-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H/zOscVP47lOJ9A7aB7vbA52enjQ7DXdZjr12hV9yeeNLCGAlR7mC6aiBLu9g4YV 7R8lzNZg3dh2RxAXB2oHJw== 0001005150-02-000995.txt : 20020814 0001005150-02-000995.hdr.sgml : 20020814 20020814150803 ACCESSION NUMBER: 0001005150-02-000995 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TROYDEN CORP CENTRAL INDEX KEY: 0001108630 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 880346310 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-29929 FILM NUMBER: 02735425 BUSINESS ADDRESS: STREET 1: #360 220 CAMBLE ST STREET 2: 6TH FLOOR CITY: VANCOUVER BC V6E 4A6 STATE: A1 ZIP: 89502 BUSINESS PHONE: 6046892944 MAIL ADDRESS: STREET 1: 360 220 CAMBLE ST CITY: VANOURVER BC V6E 4A6 STATE: A1 ZIP: 89502 10QSB 1 form10qsb.txt FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File Number 000-29929 COMMUNICATE.COM INC. (Exact name of small business as specified in its charter) Nevada 33-0786959 ----------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) #600 - 1100 Melville Street, Vancouver, B.C. V6E 4A6 ---------------------------------------------------- (Address of principal executive offices) (604) 697-0136 -------------- (Issuer's telephone number) APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Common Stock 14,691,339 shares outstanding $.001 Par Value as of August 12, 2002 Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] COMMUNICATE.COM INC. REPORT ON FORM 10-QSB QUARTER ENDED JUNE 30, 2002 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance sheets as of June 30, 2002 and December 31, 2001 Statements of Operations as of June 30, 2002 and June 30, 2001 Statements of Cash Flows as of June 30, 2002 and 2001 Notes to the Financial Statements Item 2. Management's discussion and analysis of financial condition and results of operations PART II. Other Information Item 1. Legal Proceedings. Item 2. Changes in Securities. Item 3. Defaults Upon Senior Securities. Item 4. Submission of Matters to a Vote of Security Holders. Item 5. Other Information. Item 6. Exhibits and Reports on Form 8-K. Signatures 2 PART I ITEM 1: FINANCIAL STATEMENTS. - ----------------------------- The response to Item 1 has been submitted as a separate section of this Report beginning on page F-1. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATIONS - ------------- Registrant, through its majority-owned subsidiary, Domain Holdings, Inc. (formerly Communicate.com Inc.) (the "Subsidiary"), is involved in businesses which exploit commercial uses of the Internet. The Subsidiary markets and licenses a portfolio of approximately 40 domain names, 30 of which generate high amount of internet traffic because of, among other things, their generic description of a specific product or services category. Registrant has focused since the beginning of 2001 on developing revenue streams from its domain names and reducing the debt of the Subsidiary. Registrant generates revenue from leasing domain names, from sales commissions from the sale of third-party products and services utilizing the Internet, from "pay-per-click" revenue and from the sale of domain name assets that Registrant believes are not essential to its business. Registrant presently has one administrative employee and two consultants, both of whom are employed by the Subsidiary. Registrant has relied on hourly-contractors to meet its technical needs and expects to continue the practice for the foreseeable future. (a) SELECTED FINANCIAL DATA The following selected financial data was derived from Communicate's unaudited financial statements. The information set forth below should be read in conjunction with the Company's financial statements and related notes included elsewhere in this report.
For the Quarters Ended June 30, 2002 June 30, 2001 ------------------------------------------------------------------------------------------------------ Statements of Operations Data ----------------------------- Domain Name Revenue, Net $31,301 $70,912 Other 11,926 13,224 General and Administrative $( 85,380) $( 55,480) Professional Fees (58,124) (52,873) Sales and Marketing -- (82) Depreciation (984) (21,178)
3 Operating Income (Loss) $( 101,262) $(45,477) Interest (12,175) (9,420) Loss on Acquisition of Minority Interest (15,471) -- Gain on Settlement of Debt 159,900 -- Gain (Loss) on Assets Disposals -- (1,857) Net Income (Loss) $ 30,992 $( 56,754) Basic Earnings (Loss) per Share $ 0.01 ($ 0.01) Weighted Average Shares Outstanding 14,202,328 12,722,658 Balance Sheet Data As at June 30, As at December ------------------ 2002 31, 2001 Current Assets $ 113,096 $ 125,931 Fixed Assets 14,754 17,432 Intangible Assets 3,058,651 3,341,577 Total Assets $ 3,186,501 $ 3,484,940 Accounts Payable & Accrued Liabilities $ 464,150 $ 733,751 Loan Payable 403,781 605,000 Deferred Revenue 12,798 9,886 Total Liabilities $ 880,728 $ 1,348,637 Common Stock $ 5,701 $ 5,201 Additional Paid in Capital 2,906,616 2,772,016 Accumulated Deficit $( 606,544) $( 640,914)
(b) RESULTS OF OPERATIONS REVENUES. In the second quarter of 2002, Registrant recorded income from the utilization of its domain names (consisting primarily of the lease of domain names, commissions on the sales of products where Registrant's domain names are utilized, and fees received from third parties calculated on the number Internet users who visit sites identified with Registrant's domain names and gain or loss from domain name sales) of $31,300, a decrease of approximately 56% from the second quarter of 2001. The decrease resulted primarily from a loss recognized by Registrant of $81,200 on the sale of a health-related domain name to a third party. Excluding the loss on sale of the domain name, revenue for the second quarter would be $112,500, an increase of 58% from the second quarter of 2001. Registrant recognized approximately $44,700 from arrangements entered into with an internet pay-per-click service provider, which will pay the Registrant a fee for successful click-through traffic, in which users navigating to a site associated with 4 a domain name owned by Registrant are redirected to a site which sells goods and services associated with the domain name. Registrant recorded approximately $16,400 in income from pay-per-click agreements from various different service providers in the second quarter of 2001. Registrant's sales reflect commission generating arrangements with several of its health-related domains whereby the Registrant earns a portion of any revenue generated from customers introduced by the Registrant's domain names which generated $17,000 during the second quarter of 2002 compared to $18,000 in the second quarter of 2001. These agreements are arranged on a month-to-month basis and there can be no assurance that they will be renewed or, if renewed, that they will continue to generate income on the same basis as in past periods. In addition, Registrant also received the second annual installment of approximately $33,000 from the leasing of a geographic domain name and recognized deferred revenue to generate $15,000 from the leasing of a sports domain name in the second quarter of 2002. The operator of the leased sports domain name has notified Registrant that he will not exercise his option to purchase the domain name and will not continue to operate the site beyond September 13, 2002. Management will seek other business opportunity for this and other domain names not in use. Management will continue to market selectively individual domain names its portfolio of domain names in fiscal 2002 and identify potential purchasers who have substantial liquid assets to complete any contemplated purchase transactions. Because of the fluid nature of Internet-based businesses, Registrant will require potential purchasers to advance funds as deposits to better assure the consummation of these transactions. Management believe that its portfolio of generic product or services category domain names will continue to generate interest from potential partners or purchasers despite a softened and depressed domain names aftersales market because of the intuitive and traffic-generating characteristics of Registrant's domain names. In the second quarter of 2002, Registrant generated other revenue from a bad debt recovery of $7,300, and other miscellaneous income of $4,700. Any cashflow generated, net of monthly cash operating expenses, has been applied to reduce debt. Management anticipates continuing this debt management program for the foreseeable future. GENERAL AND ADMINISTRATIVE. Registrant's general and administrative expenses consist primarily of salaries and related costs for general and corporate functions, including all facilities fees. In the second quarter of 2002, Registrant incurred $85,000 of expenses as compared to $55,000 in the second quarter of 2002. Included in the second quarter are i) a compensation expense of $50,000 for work related to debt settlement; ii) a severance accrual of $36,000; and iii) a recovery on legal fees of $5,700. Excluding these charges and recovery, general and administrative expense would have been $5,000. These expenses have been reduced substantially from the same quarter in 2001 as a result of management's cost savings program implemented in the last quarter of 2000 and continued to date and the change in business focus in the Subsidiary's business. PROFESSIONAL FEES. A substantial amount of the professional fees were for legal and consulting fees which were related to costs of regulatory filings, financial statement preparation and litigation costs. Registrant continues to seek ways to reduce these costs. During the second quarter of 2002, professional fees totaled $58,000, compared to $52,900 for the same quarter of last year, an increase of approximately 10%. While the Company continues to pursue pending litigation, management is unaware of factors which are likely to increase professional fees for the remaining quarters in 2002. 5 (c) LIQUIDITY AND CAPITAL RESOURCES Registrant seeks to generate revenue from (i) leasing domain names to third parties to conduct on-line businesses; (ii) selling products and services of third parties; (iii) fees resulting from traffic click-through agreements generated by the domain name assets; and (iv) selling of non-core domain name assets. At June 30, 2002 Registrant had current liabilities in excess of current assets resulting in a working capital deficit of $767,600. During the six-month ended June 30, 2002 Registrant had a net income of $74,400 and an increase in cash of $31,600, compared to a net loss of $183,300 and a decrease in cash of $9,500 for the same six-month period of last year. Operating activities generated cashflows of $308,700 primarily from the sale of two domain names, from net income generated during the quarter and after payments to trade creditors. The cashflows were used to repay a $150,000 loan, other loans and to pay lease obligations. Registrant has accumulated a deficit of $593,500 since inception and has a stockholders' equity of $2,305,700 at June 30, 2002. Due to the working capital deficit, there is substantial doubt about Registrant's ability to continue as a going concern. Registrant will only be able to continue operations if it raises additional funds, either through operations or outside funding. Registrant cannot predict whether it will be able to do so. During the second quarter of 2002, Registrant took several steps to reduce its debt and enhance its cash flow, while reducing potential claims. On May 24, 2002, Registrant and the Subsidiary mutually agreed to settle a potential legal dispute with David Sidoo, Siden Capital Corp. and Siden Investments Ltd. (the "Siden Group"). In the previous quarter, disputes between the Registrant and the Siden Group had arisen which were related to a loan agreement entered into on October 10, 2001, by Registrant and the Subsidiary with Siden Investments Ltd. Under that agreement, Siden advanced to Registrant and the Subsidiary an aggregate of $150,000. As security for the loan, Registrant entered into an Option Agreement pursuant to which Siden Investments Ltd. was given the right to acquire up to 15,000,000 shares of Registrant's common stock at an exercise price of $0.01 per share. The Loan was repaid in full on about March 22, 2002. Since the date of repayment, Siden and Registrant disagreed regarding the exercisability of the option. It was Registrant's belief that, inasmuch as the option was granted as additional security for the loan, and inasmuch as the loan was repaid in full, the option was terminated and of no further force or effect. No formal demand was made with respect to this matter. After extended discussions, Registrant and the Subsidiary and the Siden Group determined it was in their mutual best interests to resolve their outstanding disagreements and mutually settle the disputes. As part of the settlement, Registrant and the Siden Group came to the following arrangements: o the members of the Siden Group transferred 2,112,608 shares of the stock of the Subsidiary held by them to Registrant, increasing Registrant's interest in the Subsidiary to 93% of the outstanding shares of the Subsidiary; and o the members of the Siden Group agreed that the option granted to Siden Investments Ltd. by Registrant to acquire up to 15,000,000 shares of Registrant's common stock was void. 6 Except for the purchase of stock of the Subsidiary, which resulted in a loss upon acquisition of $15,400, the resolution of this dispute did not result in any financial impact on the Company. On June 28, 2002, the Registrant and the Subsidiary entered into two Assignment of Debt Agreements pursuant to which the Registrant effectively extinguished obligations owing to David Jeffs and Pacific Capital Markets Inc. In one such Agreement, the Registrant acquired from David Jeffs the obligation of the Subsidiary to pay David Jeffs the sum of $50,000 in return for the issuance by the Registrant of 500,000 shares of the Registrant's common stock. In the second Agreement, the Registrant acquired the obligation of the Subsidiary under a finders' agreement dated January 12, 2000 which obligated the Subsidiary to pay Pacific Capital Markets Inc. the sum of US$122,500, and effected the restructuring of a promissory note, dated November 10, 2000 in the principal amount of US$400,000. Under that Agreement, the Registrant acquired Pacific Capital Markets Inc.'s interest in the obligation of the Subsidiary, and Pacific Capital Markets, Inc. agreed to convert the promissory note from a demand note to a term note, due and payable on June 28, 2002, in consideration for the issuance to Pacific Capital Markets, Inc. of warrants to purchase 2,000,000 shares of the Registrant's common stock at an exercise price of US$0.05 per share. The settlement of the finders' fee resulted in a gain on settlement of debt of $159,900. Notwithstanding these developments, Registrant and the Subsidiary cannot satisfy its cash requirements for the next 12 months without having to raise additional funds. The Subsidiary's expected cash requirement for the next 12 months is $200,000. Registrant expects to raise any additional funds by way of equity and/or debt financing, and through the sale of non-strategic domain name assets. However, Registrant may not be able to raise the required funds from such financings, particularly in light of existing market conditions and the perception by investors of those companies that, like the Registrant, engage in e-commerce and related businesses. In that case Registrant will proceed by approaching current shareholders for loans or equity capital to cover operating costs. Although the foregoing actions are expected to cover Registrant's anticipated cash needs for working capital and capital expenditures for at least the next twelve months, no assurance can be given that Registrant will be able to raise sufficient cash to meet these cash requirements. Registrant has no current plans to purchase any plant or significant equipment. (d) UNCERTAINTIES RELATING TO FORWARD-LOOKING STATEMENTS Management's discussion and analysis of Registrant's financial condition and the results of its operations and other sections of this report, contain forward looking statements, that are based upon the current beliefs and expectations of Registrant's management, as well as assumptions made by, and information currently available to, Registrant's management. Because these statements involve risks and uncertainties, actual actions and strategies and the timing and expected results may differ materially from those expressed or implied by the forward-looking statements. As well, Registrant's future results, performance or achievements could differ materially from those expressed in, or implied by, any forward-looking statements. Future events 7 and actual results could differ materially from those set forth in or underlying the forward-looking statements. 8 PART II OTHER INFORMATION Item 1. Legal Proceedings. - -------------------------- In December 1999, the Subsidiary commenced a lawsuit in the Supreme Court of British Columbia (No. C996417) against Paul Green, the former chief executive officer of the Subsidiary, for breach of fiduciary duty for wrongfully attempting to appropriate the Subsidiary's business opportunities. The Subsidiary is seeking an undetermined amount of damages and a declaration that it had just cause to terminate Paul Green as the CEO in or about June 1999. No decision has been rendered in this case and the Company cannot predict whether it will prevail, and if it does, what the terms of any judgment may be. On March 9, 2000, Paul Green commenced a separate action in the Supreme Court of British Columbia (No. S001317) against the Subsidiary. In that action, Paul Green claimed wrongful dismissal and a breach of contract on the part of the Subsidiary. Paul Green is seeking an undetermined amount of damages and, among others, an order of specific performance for the issuance of a number of shares in the capital of the Subsidiary equal to 18.9% or more of the outstanding shares of the Subsidiary. On June 1, 2000, the Subsidiary filed a statement of defence and counterclaim. Management intends to defend this action vigorously. On April 4, 2002, Gartner, Inc. made a claim against the Subsidiary for alleged breach of contract and debt owing for marketing services rendered during April 1, 2000 to March 31, 2001 in the amount of $85,600. Registrant believes a defense is available on the basis of the contract being terminated during an agreed upon trial period. However, final assessment of the relative merits of the case will require completion of full discovery processes. In the interim, Registrant intends to defend against the claim vigorously. On April 23, 2002, DNG Capital Corp issued a demand letter to the Subsidiary demanding the payment of Cdn$15,105 for alleged services rendered during November 2001 to January 2002 and repayment of a loan of $97,000 advanced in February 2000. Registrant believes the services were provided for and on behalf of Siden and that the loan advanced were for share subscription in the Subsidiary that had been completed. On May 24, 2002, Communicate and the Subsidiary obtained a mutual release from DNG Capital Corp. for any and all possible and outstanding claims. Registrant is not aware of any other pending or threatened material legal proceedings. Item 2. Changes in Securities. - ------------------------------ On June 28, 2002, the Board of Directors authorized the issuance of 500,000 shares of common stock to David Jeffs as full and final settlement of a $50,000 debt assumed by the Registrant from the Subsidiary. The debt was accumulated from services provided by Mr. Jeffs. Communicate relied on an exemption from registration under Section 4(2) of the Securities Act of 1933 in issuing the shares. These shares are restricted securities and are subject to resale restrictions under Rule 144. 9 On June 28, 2002, the Board of Directors authorized the issuance of 2,000,000 share purchase warrants which will grant Pacific Capital Markets Inc. the right to acquire one common share for each warrant at an exercise price of $0.05 per common share at any time after June 28, 2002 through June 28, 2004. The Warrants are non-transferable. Communicate relied on an exemption from registration under Section 4(2) of the Securities Act of 1933 in issuing the shares. These shares are restricted securities and are subject to resale restrictions under Rule 144. Item 3. Defaults Upon Senior Securities. - ---------------------------------------- None. Item 4. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------ No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the first three months of the fiscal year covered by this report. Item 5. Other Information. - -------------------------- None. Item 6. Exhibits and Reports on Form 8-K. - ----------------------------------------- (A) Index to and Description of Exhibits. - ----------------------------------------------- EXHIBIT DESCRIPTION F-1 Financial Statements. 10.1 Assignment of Debt Agreement among Communicate.com Inc., David Jeffs and Domain Holdings, Inc. dated June 28, 2002. 10.2 Assignment of Debt Agreement among Communicate.com Inc., Pacific Capital Markets, Inc. and Domain Holdings, Inc. dated June 28, 2002. 10.3 Share Purchase Warrant dated June 28, 2002. 27 Financial Data Schedule. 99.1 Certification of Chief Executive Officer and Chief Financial Officer 10 (B) Reports on Form 8-K. - ----------------------------- There were no report on Form 8-K filed by Registrant during the second quarter ending June 30, 2002. On July 26, 2002, Registrant filed a Form 8-K announcing that, effective July 23, 2002, Mr. R Leigh Jeffs resigned as Director and President, Secretary and Treasurer of the Company and its subsidiary Domain Holdings Inc. Concurrently, Mr. David Jeffs was appointed as Director and President and Secretary of the Company and its subsidiary, and Mr. J Cameron Pan was appointed as Treasurer of the Company and its subsidiary. 11 PART II - SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMMUNICATE.COM INC. Date: August 14, 2002 By:/s/ David Jeffs 12 Exhibits Financial Statements..................................................F-1 Assignment of Debt Agreement among Communicate.com Inc., David Jeffs and Domain Holdings, Inc. dated June 28, 2002. Assignment of Debt Agreement among Communicate.com Inc., Pacific Capital Markets, Inc. and Domain Holdings, Inc. dated June 28, 2002. Share Purchase Warrant dated June 28, 2002. Financial Data Schedule. Certification of Chief Executive Officer and Chief Financial Officer 13 COMMUNICATE.COM INC. INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 (unaudited) BALANCE SHEETS INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS F-1 COMMUNICATE.COM INC. CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 84,324 $ 52,672 Accounts receivable 24,159 64,450 Prepaid expenses 4,613 8,809 - ---------------------------------------------------------------------------------------------------------------------- 113,096 125,931 FIXED ASSETS (Note 4) 14,754 17,432 INTANGIBLE ASSETS HELD FOR RESALE (Note 3) 3,058,651 3,341,577 - ---------------------------------------------------------------------------------------------------------------------- $ 3,186,501 $ 3,484,940 ====================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 453,859 $ 713,514 Loans payable (Note 5) 403,781 605,000 Deferred revenue 12,798 9,886 Lease obligation (Note 4) 10,290 20,237 - ---------------------------------------------------------------------------------------------------------------------- 880,728 1,348,637 - ---------------------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (Notes 1 and 11) STOCKHOLDERS' EQUITY Capital stock (note 6) Authorized 50,000,000 Common shares, $.001 par value Issued and outstanding 14,691,339 (2001 - 14,191,339) Common shares 5,701 5,201 Additional paid in capital 2,906,616 2,772,016 Accumulated deficit (593,561) (667,991) Accumulated other comprehensive income (loss) (12,983) 27,077 - ---------------------------------------------------------------------------------------------------------------------- 2,305,773 2,136,303 - ---------------------------------------------------------------------------------------------------------------------- $ 3,186,501 $ 3,484,940 ======================================================================================================================
The accompanying notes are an integral part of these interim consolidated financial statements F-2 COMMUNICATE.COM INC. INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months Three months Six months Six months ended June 30, ended June 30, ended June 30, ended June 30, 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------------------- REVENUES Domain name revenue (net of cost) $ 31,301 $ 70,912 $ 159,623 $ 121,728 Other 11,926 13,224 37,814 25,744 - ----------------------------------------------------------------------------------------------------------------- 43,227 84,136 197,437 147,472 - ----------------------------------------------------------------------------------------------------------------- EXPENSES General and administrative 85,380 55,480 112,977 105,417 Professional fees 58,124 52,873 117,209 154,906 Sales and marketing -- 82 -- 1,698 Depreciation 985 21,178 2,678 44,313 - ----------------------------------------------------------------------------------------------------------------- 144,489 129,613 232,864 306,334 - ----------------------------------------------------------------------------------------------------------------- OPERATING LOSS (101,262) (45,477) (35,427) (158,862) INTEREST EXPENSE (12,175) (9,420) (34,572) (22,666) LOSS ON ACQUISITION OF MINORITY INTEREST (15,471) -- (15,471) -- GAIN ON SETTLEMENT OF DEBTS (Note 5) 159,900 -- 159,900 -- LOSS ON DISPOSAL OF FIXED ASSETS -- (1,857) -- (1,857) - ----------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) FOR THE PERIOD $ 30,992 $ (56,754) $ 74,430 $ (183,385) ================================================================================================================= BASIC EARNINGS (LOSS) PER SHARE $ 0.002 $ (0.004) $ 0.005 $ (0.015) ================================================================================================================= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 14,202,328 12,722,658 14,196,864 12,630,466 =================================================================================================================
The accompanying notes are an integral part of these interim consolidated financial statements F-3 COMMUNICATE.COM INC. INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six months Six months ended June 30, ended June 30, 2002 2001 - ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $ 74,430 $ (183,385) Adjustments to reconcile net loss to net cash used in operating activities - gain on settlement of debt (159,900) -- - loss on disposal of assets -- 1,857 - non-cash cost of fixed revenue 282,400 42,360 - depreciation 3,204 44,313 - accrued interest 25,874 17,710 - deferred revenue 2,912 -- - accounts receivable 40,291 79,370 - prepaid expenses 4,196 8,025 - accounts payable and accrued liabilities 35,345 5,409 - --------------------------------------------------------------------------------------------------- CASH FROM OPERATING ACTIVITIES 308,752 15,659 - --------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES - proceeds on disposal of assets -- 4,720 - --------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES -- 4,720 - --------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES - lease obligation repayments (9,947) (33,626) - loan repayments (227,093) -- - --------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES (237,040) (33,626) - --------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (40,060) 3,693 - --------------------------------------------------------------------------------------------------- INCREASE IN CASH AND CASH EQUIVALENTS 31,652 (9,554) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 52,672 47,823 - --------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 84,324 $ 38,269 ===================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION On June 28, 2002 500,000 shares were issued in settlement of $50,000 of accounts payable. Refer to Note 6. On June 28, 2002 2,000,000 share purchase warrants were issued in settlement of $122,500 of accounts payable. Refer to Note 6. The accompanying notes are an integral part of these interim consolidated financial statements F-4 COMMUNICATE.COM INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 - ------------------------------------------------------------------------------- (UNAUDITED) NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION - ------------------------------------------------------------------------------- The Company was incorporated October 10, 1995 under the laws of the State of Nevada and effective August 24, 2000 changed its name from Troyden Corporation to Communicate.com Inc. ("CMNN" or "the Company"). Effective November 10, 2000 the Company acquired a 52% controlling interest in Communicate.com Inc., an Alberta private company ("AlbertaCo") and during December 2000 acquired from minority shareholders an additional 31% of the outstanding shares of AlbertaCo. After acquiring a further 10% of the outstanding shares of AlbertaCo from minority shareholders in the second quarter of 2002, CMNN owns 93% of the outstanding shares of AlbertaCo. On April 5, 2002 AlbertaCo changed its name to Domain Holdings Inc. AlbertaCo owns a portfolio of simple, intuitive domain names. AlbertaCo's current business strategy is to seek partners to develop its domain names to include content, commerce and community applications. AlbertaCo has also entered into agreements to sell or lease certain of its domain names (refer to Note 7). The consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At June 30, 2002 the Company has a working capital deficiency of $767,632 (2001 - $1,222,706) and has incurred losses since inception raising substantial doubt as to the Company's ability to continue as a going concern. The Company's continued operations are dependent on its ability to obtain additional financing, settling its outstanding debts and to maintain profitable operations. UNAUDITED INTERIM FINANCIAL STATEMENTS The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-B. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2001 included in the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim unaudited consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------------------------------------------------------------------------------- BASIS OF PRESENTATION The accompanying financial statements are presented in United States dollars and are prepared in accordance with accounting principles generally accepted in the United States. PRINCIPLES OF CONSOLIDATION The financial statements include the accounts of the Company and the 93% interest in its subsidiary, Domain Holdings Inc. All significant intercompany balances and transactions are eliminated on consolidation. FIXED ASSETS Fixed assets are recorded at cost. Depreciation is computed at the following rates over the estimated useful lives of the assets: Computer equipment 30% declining balance Furniture and fixtures 20% declining balance Office equipment 20% declining balance One-half year depreciation is taken in the year of acquisition on certain capital assets. F-5 COMMUNICATE.COM INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 - ------------------------------------------------------------------------------- (UNAUDITED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) - ------------------------------------------------------------------------------- REVENUE RECOGNITION Revenues from the sale and lease of domain names, whose carrying values are recorded as intangible assets held for resale, consists primarily of funds earned for the transfer of rights to domain names that are currently in the Company's control. Collectibility of these proceeds is subject to a high level of uncertainty; accordingly revenues are recognized only as received in cash and are shown net the carrying value of the intangible asset sold. Lease payments paid in advance are recorded as deferred revenue. Web advertising revenue consists primarily of commissions earned from the referral of visitors to the Company's sites to other parties. The amount and collectibility of these referral commissions is subject to uncertainty; accordingly revenues are recognized when the amount can be determined and collectibility can be reasonably assured. STOCK-BASED COMPENSATION The Company accounts for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", ("APB No. 25") and complies with the disclosure provisions of Statement of Financial Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"). Under APB No. 25, compensation expense is recognized based on the difference, if any, on the date of grant between the estimated fair value of the Company's stock and the amount an employee must pay to acquire the stock. Compensation expense is recognized immediately for past services and pro-rata for future services over the option-vesting period. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services" ("EITF 96-18"). Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18. The Company has also adopted the provisions of the Financial Accounting Standards Board Interpretation No.44, Accounting for Certain Transactions Involving Stock Compensation - An Interpretation of APB Opinion No. 25 ("FIN 44"), which provides guidance as to certain applications of APB 25. FIN 44 is generally effective July 1, 2000 with the exception of certain events occurring after December 15, 1998. INCOME TAXES The Company follows the liability method of accounting for income taxes. Under this method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Future tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize the future benefit, or if the future deductibility is uncertain. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 date of the financial statements and the reported amounts of revenue and expenses for the periods that the financial statements are prepared. Actual amounts could differ from these estimates. F-6 COMMUNICATE.COM INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 - ------------------------------------------------------------------------------- (UNAUDITED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) - ------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSACTIONS The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates that prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is computed by dividing earnings (loss) for the period by the weighted average number of common shares outstanding for the period. Fully diluted earnings (loss) per share reflects the potential dilution of securities by including other potential common stock, including convertible preferred shares, in the weighted average number of common shares outstanding for a period and is not presented where the effect is anti-dilutive. The presentation is only of basic earnings (loss) per share as the effect of the potential dilution of securities is anti-dilutive to the prior period's basic (loss) per share and has no effect on the current period's basic earnings per share. COMPREHENSIVE INCOME Comprehensive income is defined as the change in equity from transactions, events and circumstances, other than those resulting from investments by owners and distributions to owners. Comprehensive income to date consists only of the net loss resulting from translation of the foreign currency financial statements of AlbertaCo. INTANGIBLE ASSETS HELD FOR RESALE The Company has adopted the provision of the Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Intangible Assets", which revises the accounting for purchased goodwill and intangible assets. Under SFAS 142, goodwill and intangible assets with indefinite lives will no longer be amortized and will be tested for impairment annually. The determination of any impairment would include a comparison of estimated future operating cash flows anticipated during the remaining life with the net carrying value of the asset. Management has determined that as at June 30, 2002 no impairment of intangible assets held for resale has occurred. RECENT ACCOUNTING PRONOUNCEMENTS The Securities and Exchange Commission Staff Accounting Bulletin No. 101 and subsequent amendments and related releases ("SAB 101") released during the year ended September 30, 1999 provide guidance for the recognition of revenue in financial statements. The Company has considered the guidance presented therein and believes that the Company's practices for the recording of revenue are consistent with this guidance. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations", which eliminates the pooling method of accounting for business combinations initiated after June 30, 2001. In addition, SFAS 141 addresses the accounting for intangible assets and goodwill acquired in a business combination. This portion of SFAS 141 is effective for business combinations completed after June 30, 2001. The adoption of SFAS 141 does not have a material impact on the Company's financial position or results of operations. F-7 COMMUNICATE.COM INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 - ------------------------------------------------------------------------------- (UNAUDITED) NOTE 3 - ACQUISITION - ------------------------------------------------------------------------------- By agreement dated November 10, 2000 the Company acquired 52% of the outstanding shares of AlbertaCo, for total consideration of $2,000,000 of which $400,000 was paid in cash in 2000, $775,000 was paid in 2000 through the issuance of 1,550,000 shares of the Company's common stock at $0.50 per share and the remaining $825,000 was paid in 2001 through the issuance of 1,650,000 shares of the Company's common stock at $0.50 per share. In addition, by offer made November 30, 2000 and completed December 29, 2000, the Company acquired an additional 31% of the remaining minority shareholdings of AlbertaCo for consideration of $880,217 paid through the issuance of 1,375,339 shares of the Company's common stock at $0.64 per share. After completion of these two transactions, the Company owned 83% of the outstanding shares of common stock of AlbertaCo. This business combination has been accounted for using the purchase method of accounting. The purchase price has been allocated as follows: Assets acquired at fair value: Current assets $ 350,568 Capital assets 519,798 Intangible assets held for resale - domain names 3,421,135 --------------- 4,291,501 Liabilities assumed at fair value: Accounts payable and accrued liabilities (1,301,421) Lease obligations (109,863) --------------- Purchase price $ 2,880,217 ===============
On May 24, 2002 the Company acquired an additional 10% of AlbertaCo for $15,471. As AlbertaCo had a Stockholders' deficiency at the date of this transaction, this amount has been recorded as a loss on acquisition of minority interest. The Company now owns 93% of the outstanding shares of common stock of AlbertaCo. NOTE 4 - FIXED ASSETS - -------------------------------------------------------------------------------
December 31, June 30, 2002 2001 --------------------------------- Computer equipment $ 208,388 $ 208,388 Furniture and fixtures 6,568 6,568 Office equipment 3,993 3,993 --------------------------------- 218,949 218,949 Less: accumulated depreciation (59,772) (57,094) Less: accumulated impairment provision (144,423) (144,423) --------------------------------- $ 14,754 $ 17,432 =================================
As at June 30, 2002, computer equipment includes $56,295 of equipment held under capital lease. In connection with this leased equipment the Company has lease obligations of $10,290 that are due in 2002. During the year ended December 31, 2001 the Company wrote down the carrying value of its fixed assets by $144,423 to reflect the equipment's net realizable value. F-8 COMMUNICATE.COM INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 - ------------------------------------------------------------------------------- (UNAUDITED) NOTE 5 - LOANS PAYABLE - ------------------------------------------------------------------------------- In connection with the acquisition of AlbertaCo, the Company entered into a Loan and Security Agreement dated November 10, 2000 with Pacific Capital Markets Inc. ("PCMI"), a British Columbia corporation. Under the terms of the agreement, PCMI agreed to loan the Company up to $1,500,000 to satisfy its obligation pursuant to the AlbertaCo purchase agreement dated November 10, 2000. Amounts loaned by PCMI are secured by a promissory note payable on demand and bearing interest at the Royal Bank of Canada United States dollar prime rate plus 2%. In the event that the Company fails to repay the amounts due under this agreement, PCMI may, at its option, convert the balance of principal and interest due pursuant to this agreement into shares of the Company's common stock of at a price equal to 80% of the average selling price of the Company's common stock for the fifteen days prior to conversions. To June 30, 2002, $400,000 has been loaned by PCMI to the Company and a total of $80,874 of interest has been accrued. During the period $77,093 was repaid to PCMI leaving $403,781 owing as at June 30, 2002. PCMI and certain of its officers and directors were also shareholders of AlbertaCo and sold their shareholdings in AlbertaCo to the Company in connection with the minority shareholder offer as described in Note 3, and as a result became shareholders of the Company. During the period, the Company issued 2,000,000 share purchase warrants to PCMI in settlement of $122,500 of previously accrued finders' fees owing to PCMI from AlbertaCo. The warrants have a fair value of $85,100 and resulted in a gain on settlement of $37,400. (Refer to Note 6) In 2001, the Company and AlbertaCo signed a promissory note with Siden Investments Ltd. ("Siden") for $150,000. As consideration for entering into the agreement the Company agreed to pay the lender a $15,000 set up fee. The proceeds of the loan were used to repay a loan from DMD Investments Ltd. in the amount of $65,000 and to further settle liabilities of AlbertaCo. The loan bore interest, calculated monthly, at the Royal Bank Prime Rate plus four percent (4%) commencing November 1, 2001. During the period the principal and accrued interest was repaid in full. Subsequent to the date of repayment, a dispute arose between Siden and the Company regarding the exercisability of an Option Agreement (the "Option"). It was the Company's belief that inasmuch as the Option was granted as additional security for the Loan, and inasmuch as the Loan had been repaid in full, the Option had terminated and was of no further force or effect. While Siden had not attempted to exercise the option, Siden had advised the Company that it believed it was entitled to do so. By settlement agreement dated May 24, 2002, Siden, and the Company agreed that the Option is of no further force or effect and released each other from any mutual obligations, commitments or contractual arrangements. As a result, the Company recorded a gain on settlement of debts of $122,500 resulting from the settlement of previously accrued finders' fees owing to Siden from AlbertaCo. NOTE 6 - CAPITAL STOCK - ------------------------------------------------------------------------------- The authorized capital of the company consists of 50,000,000 Common Shares with a par value of $.001. During June 2002, the Company issued 500,000 shares of common stock of the Company in settlement of certain accounts payable of AlbertaCo in the amount of $50,000 owing to an individual who became a director of the Company in July 2002. STOCK-BASED COMPENSATION On June 28, 2002, the Company issued 2,000,000 share purchase warrants entitling the holder to purchase one share of common stock at $0.05 for a period of two years in settlement of certain accounts payable of $122,500. The Company has accounted for these share purchase warrants in accordance with SFAS No. 123 by applying the fair value method using the Black-Scholes option pricing model assuming a dividend yield of 0%, a risk-free interest rate of 4%, an expected life of two years and an expected volatility of 201%. The fair value of these warrants is $85,100 resulting in a gain on settlement of $37,400. The Company has no stock options outstanding as at June 30, 2002 and has recorded no compensation expense for any period relating to the granting of stock options. F-9 COMMUNICATE.COM INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 - ------------------------------------------------------------------------------- (UNAUDITED) NOTE 7 - DOMAIN SALES AND LEASING - ------------------------------------------------------------------------------- LEASE OF VANCOUVER.COM By agreement dated March 21, 2001, AlbertaCo entered into an agreement to lease its URL domain name (vancouver.com) for a ten year period for consideration of 2% of the gross revenue (exclusive of applicable taxes) generated by the lessee in respect of on-line revenues originating from the domain name URL and 1% of the gross revenue (exclusive of applicable taxes) generated by the lessee in respect of offline revenues originating from the domain name URL. The lessee has the right to purchase the domain name URL prior to the fifth anniversary date for CAN$400,000 less all amounts previously paid to AlbertaCo during the lease term. The lessee also has the right to purchase the domain name URL prior to the eighth anniversary date for CAN$800,000 less all amounts previously paid to AlbertaCo during the lease term. The lessee may cancel this agreement with 60 days notice of the annual anniversary date. LEASE OF BOXING.COM By agreement dated September 14, 2001, the Company agreed to lease the use of its URL domain name (boxing.com) for $25,000 paid for the first six months, of which $9,886 is shown as deferred revenue as at December 31, 2001, and $30,000 due for the second six months of which $12,748 is included in deferred revenue. Included in the agreement is an option to purchase the domain name for $250,000 for 45 days after the one-year anniversary of this agreement and $275,000 for 45 days after the eighteen-month anniversary of this agreement. During the period the $27,138 has been recorded as revenue in connection with this agreement. SALE OF HOCKEY.COM By agreement dated March 11, 2002, AlbertaCo entered into an agreement to sell its URL domain name (hockey.com) for $200,000. The agreement closed on March 21, 2002 and the gain on the sale of $58,800 has been recognized in Domain Name Revenue, net of the carrying value of hockey.com of $141,200 SALE OF VEGETARIAN.COM By agreement dated May 13, 2002, AlbertaCo entered into an agreement to sell its URL domain name (vegetarian.com) for $60,000. The agreement closed on May 14, 2002 and the loss on the sale of $81,200 has been recognized in Domain Name Revenue, net of the carrying value of vegetarian.com of $141,200 NOTE 8 - RELATED PARTY TRANSACTIONS - ------------------------------------------------------------------------------- During the period ended June 30, 2002 management fees and salaries of totalling $8,000 were paid to the sole director of the Company. During the period ended June 30, 2001 management fees and salaries of totalling $24,934 were paid to two directors of the Company. NOTE 9 - FINANCIAL INSTRUMENTS - ------------------------------------------------------------------------------- INTEREST RATE RISK EXPOSURE The Company has limited exposure to any fluctuation in interest rates. FOREIGN EXCHANGE RISK The Company is subject to foreign exchange risk for sales and purchases denominated in foreign currencies. Foreign currency risk arises form the fluctuation of foreign exchange rates and the degree of volatility of these rates relative to the United States dollar. The Company does not actively manage this risk. F-10 COMMUNICATE.COM INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 - ------------------------------------------------------------------------------- (UNAUDITED) NOTE 9 - FINANCIAL INSTRUMENTS (cont'd) - ------------------------------------------------------------------------------- CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and trade accounts receivable. The Company limits its exposure to credit loss by placing its cash and cash equivalents on deposit with high credit quality financial institutions. Receivables arising from sales to customers are generally not significant individually and are not collateralized; as a result, management continually monitors the financial condition of its customers to reduce the risk of loss. FAIR VALUES OF FINANCIAL INSTRUMENTS The Company's financial instruments include cash and cash equivalents, accounts receivable, bank indebtedness, accounts payable and accrued liabilities, loan payable, note payable and capital lease obligation. The fair values of these financial instruments approximate their carrying values. The fair value of the Company's capital leases are estimated based on market value of financial instruments with similar terms. Management believes that the fair value of the debt approximates its carrying value. NOTE 10 - INCOME TAXES - ------------------------------------------------------------------------------- The Company's subsidiary, AlbertaCo is subject to Canadian federal and British Columbia provincial taxes in Canada and the Company is subject to United States federal and state taxes. As at December 31, 2001 the Company has net operating loss carryforwards of approximately $5,800,000 that result in deferred tax assets. The carryforwards will expire, it not utilized, commencing in 2006. Management believes that the realization of the benefits from these deferred tax assets appears uncertain due to the Company's limited operating history and history of operating losses. Accordingly, a full deferred tax asset valuation allowance has been provided and no deferred tax asset benefit has been recorded. No tax provision has been recorded in the current period as the Company and AlbertaCo have sufficient loss carryforwards to offset all taxable income recorded in the period. NOTE 11 - COMMITMENTS AND CONTINGENCIES - ------------------------------------------------------------------------------- CONTINGENCIES The former Chief Executive Officer of AlbertaCo commenced a legal action against AlbertaCo on March 9, 2000 for wrongful dismissal and breach of contract. He is seeking, at minimum, 18.39% of the outstanding shares of AlbertaCo, specific performance of his contract, special damages in an amount of CAN$37,537, aggravated and punitive damages, interest and costs. On June 1, 2000, Communicate.com commenced an action against this individual claiming damages and special damages for breach of fiduciary duty and breach of his employment contract. The outcome of these legal actions is currently not determinable and as such the amount of loss, if any, resulting from this litigation is presently not determinable. On April 4, 2002 Gartner Inc. filed a claim against AlbertaCo for an alleged breach of contract and debt owing for marketing services rendered during 2000 and 2001 in the amount of $85,600. The Company believes the contract was properly cancelled and intends to defend itself against this claim. No provision for loss has been recorded pending outcome of this litigation. F-11 EX-10.1 3 ex10-1.txt EXHIBIT 10.1 EXHIBIT 10.1 ASSIGNMENT OF DEBT AGREEMENT (David Jeffs) THIS ASSIGNMENT OF DEBT AGREEMENT dated the 28th day of June, 2002, AMONG: COMMUNICATE.COM INC., of Suite 600, 1100 Melville Street, Vancouver, British Columbia, V6E 4A6 (the "ASSIGNEE") AND: DAVID JEFFS, of #403 - 1080 Broughton Street, Vancouver, British Columbia, V6G 2A8 (the "ASSIGNOR") AND: DOMAIN HOLDINGS INC., of 600 - 1100 Melville Street, Vancouver, British Columbia, V6E 4A6 (the "DEBTOR") WHEREAS: A. The Debtor is indebted to the Assignor for the principal amount of Fifty Thousand (US$50,000) Dollars in U.S. funds (the "Debt"). B. The Assignee wishes to purchase, and the Assignor wishes to grant, assign, transfer and set over unto the Assignee his entire right, title and interest in and to the Debt upon the terms and conditions contained in this Agreement. NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and the mutual promises, covenants, conditions, representations and warranties hereinafter contained and the sum of Ten ($10.00) Dollars now paid by the Assignee to the Assignor and for other good and valuable consideration, the receipt of which are acknowledged, and subject to the terms and conditions hereinafter set out, the parties agree as follows: 1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ASSIGNOR --------------------------------------------------------- 1.1 The Assignor represents, warrants and covenants to the Assignee that: (a) the above premises are true and complete, that the Debt has not been prepaid in full or in part, and that the Debtor has been given notice of this Assignment by the Assignor; (b) the full amount of the Debt is due and owing by the Debtor to the Assignor; and (c) the Assignor now has a good right, full power and absolute authority to assign its right, title and interest in and to the Debt in the manner set out in Article 2 hereof according to the true intent and meaning of this Agreement. 1.2 The representations, warranties and covenants contained in Section 1.1 are provided for the exclusive benefit of the Assignee and a breach of any one or more thereof may be waived by the Assignee in whole or in part at any time without prejudice to its rights in respect to any other breach of the same or any other representation or warranty or covenant. Any representations, warranties and covenants contained in Article 1 will survive the signing of this Agreement. 2. ASSIGNMENT AND PURCHASE OF THE DEBT ----------------------------------- 2.1 The Assignor grants, assigns, transfers and sets over unto the Assignee his entire right, title and interest in and to the Debt, including, without limitation, all rights, benefits and advantages of the Assignor to be derived therefrom and all burdens, obligations and liabilities to be derived thereunder, in consideration of the premises and in consideration of the issuance of 500,000 common shares in the capital of the Assignee at a price of US$0.10 per share (the "Shares"). 2.2 The Assignor acknowledges and agrees that the Shares may only be resold in compliance with the Securities Act of 1933, pursuant to a registration statement or an exemption from registration under the Securities Act of 1933. The Assignor acknowledges that the share certificates representing the Shares will bear a trading restriction legend and may bear any other legend, if the legend or legends are reasonably required by the Assignee to comply with state, federal or foreign law. 3. CONSENT OF DEBTOR ----------------- 3.1 The Debtor agrees and consents to the assignment of the Assignor's interest in the Debt to the Assignee pursuant to the terms and conditions of this Agreement. 3.2 The Debtor represents, warrants and covenants to the Assignee that the full amount of the Debt is due and owing at the time of this Agreement and that the Debt has not been prepaid in full or in part. 3.3 The Debtor agrees and acknowledges and that the Assignee is entitled to make demand at any time for payment of the full amount of the Debt. -2- 4. COUNTERPART 4.1 This Agreement may be signed in one or more counterparts, each of which when so signed will be deemed an original, and such counterparts together will constitute one in the same instrument. IN WITNESS WHEREOF this Agreement was signed by the parties hereto as of the day and year first above written. The Common Seal of ) COMMUNICATE.COM INC. ) affixed was hereunto in the presence of: ) ) ) ) ) C/S - -------------------------------------------- AUTHORIZED SIGNATORY ) SIGNED, SEALED and DELIVERED ) by DAVID JEFFS in the presence of: ) ) ) Signature of Witness ) - --------------------------------- ) ) ) ) ------------------------------ - --------------------------------- ) DAVID JEFFS Print Name ) ) ) - --------------------------------- ) Address ) ) ) - --------------------------------- ) Occupation ) The Common Seal of ) DOMAIN HOLDINGS INC. ) affixed was hereunto in the presence of: ) ) ) ) ) C/S - --------------------------------------------) AUTHORIZED SIGNATORY ) -3- EX-10.2 4 ex10-2.txt EXHIBIT 10.2 EXHIBIT 10.2 ASSIGNMENT OF DEBT AGREEMENT PCMI THIS ASSIGNMENT OF DEBT AGREEMENT dated the 28th day of June, 2002, AMONG: COMMUNICATE.COM INC., of Suite 600, 1100 Melville Street, Vancouver, British Columbia, V6E 4A6 (the "ASSIGNEE") AND: PACIFIC CAPITAL MARKETS INC., of 1100 Melville Street, 6th Floor, Vancouver, British Columbia, V6E 4A6 (the "ASSIGNOR") AND: DOMAIN HOLDINGS INC., of 600 - 1100 Melville Street, Vancouver, British Columbia, V6E 4A6 (the "DEBTOR") WHEREAS: A. The Debtor is indebted to the Assignor for the principal amount of One Hundred Twenty-Two Thousand and Five Hundred (US$122,500) Dollars in U.S. funds (the "Debt") pursuant to the terms of a finders' agreement dated January 12, 2000 among the Debtor, Siden Capital Corp. and the Assignor. B. The Assignee wishes to purchase, and the Assignor wishes to grant, assign, transfer and set over unto the Assignee his entire right, title and interest in and to the Debt upon the terms and conditions contained in this agreement. C. The Assignee is indebted to the Assignor for the principal amount of Four Hundred Thousand (US$400,000) Dollars in U.S. funds, which is evidenced by a promissory note dated November 10, 2000 (the "Promissory Note"). D. The Assignee and the Assignor wish to restructure the terms of the Promissory Note upon the terms and conditions contained in this agreement. NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and the mutual promises, covenants, conditions, representations and warranties hereinafter contained and the sum of Ten ($10.00) Dollars now paid by the Assignee to the Assignor and for other good and valuable consideration, the receipt of which are acknowledged, and subject to the terms and conditions hereinafter set out, the parties agree as follows: 1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ASSIGNOR --------------------------------------------------------- 1.1 The Assignor represents, warrants and covenants to the Assignee that: (a) the above premises are true and complete, that the Debt has not been prepaid in full or in part, and that the Debtor has been given notice of this Assignment by the Assignor; (b) the full amount of the Debt is due and owing by the Debtor to the Assignor; and (c) the Assignor now has a good right, full power and absolute authority to assign its right, title and interest in and to the Debt in the manner set out in Article 2 hereof according to the true intent and meaning of this agreement. 1.2 The representations, warranties and covenants contained in Section 1.1 are provided for the exclusive benefit of the Assignee and a breach of any one or more thereof may be waived by the Assignee in whole or in part at any time without prejudice to its rights in respect to any other breach of the same or any other representation or warranty or covenant. Any representations, warranties and covenants contained in Article 1 will survive the signing of this agreement. 2. ASSIGNMENT OF THE DEBT AND RESTRUCTURING OF TERMS ------------------------------------------------- 2.1 The Assignor grants, assigns, transfers and sets over unto the Assignee his entire right, title and interest in and to the Debt, including, without limitation, all rights, benefits and advantages of the Assignor to be derived therefrom and all burdens, obligations and liabilities to be derived thereunder, in consideration of the premises and the consideration set out in Section 2.3. 2.2 The Assignor agrees to restructure the terms of the Promissory Note by changing the Promissory Note from a demand note to a term of 12 months from the date of this agreement, in consideration of the premises and the consideration set out in Section 2.3. 2.3 In consideration of the assignment of the Debt and the restructuring of the terms of the Promissory Note, the Assignee will (a) issue 2 million share purchase warrants, which will entitle the Assignor to acquire 2 million common shares in the capital of the Assignee at a price of US$0.05 per share (the "Warrants"), and (b) sign and deliver a new promissory note as evidence of the restructured terms of the Promissory Note. 2.4 The Assignor acknowledges and agrees that the Warrants, and any common shares obtained as a result of the exercise of the Warrants, may only be resold in compliance with the Securities Act of 1933, pursuant to a registration statement or an exemption from registration under the Securities Act of 1933. The Assignor acknowledges that the share certificates representing the shares issued on the exercise of the Warrants will bear a trading restriction legend and may bear any other legend, if the legend or legends are reasonably required by the Assignee to comply with state, federal or foreign law. -2- 3. CONSENT OF DEBTOR ----------------- 3.1 The Debtor agrees and consents to the assignment of the Assignor's interest in the Debt to the Assignee pursuant to the terms and conditions of this agreement. 3.2 The Debtor represents, warrants and covenants to the Assignee that (a) the full amount of the Debt is due and owing at the time of this agreement, (b) the Debt has not been prepaid in full or in part, and (c) any interest owing on the Debt ahs been paid in full up to June 1, 2002. 3.3 The Debtor agrees and acknowledges and that the Assignee is entitled to make demand at any time for payment of the full amount of the Debt. 4. COUNTERPART ----------- 4.1 This agreement may be signed in one or more counterparts, each of which when so signed will be deemed an original, and such counterparts together will constitute one in the same instrument. IN WITNESS WHEREOF this agreement was signed by the parties hereto as of the day and year first above written. The Common Seal of ) COMMUNICATE.COM INC. ) affixed was hereunto in the presence of: ) ) /s/ David Jeffs ) ) C/S - --------------------------------------------) AUTHORIZED SIGNATORY ) The Common Seal of ) PACIFIC CAPITAL MARKETS INC. ) affixed was hereunto in the presence of: ) ) /s/ James R. King, Jr. ) ) C/S - -------------------------------------------- AUTHORIZED SIGNATORY ) The Common Seal of ) DOMAIN HOLDINGS INC. ) affixed was hereunto in the presence of: ) ) /s/ David Jeffs ) ) C/S - -------------------------------------------- AUTHORIZED SIGNATORY ) EX-10.3 5 ex10-3.txt EXHIBIT 10.3 EXHIBIT 10.3 THIS SHARE PURCHASE WARRANT WILL BE VOID AND OF NO VALUE AFTER THE CLOSE OF BUSINESS ON June 28, 2004. SHARE PURCHASE WARRANT TO PURCHASE COMMON SHARES OF COMMUNICATE.COM INC. This is to certify that, for value received, the bearer, PACIFIC CAPITAL MARKETS INC. (the "BEARER"), of this share purchase warrant has the right to purchase, upon and subject to the terms and conditions referred to in this share purchase warrant, at any time from and after JUNE 28, 2002, and up to 5:00 p.m. Pacific Standard Time, on JUNE 28, 2004, TWO MILLION (2,000,000) common shares in the capital of COMMUNICATE.COM INC. (the "COMPANY") at the price of $0.05 per share in lawful money of the United States. The right to purchase common shares of the Company may only be exercised by the Bearer within the time set out by (i) duly completing in the manner indicated and signing the attached subscription form, (ii) paying the appropriate purchase price for the common shares of the Company subscribed for either in cash or by certified cheque payable at par, and (iii) delivering the signed subscription form and payment in full for the shares to the Company. Upon surrender and payment by the Bearer, the Company will issue to the Bearer or its nominee the number of common shares subscribed for and the Bearer or its nominee will become a shareholder of the Company in respect of the common shares as of the date of the surrender and payment. Within 30 days of the surrender and payment the Company will mail to the Bearer at the address or addresses specified in the subscription form a certificate or certificates evidencing the common shares subscribed for. If the Bearer of this warrant subscribes for a lesser number of common shares than the number of shares referred to in this warrant the Bearer will be entitled to receive a further warrant in respect of the common shares referred to in this warrant but not subscribed for. If any subdivision or subdivisions of the common shares of the Company, as constituted on JUNE 28, 2002, occurs at any time while this warrant is outstanding, resulting in a greater number of common shares being issued and outstanding, and the Bearer subsequently exercises any share purchase warrants, the Company will deliver at the time of purchase of shares hereunder, in addition to the number of shares in respect of which the right to purchase is then being exercised, such additional number of shares as result from the subdivision or subdivisions without the Bearer having to make any additional payment or give any other consideration therefor. If any consolidation or consolidations of the common shares of the Company, as constituted on JUNE 28, 2002, occurs at any time while this warrant is outstanding, resulting in a lesser number of common shares being issued and outstanding, the Company will deliver and the Bearer will accept, at the time of purchase of shares hereunder, in lieu of the number of shares in respect of which the right to purchase is then being exercised, the lesser number of shares as result from such consolidation or consolidations. If any change of the common shares of the Company, as constituted on JUNE 28, 2002, occurs at any time while this warrant is outstanding, the Company will thereafter deliver at the time of purchase of shares hereunder the number of shares of the appropriate class resulting from the said change as the Bearer would have been entitled to receive in respect of the number of shares so purchased had the right to purchase been exercised before such change. If the Company, at any time while this warrant is outstanding, will pay any stock dividend or stock dividends upon the common shares of the Company in respect of which the right to purchase is herein then given, the Company will thereafter deliver at the time of purchase of shares hereunder in addition to the number of shares in respect of which the right of purchase is then being exercised, the additional number of shares of the appropriate class as would have been payable on the shares so purchased if they had been outstanding on the record date for the payment of said stock dividend. The Company will not be obligated to issue fractional shares in satisfaction of any obligation under this share purchase warrant. The Company covenants and agrees with the Bearer that the Company will give at least 30 days' notice of the record date of any dividend payment on its common shares, and before issuing to its shareholders pro rata rights to subscribe for any additional common shares, making any repayment of capital on its shares, consolidation or merging with any other Company or selling or leasing a substantial part of its undertaking. Such notice will be given by registered mail to PACIFIC CAPITAL MARKETS INC., C/O 1100 MELVILLE STREET, 6TH FLOOR, VANCOUVER, BRITISH COLUMBIA, V6E 4A6. The Bearer , by acceptance of this share purchase warrant, agrees that this share purchase warrant and all rights hereunder are non-transferable. Nothing contained in this share purchase warrant will confer any right upon the Bearer or any other person to subscribe for or purchase any shares of the Company at any time subsequent to 5:00 P.M. Pacific Standard Time, on JUNE 28, 2004, and from and after such time, this share purchase warrant and all rights hereunder will be void and of no value. The holding of this warrant will not constitute the Bearer a shareholder of the Company. The Bearer acknowledges and agrees that the warrants, and any common shares obtained as a result of the exercise of the warrants, may only be resold in compliance with the Securities Act of 1933, pursuant to a registration statement or an exemption from registration under the Securities Act of 1933. The Bearer acknowledges that the share certificates representing the shares issued on the exercise of the warrants will bear a trading restriction legend and may bear any other legend, if the legend or legends are reasonably required by the Company to comply with state, federal or foreign law. -2- If a share purchase warrant becomes mutilated, lost, destroyed or stolen, the Company, in its discretion, may issue and deliver a new warrant of like date and tenor as the one mutilated, lost, destroyed or stolen, in exchange for and in place of and upon cancellation of such mutilated warrant, or in lieu of, and in substitution for such lost, destroyed or stolen warrant, and the substituted warrant will be entitled to the benefit hereof and rank equally in accordance with its terms with all other warrants issued or to be issued by the Company. The applicant for the issue of the new warrant pursuant hereto will bear the cost of the issue therefore and in case of lost, destruction or theft furnish the Company such evidence of ownership and of loss, destruction, or theft of the warrant so lost, destroyed or stolen and it will be satisfactory to the Company in its discretion and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion, and will pay the reasonable charges of the Company in connection therewith. The warrant will be construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable thereto and will be treated in all respects as a British Columbia contract. Time will be of the essence hereof. IN WITNESS WHEREOF the Company has caused its corporate seal to be hereto affixed and this warrant to be signed by its President as of the 28th day of June, 2002. COMMUNICATE.COM INC. Per: ------------------------------ LEIGH JEFFS - PRESIDENT -3- SUBSCRIPTION FORM TO: PACIFIC CAPITAL MARKETS INC. 1100 Melville Street, 6th Floor Vancouver, British Columbia V6E 4A6 The undersigned, PACIFIC CAPITAL MARKET INC., exercises its right to purchase and subscribe for _____________ common shares in Communicate.com Inc. in accordance with the terms and conditions set out in the share purchase warrant and makes payment of the purchase price in full for the said number of shares. The common shares are to be issued as follows: Name: --------------------------------- Address: ------------------------------ ------------------------------ Number of Shares: --------------------- DATED this ____ day of ____________________, 200__. ------------------------------------- Name of Purchaser (Please Print) Per: --------------------------------- Authorized Signatory ------------------------------------- Official Capacity ------------------------------------- Name of individual whose signature appears above, f different from name of Purchaser -4- EX-99.1 6 ex99-1.txt EXHIBIT 99.1 EXHIBIT 99.1 COMMUNICATE.COM INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Communicate.com Inc. (the "Company") on Form 10-QSB for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David Jeffs, the Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ David Jeffs ------------------------------- David Jeffs Chief Executive Officer August 14, 2002 COMMUNICATE.COM INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Communicate.com Inc. (the "Company") on Form 10-QSB for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, J Cameron Pan, the Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ J Cameron Pan --------------------------------- J Cameron Pan Chief Financial Officer August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----