U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended: December 31, 2002
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from: ___________________ to _____________________
Commission File Number: 0-32353
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EASYWEB, INC.
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(Name of small business issuer in its charter)
COLORADO 84-1475642
--------------------------------- ------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
6025 S. Quebec Street, Suite 150, Englewood, Colorado 80111
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(Address of Principal Executive Office) (Zip Code)
Issuer's telephone number: (720) 489-8873
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Securities registered under Section 12(b) of the Act: None Securities registered
under Section 12(g) of the Act:
Common Stock, No Par Value
--------------------------
Title of Class
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $2,570
As of December 31, 2002: (a) 4,506,200 common shares, no par value, of the
registrant were outstanding; (b) approximately 904,200 common shares were held
by non-affiliates; and (c) the aggregate market value of the common shares held
by non-affiliates was $27,126 based on the price at which the common equity was
most recently sold in January 2002.
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
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(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 4,706,200 common shares issued and
outstanding as of March 31, 2003
Transitional Small Business Disclosure Format: Yes No X
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2
EASYWEB, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-KSB
Page
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PART I
Item 1. DESCRIPTION OF BUSINESS.................................. 4
Item 2. DESCRIPTION OF PROPERTY.................................. 12
Item 3. LEGAL PROCEEDINGS........................................ 12
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...... 13
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...................................... 13
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION ....................................... 13
Item 7. FINANCIAL STATEMENTS..................................... 17
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...................... 17
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT...................................................... 17
Item 10. EXECUTIVE COMPENSATION................................... 19
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS............... 21
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........... 23
Item 13. EXHIBITS AND REPORTS ON FORM 8-K......................... 24
Item 14. CONTROLS AND PROCEDURES..................................
SIGNATURES ................................................................ 26
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Additional information
Descriptions in this Report are qualified by reference to the contents of
any contract, agreement or other documents and are not necessarily complete.
Reference is made to each such contract, agreement or document filed as an
exhibit to this Report, or previously filed by the Company pursuant to
regulations of the Securities and Exchange Commission (the "Commission"). (See
"Item 13. Exhibits and Reports of Form 8-K.")
Reference in this document to "us" or "we" or "the Company" or "the
Registrant" refer to EasyWeb, Inc.
Special Note Regarding Forward Looking Statements
Certain statements contained herein constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward looking statements include, without limitation, statements regarding the
Company's plan of business operations and related expenditures, potential
contractual arrangements, anticipated revenues and related expenditures.
Investors are cautioned not to put undue reliance on forward-looking statements.
Except as otherwise required by applicable securities statutes or regulations,
the Company disclaims any intent or obligation to update publicly these forward
looking statements, whether as a result of new information, future events or
otherwise.
PART I
Item 1. DESCRIPTION OF BUSINESS
(a) General Development of Business
-------------------------------
We were organized under the laws of the State of Colorado under the name of
"NetEscapes, Inc.," on September 24, 1998. We changed our name to "EasyWeb,
Inc." on February 2, 1999. Our executive offices are presently located at 6025
South Quebec Street, Suite 150, Englewood, Colorado 80111, and our telephone and
facsimile numbers are (720) 489-8873 and (720) 489-8874, respectively. We are
currently in the development stage and have been in the development stage since
inception.
We design, market, sell and maintain customized and template, turnkey sites
on the worldwide web, or the Internet, hosted by third parties. We refer to the
template web sites as "turnkey" because the customer receives, for the purchase
price paid, a fully-operational site on the Internet from which to advertise its
business, products and/or services. Each of these template sites includes the
basic features such as identifying information, business logo, photographs,
graphics and/or text provided by the customer. The template is a simple,
"fill-in-the-blank" form that can be completed by the customer with handwritten
information about the business. There is no additional cost for technical
assistance or infrastructure. Common web site options can be added to the
template site on an as-needed basis.
Our business plan has been prepared based upon the popularity of the
Internet and the growing number of businesses interested in advertising and
marketing online. The customer pays us a fee for the design and maintenance of
its custom or template web site; which fee may include a portion of the fee paid
monthly by the customer for the hosting of the site. To date, we have sold less
than ten web sites and, accordingly, we have realized only minimal revenue of
$9,547 from the design, sale and maintenance of Internet sites and incurred a
loss from operations of $(210,475) for the period from inception through
December 31, 2002.
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We have not been subject to any bankruptcy, receivership or similar
proceeding.
We have not been subject to any material reclassification, merger,
consolidation, or purchase or sale of a significant amount of assets not in the
ordinary course of business.
(b) Narrative Description of the Business
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General
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From February 1999 through May 2000, we marketed, as an independent
contractor, customized, turnkey sites on the worldwide web created and hosted by
Big Online, Inc., an established web site vendor service company located in San
Francisco, California, that maintains an electronic directory of more than
eleven million businesses. Our rights to market and sell Big Online's products
and hosting services and receive compensation for these marketing services was
obtained pursuant to the assignment of the rights in February 1999 under the
Marketing Agreement with Millennium Marketing, Inc., a company then owned and
managed by Mr. David C. Olson, the President, the Treasurer, a director and an
approximate 37.9%-owner of EasyWeb, that was dissolved on May 1, 2000. In June
1999, Millennium Marketing entered into an Independent Consultant Application
and Agreement with Big Online pursuant to which Millennium Marketing obtained
the marketing rights and rights to compensation that it subsequently assigned to
us. The agreement was non-exclusive and provided for Millennium Marketing to
receive fees from the sale of each web site, including a sales commission
representing a portion of the purchase price of the site and a portion of the
hosting fee paid monthly by the customer for the maintenance of the site.
EasyWeb, as Millennium Marketing's assignee, enjoyed status at the highest level
of "executive consultant" in Big Online's commission structure because of
Millennium Marketing's payment to Big Online of a fee of $1,000 pursuant to the
agreement. Because of its status of "executive consultant," EasyWeb had the
right to receive, as its commission on the sale of each Internet site, 100
percent of the purchase price paid by the customer to Big Online for the
creation and development of the site. The agreement was terminable by Big Online
upon the commission of any act deemed to be detrimental to Big Online in any
manner; failure to abide by the agreement and Big Online's Policies and
Procedures; the assignment of the agreement without Big Online's consent; six
months of continuous inactivity; and the utilization of non-Big Online
literature. While Millennium Marketing received compensation monthly from Big
Online for the sale of five web sites and the sponsorship of sales
representatives pursuant to a discontinued multi-level marketing program, we
sold no Big Online Internet sites and, accordingly, received no revenue from Big
Online. We ceased marketing and selling Big Online's products and services as
the assignee of Millennium Marketing, a marketing agent for Big Online, when we
severed our relationship with Millennium Marketing in May 2000. No business was
ever transacted among EasyWeb, Big Online and Millennium Marketing.
We design, market, sell and maintain customized and template, turnkey
"sites" on the Internet to businesses in the United States that are hosted by
third parties. A customer who purchases a turnkey, template "site" receives a
pre-designed, fully-operational web site from which to advertise its business,
products and/or services without the necessity of incurring additional cost for
technical services or infrastructure. The only elements of the site required to
be provided by the customer are identifying information, the business logo,
photographs and, if desired, graphics and/or text. We are dependent on Cinapsys,
Inc. ("Cinapsys"), for the template, model web sites that we market, sell and
maintain. We design and develop the customized web sites that we market, sell
and maintain on behalf of our customers. Either Mr. David C. Olson, our
President/Treasurer, or third party suppliers, including Cinapsys, perform the
actual design work and provide the content for the web sites. In instances where
Mr. Olson is the site design and content provider, a third party supplier
implements and incorporates his designs and content into the Internet site in
accordance with his specific instructions. The third party site designer will
typically be paid hourly by us for its web site designs and content. We
presently depend upon third party suppliers for technical assistance in
implementing and incorporating our designs, concepts and content into the site.
5
The template, turnkey web site models that we offer were initially designed
and developed by EasyWeb. Alterations to the original designs are the result of
research and development by Mr. Olson and Mr. Mark Moline, President of
Cinapsys, to make them compatible with EasyWeb's business plan. The three
customized web sites that we have sold to date have been designed and developed
by Mr. Olson, with technical assistance in their implementation and/or
maintenance provided by third party consultants. In the past, Sunstar 2000 and
Mr. Richard Bagdonis had served as a third party provider of design and
development services for one custom site and technical assistance for all three
custom sites. However, commencing in approximately the second quarter of 2002,
we began using Cinapsys as our third party provider. The web sites that we
design and maintain for customers are hosted by Cinapsys. We determine who will
host a customer's site based on two factors, the cost of the services and the
level of service available. We paid Sunstar 2000 a total of $9,000 at the rate
of $1,500 per month from May through October 2000 to provide consulting services
relating to our door-to-door sales personnel. Also, on December 20, 2001, we
issued the president of Sunstar 2000 100,000 options to purchase shares of our
common stock at an exercise price of $.25 per share in consideration for
consulting services he has provided to EasyWeb.
Our current agreement with Cinapsys is verbal and non-exclusive to
accommodate a number of relationships and projects. The agreement is terminable
by either party at any time. The compensation and/or revenue sharing provisions
of the agreement are flexible so as to accommodate the parties' various
relationships and the variety in EasyWeb's customer projects to date. Generally,
however, Cinapsys charges EasyWeb and others for template web sites and basic
services in accordance with its standard fees. See "Products and Services" below
for a description of the template, turnkey web site models and hosting and other
services that Cinapsys provides us.
For the use of the web site models, we pay Cinapsys a portion of the fee
that we receive from the customer for the design and/or maintenance of each
template web site in accordance with Cinapsys' standard fees. If we utilize
other services, such as custom design and technical maintenance services, we
negotiate compensation arrangements on a case-by-case basis depending upon the
time required in, and the difficulty of, the performance of the services. We may
receive a portion of the fee paid monthly by the customer to Cinapsys for the
hosting of its web site.
We currently market our design and maintenance services for customized and
template, turnkey sites, only by word of mouth due to limited capital resources.
In September 2000, we designed and created a website located at
www.AJOnTheTown.com for AJ Indoors, Inc., a Denver, Colorado, indoor sign
company, in exchange for featuring EasyWeb on approximately 100 indoor signs
throughout the Denver and Colorado front range areas. This advertising did not
commence until February 2001 and we sold only one turnkey, template web site as
a result of the arrangement. This arrangement was terminated during 2002.
As of December 31, 2002, we had sold less than ten web sites and realized
$9,547 in revenue since inception. We bartered, in exchange for the design and
ongoing maintenance services in connection with one of the custom web sites, for
the advertising services described above. As compensation for the design and
ongoing maintenance services and costs relating to another customized site for
Euthenics International, Inc., a company engaged in marketing and distributing
dietary supplements, we entered into a Letter of Understanding and Terms dated
November 1, 2000, providing for Euthenics International to pay us an ongoing
royalty of $.50 per each bottle of product sold for a five-year period from
December 1, 2000, through 2005. Thereafter, the agreement is renewable annually
commencing December 1, 2005, subject to termination by either party within
thirty days prior to December 1 of each year. Commencing in January 2001,
Euthenics ran infomercials from time-to-time on national television advertising
its dietary supplements with limited success. We agreed to upgrade and integrate
Euthenics International's "Mail Order Management" ("MOM") system with a secure
e-commerce site in connection with Euthenics International's national
infomercial marketing campaign. We also agreed to train Euthenics International
employees on the MOM system by hiring and compensating a mutually acceptable
expert consultant.
6
During 2002, Euthenics filed for bankruptcy and the agreement was
terminated. We received no revenues under the agreement with Euthenics
International.
Dependence on a Few Major Customers
-----------------------------------
Approximately seventy-eight percent (78%) of our revenue to date has been
received from one customer, Creative Host Services. As a result, Creative Host
Services must be considered to be a major customer on whom we are dependent.
Products and Services
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Custom Web Sites
In prior years, a significant number of businesses have retained web site
vendor service companies like us to create and maintain customized web sites to
advertise their business, products and/or services. Although the market has
softened, the web site design, hosting and maintenance business remains
sizeable. The reasons for selecting a customized site vary greatly, but include
the enhanced customer impact anticipated from a custom web site and the extra
features that are not available in a template site. The custom sites we design
are usually from one to twelve pages in length and include all of the basic
features, such as identifying information, business logo, photographs and/or
graphics submitted by the customer and text, included in the design of a
template web site. The additional features available with each customized web
site include, among others, streaming audio and video, flash movies, custom
graphic design, complete design control and framed web sites. We also offer
services relating to web site promotion, marketing and e-commerce, including,
among others, promotional and advertising packages, shopping cart technology,
e-commerce merchant accounts and payment gateways and e-commerce solutions.
The Company is currently in a dispute with the president of Sunstar 2000
whom the Company was heavily dependent upon for certain previous business and
technical development. While engaged by the Company, the president of Sunstar
2000 developed proprietary information that was essential for the Company to
perform certain aspects of its business. The Company believes that this
proprietary information has been paid for and is the property of the Company.
The Company is currently exploring its options as to the approach it plans to
take with the consultant to retrieve this proprietary information.
Mr. David C. Olson, our President/Treasurer, and a related party supplier,
Wilbanks Design ("Wilbanks"), currently perform the actual design, development
and maintenance work on the custom web sites that we sell. Mr. Olson has limited
experience in web site design and development because the business is in its
infancy. However, he has significant experience, as the owner of Summit
Financial Relations, Inc. ("Summit") since August 1997, in the design, drafting,
development and publication of advertising and promotional materials for private
and publicly-traded companies.
We have sold only three customized sites since inception. In each case, we
negotiated compensation arrangements with the customer and revenue allocation
arrangements with our previous third party suppliers. For two of the three
custom web sites, Mr. Olson performed the design work and provided the content
and Sunstar 2000 provided the technical services and infrastructure in
accordance with Mr. Olson's instructions to implement and incorporate his
designs and content. See Part I, Item 1. "Description of Business, (b) "Business
of Issuer - General" for a description of the royalty arrangement we negotiated
with Euthenics International in exchange for EasyWeb's design, development,
hosting and maintenance of Euthenics International's web site. Our revenue
allocation arrangements with Sunstar 2000 with regard to Euthenics
International's custom site include a payment of $.125 per order sold from the
web site. Sunstar 2000 designed and developed, and provided the content for, the
custom web site we sold to AJ Indoors. We paid Sunstar 2000 hourly for these
services. Mr. Olson provided the content upgrades in connection with maintenance
of the site. For an hourly fee of $45 per hour, Richard Bagdonis performed
technical assistance to implement and incorporate Mr. Olson's content upgrades
in accordance with his directions. We have paid Mr. Bagdonis a total of $338 for
7
his technical assistance with such content upgrades. During 2001, Mr. Bagdonis
replaced Sunstar 2000 as the host of Creative Host Services' customized web
site. Then, in September 2001, Mindpointe, Inc. (now called Cinapsys) replaced
Mr. Bagdonis as the host of Creative Host Services' customized web site. We
charge Creative Host Services a higher monthly fee than we pay to Cinapsys to
host Creative Host Services' site on the Internet.
We intend to continue to negotiate the compensation arrangements with each
customer on a case-by-case basis for design, development, hosting and
maintenance services performed on customized web sites sold by EasyWeb. We
believe, but cannot assure, that Wilbanks and Cinapsys will continue to remain
flexible in its revenue allocation arrangements with us for this and future
sites. However, if we are unable to negotiate acceptable arrangements on any
project, we will retain other independent contractors to perform the requisite
services. There is no prescribed formula based upon which we determine the
fee(s) payable to Cinapsys or Wilbanks on any particular custom web site
development project.
Template, Turnkey Web Sites
Cinapsys provides EasyWeb with the template web site models it offers.
Design of the template web sets is usually completed and the site is customarily
available on the Internet within ten business days from the date of purchase.
The customer that selects a template web site can develop its site based on one
of EasyWeb's models at a much lower cost than the cost of a customized site. The
web sites are hosted by Cinapsys or other hosts on a month-to-month basis or
pursuant to an annual contract at a reduced rate. A potential client may select
a one-page promotional site or a multi-page web site created from templates. The
one-page web site includes: (i) the company name, address, telephone number and
other contact information; (ii) the company logo; (iii) one photograph or
graphic; and (iv) up to 200 words of text describing the company or its
products. The retail price for the one-page template site is $100, of which $60
is received by EasyWeb and $40 is received by Cinapsys. This may change on a
case-to-case basis, depending on the complexity of the website.
There is no size limitation on the multi-page site except the current
storage limit of 10MB for the entire site, and additional pages can be added at
any time. The typical pages on a multi-page web site include one or more of the
following pages: (i) home page; (ii) products or services page; (iii) contact
information; (iv) mission statement; (v) frequently asked questions; (vi)
technical support; and (vii) customer testimonials or references. At a minimum,
each multi-page web site includes the following: (i) the company name, address,
telephone number and other contact information; (ii) the company logo; (iii) up
to four photographs or graphics per page; (iv) up to 200 words of text
describing the company or its products per page; (v) three e-mail addresses; and
(vi) search engine registration. Optional features include a map to the
company's location, capability to use the company's own custom domain name;
monthly search engine re-registration; meta-tag inclusion, i.e., the imbedding
of a code that links a web site to a search engine or another site; and
maintenance contracts. The retail price and the revenue allocation with Cinapsys
for the first page of the multi-page template site are identical to the retail
price and revenue allocation for the one-page template site; i.e., a retail
price of $100, with the sum of $60 payable to EasyWeb and the amount of $40
payable to Cinapsys. The retail price of each additional page of the multi-page
web site is $50; $31 of which sum is payable to EasyWeb and $19 of which amount
is payable to Cinapsys. This may change on a case-to-case basis depending on the
complexity of the website.
The visitor to EasyWeb's Internet site contemplating the purchase of a
template one-page starter or multi-page site can view the templates in their
full size from three basic samples. The potential customer can then navigate
through the sample to view the various page options. Before making his final
selection, the visitor can download and print blank worksheets to be completed
and submitted to EasyWeb.
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Template web sites are available separately or in a package together with
hosting, domain name registration, meta-tag inclusion and/or a maintenance plan.
There are two packages available, including a three-page and a five-page web
site package. The three-page web site package includes up to four pictures, six
links per page, one year of hosting, domain name registration for two years,
three e-mail addresses, meta-tag inclusion and monthly registration in over
3,000 search engines. In addition to the foregoing, the five-page web site
package includes a maintenance plan covering twelve complete web page makeovers
available at any time. The retail price for the three-page web site package is
$695 and the retail price for the five-page package is $1,095. EasyWeb will
receive the sum of approximately $275 out of the $695 retail price for each
three-page package it sells and the sum of approximately $403 out of the $1,095
retail price for each five-page web site package sold. Cinapsys receives the
balance of the retail price. This typically will depend on the quality of the
photography provided by the customer.
Maintenance Services
We offer a number of options for web site maintenance for partial and
complete changes to the web sites we create for our customers. Our "bolt-on
e-commerce solutions," or the linking of a web site to a secure e-commerce
server to permit secure online e-commerce transactions, include monthly charges
for products, prices, etc. For customers with e-commerce web sites consisting of
hundreds or thousands of products, we offer individualized programs enabling
self-management of changes. We depend upon outside consultants, primarily
Cinapsys, to assist us with programming work in connection with complex
maintenance services.
Hosting Services
Cinapsys, primarily, and other third party providers will provide hosting
services for our customers. Cinapsys charges fees in a range from $14.95 to
$34.95, out of which we receive the sum of $6.50 to $17, per month for web
hosting. The fees for bolt-on e-commerce hosting range from $49.95 to $69.95,
out of which we receive $16.50 to $22, per month. For customers that use
Cinapsys for hosting, we offer, for one monthly fee, access to a number of
services in a "Value Pack," including a real-time chat program, auction
capability, a banner rotation system, web-based e-mail, an online calendar
accessible from any browser and a bulletin board feature that may be used to
post messages. Cinapsys' web site value pack installation fee is $49.95, out of
which we receive the sum of $20, and the monthly value pack-hosting fee is
$34.95, $10 of which is paid to us. These fees may increase or decrease on a
case-to-case basis.
Competition
-----------
The market for web site design and maintenance services is intensely
competitive. Additional companies are expected to enter the competition in the
future. We anticipate that we will be in competition with companies of all sizes
located in the United States that offer Internet web site design, hosting and
maintenance services to business customers. A number of these companies offer
essentially the same products and services as EasyWeb and compete in the areas
of price and service. We now control our own templated services and do not need
to use Cinapsys unless they are competitive. However, because we obtain template
web sites that we offer from Cinpasys, we are in direct competition with
Cinapsys in the marketing and sale of these products and services. Cinapsys
provides its template web sites to third parties in addition to EasyWeb. We must
make changes on a timely basis in the nature, price, quality and other aspects
of our products and services in response to changes in the market. We expect to
compete by marketing our products and services online and via radio, newspaper
and indoor sign advertising. We intend, through the use of online marketing and
independent contractors, to minimize our weaknesses, including, among others,
our undercapitalization, cash shortage, limitations with respect to personnel,
technological, financial and other resources and lack of a customer base and
market recognition, and to eliminate the need for a sizeable retail facility and
marketing staff. Many of the companies and other organizations with which we
will be in competition are established and have far greater financial resources,
substantially greater experience and larger staffs than EasyWeb. Additionally,
many of these organizations have proven operating histories, which we lack. We
9
expect to face strong competition from both well-established companies and small
independent companies like us. In addition, in the future, AT&T, Qwest
Communications and other "Baby Bell" and other telecommunications companies may
offer customers assistance in establishing web sites at costs lower than those
available from us. Additionally, our business may be subject to decline because
of generally increasing costs and expenses of doing business, thus further
increasing anticipated competition. Further, it is anticipated that there may be
significant technological advances in the future and we may not have adequate
creative management and resources to enable us to take advantage of these
advances. The effects of any of these technological advances on EasyWeb,
therefore, cannot be presently determined.
Marketing
---------
Although activity in the entire Internet sector has subsided substantially
as the public has begun to realize the limitations on the Internet and other
online services as a medium of commerce, the number of companies that offer
Internet services has also decreased. We believe that a market still exists for
businesses and individuals who need customized websites or the more cost
effective templated web sites. Despite competition from companies with greater
resources than EasyWeb, we believe EasyWeb offers a viable selection of products
and services to the marketplace which we hope will be accepted in the future.
We used to market our products and services online, primarily, from our web
site located at www.easywebcorp.com. In addition, we have employed advertising
on the radio on KTLK's "Business for Breakfast" and "Hard Core Sports" programs.
Currently, we only market by word-of-mouth due to limited capital resources. Mr.
David C. Olson, the President, the Treasurer, a director and a principal
shareholder of EasyWeb, contacts potential customers from his own sales efforts
and referrals of potential customers. While we employed two full-time,
door-to-door salespersons for a short time, we terminated them because of the
lack of performance in relation to the expense.
We have sold only a limited number of Internet sites and, accordingly, we
have a very small customer base. While management believes, we cannot be
certain, that our plan to market and sell our products and services will enable
us to develop a customer base. If our marketing plan fails, we may be required
to employ sales personnel and/or compensate them via salary in addition to
commission. Such change(s) in our marketing plan could adversely affect revenues
in the short-term and necessitate the formulation of additional marketing
strategies, with attendant delays and expenses.
Research and Development
------------------------
We have been actively engaged in research and development in order to
enhance our existing, and produce new, products. We have been engaged, utilizing
Mr. David C. Olson, our President/Treasurer, in research and development
activities related to the design, development and operation of our web site and,
utilizing Mr. Olson together with Mr. Terry Romero, President of Sunstar 2000,
in the design, development and operation of the line of model, template web
sites that we offer. However, during 2002 we terminated our relationship with
Mr. Romero and Sunstar 2000 and are currently working with Mark Moline of
Cinapsys.
Currently there are no agreements between Mr. Olson and Mr. Moline or
EasyWeb and Cinapsys regarding ownership of any products or services developed
as a result of the parties' collaborative efforts. We currently anticipate that
any new products or services developed by Mr. Olson and Mr. Moline as a result
of their joint efforts would be shared between EasyWeb and Cinapsys equitably.
However, because we have no formal agreement with Cinapsys or Mr. Moline, any
dispute between Mr. Olson and Mr. Moline or EasyWeb and Cinapsys could have an
adverse affect on our continued research and development activities. All of
these activities have been performed by Mr. Olson free of charge to EasyWeb.
Although, none of the third party suppliers have received any cash compensation
for these services, on December 20, 2001, we issued 100,000 options to Mr.
10
Romero to purchase shares of our common stock at an exercise price of $.25 per
share in consideration for the various services he provided to EasyWeb during
2001. Accordingly, we have spent no cash on research and development activities
during the period from inception on September 24, 1998, through December 31,
2002. We will spend no funds on research and development until we are able to
generate sufficient revenue from operations to pay for our research and
development needs. Therefore, for the foreseeable future, Messrs. Olson and/or
Moline will perform research and development, if any, to enhance our existing,
and produce new, products at no out-of-pocket cost to EasyWeb. We have no
research and development activities planned for the next twelve months or
thereafter.
Employees and Consultants
-------------------------
As of the date hereof, we employ two individuals, including Mr. David C.
Olson and Ms. Barbara Petrinsky, the President/Treasurer and the Secretary,
respectively, of EasyWeb, on a part-time basis. Both Mr. Olson and Ms. Petrinsky
are considered to be key to our business success. No cash compensation has been
awarded to, earned by or paid to either of the foregoing or Mr. Thomas M.
Vickers, a director of EasyWeb together with Mr. Olson, for all services
rendered in all capacities through December 31, 2002. Mr. Vickers has received
200,000 shares of our common stock in consideration for agreeing to serve as a
director of EasyWeb. We do not anticipate that he will be awarded any cash
compensation for the foreseeable future. For the foreseeable future, Mr. David
C. Olson and Ms. Barbara Petrinsky will receive no compensation in any form for
their services performed in the capacities as our executive officers and/or
directors. It is anticipated that at such time, if ever, as EasyWeb's financial
position permits, assuming that we are successful in raising additional funds
through equity and/or debt financing and/or generating a sufficient level of
revenue from operations, Mr. Olson and Ms. Petrinsky will receive reasonable
salaries and other appropriate compensation, such as bonuses, coverage under
medical and/or life insurance benefit plans and participation in stock option
and/or other profit sharing or pension plans, for services as executive officers
of EasyWeb and Messrs. Olson and Vickers may receive fees for their attendance
at meetings of the Board of Directors. Mr. Olson and Ms. Petrinsky devote up to
25 percent of their time and effort to the business and affairs of EasyWeb and
Mr. Vickers devotes only such time as is necessary for him to perform his
responsibilities as a director of EasyWeb. See Part I, Item 2. "Description of
Property," for a description of the Agreement for Administrative Support dated
March 11, 1999, between EasyWeb and Summit, an affiliated company of which Mr.
Olson is the President, a director and a controlling shareholder, and subsequent
agreements pursuant to which we paid Summit the sum of $13,509 through December
31, 2002, for use of office space and administrative and technical support
services at Summit Financial Relation's offices. As the sole shareholder of
Summit, Mr. Olson benefited indirectly from these payments. See Part 3, Item 12.
"Certain Relationships and Related Transactions," for detailed information
relating to our issuance on March 11, 1999, to Mr. Olson and Robert Zappa, a
former director of EasyWeb, of 1,600,000 shares, and 800,000 shares, of our
common stock, respectively, in consideration for the payment of $2,500 and
$1,500 in cash (approximately $.002 per share), respectively, the issuance on
December 7, 2001, of 200,000 shares to Mr. Thomas M. Vickers as consideration
for his agreement to serve on the board of directors of EasyWeb, the issuance on
December 7, 2001, of 150,000 shares to Mr. Olson and Summit as consideration for
working capital advances, and common stock sold to Mr. Olson and Ms. Petrinsky
during January 2002.
(c) Organization
----------------
We are comprised of one corporation with no subsidiaries or parent
entities.
(d) Operations
--------------
We have been in the development stage since our inception on September 24,
1998.
(e) Proprietary Information
---------------------------
11
We have no proprietary information.
(f) Government Regulation
-------------------------
We are not subject to any material governmental regulation or approvals.
(g) Environmental Compliance
At the present time, we are not subject to any material costs for
compliance with any environmental laws.
Item 2. DESCRIPTION OF PROPERTY
We maintain our offices at the business offices located at 6025 South
Quebec Street, Suite #150, Englewood, Colorado 80111, of Summit, an affiliated
corporation of which Mr. David C. Olson, the President, the Treasurer, a
director and a controlling shareholder of EasyWeb, is the President, a director
and the sole shareholder. Summit leases its offices from an unaffiliated company
and shares the offices with that company and a number of other affiliated
companies. We entered into the Agreement with Summit dated April 1, 2001, for
use of office space, administrative support (including reception, secretarial
and bookkeeping services) and technical support (including use of office,
computer and telecommunications equipment) at Summit's offices. The agreement
provides for us to pay Summit rent in the amount of $4,000 in advance for a
period of one year from April 1, 2001, to March 31, 2002, and the sum of $15 per
hour for bookkeeping services. Pursuant to the agreement, all other services,
including administrative and technical support and web site design, development
and sales, are provided by Summit free of charge until our Board of Directors
determines that we have sufficient cash flow or earnings to pay Summit cash for
the services. Pursuant to the agreement, we paid Summit $4,000 for rent on April
1, 2001, and a total of $960 and $1,016 for bookkeeping and other administrative
services for the years ended December 31, 2002 and 2001. We anticipate that the
Board will make its determination based on our ability to pay Summit reasonable
rates for these services based on current market conditions while at the same
time maintaining sufficient capital to pay for ongoing operations, including the
costs of marketing our products and services.
During the period from March 11, 1999, through August 31, 2000, we were
parties to the Agreement for Administrative Support with Summit dated March 11,
1999, for use of office space, administrative support and technical support at
Summit's offices. The agreement provided for us to pay Summit for these services
the amount of $1,500 per month commencing in the month of April 2000 in which we
received the minimum proceeds of at least $100,000 from our offering of common
stock that occurred between December 10, 1999, and April 10, 2000. During the
period following the closing of this common stock offering for the receipt of
gross proceeds of $101,050 on April 10, 2000, through August 31, 2000, we paid
Summit the sum of approximately $7,000 for rent and administrative and technical
support services pursuant to the agreement. On September 1, 2000, EasyWeb and
Summit abandoned the agreement because of EasyWeb's failure to realize
significant revenues from operations. During the period from September 1, 2000,
through March 31, 2001, we paid no rent and a total of $825 at the rate of $15
per hour to Summit for administrative and technical support services pursuant to
a verbal agreement.
The office space and administrative support provided by Summit has a fair
market value of approximately $500 and $1,000 per month, respectively. We have
recognized expenses for rent and administrative support based on fair market
value. Any period in which the amount paid to Summit for office space and
administrative support was below the fair market value, the remaining balance
was considered contributed by Summit and recorded as a credit to additional
paid-in capital in our financial statements. As of December 31, 2002, Summit had
contributed office space and administrative support totaling $15,667 and
$36,824, respectively.
The office space we currently occupy is expected to be adequate to meet our
foreseeable future needs while we are in the development stage. We own no real
property.
Item 3. LEGAL PROCEEDINGS
No legal proceedings of a material nature to which we are a party were
pending during the reporting period, and we know of no legal proceedings of a
material nature, pending or threatened, or judgments entered against any of our
directors or officers in their capacity as such.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We did not submit any matter to a vote of security holders through
solicitation of proxies or otherwise during the fourth quarter of the year
covered by this report.
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Principal Market or Markets
-------------------------------
Our common stock does not trade on any market or exchange.
(b) Approximate Number of Holders of Common Stock
-------------------------------------------------
The number of holders of record of our Common Stock at December 31, 2002,
was approximately 59.
(c) Dividends
-------------
Holders of our common stock are entitled to receive such dividends as may
be declared by our Board of Directors. No dividends on the common stock were
paid during the periods reported herein nor do we anticipate paying dividends in
the foreseeable future.
(d) The Securities Enforcement and Penny Stock Reform Act of 1990
-----------------------------------------------------------------
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure and documentation related to the market for penny stock
and for trades in any stock defined as a penny stock. Unless we can acquire
substantial assets and trade at over $5.00 per share on the bid, it is more
likely than not that our securities, for some period of time, would be defined
under the Act as a "penny stock." As a result, those who trade in our securities
may be required to provide additional information about their fitness to trade
our shares. Also, there is the requirement of a broker-dealer, prior to a
transaction in a penny stock, to deliver a standardized risk disclosure document
that provides information about penny stocks and the risks in the penny stock
market. Further, a broker-dealer must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer and
its salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. These
requirements present a substantial burden on any person or brokerage firm who
plans to trade out securities and would thereby make it unlikely that any liquid
trading market would ever result in our securities while provisions of this Act
might be applicable to those securities.
13
(e) Blue Sky Compliance
-----------------------
The trading of penny stock companies may be restricted by the securities
laws ("Blue Sky" laws) of the several states. Management is aware that a number
of states currently prohibit the unrestricted trading of penny stock companies
absent the availability of exemptions, which are in the discretion of the
states' securities administrators. The effect of these states' laws would be to
limit the trading market, if any, for our shares and to make resale of shares
acquired by investors more difficult.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking statements
--------------------------
The following discussion contains forward-looking statements regarding our
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause our actual business, prospects and results of operations to differ
materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation; our ability to successfully develop new products for new
markets; the impact of competition on our revenues; changes in law or regulatory
requirements that adversely affect or preclude clients from using our products
for certain applications; delays our introduction of new products or services;
and our failure to keep pace with emerging technologies.
When used in this discussion, words such as "believes", "anticipates",
"expects", "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. Our Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various
disclosures made by us in this report and other reports filed with the
Securities and Exchange Commission that attempts to advise interested parties of
the risks and factors that may affect our business.
General
-------
EasyWeb's business plan is to design, market, sell and maintain customized
and template, turnkey sites on the Internet hosted by third parties. Our
business plan has been prepared based upon the popularity of the Internet and
the growing number of businesses interested in advertising and marketing online.
We have generated only $9,547 in revenue and a net loss from operations of
$(210,475) through December 31, 2002.
We initially anticipated that our arrangement in September 2000 with AJ
Indoors, Inc., an indoor sign company, to feature EasyWeb on approximately 100
indoor signs throughout the Denver and Colorado front range areas, would assist
us in obtaining an increased customer base in the future. However, this
advertising did not commence until February 2001 and we sold only one turnkey,
template web site to date as a result of the arrangement, which was terminated
in 2002. We also expected to receive revenue in the near future from our
arrangement with Euthenics International, Inc., to design and maintain the
company's web site in exchange for an ongoing royalty of $.50 per each bottle of
product sold from the site for a period five years. However, this arrangement
was terminated following Euthenics' bankruptcy in 2002, with EasyWeb recognizing
no revenues from the agreement.
Additionally, we intend to generate increased revenue in the future through
the expenditure of funds for marketing, advertising and/or promotion. The
implementation of these plans is dependent upon our ability to raise additional
capital from equity and/or debt financing and/or achieve profitable operations.
We believe that the revenue generated from our business may not be sufficient to
finance these and other future activities and that it may be necessary to raise
additional funds through equity and/or debt financing in the next twelve months.
We estimate that we will need at least an additional $45,000 in capital during
this period in order to fully implement our plans to increase revenue through
increased marketing, advertising and promotion and to continue in operation as a
going concern. Although we intend to explore all available alternatives for debt
14
and/or equity financing, including, but not limited to, private and public
securities offerings, there can be no assurance that we will be able to generate
additional capital for marketing, advertising and promotion and/or other
purposes. In the event that only limited additional financing is received, we
expect our opportunities in the design, marketing and sale of Internet web sites
to be limited. Further, even if we succeed in obtaining the level of funding
necessary to increase sales through the expenditure of additional funds for
marketing, advertising and/or promotion, this will not ensure that operations
will be profitable.
Plan of Operation
-----------------
Our plan of operation for the next twelve months is to focus upon raising
additional working capital and, subsequently, the marketing and sale of our web
site design, development, hosting and maintenance services. We do not expect to
perform any additional product research and development during the term of this
plan. In any event, any additional research and development to enhance our
existing products or otherwise, would be performed by Mr. David C. Olson, our
President/Treasurer, with the possible assistance of Cinapsys or Wilbanks, at no
out-of-pocket cost to us.
We are unable to calculate the cost of our plan of operations over the next
twelve months. We expect to be able to satisfy our cash requirements for at
least the next three months with cash infusions from officers and investors, if
we do not increase our marketing, advertising or promotional activities. This is
because we have no salaried employees and no additional research and development
planned. We currently do not intend to hire any additional employees for the
foreseeable future and Mr. Olson has verbally agreed not to seek any
remuneration from EasyWeb until the Company has been profitable for a period of
time acceptable to EasyWeb's Board of Directors. To date, Mr. Olson has not
accrued, nor does he plan to accrue any salary from EasyWeb. However, see Part
3, Item 12. "Certain Relationships and Related Transactions," of this report for
a description of our payments to Summit, from which Mr. Olson, as the sole owner
of Summit, benefits indirectly. If we are successful in our efforts to raise
additional funding from equity and/or debt financing, we intend to allocate the
bulk of those funds for marketing, advertising and promotion. Because the
results of our previous advertising efforts have been disappointing, Mr. Olson
intends to renew his sales efforts. During January 2002, we raised $16,500
through the sale of 550,000 shares of our common stock ($.03 per share), and in
March 2003 we sold 200,000 shares of common stock for $10,000 ($.05 per share).
These stock sales have been our only fund-raising efforts since the successful
completion of our securities offering on April 10, 2000, for the receipt of
gross proceeds of $101,050. We intend to increase our efforts to raise capital,
exploring all available alternatives for debt and/or equity financing,
including, but not limited to, a private placement of securities that we are
contemplating. We cannot be certain that these efforts will be successful. We do
not expect the purchase or sale of any significant equipment or a significant
change in the number of employees for the next twelve months.
However, if we are unable to raise additional capital to support our future
operations, we may begin exploring business opportunities for possible
investments and/or business combinations with companies that may be operating
outside of our original business plan. As of the date of this filing, we have
had no discussions and no agreements have been reached with any third parties
regarding such an investment or business combination.
The following summarizes the Company's results of operations and financial
conditions, and should be read in conjunction with the financial statements:
Results of Operations
---------------------
Year Ended December 31, 2002, Versus Year Ended December 31, 2001:
Total revenue was $2,570 for the year ended December 31, 2002, as compared
to total revenue of $1,726 for the year ended December 31, 2001.
15
We incurred a net loss of $(39,941) during the year ended December 31,
2002, as compared to a net loss of $(72,535) during the year ended December 31,
2001, because of the factors described below. Operating expenses decreased
approximately 43 percent, from $74,261 for the year ended December 31, 2001, to
$42,511 for the year ended December 31, 2002. We experienced sizeable decreases
in stock-based compensation and professional fees due to our reduced operations.
Because our original marketing approach did not generate any significant
revenues we have been forced to reevaluate our business model. Management
currently plans to re-establish advertising efforts in the future, provided it
is able to procure additional financing for EasyWeb in order to support such
efforts.
Year Ended December 31, 2001, Versus Year Ended December 31, 2000:
------------------------------------------------------------------
Total revenue was $1,726 for the year ended December 31, 2001, as compared
to total revenue of $5,251 for the year ended December 31, 2000.
We incurred a net loss of $(72,535) during the year ended December 31,
2001, as compared to a net loss of $(79,951) during the year ended December 31,
2000, because of the factors described below. Operating expenses decreased
approximately 13 percent, from $85,202 for the year ended December 31, 2000, to
$74,261 for the year ended December 31, 2001. We experienced sizeable decreases
in salaries and payroll taxes, web site consulting and maintenance and
advertising as a result of the ineffectiveness of our original marketing
approach of door-to-door sales. However, professional fees and stock-based
compensation support increased substantially. The increase in professional fees
are a result of the additional legal and accounting fees the Company incurred as
a result of our filing to become a reporting company. Additionally, we incurred
$26,600 in stock-based compensation during the year ended December 31, 2001 as
compared to $-0- for the year ended December 31, 2000. The increase occurred as
a result of paying for services with stock due to the lack of working capital.
Liquidity and Capital Resources
-------------------------------
As of December 31, 2002, we had total assets of $501 consisting of $15 in
cash and $486 in net intangible assets. As of December 31, 2001, we had total
assets of $2,885 consisting of $451 in cash, $465 in trade receivables, $1,000
in prepaid expenses and $969 in net intangible assets.
As of December 31, 2002 and 2001, we had total liabilities of $17,835 and
$12,818, respectively. Our total shareholders' deficit was $(17,334) and
$(13,933), as of December 31, 2002, and 2001, respectively.
As a result of our inability to generate significant revenue to date
together with sizeable continuing operating expenses, access to capital may be
unavailable in the future except from affiliated persons. If we are able to
obtain access to outside capital in the future, it is expected to be necessarily
costly because of high rates of interest and fees. Through December 31, 2002, we
have been funded through the sale of common stock for gross proceeds in the
amount of $101,550 and proceeds of $16,500 through the sale of 550,000 shares of
our common stock ($.03 per share) during January 2002. However, we are
experiencing working capital shortages and are dependent upon successfully
obtaining additional capital in the future. Currently Summit, an affiliate, is
paying administrative expenses on behalf of the Company so that the Company can
maintain operations; however, Summit could stop making payments on behalf of the
Company at any time. While our independent auditor has presented our financial
statements on the basis that we are a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business over a reasonable length of time, it has noted that our significant
operating losses and working capital deficit raise a substantial doubt about our
ability to continue as a going concern. Our future success will be dependent
upon our ability to raise additional working capital and increase sales of our
Internet products and services. There is no assurance that we will be successful
in raising additional working capital or increasing sales of our Internet
products and services.
16
Unless we achieve profitable operations, management will be forced to raise
funds from private and/or public equity and/or debt financing in order to
continue in operation long-term. We expect our access to capital to continue to
be severely restricted on a long-term basis because of the anticipated low
market value of our common stock, if it becomes publicly traded, combined with
our unstable operating performance. Even if capital is obtained, it is expected
to involve extremely high management fees, interest rates and related loan fees
and/or require significant discounts and incentives. We expect that management
will not continue to fund EasyWeb on a long-term basis and that any other
financing may not be available on acceptable terms, if at all. If we fail to
achieve profitable operations and we are unable to obtain capital from sources
other than affiliates over the long term, we would be forced to cease
operations.
Net cash used in operating activities was $(11,770) for the year ended
December 31, 2002, because of the net loss of $(39,941), offset primarily, by
the value of office space and administrative support contributed by an
affiliated company ($16,040) and increase in liabilities ($9,867). Net cash used
in operating activities was $(30,256) for the year ended December 31, 2001,
because of the net loss of $(72,535), offset primarily, by the value of office
space and administrative support contributed by an affiliated company ($13,984)
and stock-based compensation ($26,600).
For the years ended December 31, 2002 and 2001, net cash used in investing
activities totaled $(316) and $-0-, respectively. Cash was used in 2002 to
acquire computer software ($316). During the years ended December 31, 2002 and
2001, net cash provided by financing activities totaled $11,650 and $4,000,
respectively. Cash proceeds in 2002 consisted of common stock sales ($16,500), a
working capital loan from an officer ($650) and the repayment of prior year
related party loans ($5,500); and proceeds in 2001 consisted of working capital
advances from related parties ($4,000).
Cash decreased by $436, from $451 at December 31, 2001 to $15 at December
31, 2002, because of the above-described factors. Cash decreased by $26,256,
from $26,707 at December 31, 2000 to $451 at December 31, 2001, because of the
above-described factors.
Inflation
---------
We believe that inflation has not had a material impact on our business.
Seasonality
-----------
We do not believe that our business is seasonal.
Item 7. FINANCIAL STATEMENTS
The report of the independent auditors on the financial statements appears
at Page F-2 and the financial statements and accompanying footnotes appear at
Pages F-3 through F-14 hereof. These financial statements and related financial
information required to be filed hereunder commence on Page F-1 of this Form and
are incorporated herein by this reference.
17
EASYWEB, INC.
(A Development Stage Company)
Audited Financial Statements
for Year Ended December 31, 2002
EASYWEB, INC.
(A Development Stage Company)
Index to Financial Statements
Page
----
Report of Independent Auditors ......................................... F-2
Balance Sheet at December 31, 2002 ..................................... F-3
Statements of Operations for the years ended December 31, 2002
and 2001, and from September 24, 1998 (inception) through
December 31, 2002 ................................................. F-4
Statement of Changes in Shareholders' Deficit for the period from
September 24, 1998 (inception) through December 31, 2002 .......... F-5
Statements of Cash Flows for the years ended December 31, 2002
and 2001, and from September 24, 1998 (inception) through
December 31, 2002 ................................................. F-7
Notes to Financial Statements .......................................... F-8
F-1
Report of Independent Auditors
To the Board of Directors and Shareholders:
EasyWeb, Inc.
We have audited the accompanying balance sheet of EasyWeb, Inc. (a development
stage company) as of December 31, 2002, and the related statements of
operations, shareholders' deficit and cash flows for the years ended December
31, 2002 and 2001, and the period from September 24, 1998 (inception) through
December 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EasyWeb, Inc. as of December
31, 2002, and the results of its operations and its cash flows for the years
ended December 31, 2002 and 2001, and from September 24, 1998 (inception)
through December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has a working capital deficit at December 31, 2002 and
has suffered significant operating losses since inception. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans regarding those matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Cordovano and Harvey, P.C.
------------------------------
Cordovano and Harvey, P.C.
Denver, Colorado
April 3, 2003
F-2
EASYWEB, INC.
(A Development Stage Company)
Balance Sheet
December 31, 2002
Assets
Current Assets:
Cash ..................................................... $ 15
---------
Total current assets ....................... 15
Intangible assets, net of accumulated
amortization of $2,080 (Note 1) .......................... 486
---------
$ 501
=========
Liabilities and Shareholders' Deficit
Current Liabilities:
Accounts payable and accrued liabilities ................. $ 8,891
Due to affiliate (Note 2) ................................ 8,294
Due to officer (Note 2) .................................. 650
---------
Total current liabilities .................. 17,835
---------
Shareholders' deficit (Notes 2 and 4):
Common stock, no par value; 30,000,000 shares authorized,
4,506,200 shares issued and outstanding ............... 120,050
Stock options outstanding - 100,000 ...................... 20,600
Additional paid-in capital ............................... 52,491
Deficit accumulated during development stage ............. (210,475)
---------
Total shareholders' deficit ................ (17,334)
---------
$ 501
=========
See accompanying notes to financial statements
F-3
EASYWEB, INC.
(A Development Stage Company)
Statements of Operations
September 24,
1998
For the Years Ended (Inception)
December 31, Through
-------------------------- December 31,
2002 2001 2002
----------- ----------- -----------
Revenue:
Commissions, related party (Note 2) ....... $ -- $ -- $ 4,000
Commissions, other ........................ 2,570 1,726 5,547
----------- ----------- -----------
Total revenue .............. 2,570 1,726 9,547
----------- ----------- -----------
Operating expenses:
Stock-based compensation (Notes 2 and 4):
Consulting services .................... -- 20,600 20,600
Director services ...................... -- 6,000 6,000
Rent ...................................... 1,000 3,000 6,333
Contributed rent (Note 2) ................. 5,000 3,000 15,667
Administrative support .................... 960 1,016 7,176
Contributed administrative support (Note 2) 11,040 10,984 36,824
Salaries and payroll taxes ................ -- -- 20,729
Professional fees ......................... 16,136 23,174 56,499
Web site consulting and maintenance ....... 660 2,624 13,419
Information technology agreement (Note 5) . -- -- 8,269
Advertising ............................... -- 120 12,034
Depreciation and amortization ............. 799 750 2,238
Other ..................................... 6,916 2,993 14,234
----------- ----------- -----------
Total operating expenses ... 42,511 74,261 220,022
----------- ----------- -----------
Loss before income taxes ... (39,941) (72,535) (210,475)
Income tax provision (Note 3) ................. -- -- --
----------- ----------- -----------
Net loss ................... $ (39,941) $ (72,535) $ (210,475)
=========== =========== ===========
Basic and diluted loss per share .............. $ (0.01) $ (0.02)
=========== ===========
Basic and diluted weighted average
common shares outstanding ................. 4,499,431 3,611,969
=========== ===========
See accompanying notes to financial statements
F-4
EASYWEB, INC.
(A Development Stage Company)
Statement of Changes in Shareholders' Deficit
Deficit
Accumulated
Common Stock Outstanding Additional During
------------------------ Stock Paid-In Development
Shares Amount Options Capital Stage Total
---------- ---------- ---------- ---------- ---------- ----------
Balance at
September 24, 1998 (inception) ............ -- $ -- $ -- $ -- $ -- $ --
Net loss for the period ended
December 31, 1998......................... -- -- -- -- (1,500) (1,500)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1998 .................. -- -- -- -- (1,500) (1,500)
March 11, 1999, shares sold to officers
($.0017/share) (Note 2) ................... 2,400,000 4,000 -- -- -- 4,000
March 11, 1999, shares issued to director
in exchange for expenses paid on behalf
of the Company ($.0019/share) (Note 2) .... 800,000 1,500 -- -- -- 1,500
November 9, 1999, shares sold to affiliate
at $.25 per share (Note 2) ................ 2,000 500 -- -- -- 500
Office space and administrative support
contributed by an affiliate (Note 2) ...... -- -- -- 12,000 -- 12,000
Net loss, year ended December 31, 1999 ........ -- -- -- -- (16,548) (16,548)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1999 .................. 3,202,000 6,000 -- 12,000 (18,048) (48)
March 2000, shares sold in a private
offering at $0.25 per share, net of
$14,000 of offering costs (Note 4) ........ 404,200 87,050 -- -- -- 87,050
July 2000, stock subject to rescission
(Note 4) .................................. (16,000) (4,000) -- -- -- (4,000)
Office space and administrative support
contributed by an affiliate (Note 2) ...... -- -- -- 10,467 -- 10,467
Net loss, year ended December 31, 2000 ........ -- -- -- -- (79,951) (79,951)
---------- ---------- ---------- ---------- ---------- ----------
See accompanying notes to financial statements
F-5
EASYWEB, INC.
(A Development Stage Company)
Statement of Changes in Shareholders' Deficit
Continued
Deficit
Accumulated
Common Stock Outstanding Additional During
------------------------ Stock Paid-In Development
Shares Amount Options Capital Stage Total
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2000 .................. 3,590,200 89,050 -- 22,467 (97,999) 13,518
December 2001, stock issued to officer in
exchange for debt ($.03/share) (Note 2) ... 150,000 4,500 -- -- -- 4,500
December 2001, stock issued to director in
exchange for services ($.03/share) (Note 2) 200,000 6,000 -- -- -- 6,000
December 2001, stock options issued in
exchange for services, valued at the fair
value of the options ($.206/share) (Note 4) -- -- 20,600 -- -- 20,600
Office space and administrative support
contributed by an affiliate (Note 2) ...... -- -- -- 13,984 -- 13,984
Net loss, year ended December 31, 2001 ........ -- -- -- -- (72,535) (72,535)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2001 .................. 3,940,200 99,550 20,600 36,451 (170,534) (13,933)
January 2002, sale of common stock
($.03/share) (Note 4) ..................... 500,000 15,000 -- -- -- 15,000
January 2002, sale of common stock to
officers ($.03/share) (Note 2) ............ 50,000 1,500 -- -- -- 1,500
April 2002, closing of Arizona rescission
offer (Note 4) ............................ 16,000 4,000 -- -- -- 4,000
Office space and administrative support
contributed by an affiliate (Note 2) ...... -- -- -- 16,040 -- 16,040
Net loss, year ended December 31, 2002 ........ -- -- -- -- (39,941) (39,941)
---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 2002 .................. 4,506,200 $ 120,050 $ 20,600 $ 52,491 $ (210,475) $ (17,334)
========== ========== ========== ========== ========== ==========
See accompanying notes to financial statements
F-6
EASYWEB, INC.
(A Development Stage Company)
Statements of Cash Flows
September 24,
1998
(Inception)
For the Years Ended Through
December 31, December 31,
----------------------
2002 2001 2002
--------- --------- ---------
Cash flows from operating activities:
Net loss ......................................... $ (39,941) $ (72,535) $(210,475)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization .............. 799 750 2,238
Equipment and intangible assets exchanged
for services (Note 1) .................... -- -- 450
Stock-based compensation ................... -- 26,600 26,600
Office space and administrative support
contributed by an affiliate (Note 2) ..... 16,040 13,984 52,491
Changes in operating assets and liabilities:
Receivables and prepaid expenses ...... 1,465 (1,465) --
Accounts payable, accrued expenses
and due to affiliate ............... 9,867 2,410 18,685
--------- --------- ---------
Net cash used in
operating activities ......... (11,770) (30,256) (110,011)
--------- --------- ---------
Cash flows from investing activities:
Purchases of equipment ........................... -- -- (400)
Payments for intangible assets ................... (316) -- (2,774)
--------- --------- ---------
Net cash used in
investing activities ......... (316) -- (3,174)
--------- --------- ---------
Cash flows from financing activities:
Proceeds on loans from related parties ........... 650 4,000 10,650
Repayment of related party loans ................. (5,500) -- (5,500)
Proceeds from the sale of common stock ........... 16,500 -- 118,050
Proceeds from the sale of common stock subject
to rescission ................................. -- -- 4,000
Payments for offering costs ...................... -- -- (14,000)
--------- --------- ---------
Net cash provided by
financing activities ......... 11,650 4,000 113,200
--------- --------- ---------
Net change in cash ........... (436) (26,256) 15
Cash, beginning of period ............................ 451 26,707 --
--------- --------- ---------
Cash, end of period .................................. $ 15 $ 451 $ 15
========= ========= =========
Supplemental disclosure of cash flow information:
Income taxes ..................................... $ -- $ -- $ --
========= ========= =========
Interest ......................................... $ -- $ -- $ --
========= ========= =========
Non-cash financing activities:
Common stock issued in exchange for debt ......... $ -- $ 4,500 $ 6,000
========= ========= =========
See accompanying notes to financial statements
F-7
EASYWEB, INC.
(A Development Stage Company)
Notes to Financial Statements
(1) Organization and Summary of Significant Accounting Policies With Basis of
Presentation
Organization
EasyWeb, Inc. (the "Company") was incorporated in Colorado on September 24, 1998
under the name NetEscapes, Inc. The name of the Company was changed to EasyWeb,
Inc. on February 2, 1999. The Company is a development stage enterprise in
accordance with Statement of Financial Accounting Standard ("SFAS") No. 7. The
Company markets web sites on the Internet, which are built by third party
consultants. The Company has entered verbal agreements with Cinapsys, Inc. and
Wilbanks Designs, a related party, whereby the Company receives a sales
commission for all custom and templated web sites and web site products sold by
the Company. The Company has not conducted any transactions with Wilbanks
Design, a related party, as of December 31, 2002.
As of December 31, 2002, the Company has a working capital deficit and has
suffered significant operating losses since inception, which raises substantial
doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's ability to
continue as a going concern is dependent upon its ability to generate sufficient
cash flow to meet obligations on a timely basis and ultimately to attain
profitability. The Company's management intends to obtain working capital
through operations and to seek additional funding through equity offerings to
help fund the Company's operations. There is no assurance that the Company will
be successful in its efforts to raise additional working capital or achieve
profitable operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Cash equivalents and fair value of financial instruments
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. The Company had no cash equivalents at
December 31, 2002.
The carrying amounts of cash, accounts payable and accrued liabilities
approximate fair value due to the short-term maturity of the instruments.
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Intangible assets and amortization
The Company's intangible assets consist of computer software and web site
development costs. The Company capitalizes internal and external costs incurred
to develop its web site during the application development stage in accordance
with Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". Capitalized web site development costs
are amortized over an estimated life of three years commencing on the date the
software is ready for its intended use. The Company commenced amortizing its
web-site development costs on April 11, 2000.
F-8
Amortization expense totaled $799, $750, and $2,080, respectively, for the years
ended December 31, 2002 and 2001, and the period from September 24, 1998
(inception) through December 31, 2002. In addition, the Company has adopted the
Emerging Issues Task Force Issue No. 00-2 ("EITF 00-2"), "Accounting for Web
Site Development Costs". EITF 00-2 requires the implementation of SOP 98-1 when
software is used by a vendor in providing a service to a customer but the
customer does not acquire the software or the right to use it.
Impairments on long-lived assets
The Company evaluates the carrying value of its long-lived assets under the
provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". Statement No. 144 requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying value or fair value, less
costs to sell.
Deferred offering costs
Costs related to common stock offerings are recorded initially as a deferred
asset until the offering is successfully completed, at which time they are
recorded as a reduction of gross proceeds in shareholders' equity. If an
offering is not successful, the costs are charged to operations at that time.
Loss per common share
The Company accounts for loss per share under the provisions of SFAS No. 128,
"Earnings Per Share". Under SFAS No. 128, net loss per share-basic excludes
dilution and is determined by dividing income available to common shareholders
by the weighted average number of common shares outstanding during the period.
Net loss per share-diluted reflects the potential dilution that could occur if
securities and other contracts to issue common stock were exercised or converted
into common stock. Common stock options outstanding at December 31, 2002 were
not included in the diluted loss per share as all 100,000 options were
anti-dilutive. Therefore, basic and diluted losses per share at December 31,
2002 were equal.
Revenue recognition
The Company's sales are reported on a net basis in accordance with EITF 99-19,
"Reporting Revenue Gross as a Principal Versus Net as an Agent". All of the
Company's revenues are reported as commissions. The Company recognizes revenue
only after its service has been performed and collectibility of its fee is
reasonably assured. Revenues through related party transactions are recognized
when the service has been performed and the cash has been received.
Advertising barter transactions
The Company reports its advertising barter transactions in accordance with EITF
99-17, "Accounting for Advertising Barter Transactions". Under EITF 99-17,
revenue and expense should be recognized at fair value from an advertising
barter transaction only if the fair value of the advertising surrendered in the
transaction is determinable based on the entity's own historical transactions
involving cash. The Company did not recognize any revenues or expenses in
connection with its advertising barter transactions for the periods presented.
F-9
EASYWEB, INC.
(A Development Stage Company)
Notes to Financial Statements
Stock-based Compensation
The Company accounts for stock-based compensation arrangements in accordance
with SFAS No. 123, "Accounting for Stock-Based Compensation," which permits
entities to recognize as expense, over the vesting period, the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of Accounting Principle Board
("APB") Opinion No. 25 and provide pro forma net earnings (loss) disclosures for
employee stock option grants as if the fair value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123. The Company did not report pro forma disclosures in the
accompanying financial statements as the Company did not grant any employee
stock options as of December 31, 2002.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and the tax
basis of assets and liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
(2) Related Party Transactions
Liabilities
At December 31, 2002, the Company owed an affiliate $8,294 for professional fees
and other administrative expenses paid on behalf of the Company. The $8,294 is
included in the accompanying financial statements as Due to Affiliate.
During the year ended December 31, 1999, an officer and two directors advanced
the Company a total of $6,000 ($2,000 each) for working capital. The advances
were unsecured, carried no interest rate and were due on demand. During the year
ended December 31, 2001, the officer and directors advanced the Company an
additional $4,000 at the same terms. In December 2001, the Company issued the
officer 150,000 shares of its common stock in exchange for advances totaling
$4,500. Following the stock issuance, the Company owed the directors $5,500,
which was repaid in January 2002.
In April 2002, the officer loaned the Company $650 for working capital. The loan
carries no interest rate and is due on demand. The $650 is included in the
accompanying financial statements as Due to Officer.
Common stock
During January 2002, the Company sold 50,000 shares of its common stock to
officers of the Company for $1,500, or $.03 per share.
On December 7, 2001, the Company issued 200,000 shares of its common stock to a
director in exchange for services provided to the Company. Because the
transaction was between related parties, no fair market value was assigned to
the services. The transaction was valued at $.03 per share based on
contemporaneous common stock sales to unrelated third parties. Stock-based
compensation of $6,000 is included in the accompanying financial statements.
F-10
EASYWEB, INC.
(A Development Stage Company)
Notes to Financial Statements
On November 9, 1999, the Company sold 2,000 shares of its no par value
restricted common stock to an affiliate company for $500. The Company is
affiliated through common control.
On March 11, 1999, the Company sold 2,400,000 shares of its no par value
restricted common stock to two officers for a total of $4,000.
On March 11, 1999, the Company issued 800,000 shares of its no par value
restricted common stock to a director in exchange for legal expenses paid on
behalf of the Company totaling $1,500.
Revenue
During the year ended December 31, 2000, the Company earned commission revenues
totaling $4,000 for the sale of a web site to an affiliate. The $4,000
commission totals 41.9 percent of the revenue generated by the Company since
inception.
Rent and administrative support
On March 11, 1999, the Company entered an Administrative Support Agreement with
an affiliate, which provides for the use of the affiliate's office space, and
administrative and technical support by the Company. The Company agreed to pay
the affiliate $1,500 per month for these services ($500-rent and
$1,000-support). Following is a schedule showing the allocation between rent
payments and contributed rent from inception through December 31, 2002:
Rent Contributed
Period Payments Rent Total
------------------------------ --------- --------- ---------
Inception to December 31, 1999 $ -- $ 4,000 $ 4,000
Year ended December 31, 2000 2,333 3,667 6,000
Year ended December 31, 2001 3,000 3,000 6,000
Year ended December 31, 2002 1,000 5,000 6,000
-------- --------- ---------
$ 6,333 $15,667 $ 22,000
======== ========= =========
Following is a schedule showing the allocation between administrative service
payments and contributed administrative services from inception through December
31, 2002:
Service Contributed
Period Payments Services Total
Inception to December 31, 1999 $ -- $ 8,000 $ 8,000
Year ended December 31, 2000 5,200 6,800 12,000
Year ended December 31, 2001 1,016 10,984 12,000
Year ended December 31, 2002 960 11,040 12,000
--------- --------- ----------
$ 7,176 $36,824 $ 44,000
========= ========= ==========
F-11
EASYWEB, INC.
(A Development Stage Company)
Notes to Financial Statements
Marketing agreement
On February 24, 1999, an affiliate assigned all of its rights and privileges in
a marketing agreement to the Company. The Agreement assigns the affiliate's
rights to market Big Online, Inc.'s products and services to the Company. The
products and services consist of the development and maintenance of "web sites"
on the Internet for business and professional customers. On May 1, 2000, the
Company's affiliate was dissolved and the marketing agreement was terminated.
The Company conducted no transactions under the agreement.
(3) Income Taxes
A reconciliation of U.S. statutory federal income tax rate to the effective rate
is as follows:
Years Ended
December 31,
-------------------
2002 2001
-------- -------
U.S. statutory federal rate 15.00% 16.05%
State income tax rate, net of federal benefit 3.94% 3.89%
Permanent differences -7.60% -3.85%
Net operating loss for which no tax
benefit is currently available -11.34% -16.09%
-------- -------
0.00% 0.00%
======== =======
At December 31, 2002, deferred taxes consisted of a net tax asset of $34,467 due
to operating loss carryforwards of $169,624, which was fully allowed for, in the
valuation allowance of $34,467. The valuation allowance offsets the net deferred
tax asset for which there is no assurance of recovery. The changes in the
valuation allowance for the years ended December 31, 2002 and 2001 were $4,526
and $11,671, respectively. Net operating loss carryforwards will expire through
2022.
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
(4) Shareholders' Deficit
Sale of common stock
During January 2002, the Company sold 500,000 shares of its common stock to
unrelated third parties for $15,000, or $.03 per share.
During the months from December 1999 through March 2000, the Company conducted a
private placement offering whereby it sold 404,200 shares of its no par value
common stock for $.25 per share pursuant to an exemption from registration
claimed under Rule 504 of Regulation D of the Securities Act of 1933, as
amended. The shares were sold through the Company's officers and directors. The
Company received $87,050 after deducting offering costs totaling $14,000. The
Company relied upon exemptions from registration believed by it to be available
under federal and state securities laws in connection with the offering.
F-12
Rescission offer
On July 5, 2000, the Company notified the State of Arizona that it had collected
proceeds from a common stock offering prior to meeting all Blue Sky laws
required by that State. The Company sold 16,000 shares of its no par value
common stock to three Arizona residents for $4,000 through the private stock
offering. To remedy this situation, the Company undertook a voluntary rescission
offering pursuant to R14-4-101 of the Regulations of the Arizona Corporation
Commission, Title 14, Chapter 4, as amended, which was approved by the Arizona
Corporation Commission, Securities Division on April 10, 2002. The Rescission
Offer was subsequently submitted to the Arizona investors, all of whom declined
to rescind their shares.
Stock option plan
The Company has adopted an incentive stock option plan for the benefit of key
personnel and others providing significant services. An aggregate of 175,000
shares of common stock has been reserved under the plan. Options granted
pursuant to the plan will be exercisable at a price no less than 100% of fair
market value of a common share on the date of grant.
In December 2001, the Company granted options for 100,000 shares of its common
stock, exercisable at $.25 per share to a non-employee for consulting services
rendered to the Company. The Company's common stock had a fair market value of
approximately $.03 per share based on contemporaneous common stock sales. The
options were fully vested on the grant date and expire on December 20, 2011. The
fair value of the options as determined in accordance with SFAS No. 123 was
$20,600, which charged to operations during 2001 with a corresponding credit to
equity reported as outstanding stock options in the accompanying financial
statements.
The fair value of the stock options granted has been estimated as of the grant
date using the Black-Scholes option-pricing model. The weighted average
assumption of the risk-free interest rate used to determine the fair value of
the above options was three percent. Because the Company's common stock is not
publicly traded, the expected volatility was zero based on the minimum value
method. The assumed expected dividend yield was zero and the expected life of
the options was two years.
The weighted average exercise price and fair value of the options were $.25 and
$.206, respectively. There were no options granted with exercise prices less
than the fair market value of the underlying stock on the date of grant. No
options were exercised, forfeited, or expired during 2001. The options granted
to purchase 100,000 shares of the Company's common stock are the only options
granted since inception and all were outstanding and exercisable at December 31,
2002.
The Black-Scholes options valuation model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.
F-13
EASYWEB, INC.
(A Development Stage Company)
Notes to Financial Statements
(5) Information Technology Agreement
On November 1, 2000, the Company entered into an information technology
agreement with Euthenics International, Inc. ("EII"). The Company agreed to
design, develop and pay for a web site that would allow EII to sell its products
over the Internet. The Company also agreed to assist EII with the implementation
of its Mail Order Management system and to train EII employees by hiring and
paying for a mutually acceptable consultant. In exchange for these services, the
Company will receive a royalty of $.50 per bottle of any EII product sold for
the five year period from December 1, 2000 through December 1, 2005. The
contract is renewable on a year-to-year basis following December 1, 2005.
Management estimates that the total costs associated with this contract will not
exceed the $8,269 recognized during the year ended December 31, 2000. Costs
incurred under this contract may exceed the amount of royalty revenues realized.
Revenue will be recognized under the agreement, in accordance with the Company's
revenue recognition policy. The Company has not recognized any revenue under the
agreement through December 31, 2002.
F-14
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements between the Company and its independent
accountants on any matter of accounting principles or financial statement
disclosure.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
(a) Directors and Executive Officers
-------------------------------------
The names and ages of our directors and executive officers are as follows:
David C. Olson 42 President, Treasurer, Director
Thomas M. Vickers 64 Director
Barbara Petrinski 60 Secretary
* May be deemed a "promoter" and "parent" of our Company, as those terms
are defined under the General Rules and Regulations promulgated under the
Securities Act of 1933, as amended.
Directors hold office until our next annual shareholder meeting and until
their respective successors have been elected and qualify. Officers serve at the
pleasure of the Board of Directors. Mr. Olson and Ms. Petrinsky devote up to 25
percent of their time and effort to our business affairs and Mr. Vickers devotes
only such time as is necessary for him to perform his responsibilities as a
director of our Company.
We have no audit or compensation committee.
No family relationship exists between or among our executive officers and
directors.
(b) Business Experience
-----------------------
David C. Olson has served as the President, the Treasurer and a director of
EasyWeb since March 11, 1999. Since May 1997, Mr. Olson has been President of
Summit Financial Relations, Inc., a business consulting and investor relations
firm located in Englewood, Colorado. From January 1993 until May 1997, Mr. Olson
held various positions including national sales manager at Cohig and Associates,
Inc. (now part of EastBrokers International, Inc.), a securities broker-dealer
firm in Englewood, Colorado with 256 brokers and offices in 23 states which
specialize in small cap and growth stocks. Mr. Olson has not been associated
with any brokerage firm since May 1997. Mr. Olson also is a managing partner of
Mail Box Money, LLC, a private company which is an independent licensed reseller
of services for Airborne Express, Inc.
18
Thomas M. Vickers has served as a director of EasyWeb since December 7,
2001. Since 1984, Mr. Vickers has been the owner and president of Thomas Vickers
Investments located in Englewood, Colorado. His company is primarily active in
real estate and private investments. Mr. Vickers is presently semi-retired but
stays active in the area of private investments and venture capital
opportunities. Prior to moving to Denver, Colorado from Wichita, Kansas in 1984,
Mr. Vickers was employed in the investment business with New York Stock Exchange
firm A.G. Edwards and Sons (1961-1973) where he was a vice president and later,
Dean Witter Reymolds (1973-1983) where he was a vice president and district
manager. Mr. Vickers attended Wichita State University from 1956 to 1960, at
which time he was recruited into the first "on Wall Street Training Program" in
its history by Bache and Company. In addition to his other activities, Mr.
Vickers has served on the boards of directors of several companies through out
his business career.
Barbara Petrinsky has served as the Secretary of the Company since July 26,
1999. She has been employed by Summit Financial Relations, an affiliated
company, as operations manager since November 1998. In this position, her
responsibilities include bookkeeping, payroll, investor/client relations,
preparation of press releases, telephone answering, filing and general office
management. From April 1990 to July 1998, Mrs. Petrinsky was employed by
Montessori Mid-America and from September 1996 to July 1998, she served as the
Director of the Montessori School at the Denver Technological Center.
Section 16(a) Beneficial Reporting Compliance
---------------------------------------------
To the best of the knowledge of the Company, based on reports received
pursuant to rule 16a-3(e) of the 1934 Act, all reports required to be filed
pursuant to rule 16(a)-3(e) were filed as of the date of this report.
Item 10. EXECUTIVE COMPENSATION
No cash compensation has been awarded to, earned by or paid to Messrs.
David C. Olson and Thomas M. Vickers, President/Treasurer/director and a
director of EasyWeb, respectively, and Ms. Barbara Petrinsky, our Secretary, for
all services rendered in all capacities to EasyWeb since our inception on
September 24, 1998. It is anticipated that, for the foreseeable future, Mr.
Olson and Ms. Petrinsky, will receive no compensation in any form for services
to EasyWeb in their capacities of executive officer and/or director. Mr. Thomas
M. Vickers has been awarded 200,000 shares of our common stock in consideration
for his agreement to serve as a director of EasyWeb. We do not anticipate
awarding him any cash compensation for his services in the foreseeable future.
See Part I, Item 2. "Description of Property," for a description of the
Agreement for Administrative Support dated March 11, 1999, between EasyWeb and
Summit Financial Relations, Inc., an affiliated company of which Mr. Olson is
the President, a director and the sole shareholder, pursuant to which we paid
Summit the sum of approximately $13,509 through December 31, 2002, for use of
office space and administrative and technical support services at Summit's
offices. As the sole shareholder of Summit, Mr. Olson benefited indirectly from
these payments.
See Part 3, Item 12. "Certain Relationships and Related Transactions," for
detailed information relating to our issuance on March 11, 1999, to Mr. Olson
and Robert Zappa, a former director of EasyWeb, of 1,600,000 shares, and 800,000
shares, of our common stock, respectively, in consideration for the payment of
$2,500 and $1,500 in cash (approximately $.002 per share), respectively, the
issuance on December 7, 2001, of 200,000 shares to Mr. Thomas M. Vickers as
consideration for his agreement to serve on the board of directors of EasyWeb,
the issuance on December 7, 2001, of 150,000 shares to Mr. Olson and Summit as
consideration for working capital advances made prior to December 31, 2001, and
the sale of 50,000 shares of common stock to Mr. Olson and Ms. Petrinsky for
$1,500 ($.03/share) in January 2002.
19
Effective March 11, 1999, our Board of Directors and shareholders approved
the adoption of the Incentive Stock Option Plan (the "Plan") reserving 175,000
shares of our common stock for issuance upon the exercise of stock options
received by optionees under the Plan. Except for this Plan, described below at
"Incentive Stock Option Plan", we do not provide our officers or employees with
pension, stock appreciation rights, long-term incentive or other plans and have
no intention of implementing any such plans for the foreseeable future. In the
future, we may offer stock options to prospective employees and/or consultants;
however, except for 100,000 options issued to Terry Romero, a consultant, no
options have been granted as of the date hereof. It is possible that in the
future we may establish various executive incentive programs and other benefits,
including reimbursement for expenses incurred in connection with our operations,
company automobiles and life and health insurance, for our executive officers
and directors, but none has yet been granted. The provisions of any of these
plans and benefits will be at the discretion of our Board of Directors.
Under Colorado law and pursuant to our Articles of Incorporation, the
officers and directors of EasyWeb may be indemnified for various expenses and
damages resulting from their acting in such capacity. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to our
officers or directors pursuant to those provisions, EasyWeb has been informed by
our counsel that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
Incentive Stock Option Plan
---------------------------
Effective as of March 11, 1999, Mr. David C. Olson, our then sole director
and shareholder, approved the Incentive Stock Option Plan (the "Plan") reserving
an aggregate of 175,000 shares of common stock for issuance upon the exercise of
stock options granted to our employees, consultants and non-employee members of
the Board of Directors under the Plan. The purpose of the Plan is to promote the
growth and general prosperity of EasyWeb by permitting us to grant options
exercisable to purchase shares of common stock to our employees, consultants and
non-employee members of the Board of Directors.
Pursuant to the Plan, we may grant incentive stock options within the
meaning of Section 422A of the Internal Revenue Code of 1986, as amended, to
employees as well as non-qualified stock options to employees, officers,
directors and consultants. The Plan provides for administration by our Board of
Directors or by a committee that comprises disinterested members of the Board of
Directors. The Board or the committee selects the optionees, authorizes the
grant of options and determines the number of underlying shares of common stock,
the exercise price, the term (not to exceed ten years) and any other terms and
conditions of the options. The Board of Directors administers the plan.
The exercise price of each stock option under the Plan must be at least 100
percent of the fair market value of the shares of common stock on the date of
grant as determined by the Board of Directors. Each incentive stock option may
be exercisable for a period, as determined by the Board of Directors, but not in
excess of ten years from the date of grant. The exercise price of all incentive
stock options granted under the Plan to shareholders possessing more than 10
percent of the total combined voting power of all classes of our stock must be
less than 110 percent of the fair market value of the shares of common stock on
the date of grant and those options may be exercisable for a period not in
excess of five years from the date of grant. All options granted under the Plan
are non-transferable and may be exercised only by the optionee or the optionee's
estate.
There is no limit on the number of shares with respect to which options may
be granted under the Plan to any participating employee. However, the aggregate
fair market value of shares of common stock (determined on the date the option
is granted) with respect to which incentive stock options become exercisable for
the first time by an individual option holder during any calendar year (under
all such plans maintained by EasyWeb) may not exceed $100,000.
Options granted under the Plan may be exercised within twelve months after
the date of an optionee's termination of employment by reason of his death or
disability, or within three months after the date of termination by reason of
retirement or voluntary termination approved by the Board of Directors, but only
to the extent the option was otherwise exercisable on the date of termination.
In the event an optionee's employment is terminated for any reason other than
death, disability, retirement or voluntary termination approved by the Board of
Directors, the optionee's option terminates thirty days after the date of such
termination.
The Plan will terminate on February 24, 2009. The Plan may be amended by
the Board of Directors without shareholder approval, except that no amendment
that increases the maximum aggregate number of shares that may be issued under
the Plan or changes the class of employees who are eligible to participate in
the Plan, can be made without the approval of our shareholders. As of December
31, 2002, 100,000 options were outstanding and exercisable. These options were
granted to Terry Romero on December 20, 2001. Options granted under the Plan,
and shares of common stock issued upon the exercise of any those options, will
not be registered with the U.S. Securities and Exchange Commission under the
Securities Act of 1933. These securities will be offered pursuant to the
exemption from registration provided by Regulation D promulgated under Sections
3(b) and 4(2) of, or other available exemption under, the Securities Act of
1933. Accordingly, resales of the securities will be subject to the registration
requirements of Section 5 of, and Rule 144 of the General Rules and Regulations
promulgated under, the Securities Act of 1933.
The Plan provides that the number of shares of common stock underlying each
option and the exercise price of the option shall be proportionately adjusted in
the event of a stock split, reverse stock split, stock dividend or similar
capital adjustment that is effected without receipt of additional consideration
by EasyWeb.
Compensation of Directors
-------------------------
Directors of EasyWeb receive no compensation pursuant to any standard
arrangement for their services as directors. However, directors who are not
officers may be paid an annual fee or a fee per meeting of the Board of
Directors in an amount to be determined in the future by the Board of Directors.
Thomas M. Vickers was awarded 200,000 shares of our common stock on December 7,
2001, in consideration for his agreement to serve as a director of EasyWeb.
Employment Agreements
---------------------
Currently, no employment agreements exist with any officer or employee.
Long-Term Incentive Plans
-------------------------
None.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Beneficial Owners
-----------------
The following table sets forth information regarding beneficial ownership
as of the December 31, 2002 of our common stock by any person who is known by us
to be the beneficial owner of more than five (5%) percent of our voting
securities, by each Director of the Registrant, and by officers and Directors of
the Registrant as a group. Under the General Rules and Regulations of the
Commission, a person is deemed to be the beneficial owner of a security if the
person has or shares the power to vote or direct the voting, or dispose or
direct the disposition, of the security. As of December 31, 2002, there were
4,506,200 common shares issued and outstanding.
21
All ownership is beneficial and on record and all beneficial owners listed
below have sole voting and investment power with respect to the shares shown,
unless otherwise indicated.
Shares
Beneficially Percentage
Beneficial Owner Owned (1) of Class (1)
---------------- --------- ------------
David C. Olson (2) (3) 1,783,333 37.9%
6025 South Quebec Street, Suite 150
Englewood, Colorado 80111
Thomas M. Vickers (3) 410,000 8.7%
6025 South Quebec Street, Suite 150
Englewood, Colorado 80111
Robert J. Zappa 964,000 20.5%
2740 Kendrick Street
Golden, Colorado 80401
Steven E. Muth 800,000 17.0%
6463 South Malaya Street
Aurora, Colorado 80016
Barbara Petrinsky (2) 17,667 0.4%
6025 South Quebec Street, Suite 150
Englewood, Colorado 80111
All executive officers and directors 2,211,000 47.0%
as a group
(1) Represents the number of shares of common stock owned of record and
beneficially by each named person or group, expressed as a percentage of
4,706,200 shares of our common stock issued and outstanding as of March 31,
2003.
(2) Executive officer of the Company.
(3) Member of the Board of Directors of the Company.
22
The following table provides information related to equity compensation
plans as of December 31, 2002:
Number of Securities Number of Securities
to be Issued Upon Weighted-Average Remaining Available
Exercise of Exercise Price of for Future Issuance
Outstanding Options, Outstanding Options, Under Equity
Plan Category Warrants and Rights Warrants and Rights Compensation Plans
------------- ------------------- ------------------- ------------------
Equity compensation
plans approved by
security holders 100,000 $ 0.25 75,000
Equity compensation
plans not approved
by security holders -0- N/A -0-
Changes in Control
------------------
The Company knows of no arrangement, including the pledge by anyone of any
securities of the Company that may result in a change in control.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Because of their management positions, organizational efforts and/or
percentage share ownership in EasyWeb, Messrs. Olson, Zappa and Muth may be
deemed to be "parents" and "promoters" of the Company, as those terms are
defined in the Securities Act of 1933 and the applicable Rules and Regulations
under the Securities Act of 1933. Because of the above-described relationships,
transactions between and among EasyWeb and Messrs. Olson, Zappa and Muth, such
as the sale of our common stock to each of them as described above, should not
be considered to have occurred at arm's-length.
Common Stock Transactions
-------------------------
During January 2002, we sold 33,333 and 16,667 shares of our common stock
to Mr. Olson and Ms. Petrinsky, respectively, at $.03 per share (gross proceeds
totaling $1,500). Both Mr. Olson and Ms. Petrinsky are officers of EasyWeb. In
addition to the 50,000 shares sold to Mr. Olson and Ms. Petrinsky, we sold
500,000 shares of our common stock to unrelated third parties for gross proceeds
totaling $15,000, or $.03 per share.
On December 7, 2001, Thomas M. Vickers, was awarded 200,000 shares of our
common stock in consideration for his agreement to serve as a director of
EasyWeb.
On December 7, 2001, we issued 150,000 shares of our common stock to Mr.
Olson and Summit as consideration for working capital advances totaling $4,500
($.03 per share).
On March 11, 1999, we sold 1,600,000 shares of our common stock to Mr.
David C. Olson, the President, the Treasurer and a director of EasyWeb, in
consideration for the sum of $2,500 in cash (approximately $.002 per share). Mr.
Olson serves as one of our two executive officers and directors and owns of
record and beneficially 37.9% of the issued and outstanding shares of our common
stock. Also on March 11, 1999, we sold 800,000 shares of common stock to each of
Mr. Robert J. Zappa and Mr. Steven Muth, both former company directors, in
consideration for the payment by each individual of the amount of $1,500 in cash
(approximately $.002 per share).
Office Space and Administrative/Technical Support
-------------------------------------------------
23
During the period from March 11, 1999, through August 31, 2000, we were
parties to the Agreement for Administrative Support with Summit, for use of
office space, administrative support and technical support at Summit's offices
located at 6025 South Quebec Street, Suite #150, Englewood, Colorado 80111. The
agreement provided for us to pay Summit for these services the amount of $1,500
per month commencing in the month of April 2000 in which we received the minimum
proceeds of at least $100,000 from our offering of common stock that occurred
between December 10, 1999, and April 10, 2000. During the period following the
closing of this common stock offering, from April 10, 2000 through August 31,
2000, we paid Summit, pursuant to the Agreement for Administrative Support, the
sum of approximately $7,000 for the use of office space and administrative and
technical support services at Summit's offices. On September 1, 2000, EasyWeb
and Summit abandoned the agreement because of EasyWeb's failure to realize
significant revenues from operations. During the period from September 1, 2000,
through March 31, 2001, we paid no rent and a total of $825 at the rate of $15
per hour to Summit for administrative and technical support services pursuant to
a verbal agreement. Mr. Olson, as the sole shareholder of Summit, benefited
indirectly from these payments.
On April 1, 2001, we entered into the Agreement with Summit for use of
office space, administrative support (including reception, secretarial and
bookkeeping services) and technical support (including use of office, computer
and telecommunications equipment) at Summit's offices. The agreement provides
for us to pay Summit rent in the amount of $4,000 in advance for a period of one
year from April 1, 2001, to March 31, 2002, and the sum of $15 per hour for
bookkeeping services. Pursuant to the agreement, all other services, including
administrative and technical support and web site design, development and sales,
are provided by Summit free of charge until our Board of Directors determines
that we have sufficient cash flow or earnings to pay Summit cash for the
services. Pursuant to the agreement, we paid Summit $4,000 for rent on April 1,
2001, and a total of $960 and $1,016 for bookkeeping and other administrative
services for the years ended December 31, 2002 and 2001.
The fair value of the office space and administrative support provided by
Summit has a fair market value of approximately $500 and $1,000 per month,
respectively. We have recognized expenses for rent and administrative support
based on fair market value. Any period in which the amount paid to Summit for
office space and administrative support was below the fair market value, the
remaining balance was considered contributed by Summit and recorded as a credit
to additional paid-in capital in our financial statements. As of December 31,
2002, Summit had contributed office space and administrative support totaling
$15,667 and $36,824, respectively.
Liabilities
-----------
At December 31, 2002, the Company owed Summit $8,294 for professional fees
and other administrative expenses paid on behalf of the Company.
In April 2002, Mr. Olson loaned the Company $650 for working capital. The
loan carries no interest rate and is due on demand. The loan was outstanding at
December 31, 2002.
During the year ended December 31, 1999, Messrs. Olson, Zappa and Muth
advanced the Company a total of $6,000 ($2,000 each) for working capital. The
advances were unsecured, carried no interest rate and were due on demand. During
the year ended December 31, 2001, they advanced the Company an additional $4,000
at the same terms. In December 2001, the Company issued Mr. Olson 150,000 shares
of its common stock in exchange for advances totaling $4,500. The Company repaid
Messrs. Zappa and Muth the remaining $5,500 in January 2002.
Revenue
-------
During the year ended December 31, 2000, the Company earned commission
revenues totaling $4,000 for the sale of a web site to an affiliate. The $4,000
commission totals 41.9 percent of the revenue generated by the Company since
inception.
24
Marketing Agreement
-------------------
On February 24, 1999, an affiliate assigned all of its rights and
privileges in a marketing agreement to the Company. The Agreement assigns the
affiliate's rights to market Big Online, Inc.'s products and services to the
Company. The products and services consist of the development and maintenance of
"web sites" on the Internet for business and professional customers. On May 1,
2000, the Company's affiliate was dissolved and the marketing agreement was
terminated. The Company conducted no transactions under the agreement.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
--------------
3.01 Articles of Incorporation (1)
3.02 Bylaws (2)
10.01 Agreement for Administrative Support, dated March 11, 1999 (3)
10.02Independent Consultant Application and Agreement, dated June 1,
1999(4)
10.03Rent, Bookkeeping and Services Agreement between EasyWeb, Inc. and
Summit Financial Relations, Inc., dated April 1, 2001 (5)
99.1 Certification of President and Principal Accounting Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(1) Incorporated by reference to Exhibit 3.01 to the registration
statement on Form 10-SB of the Registrant filed with the Securities
and Exchange Commission on December 28, 2001 (File No. 0-32353).
(2) Incorporated by reference to Exhibit 3.02 to the registration
statement on Form 10-SB of the Registrant filed with the Securities
and Exchange Commission on December 28, 2001 (File No. 0-32353).
(3) Incorporated by reference to Exhibit 10.01 to the registration
statement on Form 10-SB of the Registrant filed with the Securities
and Exchange Commission on December 28, 2001 (File No. 0-32353).
(4) Incorporated by reference to Exhibit 10.02 to the registration
statement on Form 10-SB of the Registrant filed with the Securities
and Exchange Commission on December 28, 2001 (File No. 0-32353).
(5) Incorporated by reference to Exhibit 10.03 to the registration
statement on Form 10-SB of the Registrant filed with the Securities
and Exchange Commission on December 28, 2001 (File No. 0-32353).
(b) Reports on Form 8-K:
None.
Item 14. CONTROLS AND PROCEDURES.
The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission. Based upon his evaluation of
those controls and procedures performed within 90 days of the filing date of
this report, David Olson, the President and Treasurer of the Company concluded
that the Company's disclosure controls and procedures were adequate.
The Company made no significant changes in its internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluations of these controls by David Olson, the President and
Treasurer of the Company.
25
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
(Registrant): EASYWEB, INC.
By: /s/ David C. Olson Date: April 11, 2003
------------------ --------------
David C. Olson
President
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this Report has been signed below by the following persons in the capacities and
on the dates indicated.
By: /s/ David C. Olson Date: April 11, 2003
------------------ --------------
David C. Olson
President
26
CERTIFICATION OF PRESIDENT AND PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Annual Report on Form 10-KSB of EasyWeb,
Inc. for the fiscal year ending December 31, 2002, as filed with the Securities
and Exchange Commission on the date hereof, the undersigned, in the capacity and
date indicated below, hereby certifies that:
1. I have reviewed this annual report on Form 10-KSB of EasyWeb, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiary, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
By: /s/ David C. Olson Date: April 11, 2003
------------------------ --------------
David C. Olson
President and Treasurer
27