ITEM 1 DESCRIPTION OF BUSINESS
General
E*twoMedia.com was incorporated in the State of Nevada in 1985. Reference in this Report to "E*twoMedia", "The Company", "The Registrant" " we", "our", and "us" refer to E*twoMedia.com Up until December of 1998 the company's primary activities had been directed towards the development of oil, gas and coal properties. The Registrant on December 18,1998 completed a stock purchase agreement selling all the outstanding stock it held in its subsidiary Nerox Power Systems Inc. (NPSI) to Ross Production Company Inc. NPSI held all the Coal, Oil and Gas interests of the company on a consolidated basis.
The Registrants primary activities are now directed towards developing online publishing. The Registrant is constantly seeking business opportunities in the online publishing industry and other means of revenue activities and financing to enable it to complete its business plan.
Recent Transactions
The Company acquired FPS a United Kingdom based company. These transactions are described in Note 3 to the financial statements included in this Report and are referred to herein as the "Pending Transactions."
E*twoMedia.com, Inc. has acquired a stake in PeopleBank, one of the UK's largest online recruitment companies.
Investment Properties
As part of the Stock Purchase agreement entered into December 18,1998 the company sold all its rights and obligations relating to oil, gas and coal properties.
Revenues
The Registrant's revenues in 1998 were derived from its proportionate interest in domestic oil and gas producing properties prior to the sale of all its rights and obligations relating to the oil, gas and coal properties. The Registrant was never the operator of any wells in which it owned interest.
Competitive Conditions
Subsequent to the stock purchase agreement entered into December 18, 1998 the company no longer expects to realize revenues from oil, gas and coal operations which had contributed to over 90% of the Company's revenues and earnings stream. The Company's operations currently are directed towards the online publishing industry. The company has been in negotiations to acquire a United Kingdom based publishing company.
E*twoMedia.com has developed a business plan including creating markets, namely Internet advertising and related products and services, which are intensely competitive. E*twoMedia.com expects such competition to continue to increase because its markets pose no substantial barriers to entry. Competition may also increase as a result of industry consolidation. E*twoMedia.com believes that its ability to compete depends on many factors both within and beyond its control, including the following:
(i) the timing and market acceptance of new solutions and enhancements to existing solutions developed by either E*twoMedia.com or its competitors
(ii) customer service and support efforts
(iii) sales and marketing efforts
(iv) the ease of use, performance, price and reliability of solutions developed either by E*twoMedia.com or its competitors.
E*twoMedia.com will compete for Internet Publishing revenues with large Web publishers and Web search engine companies, such as America Online, Excite, Lycos, Microsoft, Infoseek and Yahoo!. E*twoMedia.com will also encounter competition from a number of other sources, including content aggregation companies, companies engaged in advertising sales networks, advertising agencies, and other companies which facilitate Internet publishing.
Many of E*twoMedia.com's future competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than does E*twoMedia.com. These factors allow them to respond more quickly than E*twoMedia.com can to new or emerging technologies and changes in customer requirements. They may also allow them to devote greater resources than E*twoMedia.com can to the development, promotion and sale of their products and services. Such competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential employees, strategic partners, advertisers and Web publishers. It is possible that E*twoMedia.com's competitors will develop products or services that are equal or superior to E*twoMedia.com's products or that achieve greater market acceptance than E*twoMedia.com's products. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products or services to address the needs of E*twoMedia.com's prospective advertising and Web publisher customers. As a result, it is possible that new competitors may emerge and rapidly acquire significant market share. Increased competition is likely to result in price reductions, reduced gross margins and loss of market share. It is possible that E*twoMedia.com will not be able to compete successfully or that competitive pressures will not materially and adversely affect its results of operations or financial condition.
Companies doing business on the Internet, including E*twoMedia.com must also compete with television, radio, cable and print (traditional advertising media) for a share of advertisers' total advertising budgets. Advertisers may be reluctant to devote a significant portion of their advertising budget to Internet advertising if they perceive the Internet to be a limited or ineffective advertising medium.
INDUSTRY OVERVIEW
The online publishing industry is rapidly growing due in part to the ever increasing need of businesses for specialized information. As a result of this need for information, many publishers have oriented their business toward online publishing.
The online publishing market is diverse, consisting of online trade journals, newsletters, directories and magazines aimed at specific target markets such as computers, sports fans, financial information, travel, and lifestyles, etc. Online directories, including association directories and yellow page directories, are just one part of the online publishing market. Advertisers are increasingly seeking ways to channel their advertising dollars toward specific target markets.
In 1999, the Registrant plans to expand its business to include electronic publishing on the Internet for clients. The Registrant will provide hosting services and maintain web sites.
Acquisition Strategy
In addition to online publishing the company expects to enter acquisitions which will enable it to complete its business plan. The Company seeks to acquire underperforming middle market media businesses whose acquisition costs are low relative to potential revenues and cashflow. The Company focuses on developing significant long-term franchises in middle markets. The Company then seeks to improve revenues and cashflow, using its particular promotional, marketing, sales, programming and editorial approaches. The Company targets businesses that it believes operate in underdeveloped market segments with a low level of competition and a strong economic base.
The Company believes that its acquisition strategy, properly implemented, has a number of specific benefits, including
(i) diversification of revenues and cashflow across a broader base of media industries, properties and markets,
(ii) geographic clustering which has allowed improved cashflow margins through the consolidation of facilities, centralized newsgathering, cross-selling of advertising and elimination of redundant expenses
(iii) improved access to consultants and other industry resources
(iv) greater appeal to qualified industry management talent and
(v) efficiencies from economies of scale.
If and when achieved, new acquisitions may adversely affect near-term operating results due to increased capital requirements, transitional management and operating adjustments, increased interest costs associated with acquisition debt, and other factors. Any future acquisitions may be highly-leveraged, and such acquisitions well may increase the Company's overall leveraged position. There can be no assurance that debt or equity financing for such acquisitions will be available on acceptable terms, or that the Company will be able to identify or consummate any new acquisitions. Any failure to make necessary acquisitions, or the making of unsuccessful acquisitions, could have a material, adverse effect on the future financial condition and operating results of the Company.
GOVERNMENT REGULATION
The Company plans to be in the business of Online Publishing which is dependent upon Internet access, in part, through transmissions over public telephone lines. These transmissions are governed by regulatory policies establishing charges and terms for communications. The Company, as an online publishing company will depend upon Internet access providers, who are not currently subject to direct regulation by the Federal Communications Commission (the "FCC") or any other agency, other than regulations applicable to businesses generally. However, the Company could become subject in the future to regulations by the FCC and/or other regulatory commissions as a provider of basic telecommunications services.
Such regulations could affect the charges that the Company pays to connect to the local telephone network or for other purposes. Currently, Internet access providers, are not required to pay carrier access charges. Access charges are assessed by local telephone companies to long-distance companies for the use of the local telephone network to originate and terminate long-distance calls, generally on a per minute basis. Access charges have been a matter of continuing dispute, with long-distance companies complaining that the rates are substantially in excess of cost and local telephone companies arguing that access rates are justified to subsidize lower local rates for end users and other purposes. In May 1997, the FCC reaffirmed its decision that Internet access providers should not be required to pay carrier access charges. In a related order, the FCC also concluded that Internet access providers should not be required to contribute to a new universal service fund established to replace current local rate subsidies and to meet other public policy objectives, such as enhanced communications systems for schools, libraries, and certain health care providers. As a result, unlike telecommunications carriers and other telecommunications providers, Internet access providers will not have to contribute a percentage of their revenues to the federal universal service fund and are not likely to be required to contribute to similar funds being established at the state level. However, both the access charge and universal service treatment of Internet access providers are the subjects of further proceedings and could change. Telephone companies are actively seeking reconsideration or reversal of the FCC decisions, and their arguments are gaining more support as Internet-based telephony begins to compete with conventional telecommunications companies.
The Company is not in a position to predict how these matters will be resolved, but it could be adversely affected if, in the future, it and other Internet access providers are required to pay access charges or contribute to universal service support.
The law relating to the liability of Internet access providers and on-line services companies for information carried on or disseminated through their networks is unsettled. Although no claims seeking to impose such liability have been asserted against the Company to date, there can be no assurance that such claims will not be asserted in the future or, if asserted, will not be successful. As the law in this area develops, the potential imposition of liability upon the Company for information carried on and disseminated through its network could require the Company to implement measures to reduce its exposure to such liability, which may require the expenditure of substantial resources or the discontinuation of certain products or service offerings. Any costs that are incurred as a result of contesting any such asserted claims or the consequent imposition of liability could materially adversely affect the Company's business, financial condition, and results of operations.
Due to the increasing popularity and use of the Internet, it is possible that additional laws and regulations may be adopted with respect to the Internet, covering issues such as content, user privacy, pricing, and copyright infringement. The Company cannot predict the impact, if any, that any future regulatory changes or developments may have on its business, financial condition, and results of operations. Changes in the regulatory environment relating to the Internet access industry, including regulatory changes that directly or indirectly affect telecommunication, costs or increase the likelihood or scope of competition from regional telephone companies or others, could have a material adverse effect on the Company's business, financial condition, and results of operations.
Insurance Coverage
None
Employees
As of April 30,2000, the Registrant had 5 employees. Currently, the Registrant is charged for office space and clerical staff time through the offices of Daniel Jefferies, President and CEO.
ITEM 2
ITEM 2 DESCRIPTION OF PROPERTIES
None
ITEM 3
ITEM 3 LEGAL PROCEEDINGS
ITEM 4
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
High and Low Bid
The following table sets forth the high and low bid prices of the Common Stock of the Registrant in the over-the-counter market (OTC Bulletin Board) by quarter in 1998 and 1999. The information was provided by the market-maker in the Registrant's stock and statistical reports by the NASD. Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Mar 1998 Jun 1998 Sep 1998 Dec 1998
High 11/20 2/5 1/8 1/40 Low .7/25 2/25 1/25 7/50
Mar 1999 Jun 1999 Sep 1999 Dec 1999
High 6 3/4 7 6 1/4 2 3/8 Low 2 3 1/8 1 3/4 1
Holders
At the date of this filing there are approximately 439 holders of the Common Stock of the Registrant.
Dividends
The Company has paid no dividends on its common stock and for the foreseeable future has no plans to pay dividends. The Preferred shareholders elected to convert accrued dividends into common stock in 1999.
ITEM 6
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following review of operations should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included elsewhere in this document.
1999 compared to 1998
Total revenues from resulted from on-line publishing in 1999, which amounted to $556,019. In 1998 there were no on-line publishing sales due to the fact that the Company had changed its business plan. Management was disappointed with revenues less then expected compounded by increased pressure on margins. Exceptional costs due to the merger and fund raising for expansion further impacted this year's results. Management is in the process of developing other product lines to compliment its existing guide business and capitalize on our growing experience in the e-commerce arena. Further acquisitions are planned for the year 2000.
Liquidity and Capital Resources
At December 31, 1999, the Company had current liabilities totaling $783,964 and current assets of $247,179 for a working capital deficit of $536,785 due primarily to professional fees accrued relating to the reorganization of the company at the end of 1999 and compensated for in cash payments and in the form of stock issued to the individuals listed in item 11.
Inflation
Inflation during the year ended December 31, 1999 has had little effect on the Company's capital costs and results of operations.
ITEM 7
ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Exhibit A, Auditor's Report, attached hereto and incorporated herein by this reference.
ITEM 8
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On February 9, 1999, the Company filed an 8-K to report the appointment of Nelson, Mayoka and Company CPA's as its new independent accountants.
PART III
ITEM 9
ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Board of Directors
Name Age Position with the Company Since
Daniel Jefferies 35 Chief Executive Officer/Director May 10, 1999
Daniel Jefferies has served as managing director and owner of FPS a United Kingdom based publishing company. Mr. Jefferies has fourteen years of experience in the media promotions and packaging industry. He set up Bolton Films in 1986 and developed a number of successful deals. He also was involved in the launch of Maximize Media which specialized in repackaging and selling paid for newspaper space in the form of advertorials and special features.
ITEM 10
ITEM 10 EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1999, none of the Officers or Directors of the Company had compensation with the exception of payments to Daniel Jefferies in the amount of approximately $130,000.
ITEM 11
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 30, 2000 as to each person who is known to the Registrant to be the beneficial owner of more than 5% of the common stock of the Registrant, and as to the security ownership of each Director of the Registrant and all Officers and Directors of the Registrant as a group. Except where specifically noted, each person listed in the table has sole voting and investment power in the shares listed.
Name and Address Number of Shares Percent of Of Beneficial Owner Beneficially Owned Shares Outstanding
Daniel Jefferies 17,000,000 74.90% 67 Brompton Road London, SW31DB
(1) A person is deemed to be the beneficial owner of securities than can be acquired by such person within 60 days from April 30, 2000 upon the exercise of warrants or options. Each beneficial owner's percentage ownership is determined by assuming that options or warrants that are held by such person (but not those held by any other person) and which are exercisable within 60 days from May 12,1999 have been exercised.
ITEM 12
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, 955,000 shares of common stock were issued to consultants as compensation for services from 1998 as follows.
Shares
Oram Ltd. 200,000 William W. Bolles 525,000 Michael A. Cassin 200,000 Marc A. Palazzo 30,000 ------- 955,000
The company in the first quarter of 1999 began negotiations with FPS a United Kingdom based company to be acquired.
ITEM 13
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT A Auditors' Report
FORM 8-K
On February 9, 1999 E*twoMedia.com filed an 8-K reporting the company filed a Certificate of Amendment to the Certificate of Incorporation which changed the name of the Company from Nerox Energy Corporation to E*twoMedia.com. In addition the company reported the engagement of Nelson, Mayoka & Company as its new independent accountant.
On March 22,1999 the company filed an 8K reporting the Amendment of Article 4 of the Articles of Incorporation, which superseded the Amendment of the Articles of Incorporation file on an 8K on April 26, 1998 increasing the shares outstanding to 12,000,000. On August 10,1999 the company filed an 8K reporting the Amendment of Article 4 of the Articles of Incorporation, which superseded the Amendment of the Articles of Incorporation file on an 8K on April 26, 1998 increasing the shares outstanding to 50,000,000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 22, 2000 E*TWOMEDIA.COM By: /s/ Daniel Jefferies ----------------------------- Daniel Jefferies, President and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
Dated: May 22, 2000 By: /s/ Daniel Jefferies ----------------------------- Daniel Jefferies, President and Secretary
E*twoMedia.com, Inc. December 31, 1999
Page
Independent Auditors Report ............................................ 1
Financial Statements
Balance Sheet ................................................. 2
Statement of Operations ....................................... 3
Statement of Cash Flows ....................................... 4
Notes to Financial Statements .......................................... 5-10
Nelson, Mayoka & Company, P.C.
CERTIFIED PUBLIC ACCOUNTANTS 551 5TH Avenue New York, New York 10176-0001 Tel. (212) 697-7979 Fax (212) 697-8997 DIRECT LINE
INDEPENDENT AUDITORS REPORT
Board of Directors E*twoMedia.com, Inc. New York, New York
We have audited the accompanying statement of financial condition of E*twoMedia.com, Inc. as of December 31, 1999 and the related statements of income, changes in stockholders equity, cash flows, and changes in liabilities subordinated to claims and general creditors for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit 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 audit provides 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 E*twoMedia.com, Inc. as of December 31, 1999, and the results of operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company is a development stage enterprise. The lack of sufficient working capital to operate as of December 31, 1999 raises substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are described in Note 4. the financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Nelson, Mayoka and Company, PC
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York May 19, 2000
E*twoMEDIA.com Statement of Operations December 31, 1999
Revenues
On Line Publishing Sales .......... $ 556,019 Oil and gas sales ................. --
Total Sales ....................... 556,019
Cost and expenses
General and administrative ........ 1,665,998 Depreciation ...................... 4,138
Total Expenses .................... 1,670,136
Net Loss .................................. $(1,114,117)
Basic and diluted net loss per common share $ (0.20)
Basic and diluted weighted average number of common shares outstanding ...... 5,556,664
See accompanying notes to the financial statements.
E*twoMEDIA.com
(Formerly Nerox Holding Corporation) CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Three Months Ended September 30, 1999 1998
Revenues
On Line Publishing Sales .......... $ 86,918 $ -- Oil and gas sales ................. -- --
Total Sales ....................... 86,918 --
Cost and expenses
Oil and gas costs ................. -- -- Coal mine costs ................... -- -- General and administrative ........ 36,306 -- Interest .......................... 267 11,062 Depreciation ...................... 823 Depletion ......................... -- 8,118 37,396 19,180 Net Loss .................................. $ (37,396) $ (19,180)
Basic and diluted net loss per common share $ (0.01) $ (0.00)
Basic and diluted weighted average number of common shares outstanding ...... 5,556,664 8,492,675
See accompanying notes to the financial statements.
E*twoMEDIA.com
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended December 31, 1999
Cash flows from operating activities:
Net Loss .................................... $(1,114,117) Adjustments to reconcile net loss to net cash used by operating activities
Depreciation ................................ 4,138 Notes Receivable ............................ (10,000) Accounts Receivable ......................... (145,538) Other Receivables ........................... (156,587) Accounts payable ............................ 475,163 Accrued expenses ............................ 181,110 Work in Progress ............................ (62,832) Other Payables .............................. (76,331) Deferred Income ............................. (375,123) Loans Payable ............................... 1,931,331
Net cash used by operating activities ....... 651,214
Cash flows from investing activities:
Investment - Peoples Bank ................... (1,070,682)
Net cash used by investing activities ....... (1,070,682)
Cash flows from financing activities Proceeds from notes payable ................. 10,000 Issuance of common stock .................... 19,036 Additional Paid In Capital .................. 335,902
Net cash provided by financing activities ... 364,938
Net increase (decrease) in cash ..................... (54,530)
Cash, and cash equivalents, beginning of period ..... --
Cash, and cash equivalents, end of period ........... $ (54,530) Supplemental disclosure of cash flow activities:
Cash paid for interest ...................... $ --
Non-cash investing and financing transactions Dividends in arrears ........................ $ --
See accompanying notes to the financial statements.
E*TWOMEDIA.COM
Notes to Financial Statements
December 31, 1999
Note - 1 The Company and Summary of Significant Accounting Policies
E*twoMedia.com was incorporated on September 26, 1985 as Gemini Energy Corporation under the laws of the State of Nevada. On January 28,1994, the Company's name was changed to Nerox Energy Corporation. On April 26,1998 the company name was changed to Nerox Holding Corporation. On December 7, 1998 the company name was changed to E*twoMedia.com. E*twoMedia.com is constantly seeking business opportunities in the online publishing industry and other means of financing to enable it to complete its business plan.
As of August 31, 1999, E*twoMedia.com acquired all of the issued and outstanding shares of common stock of Free Publishing Services Limited in exchange for an aggregate of 17,000,000 authorized but unissued shares of the common stock, $.001 par value, of E*twomedia.com. Free Publishing Services Limited engages in the activity of organizing the production of advertising brochures for companies in newspapers.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and cash equivalents
For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. Substantially all deposits are on account with one institution.
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 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 federal income taxes.
Due to the Company's net operating losses in the fiscal years ended December 31, 1999, 1998 and 1997 of $1,114,117, $1,815,507 and $1,008,784 respectively, there are no income taxes currently due. Due to recurring losses the company has a zero valuation allowance.
Foreign Currency Translation
The financial position and results of operations of foreign divisions are measured using the currency of the respective countries as the functional currency. Assets and liabilities are translated into the reporting currency (U.S. Dollars) at the foreign currency exchange rate in effect at the balance sheet date, while revenues and expenses for the year are translated at the average exchange rate in effect during the year. Translation gains and losses are not included in determining net income or loss but are accumulated and reported in stockholders' equity, as a component of other comprehensive income, on a net of tax basis.
Goodwill
Goodwill arose on the transfer of the trade, assets and liabilities of Daniel Jefferies trading as Free Publishing Services and amounted to the difference between the fair market value of the consideration paid and the fair market value of the assets and liabilities acquired. It was capitalized and was being amortized through the profit and loss account over the directors useful economic life of 10 years. An impairment review was carried out and resulted in the write off of the total unamortized amount of goodwill.
Revenue Recognition
On-line publishing sales represents sales to outside customers at invoiced amounts less value added tax. Sales are recognized in the period in which the promotion first appeared in the newspaper.
Work in Progress
Work in progress represents costs invoiced prior to the period end for promotions which appear in the newspaper post period end.
Deferred Income
Deferred income represents sales invoiced prior to the period end for promotions which appear in the newspaper post period end.
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the useful life of the related assets ranging form 3 to 5 years. Repair and maintenance costs are charged to expense when incurred. When assets are sold or retired, the cost and the related accumulated depreciation are removed form the accounts, and any gain or loss is included in operations.
Investments
The Company's investments are comprised of 11,696 shares of the common stock of PeopleBank The Employment Network. The investment in PeopleBank The Employment Network was purchased via loans made to the Company by related third parties.
Stock compensation
The Company accounts for compensation costs related to employee stock options and other forms of employee stock-based compensation plans in accordance with the requirements of Accounting Principles Board Opinion 25 ("APB 25"). APB 25
requires compensation costs for stock based compensation plans to be recognized based on the difference, if any, between the fair market value of the stock on the date of the grant and the option exercise price. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123 established a fair value-based method of accounting for compensation costs related to stock options and other forms of stock-based compensation plans. However, SFAS 123 allows an entity to continue to measure compensation costs using the principles of APB 25 if certain pro forma disclosures are made. The Company adopted the provisions of pro forma disclosure requirements of SFAS 123 in 1996. Options granted to non-employees are recognized at their estimated fair value at the date of grant.
Fair value of financial instruments
The fair value of financial instruments, consisting principally of notes payable, is based on interest rates available to the Company and comparison to quoted prices. The fair value of these financial instruments approximated carrying value. Fair values are based on quoted market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of perceived risk. Based on borrowing rates currently available to the Company with similar terms, the carrying value of long-term debt and capital lease obligations approximate fair value.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with Statement of Financial Accounting Standards 128, Earnings Per Share ("SFAS 128"), which superseded Accounting Principles Board Opinion 15 ("APB 15"). Net loss per share for all periods presented has been restated to reflect the adoption of SFAS 128.
Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
Note - 2 Accrued Expenses
Accrued expenses include related publishing job costs incurred aggregating $232,470.
Note - 3 Stockholders' equity
The company declared on November 20, 1998 a reverse 1 for 125 stock split effective December 4, 1998.
On April 20, 1995, the Company's board of directors authorized two classes of no par value preferred stock: Class A, 100,000 shares of 10% cumulative, non-voting convertible preferred stock, and Class B, 100,000 shares of non-convertible, non-voting shares. The Company amended its bylaws to combine the two classes of stock to one class of 200,000 shares of cumulative, convertible, non-voting preferred stock on April 20, 1996. After one year, the shares are convertible into common shares on a one for one basis at the option of the holder. The Company issued 70,709 shares of preferred stock in 1995 for cash of $495,000. In late 1997, in order to induce conversion due to the inability to pay dividends, the Company offered to convert shares at 7 to 1.
The company in December of 1998, converted all the remaining shares of preferred stock for 70,714 shares of post reverse common stock.
The Company in March of 1998 issued 3,200,000 shares of common stock for compensation of services.
The Company in December of 1998 converted $1,274,550 of debt into 10,196 shares of post reverse common stock.
On September 1, 1999 a majority of the E*twoMedia.com, Inc.'s shareholders authorized the amendment to the Company's Certificate of Incorporation to increase the number of shares the company authorized to issue from 12,000,000 shares of common stock, par value $0.001, to 50,000,000 shares of common stock, par value $0.001.
Note - 4 Income taxes
Due to the Company's net operating losses in the fiscal years ended December 31, 1999, 1998 and 1997 of $1,114,117, $1,815,507 and $1,008,784 respectively, there are no income taxes currently due. Due to recurring losses the company has a zero valuation allowance.
Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. Deferred tax assets are reduced by a valuation allowance when deemed appropriate. The measurement of deferred tax assets and liabilities is computed using applicable current tax rates (34%), and is based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated.
The Company has a Federal net operating loss carryforward of $3,938,408 that may be offset against future taxable income.
The Company's deferred tax benefit, which has been offset entirely by a valuation allowance, is comprised of the following at December 31, 1999:
Loss carryforwards $ 3,938,408
Applicable tax rate 34% ----------- 1,339,059
Valuation allowance (1,339,059) ----------- $ - ===========
Note - 5 Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation and amortization. As of December 31, 1999 the amounts were as follows:
Accumulated Net Cost Depreciation Basis
Computer Equipment $ 8,880 $ 4,833 $ 4,046
Motor Vehicles ... 18,128 11,992 6,136
Office Equipment . 10,473 1,755 8,718 ------- ------- ------- Totals ........... $37,481 $18,580 $18,900 ======= ======= =======
Note - 6 Basic and diluted net loss per share
The following table illustrates the required disclosure of the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations.
December 31,
Basic and diluted earnings per share:
Numerator
Net loss ............................................... ($1,114,117) Denominator Basic and diluted weighted average number of common shares outstanding during the period .......................... 8,417,498
Basic and diluted net loss per share.................... $ (0.13)
Note - 7 Going concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. As shown in the financial statements, the Company has incurred a net loss of $1,114,117 during the year ended December 31, 1999 and, as of that date, had a working capital deficiency of approximately $95,000. Additional capital infusion is necessary to continue general and administrative operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management is currently seeking new business opportunities.