U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under section 13 or 15 (D) of
the Securities Exchange Act of 1934
for the fiscal year ended December 31, 2001
[ ] Transition report under section 13 or
15 (d) of the Securities Exchange Act of
1934 for the transition period from _____ to _____
YSEEK, INC.
(Name of small business issuer in its charter)
Florida 65-0783722
(State or other jurisdiction of (I.R.S. Employer Identi-
incorporation or organization) fication No.)
412 East Madison Street, Suite 1000
Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (813) 926-1603
Securities registered under Section 12(b) of the Exchange Act:
None
Name of exchange on which registered
OTC Bulletin Board
Securities registered under Section 12(g) of the Exchange Act:
Common stock, $.0001 par value
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No ___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
The issuer's revenue for the most recent fiscal year ending December 31,
2001, was $477.
The aggregate market value of the voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of March 28,
2002, was approximately $2,822,400.
The number of shares of the Company's common stock, par value $.0001 per
share, outstanding as of March 26, 2002, was 22,315,100.
Transitional Small Business Disclosure Format (Check One) Yes____ No X
Part I
Item 1. Description of Business
The Company
Yseek, Inc. is a Florida Corporation formed on September 23, 1997 ("Yseek"). The
Company is engaged in the business of operating an Internet search portal
WWW.Yseek.com., and derives substantially all of its income from advertising and
internet-linking agreements.
The Company was originally formed to develop, own and operate a chain of
full-service car washes and express oil change centers. The Company is a
successor to Steele Holdings, Inc., a Florida Corporation formed on August 13,
1997. Rachel Steele was the sole shareholder of and President of Steele
Holdings. On January 20, 1998, the Company and Steele Holdings, Inc., were
reorganized with all the assets of Steele Holdings being transferred into the
Company. All 6,000 authorized shares of common stock were exchanged on a one to
one thousand basis for shares in the Company. After the reorganization, all
stock in the Company was owned by the Company's president, Rachel Steele. Steele
Holdings has conducted no other business, held no other assets and was dissolved
on October 16, 1998. On October 22, 1999, the Company changed its name to
SwiftyNet.com, Inc. On January 29, 2001, the Company changed its name to Yseek,
Inc.
The Company constructed an oil change center in Palm Harbor, Florida on real
property owned by the Company (the "Center"). The approximately one (1) acre
site was purchased from Champion Hills by the Company's predecessor for
$312,500. The first Center was opened on January 18, 1999.The Center was sold on
April 19, 2000, for a cash sales price of $1,000,000. The sales price was
determined through arms-length negotiations. The car wash was purchased by In
and Out Express Lube, Inc. There were no material relationships between the
purchaser and the Company or its affiliates, or any officer or director, or any
associate of such officer or director.
In November 2000, the Company entered into a non-exclusive 10-year license for
web-based Internet search software with Norman J. Jester, III, for a total
consideration of 1,665,000 restricted shares of common stock. In January 2001,
the Company used the software to begin operating the Yseek.com web site.
Yseek.com provides a free search engine and links by category to other World
Wide Web sites at [www.yseek.com] The Company anticipates Yseek.com advertising
revenues will increase. We do not know if the site will ever be profitable.
Industry Description and Outlook
Competition among internet portals and search engines is significant. Yseek's
success will depend on the continued growth and success of markets for goods,
services and information on the Internet. A substantial portion of Yseek's
future revenues and profits will depend upon the widespread acceptance and use
of the Internet as an effective medium of business and communication by
potential customers. Rapid growth in the use of and interest in the Internet has
occurred only recently. As a result, use of the Internet and other online
services as a medium of commerce may not continue to develop. Demand and market
acceptance for recently introduced services and products over the Internet are
subject to a high level of uncertainty, and there are few proven services and
products. The Company's success will depend on its ability to attract and retain
users. The Yseek, Inc. search engine competes with other web sites which also
offer similar services for free. The success of the Company's web site, and
therefore the profitability of the Company, is dependent upon Yseek's ability to
attract and retain users. The completion of other established web sites such as
Yahoo Google and Alta Vista, which are better funded and more extensively
advertised, may adversely affect the Company's ability to attract and retain
users.
Business Strategy
The Company intends to continue to focus its efforts on the development in the
Internet market and marketing of the Yseek web site. The success of the web site
will depend upon the continued growth of the Internet in the future, the Company
intends to continue to look for opportunities to purchase and develop new and
innovative Internet and other technologies and will continue to diversify its
business.
Government Regulation
The Company believes that its operations are in compliance in all material
respects with applicable environmental laws and regulations. Compliance with
these laws and regulations is not expected to materially affect the Company's
competitive position. The Company is subject to developing regulations involving
the Internet. The Company believes that it is currently in compliance with all
state and federal Internet regulation and will continue to monitor those
regulations as they develop.
As an Internet business, the Company is subject to some regulation in every
state, as well and federal regulation. The Company believes that the number of
regulations will continue to increase and that compliance will become more
expensive. Currently the Company believes that it is in compliance with all
state and federal regulations.
Marketing
Marketing of the Company's web site was provided through linking agreements with
other web sites. Yseek had retained Candidhosting.com, Inc. and Voice Media to
increase use of Yseek's web site. However, both agreements have expired.
Item 2. Description of Property
The company's sole car wash was sold on April 19, 2000 for a cash sales price of
$1,000,000. The sales price was determined through arms-length negotiations. The
car wash was purchased by In and Out Express Lube, Inc. There were no material
relationships between the purchaser and the Company or its affiliates, or any
officer or director, or any associate of such officer or director.
Item 3. Legal Proceedings
The Company is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the Company's security holders
during the 2001 year. The Company's name change to Yseek, Inc. was approved by a
majority of the Company's outstanding shares without a meeting.
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's common stock are traded on the Over-the-Counter Bulletin Board.
The high and low sales prices for each quarter since then are as follows:
Common Stock
High Low
1st quarter 2000 $4.00 $1.563
2nd quarter 2000 $3.5633 $1.500
3rd quarter 2000 $1.844 $ .875
4th quarter 2000 $1.375 $ .344
1st quarter 2001 $0.719 $0.72
2nd quarter 2001 $0.38 $0.188
3rd quarter 2001 $0.34 $0.08
4th quarter 2001 $0.23 $0.06
The approximate number of holders of record of common stock is 110. No dividends
have been declared to date. The future dividend policy will depend upon the
Company's earnings, capital requirements, financial condition and other factors
considered relevant by the Company's Board of Directors.
Recent Sales of the Company's Securities.
None
Special Note Regarding Forward Looking Statements.
This annual report on Form 10-KSB of Yseek, Inc. for the year ended December 31,
2001 contains certain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which are intended to be covered by the safe
harbors created thereby. To the extent that such statements are not recitations
of historical fact, such statements constitute forward-looking statements which,
by definition, involve risks and uncertainties. In particular, statements under
the Sections; Description of Business, Business Strategy and Management's
Discussion and Analysis of Financial Condition and Results of Operations contain
forward-looking statements. Where, in any forward-looking statement, Yseek
expresses an expectation or belief as to future results or events, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished.
The following are factors that could cause actual results or events to differ
materially from those anticipated, and include but are not limited to: general
economic, financial and business conditions; competition from other Internet
companies; popularity of the Internet; changes in and compliance with
governmental regulations; changes in tax laws; and the costs and effects of
legal proceedings.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with the
Financial Statements and the related Notes thereto included elsewhere in this
report. This report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Special
Note Regarding Forward-Looking Statements."
PLAN OF OPERATION
In the fourth quarter of 2000 and the first quarter of 2001, the Company entered
into strategic alliances with companies and individuals with substantial
experience in the Internet industry. The alliances allowed the Company to
acquire management and marketing expertise through consulting agreements.
Although these agreements expired near the end of 2001, certain individuals are
continuing to provide management and marketing experience both in their roles as
consultants and in some cases as officers of the Company. Those individuals are
expected to continue to provide services, most likely in exchange for stock.
This will allow the company to continue to move forward without the use of its
limited funds.
Additionally, the Company acquired a ten-year software license for the use of a
keyword biddable search engine and related domain names. The Company entered
into two traffic promotion agreements whereby each promoter provided hits to the
Company web site. The Company issued stock in exchange for these agreements
enabling the Company to move forward on its plans without the use of any funds.
In April 2001, the Company's officers resigned. Individuals affiliated with the
consultants noted above were elected to the Board of Directors. These
individuals have substantial experience with profitable Internet companies and
web sites.
The Company's plans for the next twelve months include the continued promotion
of its Web search portal, Yseek.com. The search portal was launched in mid 2001
and the company has entered into several agreements with search engines during
the 3rd and 4th quarters of 2001. Other companies owned by officers of the
Company have continued to provide traffic to the Yseek site and the Company is
pursuing other options for traffic generation alliances. The Company believes
there will be sufficient traffic to make the site a profitable internet portal.
The Company's officers and consultants are involved with the internet industry
on a full time basis and are proceeding cautiously to attempt to learn from the
success and failures of other internet companies.
Additionally the Company's expansion plans include acquiring and developing
other profitable business ventures. The Company is currently exploring several
possible acquisitions however there are no pending letters of intent, active
negotiations or other plans.
In conjunction with planning the course of action for the next twelve months,
the new Board of Directors investigated the viability of Rankstreet.com.
Rankstreet was to be an all-in-one Web site including a directory, web counter
and business to business Internet advertising agency. The Board determined that
there was no value in pursuing the marketing and enhancement of the Rankstreet
web site and has abandoned any such plans. Additionally, management determined
that the contingencies stated in the acquisition agreement had not been met. In
June, 2001, the former stockholders of Rankstreet.com, Inc. entered into a
reformation agreement and returned 3,000,000 shares for which the contingencies
were not met.
The Company plans to market the Yseek.com search engine and to acquire and
develop other profitable business ventures that will require additional funds.
During April 2001, the Company received a $40,000 loan from a relative of a
Board member. The loan bears interest at 14% per annum and is due in April 2002.
During the 3rd and 4th quarters of 2001, the Company received $55,000 from two
officers of the Company and a company owned by officers. These funds bear
interest at 14% and are currently due on demand.
As of December 31, 2001 the Company had minimal available funds. However, most
of the Company's operations are being conducted within the consulting agreements
entered into in the fourth quarter of 2000 and the cash outflows have been
substantially reduced. Additionally two of the Company's officers and board
members have agreed to fund the Company's operations as they currently exist.
There is currently no expected purchase or sale of plant and equipment or
expected significant changes in the number of employees.
Item 7. Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Yseek, Inc.
We have audited the accompanying balance sheet of Yseek, Inc. as of December 31,
2001, and the related statements of operations, changes in stockholders' equity,
and cash flows for the years ended December 31, 2001 and 2000. These financial
statements are the responsibility of the management of Yseek, Inc. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 Yseek, Inc. as of December 31,
2001, and the results of its operations and its cash flows for the years ended
December 31, 2001 and 2000, in conformity with accounting principles generally
accepted in the United States of America.
Certified Public Accountants
Tampa, Florida
March 29, 2002
The accompanying notes to financial statements
are an integral part of this statement.
YSEEK, INC.
BALANCE SHEET
DECEMBER 31, 2001
ASSETS
Current assets
Cash $ 238
Other receivables 2,025
-----------------
Total current assets 2,263
-----------------
Software license, net 583,154
-----------------
Other assets
Shareholder loan receivable, net of allowance for
doubtful accounts of $128,442 11,165
-----------------
Total Assets 596,582
-----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 34,897
Current maturities of long-term debt 99,931
-----------------
Total current liabilities 134,828
-----------------
Long-term debt, less current maturities 6,234
-----------------
Commitments and contingencies
Stockholders' equity
Common stock; $.0001 par value; 50,000,000 shares authorized;
22,315,100 shares issued and outstanding 2,231
Paid-in capital 8,152,562
Accumulated deficit (7,699,273)
----------------
Total stockholders' equity 455,520
----------------
Total Liabilities and Stockholders' Equity 596,582
----------------
The accompanying notes to financial statements
are an integral part of these statements.
YSEEK, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
------------------ -----------------
Revenues $ 477 $ -
------------------ -----------------
Expenses
Selling, general and administrative 3,640,859 2,275,193
------------------ -----------------
Total expenses 3,640,859 2,275,193
------------------ -----------------
Other income (expense)
Interest income 11,888 9,068
Interest expense (7,976) (4,670)
------------------ -----------------
Total other income (expense) 3,912 4,398
------------------ -----------------
Loss from continuing operations (3,636,470) (2,270,795)
------------------ -----------------
Discontinued operations
Loss from discontinued carwash
and quick-lube operations - (53,719)
Loss on disposal of property, equipment
and related assets - (350,000)
------------------ -----------------
Loss from discontinued operations - (403,719)
------------------ -----------------
Net loss $ (3,636,470) $ (2,674,514)
Loss per common share
From continuing operations $ (.15) $ (.14)
Discontinued operations
Loss from operations - -
Loss on disposal - (.03)
------------------- ----------------
Total loss per share $ (.15) $ (.17)
Weighted average common shares outstanding 23,605,698 16,018,736
------------------- ----------------
The accompanying notes to financial statements
are an integral part of this statement.
YSEEK, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Total
Common Stock Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
---------- ----- ----------- ------------ --------------
Balance, December 31, 1999 10,907,120 1,090 $ 3,563,721 $(1,388,289) $ 2,176,522
Common stock sold 355,980 36 236,238 - 236,274
Common stock issued for services 9,912,000 991 4,707,679 - 4,708,670
Common stock issued for property and equipment 1,665,000 166 849,584 - 849,750
Common stock issued for acquisition of Rankstreet.com, Inc. 1,000,000 100 999,900 - 1,000,000
Services donated by stockholder - - 41,250 - 41,250
Net loss - - - (2,674,514) (2,674,514)
------------ --------- ----------- ------------ -------------
Balance, December 31, 2000 23,840,100 2,383 10,398,372 (4,062,803) 6,337,952
Common stock issued for services 475,000 48 104,640 - 104,688
Common stock issued for acquisition of Rankstreet.com, Inc. 1,000,000 100 203,000 - 203,100
Common stock returned in reformation agreement (3,000,000) (300) (2,562,200) - (2,562,500)
Services donated by stockholder 8,750 8,750
Net loss - - - (3,636,470) (3,636,470)
------------ ------- ------------- ------------- ---------------
Balance, December 31, 2001 22,315,100 $2,231 $ 8,152,562 $(7,699,273) $ 455,520
------------ -------- ------------ -------------- -----------------
The accompanying notes to financial statements
are an integral part of these statements.
YSEEK, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
Operating activities
Net loss $ (3,636,470) $(2,674,514)
Adjustments to reconcile net loss to net cash used in operating activities:
Contributed services 8,750 41,250
Stock issued to consultants 104,688 956,170
Depreciation and amortization 83,041 596,238
Increase in allowance for doubtful accounts 128,442 -
Writedown of property and equipment due to impairment 129,773 -
Recovery of amortization expense due to stock recision (324,069) -
Loss from disposal of assets from discontinued operations - 350,000
Loss from disposal of equipment 13,566 -
Increase in other receivables (2,025) -
Increase in interest receivable (11,863) -
Decrease in prepaid expenses 3,349,468 448,035
Increase (decrease) in accounts payable and accrued expenses 2,620 (4,007)
------------------ -------------
Total adjustments 3,482,391 2,387,686
------------------ -------------
Net cash used in operating activities (154,079) (286,828)
Investing activities
Acquisition of property and equipment - (9,801)
Decrease (increase) in deposits and other assets 30,000 2,600
Net proceeds from sale of discontinued business segment - 223,071
----------------- -------------
Net cash provided by investing activities 30,000 215,870
----------------- -------------
Financing activities
Proceeds from issuance of notes and loans payable 95,000 -
Payments on notes payable (4,252) (16,964)
Net proceeds from issuance of stock and
contribution of cash - 236,274
Net advances from (to) a stockholder 32,519 (184,927)
----------------- --------------
Net cash provided by financing activities 123,267 34,383
----------------- --------------
Net decrease in cash (812) (36,575)
Cash, beginning of year 1,050 37,625
----------------- --------------
Cash, end of year $ 238 $1,050
----------------- --------------
The accompanying notes to financial statements
are an integral part of these statements.
YSEEK, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Supplemental disclosures of noncash investing and financing activities
2001 2000
---------------
-----------------
Business acquired by issuance of common stock $ - $1,000,000
Acquisition of prepaid asset with issuance of common stock - 3,752,500
Issuance of 1,262,000 shares of common stock for consulting services - 956,170
Acquisition of software through the issuance of common stock - 849,750
In June 2001, 3,000,000 shares of common stock were returned to the Company
related to goodwill originally valued at $2,562,500.
-----------------------------------------------------------------------------------------------------------------------------------
Cash flow information
2001 2000
---------------- -----------------
Cash paid for interest $ 2,016 $37,759
-------------------------------------------------------------------------------
YSEEK, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
(1) Significant Accounting Policies:
The following is a summary of the more significant accounting policies and
practices of Yseek, Inc. (the Company) which affect the accompanying financial
statements.
(a) Organization--Yseek, Inc. was incorporated on September 23, 1997.
(b) Operations--The Company acquires and develops unique Internet
companies, technologies and Web properties that have the potential to make
an impact on the industry. In late 1999, the Company acquired a company
that has developed a web site to provide comparative statistical analysis
of Internet advertising. This web site and its technology was abandoned in
early 2001. Late in 2000, the Company launched a Internet search portal
called Yseek.com.
Originally the Company was formed to develop, own and operate a chain of
full-service car wash and express oil change centers. The Company owned
and operated one such center from January, 1999 through April, 2000. The
center was sold in April 2000. The Company discontinued this segment of
business.
(c) Use of estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect certain reported
amounts and disclosures. Accordingly, actual results could differ from
those estimates.
(d) Cash--For the purposes of reporting cash flows, the Company considers
all highly liquid investments with an original maturity of three months or
less to be cash equivalents.
(e) Software license--The cost of purchased software is capitalized and
depreciated using the straight-line method over the estimated useful life of ten
years.
(f) Loss per common share--Loss per share is based on the weighted average
number of common shares outstanding during each period in accordance with
Statement of Financial Accounting Standards No. 128, Earnings Per Share. In
computing diluted earnings per share, warrants were excluded because the effects
were antidilutive.
(g) Advertising--Advertising costs are charged to operations when incurred.
Advertising expense was $4,300 and $2,928 for the year ended December 31,
2001 and 2000, respectively.
(h) Deferred income taxes-- Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statements carrying amounts of existing
assets and liabilities and their respective income tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized as income in the
period that included the enactment date.
(1) Significant Accounting Policies: (Continued)
--------------------------------
(i) Reclassifications--Certain reclassifications have been made to 2000
financial information to conform to the 2001 presentation.
(j) Long-lived assets--Long-lived assets to be held and used are reviewed
for impairment whenever events or changes in circumstances indicate that the
related carrying amount may not be recoverable. When required, impairment losses
on assets to be held and used are recognized based on the excess of the asset's
carrying amount and fair value of the asset and long-lived assets to be disposed
of are reported at the lower of carrying amount or fair value less cost to sell.
(2) Reformation Agreement and Loss From Impairment of Assets:
In December 1999, the Company purchased all the outstanding stock of
Rankstreet.com, Inc. In the transaction accounted for as a purchase, the total
purchase price of $2,763,510 (including the value of contingent shares issued in
May, 2000 and February, 2001) was classified as goodwill. The goodwill was being
amortized over five years and as of December 31, 2000, accumulated amortization
totaled $525,082.
Additionally, during 2000 the Company contracted with consultants to develop a
web site for Rankstreet. The web site was capitalized with a value of $206,250
and was being amortized over three years. Accumulated amortization as of
December 31, 2000 was $59,289.
In April 2001, the existing management and Board of Directors of the Company
resigned and were replaced by individuals with experience with internet based
businesses. The new Board of Directors evaluated the website and the goodwill
that was acquired in the purchase of Rankstreet.com, Inc. and deemed it to be
impaired and of no future value to the Company.
Upon further investigation by the Company's new management it was determined
that certain contingencies in the original acquisition agreement had not been
met. In June 2001, the original stockholders of Rankstreet.com, Inc. entered
into a reformation agreement with the Company. This agreement concluded that the
3,000,000 shares issued in December 1999 and May 2000 would be returned since
the contingencies related to these shares had not been met. Those shares were
returned to the Company in June 2001. This reformation results in a reduction in
goodwill related to the Rankstreet acquisition of $2,562,500, the original value
of the shares issued. This resulted the recovery of amortization in the amount
of $324,069. The Company recognized an impairment loss due to the Rankstreet
website of $129,773.
(3) Software License:
Software license as of December 31, 2001, consists of:
Software license $ 654,005
Less: accumulated amortization (70,851)
----------------
Software license, net $ 583,154
(3) Software License: (Continued)
Depreciation expense was $453 and $19,417 in 2001 and 2000, respectively.
Amortization expense on software, which is included in depreciation expense, was
$65,401 and $5,450 in 2001 and 2000, respectively. Accumulated amortization on
software license was $70,851 as of December 31, 2001.
(4) Long-term Debt:
Long-term debt as of December 31, 2001, consists of the following:
Note payable to finance company, interest at 14.9%, payment of $522 per
month including interest through December 2003 $
11,165
Note payable to relative of officer, interest of 14%, principal and interest due
April 2002, uncollateralized
40,000
Loan payable to officer, interest at 14%, principal and interest due on demand,
uncollateralized
9,700
Loan payable to officer, interest at 14%, principal and interest due on demand,
uncollateralized
11,500
Loan payable to company owned by two of the officers, interest at 14%, principal
and interest due on demand, uncollateralized
33,800
.................
106,165
Less: Amounts currently due
99,931
----------------
$
6,234
----------------
The following is a schedule by year of the approximate principal payments
required on the above debt as of December 31, 2001:
Year Ending December 31, Amount
2002 $ 99,931
2003 6,234
2004 -
2005 -
2006 -
(5) Income Taxes:
-------------------------------------------------------------------------------
No provision for income taxes has been recorded for 2001 or 2000 due to net
losses incurred.
Temporary differences giving rise to the deferred tax assets consist primarily
of the deferral and amortization of start-up costs for tax reporting purposes
and differences in lives and depreciation methods for property and equipment and
intangible assets. Management has established a valuation allowance equal to the
amount of the deferred tax assets due to the uncertainty of realization of the
benefit of the net
(5) Income Taxes: (Continued)
-------------
operating losses against future taxable income. The components of deferred tax
assets at December 31, 2001, consist of the following:
Deferred tax assets:
Net operating loss $ 1,820,000
Deferred start up costs and other temporary differences 31,000
Valuation allowance (1,851,000)
Net deferred tax asset ------------
$ -
-----------
The Company has operating losses of approximately $7,000,000 which can be used
to offset future taxable income. These losses begin to expire in the year 2018.
(6) Stock Transactions:
During 2000, the Company sold shares totaling 355,980 at prices ranging from
$0.75 to $1.00 per share. Total proceeds of $236,274, net of related expenses
were received from these sales. Certain shares were sold with warrants totaling
249,000. See Note 8 for the exercise price and termination dates of warrants.
During 2000, the Company issued 1,262,000 shares of common stock to certain
individuals for services. The Company recorded an expense of $956,170, the
market value of the shares less a 50% discount because the shares are
unregistered, are a significant block of stock and the stock is not easily
marketable.
During 2000, the Company issued 1,665,000 shares of common stock to certain
individuals for software and a license to use software. The Company capitalized
$849,750, the market value of the shares less a 50% discount because the shares
are unregistered, are a significant block of stock and the stock is not easily
marketable.
During 2000, the Company issued 5,790,000 shares of common stock under
consulting agreements with certain individuals and companies. Some individuals
and companies are related to officers or directors of Yseek. The consulting
agreements are for one year and expire in late 2001. The Company recorded a
prepaid expense of $2,465,500 related to these agreements, the market value of
the shares less a 50% discount because the shares are unregistered, are a
significant block of stock and the stock is not easily marketable. During 2001
and 2000, the Company expensed $2,169,719 and $295,781, respectively utilizing
the straight line method over the life of the agreements. Additionally, options
were granted to three entities as part of these agreements. See Note 9 for the
terms of the option agreements.
During 2000, the Company issued 2,860,000 shares of common stock under two
traffic promotion agreements with two companies related to officers and
directors of Yseek. These agreements are for one year, or until the Company's
web sites have received an aggregate of 45,000,000 hits under each agreement,
whichever is earlier. The Company recorded a prepaid expense of $1,287,000
related to these agreements, the market value of the shares less a 50% discount
because the shares are unregistered, are a significant block of stock and the
stock is not easily marketable. During 2001 and 2000, the Company expensed
$1,179,750 and $107,250, respectively utilizing the straight-line method over
the life of the agreements.
(6) Stock Transactions: (Continued)
-------------------
During January and February of 2001, the Company issued 150,000 shares of common
stock to individuals and other entities for services performed during the first
quarter of 2001. The Company recognized an expense of $31,250, the market value
of the shares less a 50% discount because the shares are unregistered and the
Company stock is not easily marketable.
During January and February of 2001, the Company issued 200,000 and 125,000
shares of common stock under six month and one year consulting agreements,
respectively. The 125,000 shares were issued to an officer of the Company. The
Company recorded a prepaid expense of $73,438 related to these agreements, the
market value of the shares less a 50% discount because the shares are
unregistered and the stock is not easily marketable. The Company expensed
$73,438 utilizing the straight line method over the life of the agreements in
2001. Additionally, options were granted to an individual as part of one of the
agreements. The option agreement allows for the purchase of 75,000 shares of
Company common stock for $.50 per share for a period of three years. The other
consulting agreement included issuance of 500,000 warrants at an exercise price
of $.50 per share.
During February 2001, the Company issued the final contingent 1,000,000 shares
related to the 1999 business acquisition. The Company capitalized goodwill of
$203,100, the market value of the shares less a 50% discount because the shares
are unregistered, are a significant block of stock and the Company stock is not
easily marketable. See Note 2 regarding goodwill and shares rescinded.
(7) Commitments and Related Party Transactions:
------------------------------------------
The President and Operations Manager performed services for the Company at no
cost through March 2001. The Board of Directors valued these services at $8,750
and $41,250 at 2001 and 2000, respectively, and recorded this amount as an
expense and an increase in additional paid-in capital in the accompanying
financial statements. The Operations Manager has an employment contract through
March 2001, with a minimum salary of $25,000 per year.
In November 1998, the company entered into a consulting contract with a
stockholder. The contract called for annual compensation of $72,500 for a period
of three years. During 1999, this contract was amended to allow the consultant
to provide services on an as needed basis for a negotiated amount rather than a
stated amount. No fees have been paid under this contract. During 2000 the
Company issued 67,000 shares of common stock to the consultant and recorded
$61,744 in expense, the current market value attributed to the 67,000 shares
less a 50% discount because the shares are unregistered and due to the lack of
marketability of the Company stock.
The Company entered into several agreements with related parties as described in
Note 6.
The above related party agreements are not necessarily indicative of the
agreements that would have been entered into by independent parties.
During 1998, the Company entered into an agreement for use of a private suite at
the Raymond James Stadium for the 1998 through 2003 football seasons. Included
in deposits at December 31, 2000 was a $30,000 deposit in accordance with the
terms of this agreement. The Company incurred expenses of $33,030 during 2000,
related to this agreement. The Company was committed under this agreement for an
annual fee of $30,000 through 2003. In June, 2001 the Company terminated this
agreement and forfeited their deposit of $30,000.
(7) Commitments and Related Party Transactions: (Continued)
In 1999, the Company entered into a three-year advertising promotion and
publicity agreement and recorded a prepaid expense of $270,400. Each year, the
Company reduces this prepaid asset in amounts equal to the greater of the actual
costs incurred under the agreement or an amount equal to the amortization of the
initial amount over the three year term using the straight line method. The
Company expensed $17,400 in 2000. This amount was fully amortized at December
31, 2000.
(8) Warrants:
At December 31, 2000, the Company had outstanding exercisable warrants to
purchase 318,240 shares of the Company's common stock at $2.00 per share. The
warrants expired in 2001.
At December 31, 2001, the Company had outstanding exercisable warrants to
purchase 249,000 shares of the Company's common stock at various prices based
upon expiration dates. Warrants expiring in 2002 and 2003, are exercisable at
$5.00 and $7.00, respectively.
Prior to expiration, the warrants may be redeemed by the Company at a price of
$.01. As of December 31, 2001 no warrants have been redeemed.
(9) Stock Options:
The Company granted options to consultants under various consulting agreements.
These agreements grant to the consultants the option to purchase shares of
Company common stock at a fixed price of $.50 per share. Management has
determined these per share prices equals or exceeds fair market value. These
options expire on the third anniversary date of the execution date of the
respective agreement and are immediately vested.
A summary of consultant option activity follows:
December 31,
2001 2000
--------------- ----------------
Outstanding, beginning of year 3,000,000 -
Issued 75,000 3,000,000
Cancelled - -
---------------- ----------------
Outstanding, end of year 3,075,000 3,000,000
---------------- ----------------
The Company follows SFAS 123 in accounting for stock options issued to
nonemployees. The fair value of each option granted is estimated using the
Black-Scholes stock option pricing model. The following assumptions were made in
estimating fair value: risk-free interest rate of 5.33% in 2000 and 5.38% in
2001; no dividend yield; expected life of one and one-half years; 9.65%
volatility in 2000 and 9.53% volatility in 2001. There was no compensation cost
related to these options.
The weighted average exercise price of options granted was $.50 in 2001 and
2000. The weighted average fair value of options granted was $.00 and $.01 in
2001 and 2000, respectively.
(10) Discontinued Operations:
On April 19, 2000, the Company sold or disposed of 100% of the assets and
liabilities of its carwash and quick-lube segment. The sale price was $1,000,000
and the Company received cash of approximately $223,000 after selling expenses
and payment of related mortgages. The results of operations for the year ended
December 31, 2000, are reported as a component of discontinued operations in the
statements of operations.
Additionally, the loss incurred on the sale of the operations is also presented
separately as a component of discontinued operations.
Summarized results of carwash and quick-lube operations for the years ended
December 31, 2001 and 2000 are as follows:
Year Ended
December 31,
2001 2000
--------------------------------
Net sales $ - $ 82,191
-------------------------------
Operating income (loss) $ - $ (53,719)
--------------------------------
Income (loss) from discontinued
operations $ - $ (53,719)
--------------------------------
(11) Revenue Agreements:
The Company has entered into a number of short-term revenue sharing agreements
with internet host sites. Generally, under the terms of these agreements, the
Company shares in a portion of the host site revenues, as defined, generated by
the Company's internet search portal. Through December 31, 2001, the Company has
generated no material revenues associated with these agreements.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company has not had any disagreement with its independent auditor on any
matter of accounting principles or practices or financial statement disclosure.
Effective July 21, 2000, Yseek engaged B2d Semago (f/k/a Semago & Co., P.A.) as
its independent auditors for the year ending December 31, 2000 to replace the
firm of Pender Newkirk & Company, C.P.A., who were dismissed as its auditors
effective July 21, 2000. The decision to change auditors was approved by Board
of Directors.
The reports of Pender, Newkirk & Company, on the consolidated financial
statements of Yseek, Inc., from August 13, 1997 (inception) to December 31,
1999, did not contain an adverse opinion or a disclaimer of opinion and were not
qualified as to uncertainty, audit scope or accounting principles.
There were no disagreements with Pender, Newkirk & Company on any matters of
accounting principles or practices, financial statement disclosure or auditing
scope and procedures in connection with the audits of SwiftyNet's consolidated
financial statements for the two-year period ended December 31, 1999 or during
the subsequent period preceding the dismissal date of July 21, 2000, including
the period covered in SwiftyNet's 10-QSB filed May 13, 2000.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act The following is a brief description of
the educational and business experience of each director, executive officer and
key employee of the Company:
David G. Marshlack, age 38, is engaged (with Mr. Hammil) in the operation of
Candidhosting, Inc. and Entertainment Network, Inc.
Charles Bruce Hammil, age 37, is engaged (with Mr. Marshlack) in the operation
of Candidhosting, Inc. and Entertainment Network, Inc.
Ron Levi, age 51, is president of Voice Media Inc.
Mark Dolan, age 50, has been actively engaged in the practice of law since 1986.
Mr. Dolan has been employed by Mark R. Dolan, PA., of Tampa, Florida since June
1998. From April 1996 to June 1998, Mr. Dolan was an employee and stockholder of
Lirot-Dolan, P.A., of Tampa, Florida.
Paul Runyon, age 55, is engaged as mangaging partner of Lincoln Equity Research.
No voting arrangements exist between the officers and directors. The above
persons were selected pursuant to provisions in the Company's By-Laws, all
holding office for a period of one year or until their successors are elected
and qualified. None of the officers or directors of the Company have been
involved in legal proceedings during the past five years which are material to
an evaluation of the ability or integrity of any director, person nominated to
become a director, or executive officer of the issuer, including any state or
Federal criminal and bankruptcy proceedings.
Item 10. Executive Compensation
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Securities All
Principal Annual Restricted Underlying Other
Position Compen Stock Options/ LTIP Compens-
Year Salary($) Bonus($) sation Awards($) SARs(#) Payouts($) sation($)
Charles Bruce Hammil
President 0 0 0 0 0 0 0 0
Mark Dolan
Secretary 0 0 0 0 0 0 0 0
Louis Haskel
Treasurer 0 0 0 0 0 0 0 0
Rachel Steele(1) 0 0 0 0 0 0 0 0
Raymond Lipsch(2) 0 0 0 0 0 0 0 0
Donald Hughes(3) 0 0 0 0 0 0 0 0
(1) Resigned as president April, 2002
(2) Resigned as treasurer April, 2002
(3) Resigned as vice president April, 2002
All of the Company's officers and director but Ms. Steele are engaged in other
enterprises on a full-time basis. Ms. Steele donated her 2000 and 2001 salary to
the Company. No other officer or directors have been compensated for their
services in those capacities. At this time, the Company does not plan on paying
its Board of Directors in return for their services as Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management
None of the officers and directors have received a salary during the past twelve
months. There are no officer or director groups. As a group, the officers and
directors of the Company own 8,203,000. As of March 26, 2002 the stock ownership
of the Officers and Directors and 10% Shareholders was as follows.
Title Name and Amt and Percent
Of Address Nature of of
Class of Beneficial Owner Beneficial Ownership Class
Common David G. Marshlack 3,860,000(1) 17.30%
Stock 412 East Madison Street
Suite 1000
Tampa, Florida 33602
Common Charles Bruce Hammil 3,860,000(1) 17.30%
Stock 412 East Madison Street
Suite 1000
Tampa, Florida 33602
Common Ron Levi 3,718,000(2) 16.66%
Stock 2533 North Carson Street
Carson City, NV 69708
Common Mark Dolan 125,000 .56%
Stock 412 East Madison Street
Suite 1000
Tampa, Florida 33602
Common Paul Runyon 500,000 2.24%
Stock
Common Candidhosting.com, Inc. 3,860,000 17.30%
Stock 412 East Madison
Suite 1000
Tampa, FL 33602
Common Voice Media, Inc. 3,718,000 16.66%
Stock 2533 North Carson Street
Suite 1091
Carson City, NV 69708
Common
Stock Total 8,203,000 36.76%
(1) Shares held in the name of Candidhosting, Inc., a corporation controlled by
Mr. Marshlack and Mr. Hammil
(2) Shares held in the name of Voice Media, Inc.
Item 12. Certain Relationships and Related Transactions
The Company entered into an employment contract with David Weintraub on April 1,
1999. Mr. Weintraub will be employed by the Company as Operations Manager for a
salary of $25,000 per year. The term of employment is two years. In 1999, Mr.
Weintraub donated his salary for the year 1999 to the Company.
Don Hughes as president of Don Hughes General Contractor, Inc., who is also a
Director and Vice-President of the Company, entered into a contract with the
Company to provide consulting services in construction and real estate for which
a sum of $210,000 was deposited for his use. On or around November 30, 1999, Mr.
Hughes paid the Company for the amount deposited by returning 50,000 shares of
stock to the Company with each share being valued at $4.00 voiding any agreement
for consulting services.
In addition, the Company has entered into a six (6) year license agreement with
the Tampa Bay Buccaneers for a Luxury Suite. The agreement required a deposit of
$30,000 and then payments of $30,000 per year with half of that amount due on
September 1, and half due on December 1. The term of the agreement began in
1998. In June, 2001 the Company terminated its Luxury Suite licenses agreement
agreeing to pay the Buccaneers Limited Partnership $30,000 in full settlement
for the 2001, 2002 and 2003 football seasons.
Item 6. Exhibits and Reports on Form 8-K
Exhibit Description Number
(2)Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession
(3)Articles of Incorporation and By-Laws
*(3.1)Articles of Incorporation
**(3.2)By-Laws
++(3.3)Articles of Amendment Name Change
(4)Instruments Defining the Rights of Security Holders
(a)Subscription Agreement
*(b)Warrant Agreement
++(c)Warrant Resolution dated March 2, 2000
(9)Voting Trust Agreement
(10)Material Contracts *(10.1)Equipment Purchase Contract *(10.2)Construction
Contract *(10.3)Architect Contract *(10.4)Consulting Contract-Donald Hughes
*(10.5)Employment Contract-Stanley Rabushka *(10.6)Promissory Note - Swifty
*(10.7)Promissory Note - Steele *(10.8)Consulting Contract-John Oster
*(10.9)Raymond Lipsch Contract *(10.10)Land Purchase Contract
**(10.11) Stanley Rabushka Employment and Stock Agreement
**(10.12) Tampa Bay Buccaneers Agreement
***(10.13)Edgar Arvelo Consulting Contract
***(10.14)Richard Kleinberg Employment Contract
***(10.15)Vladimir Rafalovich
***(10.16)Martinez Consulting Contract
****(10.17)Purchase and Sale Contract between Jim Malak and/or Assigns and
SwiftyNet.com, Inc.
dated April 6, 2000
+(10.18)Consulting Agreement with Netelligent Consulting
dated October 11, 2000
+(10.19)Consulting Agreement with Frank Pinizzotto
dated September 19, 2000
+(10.20)Consulting Agreement with Gigi Pinizzotto
dated September 19, 2000
+(10.21)Professional Services Agreement with
Laurie Stern dated July 31, 2000
+(10.22)Consulting Agreement with Mark Daniel White
dated September 19, 2000
++(10.23)Consulting Agreement with Nick Trupiano
dated November 25, 2000
++(10.24)Consulting/Option Agreement with CandidHosting.com, Inc.
dated December 1, 2000
++(10.25)Consulting/Option Agreement with David S. Goldman
dated December 19, 2000
++(10.26)Consulting/Option Agreement with Voice Media, Inc.
dated December 1, 2000
++(10.27)Public Relations Agreement with Shoreliner
Capital Ltd. Partnership dated January 17, 2001
++(10.28 Traffic Promotion Agreement with Voice Media, Inc.
dated November, 2000
++(10.29)Traffic Promotion Agreement with CandidHosting.com,Inc.
dated December 1, 2000
++(10.30)Consulting Agreement with Paul Runyon
dated November 25, 2000
++(10.31)Non-Exclusive License Agreement with Norman J. Jester, III
dated November, 2000
++(10.31)Client Services Agreement with Markham/Novell
Communications, Ltd. dated January 9, 2001
++(10.32)Client Services Agreement with Novell Markham
Communications, Ltd. dated January 9, 2001
++(10.33)Stock Option Agreement with Mark P. Dolan
dated January 10, 2001
++(10.34)Assignment of Contract with Netelligent
dated December 7, 2000
++(10.35)Consulting Agreement with Marlene Trupiano
dated January 3, 2000
++(10.36)Consulting Agreement with Marlene Trupiano
dated November 25, 2000
++(11)Statement re: computation of per share earnings Note 1 to
Financial
Statements
(13)Annual or Quarterly Reports, Form 10Q None
(16)Letter regarding Changes in Certifying Accountant None
(18)Letter on change in accounting principles None
(21)Subsidiaries of the registrant None
(22)Published report regarding matters submitted to vote None
(23)Consents of Experts and Counsel None
(24)Power of Attorney None
(99)Additional Exhibits None
* Previously filed with Form 10-SB on November 23, 1998. ** Previously filed
with Form 10-SBA No. 1 on February 2, 1999. *** Previously filed with Form
10-KSB filed on March 30, 2000. **** Previously filed with Form 10-QSB filed May
15, 2000. + Previously filed with Form 10QSB filed 11-17-00 ++ Previously filed
with Form 10KSB filed March 29, 2001
Reports on Form 8-K
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on March 29, 2002.
YSEEK, INC.
f/k/a SwiftyNet.com, Inc.
By:/s/ David G. Marshlack
David G. Marshlack,
Chairman of the Board
In accordance with the requirements of the Exchange Act, this report
has been signed by the following persons in the capacities indicated on March
29, 2002.
SIGNATURE TITLE
Chairman of the Board, Director
/s/David G. Marshlack
David G. Marshlack
President, Director
/s/Charles Bruce Hammil
Charles Bruce Hammil
Secretary, Director
/s/Mark R. Dolan
Mark R. Dolan
Treasurer
/s/Louis Haskel
Louis Haskel
Director
/s/Paul Runyon
Paul Runyon
Director
/s/Ron Levi
Ron Levi