certified
Management Accountants Society of British Columbia. He is also a Certified
Public Accountant certified by the State of Delaware and an elected member of
the Financial Executives Institute of Canada.
Garo Dyremenjian
Formerly our president and chief executive officer from 1996 to 2001, Mr.
Dyremenjian currently Acts as one of our directors. Since July 1998, he has
been president and a director of J.D. Pacific Capital Group Ltd., a private
investment company. He served as president of Platinum Pacific Investment Fund,
a private investment fund, from 1996 to 1998; and was President of Quorum
Fashion Emporium, a private retail company from 1990 to 1995.
20
<page>
6.2. Compensation of Directors
We are required, under applicable securities legislation in Canada, to disclose
to our shareholders details of compensation paid to our directors. The following
fairly reflects all material information regarding compensation paid to our
directors in our fiscal year ended July 31, 2003.
<table>
<caption>
Summary Compensation Table
=======================================================================================================================
Name and Year Annual Compensation Long-term Compensation
PrincipalPosition
- -----------------------------------------------------------------------------------------------------------------------
Other
Salary Bonus Annual Awards LTIP All Other
Compensation payouts Compensation
- ------------------------------------------------------------------------------------------------------------------------
Securities
Restricted Underlying
Stock Options/
Awards SAR's
- ------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
2003 $60,000 Nil Nil Nil Nil Nil Nil
Raffi
Khordhidian
President, CEO 2002 $60,000 628,000
& Director
- ------------------------------------------------------------------------------------------------------------------------
Garo Deyrmenjian 2001 Nil Nil Nil Nil stock options Nil Nil
Director
========================================================================================================================
</table>
Mr. Khordhidian was appointed President & CEO of the Corporation on August 23,
2001
Mr. Deyrmenjian resigned as President & CEO of the Corporation on August 23,
2001
6.3. Board Practices
Raffi Khorchidian, Hagop Khorchidian, and Shay Prasad have all served as our
directors since August 23, 2001. Garo Deyrmenjian has served as our director
since November 27, 1997. The directors hold office until the next annual general
meeting of the shareholders at which time they may stand for re-election. We are
required to hold an annual general meeting once in every calendar year and not
longer than thirteen months from the last annual general meeting.
Our audit committee is comprised of Shay Prasad, Garo Dyremenjian and Raffi
Khorchidian . We have not appointed a remuneration committee.
6.4. Employees
As of the date of filing of this statement we have 15 employees.
21
<page>
6.5. Share Ownership of Directors and Officers
Our directors and officers own beneficially the following shares as of the date
of this registration statement:
Percentage of Outstanding
Number of Shares Owned Common Shares
---------------------- -------------
Raffi Khorchidian 7,087,624 53.7%
Garo Deyrmenjian 1,000,000 7.6%
Hagop (Jack) Khorchidian Nil Nil
Shay Prasad Nil Nil
The above percentages are based on the number of common shares issued and
outstanding in our capital stock as of the date of this registration statement
which is 13,191,624.
The following incentive stock options are outstanding to our directors and
officers:
Shares that may be Purchased
Upon Exercise of Option
-----------------------
Raffi Khorchidian 628,000
Garo Deyrmenjian 300,000
Hagop (Jack) Khorchidian 628,000
Shay Prasad 50,000
Item 7. Major Shareholders and Related Party Transactions
7.1. Beneficial Ownership
As used in this section, the term "beneficial ownership" with respect to a
security is defined by Regulation 228.403 under the Securities exchange Act of
1934, as amended, as consisting of: (1) any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise has
or shares voting power (which includes the power to vote, or to direct the
voting of such security) or investment power (which includes the power to
dispose, or to direct the disposition of, such security); and (2) any person
who, directly or indirectly, creates or uses a trust, proxy, power of attorney,
pooling arrangement or any other contract, arrangement or device with the
purpose or effect of divesting such person of beneficial ownership of a security
or preventing the vesting of such beneficial ownership.
As of the date of this registration statement, 13,191,624 common shares were
issued and outstanding. The Company is authorized to issue an unlimited number
of common shares.
As of the date of this registration statement, the following persons known to
the Company were the beneficial owner of more than five percent of the
outstanding common shares of the Company.
22
<page>
NAME NUMBER OF SHARES PERCENTAGE OF TOTAL
---- ---------------- -------------------
Raffi Khorchidian 7,087,624 53.7%
Garo Deyrmenjian 1,000,000 7.6%
There are no arrangements the operation of which at a subsequent date may result
in a change in our control.
7.2. Related Party Transactions
There are no transactions, which have materially affected or will materially
affect the Company in which any director, executive officer or beneficial holder
of more than 10% of the outstanding common stock, or any of their respective
relatives, spouses, associates or affiliates, has had or will have any direct or
material indirect interest except as follows:
- - Commencing on May 1, 2000, we entered into a long term lease agreement
regarding the premises with 585272 B.C. Ltd, a private company of which
Raffi Khorchidian, our president and chief executive officer, is a
director. During the year ended July 31, 2003, the rent expense
incurred under the lease agreement totaled $72,625.
- - We have received two loans from our president and chief executive
officer, Raffi Khorchidian. The first loan of $26,098 bears interest at
a rate of 9% per annum, compounded monthly and is repayable on July 27,
2004. The second loan of $20,000 bears interest at a rate of 12% per
annum with no fixed terms of repayment. Both loans are unsecured.
Our bylaws provide that our directors or officers must disclose in writing to us
the nature and extent of any interest he has in a material contract, or proposed
material contract, with us. Such disclosure must be made immediately after the
director or officer becomes aware of the contract or proposed contract. A
director who is required to disclose an interest in a material contract or
proposed material contract may not vote on any resolution to approve the
contract except in very limited circumstances.
7.3. Interests of Experts and Counsel
Our experts and counsel have no interest in our shareholdings.
Item 8. Financial Information
8.1. Legal Proceedings
To the best of our knowledge there are no legal or arbitration proceedings
threatened, pending or in progress against us except the following: we have been
named as a defendant in a Statement of Claim filed by Telus claiming unpaid
amounts of approximately $35,000 relating to telephone services. We have
counterclaimed on the basis that the wares provided were not of merchantable
quality, whereby it has suffered loss and damages. As at July 31, 2003, no
amount has been accrued in our accounts.
23
<page>
8.2. Significant Changes
There have been no significant changes since the date of the audited financial
statements included herein except:
- - On July 2, 2004, we announced that we have agreed to a non-brokered
private placement consisting of the sale of 1,000,000 units from our
capital at a price of $0.10 each. Each unit will consist of one common
share and one 12-month non-transferable share purchase warrant. Each
warrant will entitle the holder to acquire an additional common share
for $0.12. The proceeds of the private placement will be used for
general working capital. The private placement is subject to TSX
Venture Exchange acceptance for filing.
- - We have amended the exercise price of the 1,675,000 outstanding share
options to $0.15 per share from $0.50 per share.
- - We announced that we have granted stock options to certain directors,
officers and employees to purchase up to 700,000 common shares. The
options are exercisable at a price of $0.15 per share and will expire
in 2009.
Item 9. The Offer and Listing
9.1. Offer and Listing Details
Our common shares trade on the TSX Venture Exchange under the symbol "PLX". The
following table sets forth the high and low closing prices in Canadian funds of
our common shares traded on TSX Venture Exchange and its predecessors:
Period High Low
August 1, 1998 to July 31, 1999 $0.85 $0.10
August 1, 1999 to July 31, 2000 $1.49 $0.25
August 1, 2000 to July 31, 2001 $1.45 $1.40
August 1, 2001 to July 31, 2002 $0.70 $0.05
August 1, 2002 to July 31, 2003 $0.08 $0.025
August 1, 2002 to October 31, 2002 $0.08 $0.04
November 1, 2002 to January 31, 2003 $0.06 $0.03
February 1, 2003 to April 30, 2003 $0.05 $0.04
May 1, 2003 to July 31, 2003 $0.05 $0.025
24
<page>
August 1, 2003 to October 31, 2003 $0.105 $0.025
November 1, 2003 to January 31, 2004 $0.13 $0.065
February 1, 2003 to April 30, 2003 $0.13 $0.085
January, 2004 $0.13 $0.065
February, 2004 $0.13 $0.095
March, 2004 $0.12 $0.085
April, 2004 $0.12 $0.09
May, 2004 $0.09 $0.09
June, 2004 $0.10 $0.10
Trading in our common shares was halted for trading between August 10, 2000 and
August 28, 2001 pending the completion of our acquisition of our subsidiary.
We intend to apply to have our common shares quoted on the National Association
of Securities Dealers over-the-counter electronic bulletin board. However, there
is no certainty that such listing or any other stock exchange listing will
occur.
Item 10. Additional Information
10.1. Share Capital
Our authorized share capital consists of an unlimited number of common shares
without par value. Our issued share capital as of the date of this registration
statement is 13,191,624 fully paid common shares without par value.
Effective August 23, 2001, we acquired 100% of the issued and outstanding
common shares of Graffico Printers & Design ("Graffico") by issuing 7,441,624
common shares, including 425,000 common shares that we issued to an arm's length
party as a finders fee.
At July 31, 2002, the beginning of our most recently completed fiscal year, we
had 13,191,624 common shares without par value issued and outstanding. During
the fiscal year no additional shares were issued.
We do not hold any of our own shares.
- our directors, officers and employees hold incentive stock
options entitling them to acquire up to 1,675,000 common
shares in our capital stock at an exercise price of $0.15. per
share. All options expire on September 21, 2006;
During the past three years, we have issued the following common shares without
par value in our capital stock:
25
<page>
Common Shares
<table>
<caption>
NUMBER OF SHARES CONSIDERATION
----------------- --------------------
<s> <c> <c>
Balance, July 31, 2001 1,000 $ 10
Adjustment to the number of shares issued and outstanding as a
result of the reverse take-over transaction
Graffico Printers & Design Inc. (1,000) -
Printlux.com Inc. 4,300,000 -
----------------- -----------------
4,300,000 10
Consolidation of the share capital on the basis of one
post-consolidation common share for every two pre-consolidation
common shares (2,150,000) -
----------------- -----------------
2,150,000 10
Fair value of shares issued in connection with the acquisition of
Graffico Printers & Design Inc.
7,441,624 97,370
Public offering of common shares for cash (net of share issue costs
of $332,289) 3,600,000 1,467,711
----------------- -----------------
Balance, July 31, 2002 and 2003 13,191,624 $ 1,565,091
================= =================
</table>
All shares issued and to be issued in the future must be and have been approved
by authorizing resolution consisting of a simple majority of our board of
directors. All share issuances must also be approved by the TSX Venture
Exchange.
10.2. Bylaws and Articles of Association
We were incorporated under the Business Corporations Act of Alberta by
registration of our articles of incorporation and bylaws. Pursuant to the
provisions of the Business Corporations Act, a company may conduct any business
that it is not restricted by the terms of its articles or bylaws from
conducting. Our articles and bylaws contain no such restrictions.
Our directors are required to disclose to the board of directors the nature and
extent of their interest in any proposed transaction or contract and must
thereafter refrain from voting in respect thereof. An interested director may be
counted in the quorum when a determination as to such director's remuneration is
being considered but may not vote in respect thereof. The directors have an
unlimited power to borrow money, issue debt obligations and mortgage or charge
our assets provided such actions are conducted bona fide and in the best
interests of the Company. There are no mandatory retirement ages for directors
or any required shareholdings.
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<page>
All holders of common shares are entitled to receive dividends out of assets
legally available therefore at such times and in such amounts as the board of
directors may from time to time determine. All holders of common shares will
share equally on a per share basis in any dividend declared by the board of
directors. The dividend entitlement time limit will be fixed by the board of
directors at the time any such dividend is declared. Each outstanding common
share is entitled to one vote on all matters submitted to a vote of our
shareholders in general meeting. There are no cumulative voting rights attached
to any of our shares and, accordingly, the holders of more than half of the
shares represented at a general meeting can elect all of the directors to be
elected in a general meeting. All directors stand for re-election annually. Upon
any liquidation, dissolution or winding up, all common shareholders are entitled
to share ratably in all net assets available for distribution after payment to
creditors. The common shares are not convertible or redeemable and have no
preemptive, subscription or conversion rights. In the event of a merger or
consolidation, all common shareholders will be entitled to receive the same per
share consideration.
The rights of shareholders may only be altered by the shareholders passing a
special resolution at a general meeting. A special resolution may only be passed
when it has been circulated to all shareholders by way of an information
circular and then must be passed by seventy-five percent of the votes cast at
the general meeting.
The board of directors may call annual and extraordinary general meetings when
required. One or more shareholders holding in aggregate five percent or more of
our issued shares may requisition an extraordinary meeting and the directors are
required to hold such meeting within four months of such requisition. Only
registered shareholders or persons duly appointed by proxy may be admitted to
meetings unless otherwise permitted by the chairman of the meeting.
There are no national limitations or restrictions on the right to own our common
shares.
There are no provisions in our bylaws or articles of association that would have
the effect of delaying, deferring or preventing a change in control.
There are no provisions in our bylaws or articles of association that establish
any threshold for disclosure of ownership. However, the Alberta Securities
Commission requires that persons that are the registered owners of, and/or have
voting control over 10% or more of our common shares must file insider reports
disclosing securities holdings.
10.3. Material Contracts
We have not entered into any material contracts other than in the ordinary
course of business.
10.4. Exchange Controls and other Limitations Affecting Security Holders
There is no law or governmental decree or regulation in Canada that restricts
the export or import of capital, or affects the remittance of dividends,
interest or other payments to a non-resident holder of common shares, other
than withholding tax requirements. See "Item 10.5. Taxation"
---------
27
<page>
There is no limitation imposed by Canadian law or by our constituent documents
on the right of a non-resident to hold or vote common shares, other than are
provided in the Investment Canada Act (Canada). The following summarizes the
principal features of the Investment Canada Act (Canada).
The Investment Canada Act (Canada) requires certain "non-Canadian" individuals,
governments, corporation or other entities who wish to acquire a "Canadian
business" (as defined in the Investment Canada Act), or establish a "new
Canadian business" (as defined in the Investment Canada Act) to file either a
notification or an application for review with a governmental agency known as
"Investment Canada". The Investment Canada Act requires that certain acquisition
of control of Canadian business by a "non-Canadian" must be reviewed and
approved by the Minister responsible for the Investment Canada Act on the basis
that the Minister is satisfied that the acquisition is "likely to be of net
benefit to Canada", having regard to criteria set forth in the Investment Canada
Act. Only acquisitions of control are reviewable under the Investment Canada
Act; however, the Investment Canada Act provides detailed rules for the
determination of whether control has been acquired and, pursuant to those rules,
the acquisition of one-third or more of the voting shares of a corporation may,
in some circumstances, be considered to constitute an acquisition of control.
Certain reviewable acquisitions of control may not be implemented before being
approved by the Minister; if the Minister does not ultimately approve a
reviewable acquisition, which has been completed, the acquired Canadian business
must be divested. Failure to comply with the review provisions of the Investment
Canada Act could result in, amongst other things, an injunction or a court order
directing disposition of assets of shares.
10.5. Canadian Federal Income Tax Consequences to United States
Investors
A brief description of certain provisions of the tax treaty between Canada and
the United States is included below, together with a brief outline of certain
taxes, including withholding provisions to which United States security holders
are subject under existing laws and regulations of Canada and United States; the
consequences, if any, of state and local taxes are not considered. The following
information is general and security holders are urged to seek the advice of
their own tax advisors, tax counsel or accountants with respect to the
applicability or effect on their own individual circumstances of not only the
matters referred to herein, but also any state or local taxes.
Canadian federal tax legislation generally requires a 25% withholding from
dividends paid or deemed to be paid to the Company's nonresident shareholders.
However, shareholders resident in the United States will generally have this
rate reduced to 15% through the tax treaty between Canada and the United States.
The amount of stock dividends paid to non-residents of Canada will be subject to
withholding tax at the same rate as cash dividends. The amount of stock dividend
(for tax purposes) would generally be equal to the amount by which our stated
capital has increased by reason of the payment of such dividend. We will furnish
additional tax information to shareholders in the event of such a dividend.
Interest paid or deemed to be paid on our debt securities held by non-Canadian
residents may also be subject to Canadian withholding tax, depending upon the
terms and provisions of such securities and any applicable tax treaty. Under
28
<page>
present legislation in the United States, we are generally not subject to United
States back up withholding rules, which would require withholding at a rate of
20% on dividends and interest paid to certain United States persons who have not
provided us with a taxpayer identification number.
Gains derived from a disposition of shares of the company by a non-resident
shareholder will be subject to tax in Canada only if not less than 25% of any
class of our shares was owned by the nonresident shareholder and/or persons with
whom the nonresident did not deal at arm's length at any time during the
five-year period immediately preceding the disposition. In such cases gains
derived by a U.S. shareholder from a disposition of our shares would likely be
exempt from tax in Canada by virtue of the Canada-U.S. tax treaty.
ALL PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES.
10.6. Documents on Display
You may review a copy of our filings with the SEC, including exhibits
and schedules filed with it, at the SEC's public reference facilities in Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. The SEC maintains a Web site (HTTP://WWW.SEC.GOV) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC . Although we may make our filings with
the SEC electronically as a foreign private issuer, we are not obligated to do
so.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 12. Descriptions of Securities Other than Equity Securities
12.1 Warrants
There are no share purchase warrants in our capital outstanding. TSX Venture
Exchange policy allows us to apply to reduce the exercise price of share
purchase warrants provided that the warrant exercise price is higher than 75% of
the market price for our common shares, none of our warrants has been exercised
in the past six months and at least two weeks remain before the expiry date of
the warrants. If we meet these conditions, we are entitled to reduce warrant
exercise prices to a price equal to 75% of the market price for our common
shares, subject to a minimum exercise price of $0.10.
29
<page>
If and whenever we subdivide our common shares into a greater number or
consolidate our common shares into a lesser number, the exercise price shall be
decreased or increased proportionately as the case may be. Upon any such
subdivision or consolidation the number of common shares deliverable upon the
exercise of the warrants shall be increased or decreased proportionately as the
case may be.
12.2 Stock Options
As of the date of this registration statement, a total of 1,675,000 incentive
stock options are outstanding as follows:
<table>
<caption>
- --------------------------------------------------------------------------------------
Name of Optionee Number of
Common
Shares Exercise Effective Expiry Date
underlying Price Date of Grant of Options
Options
- --------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Raffi Khorchidian 628,000 $0.15 20-Sep-2001 20-Sep-2006
- --------------------------------------------------------------------------------------
Garo Deyrmenjian 300,000 $0.15 20-Sep-2001 20-Sep-2006
- --------------------------------------------------------------------------------------
Hagop (Jack) Khorchidian 628,000 $0.15 20-Sep-2001 20-Sep-2006
- --------------------------------------------------------------------------------------
Shay Prasad 50,000 $0.15 20-Sep-2001 20-Sep-2006
- --------------------------------------------------------------------------------------
Taline Giragosian 18,000 $0.15 20-Sep-2001 20-Sep-2006
- --------------------------------------------------------------------------------------
Levon Khorchidian 15,000 $0.15 20-Sep-2001 20-Sep-2006
- --------------------------------------------------------------------------------------
Ben Khorchidian 12,000 $0.15 20-Sep-2001 20-Sep-2006
- --------------------------------------------------------------------------------------
Elsie Isidoro 12,000 $0.15 20-Sep-2001 20-Sep-2006
- --------------------------------------------------------------------------------------
Ming To 12,000 $0.15 20-Sep-2001 20-Sep-2006
- -------------------------------- ----------- ---------- --------------- --------------
</table>
TSX Venture Exchange policy allows us to apply to reduce the exercise price of
stock options provided that the stock option exercise price is higher than 75%
of the market price for our common shares, none of our stock options has been
exercised in the past six months and shareholder approval has been obtained with
respect to stock options granted to insiders. If we meet these conditions, we
are entitled to reduce stock option exercise prices to a price equal to 75% of
the market price for our common shares, subject to a minimum exercise price of
$0.10.
30
<page>
If and whenever we subdivide our common shares into a greater number or
consolidate our common shares into a lesser number, the exercise price shall be
decreased or increased proportionately as the case may be. Upon any such
subdivision or consolidation the number of common shares deliverable upon the
exercise of the warrants shall be increased or decreased proportionately as the
case may be.
PART II
-------
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable
Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds
Not applicable
Item 15. Controls and Procedures
Evalution of Disclosure Controls
We evaluated the effectiveness of our disclosure controls and procedures as of
the end of the 2003 fiscal year. This evaluation was conducted with the
participation of our chief executive officer and our principal accounting
officer.
Disclosure controls are controls and other procedures that are designed to
ensure that information that we are required to disclosed in the reports we file
pursuant to the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported.
Limitations on the Effective of Controls
Our management does not expect that our disclosure controls or our internal
controls over financial reporting will prevent all error and fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
but no absolute, assurance that the objectives of a control system are met.
Further, any control system reflects limitations on resources, and the benefits
of a control system must be considered relative to its costs. These limitations
also include the realities that judgments in decision-making can be faulty and
that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of a control. A design
of a control system is also based upon certain assumptions about potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.
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<page>
Conclusions
Based upon their evaluation of our controls, the chief executive officer and
principal accounting officer have concluded that, subject to the limitations
noted above, the disclosure controls are effective providing reasonable
assurance that material information relating to us is made known to management
on a timely basis during the period when our reports are being prepared. There
were no changes in our internal controls that occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect our internal controls.
Item 16A. Audit Committee Financial Expert
We do not have an audit committee financial expert serving on our audit
committee.
PART III
Item 17. Financial Statements
Our audited financial statements include:
- - our consolidated balance sheet as at July 31, 2003 and July 31, 2002;
- - the following statements for the fiscal years ended July 31, 2003 and
2002:
- - consolidated statements of operations and deficit
- - consolidated statements of cash flows; and
All of these were prepared by our independent accountant, Morgan & Company,
Chartered Accountants.
The financial statements are prepared in accordance with generally accepted
accounting principles in Canada and are reconciled to United States generally
accepted accounting principles in Note 16. All figures are expressed in Canadian
dollars.
Our unaudited financial statements include:
- - our consolidated balance sheet as at April 30, 2004 and July 31, 2003;
- - the following consolidated statements for the fiscal years ended July
31, 2003 and 2002:
- - consolidated statement of loss and deficit
- - consolidated statement of cash flows; and
32
<page>
These were prepared in accordance with interim reporting requirements under
United States generally accepted accounting principles.
Item 18. Financial Statements
See "Item 17 Financial Statement"
-------------------
Item 19. Exhibits
Exhibit 1: Financial Statements
Exhibit 2: Certificate of Incorporation
Exhibit 3: Bylaws
Exhibit 4: Articles of Association, as amended
Exhibit 5: List of Subsidiaries
Exhibit 6: Consent of Morgan & Company, Chartered Accountants
Exhibit 31.1: Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2: Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1: Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2: Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
33
<page>
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly cause and authorized the undersigned to sign
this statement on its behalf.
PRINTLUX.COM INC.
Dated: August 13, 2004
By: /s/ Raffi Khorchidian
-----------------------------
Raffi Khorchidian, President
34