Special Services Agreements
o In June 1998, pursuant to a stock purchase agreement, the Company issued
25,000,000 shares of common stock for public relations and marketing
services. Subsequently, the purchaser defaulted on the terms of the
agreement and 9,250,000 shares were returned to the Company. These shares
of stock are reflected as treasury stock in the accompanying financial
statements.
o On March 31, 1999, the Company entered into a cancellable special services
agreement with an unrelated active participation investor. Pursuant to
this agreement, the investor was to provide various public relations and
marketing services to the Company in exchange for the right to purchase
87,500,000 shares of the Company's stock for $1,000,000. The purchase of
these shares was to occur in stages, at varying per share prices ranging
from $.0025 to $.20 per share. At March 31, 1999, the shares associated
with this agreement were recorded as subscribed common shares. The shares
were offered pursuant to Rule 504 of Regulation D of the Securities Act of
1933, as amended.
o In accordance with the above agreement, upon collection of the
subscription price for the first stage, 25,000,000 shares of common stock
were issued. For these shares, the $812,500 difference between the fair
value of the stock at March 31, 1999, and its selling price, was recorded
as stock marketing expense.
On or about September 1, 1999, the Company was de-listed from the OTCBB.
Subsequently, the company reduced the subscription price on the remaining
62,500,000 shares to 0.005 per share. In the accompanying financial statements,
the stock subscription receivable was adjusted to reflect the revised
subscription price.
In March 2000, the remaining 62,500,000 shares were issued for $312,500,
completing the Company's obligation for this special services agreement.
The Company, at September 30, 2000, had $2,060,360 in assets compared to
$513,551 and $524,167 as of December 31, 1999 and 1998 respectively. The
increase in assets from the prior period is due primarily to the issue of stock
for cash and acquisition, for stock, of Beach Access.Net, Inc. and related
entities. Liabilities consisting of certain accrued expenses totaled $531,411
as of September 30, 2000 compared to $501,025 and $469,956 for 1999 and 1998
respectively.
The Company has reduced the value of its Patent, acquired from a related
company, from $470,000 to $61,073, less accrued amortization. The Company has
made this change to reflect the actual costs related to the Patent, in
accordance with regulatory requirements. The Company has also reduced the
offsetting Note Payable to related entities, with the entity's approval. The
resulting adjustment to interest expense is reflected in Additional Paid-In
Capital.
The Company has also recorded revised accrued interest on Shareholder Notes of
$348,900. The Notes had previously been recorded as zero interest notes. In
lieu of interest, shareholders had received additional stock certificates.
Interest equal to the par value of the shares had been recorded. In accordance
with regulatory requirements, interest, at the rate of average annual Prime + 1%
during the term of the notes, has been accrued, with the adjustment reflected in
Paid-In Capital.
If the Company is unable to begin to generate revenues from its anticipated
operations, management believes the Company will need to raise additional funds
to meet its cash requirements, including its current debt service obligations
over the next 12 months.
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