SHUAIYI INTERNATIONAL NEW RESOURCES DEVELOPMENT INC. - SB-2/A - 20040728 - PROPERTIES
Description of Property.
The Company utilizes the residence of its President, Mr. Brian Jaggard, for
offices. No monthly fee is paid for rent. The server leased by The Company and
on which our software is running, was moved from Burnaby, British Columbia to a
facility at 8863 216th Street, Langley, British Columbia. The purpose of the
move was to reduce the costs associated with its location in Burnaby, British
Columbia.
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Management
The executive officers and directors of the Company and their ages are as
follows:
Held
Name Age Position Position Since
---- --- -------- --------------
Brian Jaggard 43 President, Chief Exec. August, 2000
Officer, Chief Financial
Officer, Director
Douglas Dunn 44 Chief Operations Officer, May, 2001
Director, Secretary
Carl Lacey 56 Director February, 2003
The Directors serve until their successors are elected by the shareholders.
Vacancies on the Board of Directors may be filled by appointment of the majority
of the continuing directors. The executive officers serve at the discretion of
the Board of Directors. There are no family relationships between the directors.
Business Experience
Board of Directors/Executive Officers
Mr. Jaggard has 20 years experience as a financial manager and analyst in the
automotive industry. He has built and led teams that worked successfully to
improve the financial performance of large, multi-national companies such as
Ford, Volkswagen, and Toyota.
Summary of previous 5 years work experience:
- October 2003 to Present: President and CEO of YzApp International Inc.,
Langley British Columbia, Canada. Responsible for the operations of the firm,
reporting to the board of directors as well as appointment and direction of
other managers and subcontractors.
- August 2000 to Present: President and CEO of YzApp Solutions Inc.,
Langley British Columbia, Canada. Responsible for the operations of the firm,
reporting to the board of directors as well as appointment and direction of
other managers and subcontractors.
- March 2000 to August 2000: Contracted to develop an e-commerce business
plan for Multiland Investments Inc., Richmond British Columbia, Canada.
Multiland Investments is the parent company of the Open Road Group of
dealerships. These dealerships sell and lease new Toyota and Honda automobiles
in British Columbia. Responsibilities included development and refinement of the
business model to be deployed as well as recruitment and coordination of other
contractors.
- March 1997 to March 2000: Branch Credit Manager, Toyota Credit Canada
Inc., Richmond British Columbia, Canada. Responsible for funding up to $35
million per month in receivables to individuals as well as to small and
medium-size businesses.
Prior to his three years with Toyota, Mr. Jaggard spent four years as Manager,
Western Canada for Volkswagen Credit Canada (Richmond BC). He was National
Credit Manager for Pacific National Leasing Corporation from 1990 to 1993 in
Vancouver BC. During his eight-year career with Ford Credit in Vancouver and
Toronto, Brian successfully managed a highly profitable $700 million portfolio.
Mr. Dunn is a marketing professional with 17 years experience providing
marketing and development expertise to a corporate, government and non-profit
sector clientele.
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Mr. Dunn has served as a Director of Knexa.com Solutions Inc., a publicly traded
firm on the CDNX (now the TSX). Mr. Dunn has also held Directorships in over 20
Non-Profit organizations the majority operating as Federally Registered
Charities in Canada. His only current Directorship is with the Underwater
Council of British Columbia, with who he is in charge of strategic planning.
Summary of previous 5 years work experience:
- October 2003 to Present: COO of YzApp International Inc., Langley,
British Columbia, Canada. Supporting the Founder/CEO in all activities and
participating in all operational aspects of the firm as well as corporate
strategy decisions, of a software company providing Internet ASP solutions. The
leader in identification and development of strategic alliances. Directly
responsible for all sales, marketing and communications programs. Acting CTO
leading the software development team as well as leading testing, deployment and
software enhancement efforts. Established all sales and customer service
initiatives including lead creation, tracking, solicitation, training and
technical support.
- May 2001 to Present: COO of YzApp Solutions Inc., Langley British
Columbia, Canada. YzApp Solutions was a software company providing Internet ASP
solutions. COO was responsible for establishing sales and customer service
initiatives including lead creation, tracking, solicitation, training and
technical support.
- January 1999 to May 2001: Director, Recording Secretary, Vice-President
Marketing of Knexa.com Enterprises Inc., Vancouver British Columbia, Canada. As
a member of the Board of Directors, co-ordination of alliances to establish a
new E-commerce sector, Knowledge Exchanges, including strategic alliances in
Australia, Asia, Europe and the United States. As Recording Secretary/Board
Member intimately involved in all aspects of the operation of CDNX listed public
company. In the capacity as VP Marketing, directly responsible for the
development and execution of all marketing and communications programs. In
addition, personally created and established new Internet marketing programs
including a new business model, Knowledge Agencies. In early phases of the
project, also led the technical team in the creation and development of software
and Internet applications. Established all sales and customer service
initiatives including lead creation, tracking and development. Key solicitor for
all sales and alliance activities.
- August 1996 to December 1998: District Manager at Entertainment
Publications Ltd., Vancouver British Columbia, Canada. Responsible for
acquisition, servicing and retention of community groups and organizations
selling Entertainment coupon books and related products, with total district
sales of $1.9 million. Management of sales and sales support positions.
Co-ordination of public relations/advertising alliances with print, radio and
television. Development of sales and marketing strategies as well as new product
introduction.
- March 1983 to Present: March, 1983 - Present SILVER DRAGON ENTERPRISES
LTD., Langley, B.C. President/Sole Owner Providing marketing and development
expertise on a contract basis to corporate, government and non-profit sector
clientele ranging from the British Columbia Ministry of Municipal Affairs,
Recreation & Culture to the Vancouver Maritime Museum.
Mr. Lacey, a retired Canadian business executive, has returned from retirement
and has been living in Canada for the past 3 years. Prior to this, he resided in
the Grand Bahamas for 6 years. He has used his connections throughout North
America to assist Canadian and American start-up companies.
Summary of previous 5 years work experience:
- March 2003 to Present: Director of YzApp International Inc., Langley,
British Columbia, Canada. As a Director responsible for the policies of the
organization and the recruitment and supervision of the senior staff members.
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- October 2003 to Present: Director of YzApp Solutions Inc., Langley
British Columbia, Canada. As a Director responsible for the policies of the
organization and the recruitment and supervision of the senior staff members.
- March 2001 to December 2002: Director and consultant for STI Street
Light Technologies, Victoria British Columbia, Canada. STI Street Light
Technologies is involved in the creation of new energy and systems management
products for the lighting industry.
- 1995 to March 2001: Retired, Grand Bahamas
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Security Ownership of Certain Beneficial Owners
and of Management
The following table sets forth the persons known to us as beneficially owning
more than five percent (5%) of the 10,787,786shares which are presently
outstanding. The table also shows the number of shares of common stock
beneficially owned as of June 2004, by each individual directors and executive
officers and by all directors and executive officers as a group.
Percentage Ownership
Name/Address* Title Shares Prior to/After Offering
------------- ----- ------ -----------------------
Brian Jaggard Pres., CEO, 1,025,000(1) 9.50/7.43
6584 Willoughby Way CFO, Director
Langley BC Canada
Douglas Dunn COO, Director 274,000 2.54/1.99
Suite 48 Secretary
8863 216th St
Langley BC Canada
Carl Lacey Director NONE
Suite 308
2025 Oak Bay
Victoria BC
Canada
Officers & Directors]
(3 Individuals) 1,299,000 12.04/9.42
Silver Top Development Company (Trust) 4,000,000 (1) 37.08/29.01
c/o Venture Charters Assoc. Inc. (Trustee)
P.O. 30357
Laughlin, NV
USA
* The address for the officers and directors is that of YzApp International
Inc., 6584 Willoughby Way, Langley, B.C., Canada V2Y 1K4
(1) Silver Top Development Company is a charitable trust established by Mr.
Jaggard for which he disclaims any control or beneficial ownership. Mr. Jaggard
as the Settlor of the Trust is deemed the beneficial owner of the 4,000,000
shares as defined by the U.S. Securities and Exchange Commission beneficial
ownership regulations. The trustee, Venture Charters Assoc. Inc. is independent
of any control by Mr. Jaggard. Mr. Jaggard is not directly or indirectly a
beneficiary of the trust and Mr. Jaggard disclaims beneficial ownership of these
shares.
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Executive Compensation
Summary Compensation Table
The following table shows for the fiscal year ending July 31, 2003, the
compensation awarded or paid by YzApp to its Chief Executive Officer and any of
the executive officers whose total salary and bonus exceeded $100,000 US during
such year:
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------- -------------------------------------- ----------
Long Term Compensation
-------------------------------- ------------------------------------- -------------------------- ----------- ----------
Annual Compensation Awards Payouts
------------------------ ------- ------------ ----------- ------------ ------------ ------------- ----------- ----------
Other All
Annual Restricted Securities Other
Name and Principle Comp- Stock Underlying LTIP Comp-
Position Salary Bonus ensation Award(s) Option/SARs Payouts ensation
Year ($) ($) ($) ($) (#) ($) ($)
------------------------ ------- ------------ ----------- ------------ ------------ ------------- ----------- ----------
Brian Jaggard
President, COO 2003 $32,608 0 0 0 0 0 0
------------------------ ------- ------------ ----------- ------------ ------------ ------------- ----------- ----------
No other executive officer earned more than $100,000 US during the most
recent fiscal year.
Employment Agreements and Executive Compensation
YzApp does not have written employment agreements with its executive officers.
Brian Jaggard, the President and Chief Executive Officer is paid cash
compensation at the rate of $48,000, per annum.
Compensation of Directors
Directors are entitled to receive reimbursement for all out-of-pocket expenses
incurred for attendance at Board of Directors meetings. We have not authorized a
reimbursement of out of pocket expenses incurred for the attendance at Board of
Directors meetings. However it is a verbal policy of the board that any such
expenses would be limited to a maximum of $500.
Other Arrangements
YzApp has the YzApp International Inc., 2003 Stock Option Plan that was
adoptedon October 2003. The purpose of the Plan is to advance the business and
development of YzApp and its shareholders by affording to the employees,
directors and officers of YzApp the opportunity to acquire a proprietary
interest in YzApp by the grant of Options to such persons under the Plan's
terms. The 2003 Plan reserved 2,000,000 shares for grant or issuance upon the
exercise of options granted under the plan. As of June 30, 2004, no options have
been granted under the plan. Stock Options under the Plan will be granted by the
Board of Directors or a Compensation Committee of the Board of Directors. The
exercise prices for Options granted will be at the fair market value of the
common stock at the time of the grant if a public market develops for the common
stock or not less than the most recent price at which YzApp had sold its common
stock.
Termination of Employment and Change of Control Arrangement
There is no compensatory plan or arrangement with respect to any individual
named above which results or will result from the resignation, retirement or any
other termination of employment with YzApp, or from a change in the control of
YzApp.
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Transactions with Management and Founders
In September 2003, the shareholders of YzApp Solutions Inc., a Canadian Business
Corporation organized under the federal laws of Canada agreed to exchange 100%
of the common stock of the Canada corporation for 9,520,000 shares of the common
stock in the Nevada corporation, YzApp International Inc.
Brian Jaggard and Douglas Dunn are the founders and Mr. Jaggard is the major
shareholder of the Canadian corporation. Brian Jaggard and Douglas Dunn are also
the founders of YzApp International Inc., and Mr. Jaggard is the major
shareholder. Brian Jaggard received 1,025,000 shares, Douglas Dunn received
274,000 shares. , and Michael Smallwood, the former secretary received 10,000
shares as a result of the exchange.
Mr. Dunn is receiving compensation of approximately $3,250 monthly in cash for
his services to the company. Mr. Dunn may elect to receive shares in lieu of
cash at the current offering price of the shares. In addition, Mr. Dunn is
compensated with additional shares from time to time. The total number of shares
issued to Mr. Dunn is 274,000.
During 2001, Brian Jaggard transferred 8,000,000 of his shares to Silver Top
Development Company for the purposes of establishing a charitable trust. The
trustee is Venture Charters Association Inc. of Laughlin, Nevada. These shares
were exchanged as part of the September 2003 2:1 reorganization. Silver Top
Development Company trust now holds 4,000,000 shares in the company.
Indemnification of Officers and Directors From Liability under the Securities
Act of 1933
The YzApp By-Laws permit YzApp to indemnify and hold harmless its officers and
directors from any liability and expenses incurred by them as a result of being
an officer or director. This right of indemnity would include any liability
arising under the Securities Act of 1933. However, in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
and is unenforceable. In the event that a claim for indemnification against
liabilities under the Securities Act is asserted by an officer or director in
connection with the securities offered by this prospectus, YzApp will submit the
question whether such indemnification by it is against public policy to a court
of appropriate jurisdiction and will be governed by the final adjudication of
such issue. Submitting the question of indemnity for Securities Act liability to
a court will not occur in the case of the payment of expenses incurred in the
successful defense of any action, suit or proceeding or if in the opinion of its
counsel the matter has been settled by controlling precedent.
Transfer Agent
The Transfer Agent with respect to the Shares is Pacific Stock Transfer Company,
500 E. Warm Springs Road, Ste 240 Las Vegas, NV 89119 (702) 361-3033.
Legal Matters
The legality of the Securities of YzApp offered will be passed on for us by
Dennis Brovarone, Attorney at Law, Littleton, Colorado.
Independent Auditors
The balance sheet as of July 31, 2003 and the related statements of operations,
shareholders equity, and cash flows for the fiscal period ended July 31, 2003,
have been included herein in reliance on the report of N.I. Cameron Inc.,
Chartered Accountants given on the authority of that firm as experts in auditing
and accounting.
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Management's Discussion and Analysis of Financial
Statements and Plan of Operation
Our operation activities are related primarily to the research, development and
marketing of our interactive credit application called the Intelligent Credit
Application or "ICA". There are two versions of this application, one for use by
retailers and financial institutions and another simplified version for
consumers or those unfamiliar with computers or software. These two versions are
called the ICA Business Office also known as SalesMax and the ICA Weblink
respectively.
This section of the prospectus includes a number of forward-looking statements
that reflect our current views with respect to future events and financial
performance. Forward-looking statements are often identified by words like:
believe, expect, estimate, anticipate, intend, project and similar expressions,
or words which, by their nature, refer to future events. You should not place
undue certainty on these forward-looking statements, which apply only as of the
date of this prospectus. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or our predictions. We are a start-up stage corporation
and have not started operations or generated or realized any significant
revenues from our business operations.
Any company such as ours faced with liquidity pressures can be expected to make
internal adjustments to maximize near-term cash flow. We are addressing internal
sources of liquidity as follows. Executive salaries are being reduced. Current
shareholders, friends and family are providing expertise at no charge in several
areas. We are extracting cash from working capital by extending our payment
cycle with suppliers or entering into agreements deferring payments altogether
pending stronger cash flows. We have also reduced over all operational cost via
relocation of our server and other elements of our operation. We are reducing
capital expenditures by delaying the purchase of equipment such as additional
servers and other hardware.
Our auditors have issued a going concern opinion. This means that our auditors
believe there is substantial doubt that we can continue as an on-going business
for the next twelve months unless we obtain additional capital to pay our bills.
This is because we have not generated any revenues with our basic product
offering and no revenues are anticipated until we complete the development of
our website and source out customers to buy our products. We believe the
technical aspects of our software are sufficiently developed to use for our
operations at present. Additional customised versions can be available within 90
days from the completion of our offering.
We rely on third parties to market and sell our products. We currently maintain
an agreement with a third-party The Sawka Group, regarding the marketing and
distribution of our software (see Appendix for copy of agreement). We anticipate
our current sales commitments will begin cash flow this year. However, this may
not occur in the event that the commercial introduction of the software is
delayed or other problems occur. Accordingly, we must raise cash from sources
other than operations. Our only other sources for cash at this time is
investments by others in our company and some revenue from consulting fees. We
must raise cash to implement our project and continue our operations. Even if we
raise the maximum amount of money in this offering, we do not know how long the
money will last, however, we do believe it will last twelve months.
We will not begin customization of the existing software until we raise money
from this offering unless the cost of the customization is advanced by a
customer. If the cost of the customization is advanced by the customer, we
expect to enter into an agreement to provide the customized version exclusively
to that customer for the recreational equipment market. We will retain the right
to market other versions of the software for non recreational equipment markets
and for recreational equipment markets outside Canada.
We rely heavily on the support of our software outsourcing company, Inglenet
Solutions. This company is owed the balance of $135,000 for the original cost of
software development. To secure our indebtedness to them, they hold the source
code. This means that we are unable to make significant changes in the software
without their participation. Until we have satisfied this debt, we are required
to use their development team for upgrades and customization. This limits our
ability to search for competitive quotes or to make any changes or modifications
with internal software engineers. There is no payment schedule, however, if we
raise sufficient funds in this offering, we will make arrangements to satisfy
this indebtedness and exclusively hold the source code.
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If we are unable to; secure a suitable arrangement with our software outsourcing
firm for upgrades and customization or enough customers willing to buy the
products at higher than the cost of our fixed and variable expenses, we may
quickly use up the proceeds from the minimum amount of money from this offering
and will need to find alternative sources, like a second public offering, a
private placement of securities, or loans from our officers or others in order
for us to maintain our operations. At the present time, we have not made any
arrangements to raise additional cash, other than through this offering. If we
need additional cash and cannot raise it we will either have to suspend
operations until we do raise the cash, or cease operations entirely.
If we raise the minimum amount of money from this offering, it will last a year
but with limited funds available to develop growth strategy. If we raise the
maximum amount, we believe the money will last a year and also provide funds for
growth strategy. If we raise less than the maximum amount and we need more money
we will have to revert to obtaining additional money as described in the
paragraph above. Other than as described, we have no other financing plans.
Critical Accounting Policies And Estimates
The SEC has recently issued Financial Reporting Release No. 60, "Cautionary
Advice Regarding Disclosure About Critical Accounting Policies" ("FRR 60"),
suggesting companies provide additional disclosure and commentary on those
accounting policies considered most critical. A critical accounting policy is
one that is both very important to the portrayal of our financial condition and
results, and requires management's most difficult, subjective or complex
judgments. Typically, the circumstances that make these judgments difficult,
subjective and/or complex have to do with the need to make estimates about the
effect of matters that are inherently uncertain. We believe the accounting
policies below represent our critical accounting policies as contemplated by FRR
60. See Note 2 of the Notes to Consolidated Financial Statements for a detailed
discussion of these and other accounting policies.
Allowances for Doubtful Accounts Receivable.
We evaluate our accounts receivable to determine if they will ultimately be
collected. This evaluation includes significant judgements and estimates,
including an analysis of receivables aging and a review of large accounts. If,
for example, the financial condition of our customers deteriorates resulting in
an impairment of their ability to pay or a pattern of late payment develops,
allowances may be required.
Provisions For Obsolescence
We may need to record a provision for estimated obsolescence for the software
developed to date. Our estimates would consider the cost of the software
development to date, new developments within the industry and our historical
experience. If there are changes to these estimates, provisions for software
obsolescence may be necessary.
Results From Operations
For the period from August 24, 2000 to July 31, 2001, July 31, 2002 and July
31,2003 and for the nine months ended April 30, 2004
Since the company is in the start-up phase of operations, sales and revenues
have been insignificant. The company is anticipating that it will move from a
research and development stage to a commercial stage in the fiscal 2004 period.
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Revenue for the period between August 24, 2000 and July 31, 2001 were $2,060
compared to $729 for the 2002 period, and $0 for the 2003 period. Revenue for
the nine months ended April 30, 2004 was also $0. Our sales were primarily from
one customer to prepare a Product Requirements Document. This customer
experienced difficulties with suppliers within his industry and defaulted on the
second half of his payment in November 2002. These difficulties appear to have
been resolved and the company has collected the second half of the payment over
the past six months.
Operating expenses for the period ending July 31, 2003 were $279,404, down from
$304,757 in the 2002 period. We issued over 1,450,000 shares. Operating expenses
for the nine months ended April 30, 2004 were $74,552 with sales and marketing
expense of $38,495 representing approximately 52% of the operating expenses.
The net loss for the period between August 24, 2000 and July 31, 2001 was
$193,231 compared to $303,764 for the 2002 period, and $244,749 for the 2003
period. Revenue for the nine months ended April 30, 2004 was no revenue. As
mentioned earlier the company is in the start-up phase of operations and is
completing User Acceptance Testing with a limited client base, sales and
revenues have been insignificant there for we have had consecutive net losses
over all reporting periods presented.
Research and Development (R&D) expenditures decreased during the comparative
fiscal periods provided as we awaited the results of User Acceptance Testing,
which while an important element in the R&D efforts of the firm, required little
in the way of cash expenditures. As we enter new phases of the firms development
increased R&D expenditures can be expected.
Plan Of Operations
Assuming we raise the minimum amount in this offering, we believe we can satisfy
our cash requirements during the next 12 months. We will continue to conduct
product research and development. We do not expect to purchase or sell plant or
significant equipment. Further we do expect to increase the number of employees.
Upon completion of our public offering, our specific goal is to develop and
customize our software internally for introduction to other markets and
international expansion. We intend to accomplish the foregoing through the
following milestones:
1. Complete our public offering. We believe that we will raise sufficient
capital to begin our operations. We believe this could take up to 180 days from
the date the Securities and Exchange Commission declares our offering effective.
We will not begin expanded operations until we have closed this offering. We
intend to concentrate the majority of our efforts on raising as much capital as
we can during this period. The steps below can be completed even without full
subscription to the offering. Obtaining 25% of the full offering, as outlined on
the Use of Proceeds, would allow us to complete steps 2 and 3 below. Marketing
and Promotion could then be reduced to small highly targeted programs that would
take place cash flow would allow.
2. After completing the offering, we will immediately extinguish our
indebtedness to our software outsourcing company, Inglenet Solutions. We do not
intend to expand office space or purchase significant additional equipment. We
may enter into long term contracts for software engineering services from our
current outsource firm or hire internal software engineers. We have already
completed a review of all firms suitable for the modification and enhancement of
our software and have the first draft of our Product Requirements Document (PRD)
for Version 2 as well as the US modifications. These two PRD's will be finalized
once User Acceptance Testing is concluded. Our officers and directors will
handle our administrative duties with the majority being handled by the COO
Douglas Dunn. A detailed breakdown of the cost of operating our office is set
forth in the Use of Proceeds section of this prospectus.
3. After completing the offering, product research and development will take the
form of feedback from a limited number of customers. This is referred to as User
Acceptance Testing. The purpose of User Acceptance Testing is to document
improvements and modifications we would like to incorporate in the software.
Once User Acceptance Testing is completed then the current management team can
document the necessary modifications and contract with a software programming
company to modify the software. User Acceptance Testing has been ongoing for the
last several quarters and is nearing conclusion.
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4. After completing our offering, promotion and marketing of our products will
take place in two ways. Our existing senior management will handle all
promotion, marketing and sales to financial institutions. We intend to contact
and negotiate with large financial institutions to use our software to improve
their current decision-making process. Discussions have already commenced with
E-Lending Interchange the firm handling electronic interfacing with two of the
largest financial institutions in Canada, The TD Canada Trust and Scotiabank.
Additionally, we will offer our software to smaller financial institutions as a
method to channel more credit offerings to their branches than is currently
possible.
The second avenue in our promotion and marketing plan is the recruitment of key
organizations in different market verticals to act as our agents in both Canada
and the United States. We have signed one contract with the Sawka Group of
Companies to provide our software to the recreational equipment dealer market in
Canada, we intend to enter into agreements with similar companies in
non-competitive market segments such as mortgage brokering, heavy equipment,
retail electronics, etc. We believe we should have additional contracts signed
within 90 days of completion of this offering including an agent to represent us
in the recreational equipment sector in the United States.
The execution of additional contracts with suppliers and the development of the
software will be ongoing during the life of our operations. As more products are
added and as our customer base expands, we will have to be continually upgrading
the software. We believe that it will cost up to $100,000 to customize various
versions of the software and an additional one-time cost of $149,000 to modify
the software for access to 85 additional credit bureaus. Once we have customized
the software for access to 85 additional credit bureaus, we will be able to
launch our products into the USA and most Western markets. The initial operation
of the software is now ready and a customized version specifically for use by
Recreational Equipment dealers was launched on November 10, 2003. We are
currently installing the software directly into recreational equipment dealers
in Canada as directed by the Sawka Group of Companies in partnership with
Bombardier Canada. In addition to offering software services, we will pass on
the results of our software analysis to financial institutions for comparison to
their existing systems.
5. As soon as our software is operational at a core group of recreational
equipment dealers, we will begin to market our software in the United States and
in Canada through alliances with suppliers to the financial services industry.
We estimate that it will require 12 months to fully implement our software in
the Recreational Equipment sector. Initially, we will focus on ensuring our
software is operational in 146 dealers within 12 months after completion of this
offering. We require the funds from this offering prior to expanding our
customer base so that we ensure we can service our customer base. We intend to
target manufacturers of recreational equipment in Canada and the United States
as well as financial institutions that service recreational equipment dealers.
We believe that it will cost a minimum of $94,500 for our marketing campaign. If
we raise the maximum amount of proceeds from the offering, we will devote an
additional $418,500 to our marketing program. Marketing is an ongoing matter
that will continue during the life of our operations. We also believe that we
should begin to see results from our marketing campaign within 30 days from its
initiation, or 90 days from receipt of necessary funding.
6. Part of our marketing program includes finding and securing contracts with
experienced agents. The recreational equipment and financing industries have
large numbers of experienced agents and consultants. Sourcing customers may
consist of cold calls to manufacturers, leveraging contacts with existing
dealers, and contractual relationships with financial institutions. This process
will start as soon as funding is available and will be ongoing during the life
of our operations. Sourcing customers may consist of telephone surveys and may
contain questions that would determine the marketing approach and acceptability
of specific products. It will also involve research into existing customers and
leveraging their deal flow and finance sources. That is by having clients who
are running a large dollar value of deals through our system, lenders will be
more inclined to adopted our solution, since their customer is already using it,
and the low cost/ease of use of system would allow the lender the opportunity to
capture a greater volume of that YzApp clients' deal flow.
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7. Within 90 days from the initial launch of customized Recreational Equipment
version of the ICA, we believe that we will have enough revenues to cover our
operating costs, not including upgrades and continued research and development.
8. Once the software is fully implemented in the Recreational Equipment sector;
we intend to expand operations into the United States. We intend to hire at
least one consultant/agent working and living in the United States for this
purpose. The consultant/agent will be responsible for securing contracts with US
Recreational Equipment dealers and financial institutions.
In summary, we should be in full operation and our software submitting credit
applications to financial institutions within 90 days of completing our
offering. We estimate that we will generate enough revenue within 180 days to
cover the fixed and variable cost of operations.
Until our software is processing a large number of credit applications, we do
not believe that large financial institutions will be interested in taking
advantage of the full capabilities of our product. We believe, however, that
once our software is processing a large number of credit applications and we
have developed at significant base of dealership customers, large financial
institutions will find it in their best interests to contribute to the cost of
software development and links to their proprietary systems.
Year Ended July 31, 2003 And 2002
Fiscal Revenue
Our company, as a development stage enterprise, has received negligible revenues
for 2002 and some revenues from the Sawka Group of Companies so that we could
modify our existing software product for use by the Sawka Group. The modified
version is known as SalesMax. We received $34,655 from the Sawka Group in our
fiscal 2003 as their contribution to those modifications.
Operating Expenses
Our operating expenses were $304,493 and $244,749 in 2002 and 2003 respectively.
There was a net loss of $303,764 in 2002 compared to a net loss of $244,749 in
2003.
Liquidity And Capital Resources
We sold 1,451,250 shares of common stock to investors in our fiscal year ended
July 31, 2003 for services valued at $91,991. While we are in a working capital
deficiency, there are several mitigating factors. We have taken near-term cash
flow conservation measures mentioned in the Statements and Plan of Operations,
for example our monthly current liabilities have been slashed to only $1,000 per
months with $700 per month of that due to GE Capital for lease of our server.
The lease on the server will conclude in six months. Adding the estimated
offering costs of $27,121 our cost of operations for the balance of the year we
fully expect to cover these costs from cash flow on consulting services and a
pledge of shareholder loans from officers if required. We anticipate utilizing
approximately $256,500 in the next twelve months to attempt to increase the
sales of our products by customizing our software product for the US market. In
the Use of Proceeds table, the $256,000 figure is arrived at by combining three
items;
1. ICA Version 2 & US modifications
2. Com interface for Additional Credit Bureaus
3. part of the Offering & Operation - hard costs & staff
The reduction between the 50% and 75% expenditure scenarios for the line item
ICA Version 2 & US modifications reflect that when we exceed the 50% funding
level we will hire a new staff person instead of outsourcing. . On the table,
this shows as an increase in Offering & Operations - hard costs & staff figures.
There can be no assurance that such expenditures will result in significant
increase in the sales of our product.
31
Off Balance Sheet Arrangements
We have not entered into any Off Balance Sheet Arrangements or transactions.
Special Note Regarding Forward-Looking Statements
Some of the statements contained in this document discuss future expectations,
contain projections of future operations or state other "forward-looking"
information. These statements are subject to known and unknown risks,
uncertainties and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The forward-looking
information is based on various factors and is derived using numerous
assumptions. Important factors that may cause actual results to differ from
projections include, for example:
o The success or failure of management's efforts to implement our
business strategy;
o The uncertainty of demand for our products;
o Introduction of competitive products which may be superior to ours;
and
o Our ability to attract and retain key software engineers and quality
employees
32
Financial Statements.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders' Equity (Deficit) F-4
Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
[PLEASE NOTE THAT ALL PREVIOUSLY FILED FINANCIAL STATEMENTS AND
NOTES HAVE BEEN DELETED]
YzApp International Inc.
(a development stage enterprise)
Consolidated Financial Statements
April 30, 2004, July 31, 2003 and July 31, 2002
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
YzApp International Inc.
We have audited the accompanying consolidated balance sheets of YzApp
International Inc. (a development stage enterprise) as of July 31, 2003 and
2002, the related consolidated statements of operations, stockholders' equity
and cash flows for the two years then ended and for each of the periods from
August 24, 2000 (date of incorporation) to July 31, 2003. The financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
July 31, 2003 and July 31, 2002, and the results of their operations and their
cash flows for the years then ended, in conformity with generally accepted
accounting principles used in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has experienced accumulated losses and has had
no material revenue producing operations to date. The Company's ability to
continue as a going concern is dependent upon its ability to raise additional
capital, achieve profitable operations or to merge with a revenue producing
venture partner. These matters raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
N.I Cameron Inc. (signed)
VANCOUVER, BC CHARTERED ACCOUNTANTS
February 16, 2004
(except for notes 6 and 12 which are at June 23, 2004)
F-1
YzApp International Inc.
(a development stage enterprise)
Consolidated Balance Sheets
(expressed in U.S. dollars)
ASSETS
July 31 2002
April 30 2004 July 31 (restated -
(unaudited) 2003 note 12)
------------- ---------- ---------
CURRENT ASSETS
Cash $ 27,909 $ 33,245 $ 13,082
Accounts receivable -- 20,113 --
Other receivables - taxes 6,293 12,948 3,636
Prepaid expenses -- 4,162 3,187
--------- --------- ---------
TOTAL CURRENT ASSETS 34,202 70,468 19,905
PROPERTY, PLANT AND EQUIPMENT, (Notes 2, 4 and 5) 16,003 20,617 23,288
SOFTWARE DEVELOPMENT COSTS, (Note 2) 32,031 14,237 12,635
--------- --------- ---------
TOTAL ASSETS $ 82,236 $ 105,322 $ 55,828
========= ========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 249,240 $ 217,339 $ 136,027
Current portion of long-term debt (Note 5) 4,783 5,715 4,920
--------- --------- ---------
TOTAL CURRENT LIABILITIES 254,023 223,054 140,947
LONG-TERM DEBT (Note 5) 2,483 3,559 8,230
--------- --------- ---------
TOTAL LIABILITIES 256,506 226,613 149,177
--------- --------- ---------
STOCKHOLDERS' DEFICIT
Capital Stock (Note 7)
Authorized:
50,000,000 common shares with a par value of $0.001 each 1,000,000
preferred shares with a par value of $0.001 each
Issued:
10,787,786 common shares (July 31, 2003 - 10,748,500, July 31 10,788 10,749 8,069
2002 - 8,068,750 shares)
Additional paid in capital 630,591 618,880 395,319
Deficit accumulated during the development stage (803,051) (741,744) (496,995)
Comprehensive Income (Loss) (12,598) (9,176) 258
--------- --------- ---------
TOTAL STOCKHOLDERS' DEFICIT (174,270) (121,291) (93,349)
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 82,236 $ 105,322 $ 55,828
========= ========= =========
COMMITMENTS (Note 10)
The accompanying notes are an integral part of these financial statements.
F-2
YzApp International Inc.
(a development stage enterprise)
Consolidated Statements of Operations
(expressed in U.S. dollars)
Period from
August 24, 2000
Nine Months Nine Months Year Ended (date of
Ended Ended July 31, 2002 incorporation)
April 30, 2004 April 30, 2003 Year Ended (restated - to April 30, 2004
(unaudited) (unaudited) July 31, 2003 see note 12) (unaudited
------------ ----------- ------------- ------------- --------------
EXPENSES
Software development costs - - - 136,138 278,334
Sales and marketing consulting 19,077 109,313 147,124 46,716 212,917
Management fees (note 3) 7,504 31,209 32,608 17,834 57,946
Professional fees 8,753 8,738 19,941 8,870 40,649
Website hosting and server 7,770 5,519 16,834 10,986 35,590
management
Marketing - - - 24,273 32,479
Travel 6,108 4,065 5,083 13,264 29,249
Technical support 8,000 7,807 10,409 5,751 24,160
Bank charges and interest 1,050 12,235 20,944 961 23,142
Office 3,938 5,129 6,193 5,912 19,386
Conferences - - 285 15,620 16,668
Automobile 2,132 2,838 4,385 3,313 12,234
Feasibility study - - - - 11,814
Wages and benefits - - - - 10,554
Internet and telephone 2,164 2,034 3,327 2,977 10,510
Advertising and promotion 829 1,792 2,439 3,571 10,111
Insurance 500 478 760 707 2,679
Interest on long-term debt 700 710 947 739 2,610
Dues and subscriptions 415 281 739 473 2,263
Loss on disposal of equipment - - - 2,017 2,017
Depreciation 5,612 4,028 7,386 4,635 18,692
----------- ----------- ----------- ----------- -----------
74,552 196,176 279,404 304,757 854,004
----------- ----------- ----------- ----------- -----------
Less - expense recoveries (13,245) (32,962) (34,655) (264) (48,164)
- interest and other revenue - - - (729) (2,789)
----------- ----------- ----------- ----------- -----------
(13,245) (32,962) (34,655) (993) (50,953)
----------- ----------- ----------- ----------- -----------
61,307 163,214 244,749 303,764 803,051
----------- ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS FOR THE PERIOD $ (61,307) $ (163,214) $ (244,749) $ (303,764) $ (803,051)
=========== =========== =========== =========== ===========
Loss per share - basic and diluted $ (0.01) $ (0.02) $ (0.03) $ (0.04)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 10,775,000 8,953,000 9,405,000 7,649,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
YzApp International Inc.
(a development stage enterprise)
Consolidated Statements of Stockholders' Equity (Deficit)
(expressed in U.S. dollars)
Deficit
Capital Stock Accumulated in
Additional the Total
Number of Paid in Comprehensive Development Stockholders'
Shares Amount Capital Income (Loss) Stage Equity
----------- ----------- ----------- ------------- -------------- -------------
Founder's shares issued for cash 5,250,000 $ 5,250 $ (5,108) $ -- $ -- $ 142
Shares issued for cash -
February 2001 2,250,000 2,250 222,155 -- -- 224,405
Net loss for the period -- -- -- -- (193,231) (193,231)
Foreign Currency Translation -- -- -- (450) -- (450)
---------- ---------- ---------- ------------ ----------- -----------
Balance, July 31, 2001 7,500,000 7,500 217,047 (450) (193,231) 30,866
Common stock issued for cash -
October 2001 150,000 150 95,319 -- -- 95,469
Common stock issued for cash -
April 2002 100,000 100 63,135 -- -- 63,235
Common stock issued for services -
July 31, 2002 318,750 319 19,818 -- -- 20,137
Net loss for the year -- -- -- -- (303,764) (303,764)
Foreign Currency Translation -- -- -- 708 -- 708
---------- ---------- ---------- ------------ ----------- -----------
Balance, July 31, 2002 8,068,750 8,069 395,319 258 (496,995) (93,349)
Common stock issued for services -
December 2002 1,451,250 1,451 90,540 -- -- 91,991
Common stock issued for services -
March 2003 1,152,500 1,153 114,097 -- -- 115,250
Common stock issued for cash -
April 2003 76,000 76 18,924 -- -- 19,000
Net loss for the year -- -- -- -- (244,749) (244,749)
Foreign Currency Translation -- -- -- (9,434) -- (9,434)
---------- ---------- ---------- ------------ ----------- -----------
Balance, July 31, 2003 10,748,500 10,749 618,880 (9,176) (741,744) (121,291)
Common stock issued for cash -
October 24, 2003 20,000 20 4,980 -- -- 5,000
Common stock issued for cash -
October 31, 2003 14,286 14 4,986 -- -- 5,000
Common stock issued for cash -
November 22, 2003 5,000 5 1,745 -- -- 1,750
Net loss for the nine month period -- -- -- -- (61,307) (61,307)
Foreign Currency Translation -- -- -- (3,422) -- (3,422)
---------- ---------- ---------- ------------ ------------ -----------
Balance, April 30, 2004
(unaudited) 10,787,786 $ 10,788 $ 630,591 $ (12,598) $ (803,051) $ (174,270)
========== ========== ========== ============ ============ ===========
See notes 6 and 7 for retroactive adjustments due to a recapitalization of the
Company and 50 new for 1 old stock split
The accompanying notes are an integral part of these financial statements.
F-4
YzApp International Inc.
(a development stage enterprise)
Statements of Cash Flows
(expressed in U.S. dollars)
Period from
August 24, 2000
Nine Months Nine Months Year Ended (date of
Ended Ended July 31, 2002 incorporation)
April 30, 2004 April 30, 2003 Year Ended (restated - to April 30, 2004
(unaudited) (unaudited) July 31, 2003 see note 12) (unaudited)
-------------- -------------- ------------- ---------------- ---------------
Cash Flows Provided by (Used in) Operating
Activities
Net loss $ (61,307) $(163,214) $(244,749) $(303,764) $(803,051)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation 5,612 4,028 7,386 4,635 18,692
Loss on disposal of equipment -- -- -- 2,017 2,017
Expenses paid with common stock -- 91,991 91,991 19,664 111,655
Changes in operating assets and liabilities
Accounts receivable 20,113 (25,439) (20,113) -- --
Other receivables - taxes 6,655 (7,633) (9,102) 7,633 (6,360)
Prepaid expenses 4,162 (272) (571) 1,233 269
Accounts payable 30,477 (71) 64,714 127,960 232,102
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities 5,712 (100,610) (110,444) (140,622) (444,676)
--------- --------- --------- --------- ---------
Cash Flows Used in Investing Activities
Purchase of property, plant and equipment -- 1,523 (2,107) (24,197) (33,478)
Software development costs capitalized (17,794) -- -- (12,738) (30,532)
--------- --------- --------- --------- ---------
Net cash used in investing activities (17,794) 1,523 (2,107) (36,935) (64,010)
--------- --------- --------- --------- ---------
Cash Flows Provided by (Used in) Financing
Activities
Proceeds from issuance of common stock 11,750 134,250 134,250 158,704 529,251
Advances from (to) stockholder -- -- -- (13,246) 325
Net increase (decrease) in long-term debt (3,508) (3,878) (5,204) 7,673 4,683
--------- --------- --------- --------- ---------
Net cash provided by financing activities 8,242 130,372 129,046 153,131 534,259
--------- --------- --------- --------- ---------
Effect of Exchange Rate Changes on Cash (1,496) (497) 3,668 578 2,336
--------- --------- --------- --------- ---------
Net Increase (Decrease) in Cash (5,336) 30,788 20,163 (23,848) 27,909
Cash at Beginning of Period 33,245 13,082 13,082 36,930 --
--------- --------- --------- --------- ---------
Cash at End of Period $ 27,909 $ 43,870 $ 33,245 $ 13,082 $ 27,909
========= ========= ========= ========= =========
Supplemental information
Interest paid $ 1,106 $ 13,775 $ 21,400 $ 1,544 $ 24,279
Income taxes paid -- -- -- -- --
========= ========= ========= ========= =========
Non-cash financing activities - common shares
issued for services $ -- $ 91,991 $ 91,991 $ 20,137 $ 112,128
========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-5
YzApp International Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
1. DEVELOPMENT STAGE COMPANY
YzApp International Inc. (the "Company") was incorporated in the State of
Nevada on December 26, 2002. Effective October 15, 2003, the Company
acquired all the outstanding common stock of Yzapp Solutions Inc.
("Solutions"), a Company under common control. Prior to the acquisition the
Company was a non-operating shell corporation with nominal net assets. The
acquisition is a capital transaction in substance and therefore has been
accounted for as a reverse acquisition. (See note 6)
The Company is based in Vancouver, British Columbia, Canada and its
principal business is the development of software allowing the Company to
act as an application service provider acting as a conduit between
retailers and financial institutions.
The Company is in the development stage and planned principal activities
have commenced, but there has been no revenue generated there from. In a
development stage company, management devotes most of its activities to
developing a market for its products and services. These financial
statements have been prepared on a going concern basis, which implies the
Company will continue to realize its assets and discharge its liabilities
in the normal course of business. The Company has not generated revenue and
has never paid any dividends. The Company is unlikely to pay dividends or
generate earnings in the immediate or foreseeable future. The continuation
of the Company as a going concern and the ability of the Company to emerge
from the development stage is dependent upon the continued financial
support from its shareholders, the ability of the Company to obtain
necessary equity financing to continue operations and to generate
significant revenue. There is no guarantee that the Company will be able to
raise any equity financing or generate profitable operations. As at April
30, 2004, the Company has a working capital deficiency of $219,821, and has
accumulated losses of $803,051 since inception. These financial statements
do not include any adjustments to the recoverability and classification of
recorded asset amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
These factors raise substantial doubt regarding the Company's ability to
continue as a going concern. The Company is in the process of having its
SB-2 Registration Statement declared effective by the United States
Securities and Exchange Commission to allow the company to sell 3,000,000
shares of common stock at $0.50 per share to raise approximate net proceeds
of $1,350,000 after all offering costs. The Company will receive funds
directly and funds will be available to the Company immediately.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have, in management's opinion, been properly
prepared within reasonable limits of materiality and within the framework
of the significant accounting policies summarized below:
F-6
YzApp International Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(a) Use of estimates
The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles. Because a precise
determination of many assets and liabilities is dependent upon future
events, the preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful judgment
by management.
(b) Year End
The Company's fiscal year end is July 31.
(c) Basis of Presentation
These consolidated financial statements include the accounts of YzApp
International Inc. and YzApp Solutions Inc. All significant inter company
accounts have been eliminated.
(d) Revenue Recognition
The Company recognizes revenue from the sale of products and services in
accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." Revenue consists of software licensing and will be recognized
only when the price is fixed or determinable, persuasive evidence of an
arrangement exists, the service is performed, and collectibility is
reasonably assured. Licensing revenue consists of revenue from licensing
the Company's software and is recognized when the software has been
delivered and there are no significant remaining obligations. The Company
recognizes revenue from licensing its software product's in accordance with
AICPA Statement of Position No. 97-2, as amended, "Software Revenue
Recognition" and SAB 101.
(e) Property, Plant and Equipment
Property, plant and equipment are capitalized at original cost and
amortized over their estimated useful lives at the following annual bases
and rates:
Computer equipment 30% declining balance
Furniture and fixtures 20% declining balance
Equipment under capital lease 30% declining balance
One-half the normal amortization is taken in the year of acquisition.
F-7
YzApp International Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) Software Development Costs
Statement of Financial Accounting Standards No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed,
requires the capitalization of certain software development costs
subsequent to the establishment of technological feasibility. Based on the
Company's product development process, technological feasibility is
established upon the completion of a working model. Amortization of these
costs will commence when the product is ready for release to customers.
Total software development costs incurred are as follows:
Period from
August 24,
Nine Months 2000 (date of
Ended incorporation)
April 30, 2004 Year Ended Year Ended to July 31,
(unaudited) July 31, 2003 July 31, 2002 2003
-------------- ------------- ----------------- ---------------
Internal software
development costs $ -- $ -- $ -- $ --
Software development
costs incurred by others 17,794 -- 148,876 291,072
--------------------------------------------------------------
17,794 -- 148,876 291,072
Less: Software
development costs
capitalized 17,794 -- 12,738 12,738
--------------------------------------------------------------
Software development
costs expensed $ -- $ -- $ 136,138 $ 278,334
==============================================================
(g) Foreign Currency Translation
The Company's functional currency is the Canadian dollar. The financial
statements of the Company are translated to United States dollars under the
current rate method in accordance with SFAS No. 52 "Foreign Currency
Translation". Under the current rate method, all assets and liabilities are
translated at the current rate, while stockholders' equity accounts are
translated at the appropriate historical rate. The revenues and expenses
that occur evenly over the period are translated at the weighted-average
rate for the period. The cumulative translation adjustments balance is
reported as a component of accumulated other comprehensive income.
F-8
YzApp International Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) Income Taxes
The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
the difference between financial statement and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance in respect of
amounts considered by management to be less likely than not of realization
in future periods.
(i) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less at the time of issuance to be cash equivalents.
(j) Long-Lived Assets
In accordance with Financial Accounting Standards Board ("FASB") Statement
of Financial Accounting Standards ("SFAS") No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets", the carrying value of
intangible assets and other long-lived assets is reviewed on a regular
basis for the existence of facts or circumstances that may suggest
impairment. The Company recognizes an impairment when the sum of the
expected undiscounted future cash flows is less than the carrying amount of
the asset. Impairment losses, if any, are measured as the excess of the
carrying amount of the asset over its estimated fair value.
(k) Other Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
the reporting and display of comprehensive income and its components in the
financial statements. For the period ended April 30, 2004 and the years
ended July 31, 2003 and 2002 the Company had a comprehensive loss of
$64,729, $254,183 and $303,056, respectively. These losses included a
foreign currency translation loss of $3,422 and $9,434 for the period ended
April 30, 2004 and the year ended July 31, 2003, respectively, and a gain
of $708 for the year ended July 31, 2002.
F-9
YzApp International Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(l) Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with SFAS
No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires presentation of
both basic and diluted earnings per share (EPS) on the face of the income
statement. Basic EPS is computed by dividing net income (loss) available to
common shareholders (numerator) by the weighted average number of common
shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the
period including stock options, using the treasury stock method, and
convertible preferred stock, using the if-converted method. In computing
diluted EPS, the average stock price for the period is used in determining
the number of shares assumed to be purchased from the exercise of stock
options or warrants. Diluted EPS excludes all dilutive potential common
shares if their effect is anti-dilutive.
(m) Recent Accounting Pronouncements
In December 2003, the United States Securities and Exchange Commission
issued Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB
104"), which supersedes SAB 101, "Revenue Recognition in Financial
Statements." The primary purpose of SAB 104 is to rescind accounting
guidance contained in SAB 101 related to multiple element revenue
arrangements, which was superseded as a result of the issuance of EITF
00-21, "Accounting for Revenue Arrangements with Multiple Deliverables."
While the wording of SAB 104 has changed to reflect the issuance of EITF
00-21, the revenue recognition principles of SAB 101 remain largely
unchanged by the issuance of SAB 104. The adoption of SAB 104 did not have
a material impact on the Company's financial statements
3. RELATED PARTY TRANSACTIONS
The Company has paid management fees for ongoing management of the
Company's affairs of $32,608 in the year ending July 31, 2003 (2002 -
$17,834) to a director and officer of the Company. The amount has been
recorded at the exchange amount. Fees of $7,504 were paid to the same
director and officer for the nine-month period ended April 30, 2004
F-10
YzApp International Inc.
(a development stage enterprise)
Notes to Financial Statements
(expressed in U.S. dollars)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following:
Net Book Value
Accumulated April 30, 2004 July 31, 2003 July 31, 2002
Cost Depreciation (unaudited)
------------ -------------- ----------------- -------------------- ---------------
Computer equipment $ 9,096 $ 5,506 $ 3,590 $ 4,724 $ 4,292
Furniture and fixtures 4,351 1,748 2,603 3,061 2,727
Equipment under capital lease 22,569 12,759 9,810 12,832 16,269
------------ -------------- ----------------- -------------------- ---------------
$ 36,016 $ 20,013 $16,003 $20,617 $23,288
============ ============== ================= ==================== ===============
5. LONG-TERM DEBT
April 30, July 31, 2003 July 31, 2002
2004
(unaudited)
------------ -------------- -------------
Capital lease obligation, interest at 8.3% per annum, monthly
payments of $782 Cdn. until February, 2005 $ 7,266 $ 9,274 $ 12,899
Loan payable, unsecured, interest at 10% per annum, monthly
payments of $320 Cdn. including principal and interest, due to
a relative of an officer and director. - - 251
------------ -------------- --------------
7,266 9,274 13,150
Less: current portion 4,783 5,715 4,920
------------ -------------- -------------
$ 2,483 $ 3,559 $ 8,230
============ ============== =============
6. CAPITAL TRANSACTION - REVERSE ACQUISITION
On October 15, 2003, the Company acquired 100% of the issued and
outstanding shares of Solutions by the issuance of 9,520,000 common shares
on a one share for two shares owned basis. Solutions was incorporated under
the Company Act of British Columbia on August 24, 2000 and continued into
federal jurisdiction under the Canada Business Corporations Act on October
15, 2001. The principal business of Solutions is operating as an
application service provider acting as a conduit between retailers and
financial institutions. Prior to the reverse acquisition, the Company was a
non-operating shell company with nominal net assets. Therefore, this
acquisition is a capital transaction in substance, rather than a business
combination, and has been accounted for as a reverse acquisition. Because
Solutions is deemed to be the acquiror for accounting purposes, the
financial statements are presented as a continuation of Solutions and
include the results of operations of Solutions since incorporation on
August 24, 2000, except that all share issuances of Solutions have been
adjusted to reflect the 1 for 2 share exchange on the acquisition.
F-11
YzApp International Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
7. CAPITAL STOCK
(a) The Company's issued common shares were split 50:1 in October, 2001.
The shares issued in the year ended July 31, 2001 have been
retroactively adjusted to reflect this stock split.
(b) During the year ended July 31, 2002, the Company issued 318,750 common
shares for a deemed proceeds of $20,137 for services performed.
(c) During the year ending July 31, 2002, the Company issued 250,000
common shares for cash proceeds of $158,704.
(d) During the year ended July 31, 2003, the Company issued 1,451,250
common shares for deemed proceeds of $91,991 for services performed.
(e) During the year ended July 31, 2003, the Company issued 1,228,500
common shares for cash proceeds of $134,250
(f) Subsequent to July 31, 2003, the Company received share subscriptions
to purchase 39,286 common shares for cash proceeds of $11,750
8. INCOME TAXES
At July 31, 2003, there were deferred income tax assets resulting primarily
from operating loss carryforwards for Canadian tax purposes totaling
approximately $308,000 less a valuation allowance of $308,000. The
valuation allowance on deferred tax assets increased by $123,000 during the
period ended July 31, 2003.
At July 31, 2003, the Company had net operating loss carryforwards for
Canadian tax purposes of approximately $823,000. These carryforwards begin
to expire in 2008.
9. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments consist of cash, accounts receivable,
accounts payable, and long-term debt. It is management's opinion that the
Company is not exposed to significant interest, currency or credit risks
arising from these financial instruments. The fair value of these financial
instruments approximates their carrying values.
The Company does ongoing credit evaluations of customers and establishes
reserves for credit losses. The Company did not experience any material
credit loss in the year.
Virtually all of the Company's software development costs were incurred to
one subcontractor. The Company's business could be adversely affected
should a modification to the software be required and the subcontractor is
no longer in business.
The Company is dependent on one major customer to market its software to
Canadian recreational equipment dealers.
F-12
YzApp International Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
10. COMMITMENTS
(a) The Company is committed under a service contract for systems
management of its server for monthly payouts of $842 until December
2004. The agreement can be terminated earlier by the Company by
prepaying 50% of the remaining obligation under the contract.
(b) The Company is committed under a service agreement for collocation
management of its server for monthly payouts of $655 until December
2004. This agreement can be terminated earlier by the Company by
prepaying 50% of the remaining obligation under the contract.
11. STOCK OPTION PLAN
During the year, the Company instituted a stock option plan. Under the
terms of the plan, the Company may award options to purchase common shares
of the Company, not to exceed 2,000,000 shares. To date, no options have
been granted under the plan.
12. RESTATEMENTS
Pursuant to the audit of the July 31, 2003 and 2002 financial statements,
and the determination that the accounting treatment of software development
costs was incorrect, and the acquisition of YzApp Solutions Inc. was a
reverse acquisition, certain disclosures and financial statement amounts
have been restated. Certain software development costs have been
capitalized, as outlined in Note 2. Previously reported stockholders'
equity has been increased by $12,738 and previously reported net loss for
the year ended July 31, 2002 has been reduced by $12,738.
F-13
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES UNDERLYING THE CLASS A
WARRANTS OFFERED BY THIS PROSPECTUS OR AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE SHARES AND THE CLASS A WARRANTS IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
TABLE OF CONTENTS
PAGE
Prospectus Summary 2
Risk Factors 4
Where You Can Get Additional Information 8
Use of Proceeds 9
Determination of the Offering Price 9
Dilution 10
Plan of Distribution / Terms of the Offering 12
Market for YzApp's Common Stock
And Related Stockholder Matters 14
Description of Securities 14
YzApp International Inc., and its Business 16
Management 21
Security Ownership of Certain Beneficial Owners
And Management 24
Executive Compensation 25
Transactions with Management and Founders 26
Transfer Agent 26
Legal Matters 26
Independent Auditors 26
Management's Discussion and Analysis
Of Financial Condition 27
Financial Statements F-1
UNTIL ______, 2004 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
FFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT ARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
YZAPP INTERNATIONAL INC.
PROSPECTUS
II-9
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 11 of YzApp International Inc., By-laws provides that every person who
was or is a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or a person for whom he is the
legal representative is or was a director or officer of the corporation or is or
was serving at the request of the corporation or for its benefit as a director
or officer of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise, shall be indemnified and held harmless
to the fullest extent legally permissible under the General Corporation Law of
the State of Nevada against all expenses, liability and loss (including
attorney's fees, judgments, fines and amounts paid or to be paid in settlement)
reasonably incurred or suffered by him in connection therewith. The expenses of
officers and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in advance
of the final disposition of the action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. Such right of indemnification
shall be a contract right, which may be enforced in any manner desired by such
person. Such right of indemnification shall not be exclusive of any other right
which such directors, officers or representatives may have or hereafter acquire
and, without limiting the generality of such statement, they shall be entitled
to their respective rights of indemnification under any bylaw, agreement, vote
of stockholders, provision of law or otherwise, as well as their rights under
Article 11.
Nevada Revised Statutes Section 78.7502 provides for discretionary and mandatory
indemnification of officers, directors, employees and agents as follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed legal
proceeding, except by or in the right of the corporation, by reason of the fact
that the person is or was a director, officer, employee or agent of the
corporation, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with the action, suit or proceeding if the person acted in good faith
and in a manner which was reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, against expenses, including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by the person in connection
with the defense or settlement of the action or suit if the person acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation.
II-1
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, the corporation shall indemnify the person
against expenses, including attorneys' fees, actually and reasonably incurred in
connection with the defense.
Nevada Revised Statutes Section 78.751 requires authorization for discretionary
indemnification; advancement of expenses and limitation on indemnification and
advancement of expenses as follows:
1. Any discretionary indemnification under NRS 78.7502 unless ordered by
a court or advanced pursuant to subsection 2, may be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee
or agent is proper in the circumstances. The determination must be
made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be borne by the
Registrant, are as follows:
SEC Filing Fee 121
NASD Filing Fee na
Printing Expenses 0,000
Accounting Fees and Expenses 12,000
Legal Fees and Expenses 10,000
Blue Sky Fees and Expenses 5,000
Total Estimated Expenses $27,121
II-2
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Registrant sold securities which were not
registered under the Securities Act of 1933, as amended, as follows:
Shares Exchanged for YzApp Solutions Inc.
Date Name # of Nevada Canadian Shares
Shares Rec'd Exchanged
----------------------------------------------------------------------------------
Oct. 15, 2003
Konstantin Bernaschek 25,000 50,000
Stephani Biertuempel 400,000 800,000
Mike Colliar 25,000 50,000
Douglas Dunn 274,000 548,000
Michael Heck 400,000 800,000
Cory Herle 150,000 300,000
Brian Jaggard 1,250,000 2,500,000
Bert Laakmann 410,000 820,000
Richard Legg 750 1,500
Colin McPhail 54,750 109,500
Ken Marlin 25,000 50,000
Kevin McCaw 165,000 330,000
Alexandra Milne 340,000 680,000
Cheryl Neighbour 14,000 28,000
Erich Schmidt Sr. 410,000 820,000
Elsco Construction Ltd 375,000 750,000
Gerhard Selje 25,000 50,000
Fred Shaw 20,000 40,000
Brad Sherwin 5,000 10,000
Klause-Peter Raeke 450,000 900,000
Silver Top Development Company 4,000,000 8,000,000
Mike Smallwood 10,000 20,000
Cynthia Spraggs 116,500 233,000
Brent St Arnaud 15,000 30,000
Tina St Arnaud 25,000 50,000
Louis Stefani 25,000 50,000
Victorian Portfolio SA 400,000 800,000
Joe Wehry 100,000 200,000
Brad Wheeler 10,000 20,000
Total shares exchanged 9,520,000 19,040,000
Shares issued in Regulation D Offering
Date of Subscription Name # of Shares Consideration Proceeds
------------------------------------------------------------------------------------------------------------
March 4, 2003 Erica Seewald 317,500 $0.10 $31,750
John Laakman 317,500 $0.10 $31,750
Christopher Schmidt 100,000 $0.10 $10,000
Monika Schmidt 117,500 $0.10 $11,750
Erich Schmidt 100,000 $0.10 $10,000
March 10, 2003 Dan O'Brien 100,000 $0.10 $10,000
Mount Blanc Capital Corporation 100,000 $0.10 $10,000
April 30,2003 Carol Ann Cataldo 4,000 $0.25 $1,000
Barry Gatten 40,000 $0.25 $10,000
Kyle Eedy 28,000 $0.25 $7,000
Eric Brown 4,000 $0.25 $1,000
October 24, 2003 Bernice Ranalli 20,000 $0.25 $5,000
October 31, 2003 G.E. Corbould 14,986 $0.35 $5,000
November 22, 2003 Brent Usick 5,000 $0.35 $1,750
Total 1,267,786 $146,000
II-3
Control Person(s) for firms listed in tables above.
Elsco Construction Leo Seewald
Victorian Portfolio SA Rene Feuibli
Mount Blanc Capital Corporation Jens Biertuempel
Unregistered Securities sold by YzApp Solutions Inc.
Date Name # of CdN Shares CDN Type of US
Consideration Service Consideration
-------- ---------------------- --------------- ------------- ---------- --------------
Oct. 2001 Konstantin Bernaschek 50,000 $0.66 $16,500 $25,000
Dec. 2002 Stephani Biertuempel 800,000 $0.07 $26,400 ~ Marketing $40,000
Oct. 2001 Mike Colliar 50,000 $0.66 $16,500 $25,000
July 2002 Douglas Dunn 548,000 $0.07 $18,084 ~ Operations $27,400
Jan. 2003 Michael Heck 800,000 $0.07 $26,400 ~ Marketing $40,000
Feb. 2001 Cory Herle 300,000 $0.11 $17,160 26,000
Feb. 2001 Brian Jaggard 2,500,000 $0.00 $0 $0
Feb. 2001 Bert Laakmann 820,000 $0.11 $43,560 $66,000
July 2002 Richard Legg 1,500 $0.07 $50 ~ Technical $75
July 2002 Colin McPhail 109,500 $0.07 $3,614 ~ Marketing $5,475
Oct. 2001 Ken Marlin 50,000 $0.66 $16,500 $25,000
Feb. 2001 Kevin McCaw 330,000 $0.16 $25,740 $39,000
Jan. 2003 Alexandra Milne 680,000 $0.07 $22,440 ~ Marketing $34,000
July 2002 Cheryl Neighbour 28,000 $0.07 $924 ~ Financial $1,400
Feb. 2001 Erich Schmidt Sr. 820,000 $0.19 $79,200 $120,000
Feb. 2001 Elsco Construction Ltd 750,000 $0.13 $49,500 $75,000
Oct. 2001 Gerhard Selje 50,000 $0.66 $16,500 $25,000
July 2002 Fred Shaw 40,000 $0.07 $1,320 ~ Marketing $2,000
July 2002 Brad Sherwin 10,000 $0.07 $330 ~ Research $500
Dec. 2002 Klause-Peter Raeke 900,000 $0.07 $29,700 ~ Marketing $45,000
Feb. 2001 Silver Top Development Company 8,000,000 $0.00 $0 $0
July 2002 Mike Smallwood 20,000 $0.07 $660 ~ Operations $1,000
July 2002 Cynthia Spraggs 233,000 $0.07 $7,630 ~ Marketing $11,560
July 2002 Brent St Arnaud 30,000 $0.07 $990 ~ Sales $1,500
Oct. 2001 Tina St Arnaud 50,000 $0.66 $16,500 $25,000
Oct. 2001 Louis Stefani 50,000 $0.66 $16,500 $25,000
Dec. 2002 Victorian Portfolio SA 800,000 $0.07 $26,400 ~ Marketing $40,000
Apr. 2002 Joe Wehry 200,000 $0.66 $66,000 $100,000
July 2002 Brad Wheeler 20,000 $0.07 $660 ~ Writing $1,000
19,520,000 $545,761 $826,910
* Consideration calculated at $.66US = $1CDN if paid in CDN$
~ indicates shares issued for invoice services provided
Shares Exchanged for YzApp Solutions Inc.
The shares were exchanged on a two for basis with every two shares of YzApp
Solutions Inc., (the Canadian corporation) being exchanged for one share of
YzApp International Inc. (the Nevada corporation). With respect to the sales
made, the Issuer relied on Section 4(2) of the Securities Act of 1933, as
amended. No advertising or general solicitation was employed in offering the
securities. The securities were offered for investment only and not for the
purpose of resale or distribution, and the transfer thereof was appropriately
restricted by the Issuer.
Shares issued in Regulation D Offering
The Registrant was not a reporting company pursuant to the Securities Exchange
Act of 1934 nor was it a development stage company with no business plan. Thus
it was eligible to rely upon Rule 504. Moreover, Rule 504 was available in that
the Registrant sold less than $1,000,000 of securities in the previous 12 month
period and the purchasers were unaffiliated investors. The Shares were sold at
$.10 and $.25 per Share in March 2003 pursuant to the Rule 504 safe harbor.
These sales were entirely private transactions pursuant to which all material
information as specified in Rule 502(b)(2) was made available to the purchasers.
No advertising or general solicitation was employed in offering the securities.
The securities were offered for investment only and not for the purpose of
resale or distribution, and the transfer thereof was appropriately restricted by
the Issuer. The Issuer does not believe the Shares sold pursuant to the
above-described Exchange should be integrated into this offering due to the
different consideration and purposes of these other sales.
Shares Sold by YZapp Solutions Inc.
The shares sold by YZapp Solutions Inc., the Canadian Corp., were exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
No advertising or general solicitation was employed in offering the securities.
The securities were offered for investment only and not for the purpose of
resale or distribution, and the transfer thereof was appropriately restricted by
the Issuer.
II-4
ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement pursuant
to Item 601 of Regulation S-B:
3.1 -- Articles of Incorporation*
3.2 -- Bylaws*
4.1 -- Form of Common Stock Certificate*
5.1 -- Opinion of Dennis Brovarone, Attorney at Law
10.1 -- Agreement and Plan of Reorganization*
10.2 -- Inglenet Professional Services Agreement*
10.3 -- Sawka Group Agreement
23.1 -- Consent of Dennis Brovarone, Attorney at Law (see opinion)
23.2 -- Consent of N.I. Cameron Inc., LLP Chartered Accountants
99.1 -- Subscription Agreement
* Previously filed with Form SB-2 on January 2, 2004
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-5
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
II-6
SIGNATURES
In accordance with the requirements of the Securities Act of 1933 as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Langley, British Columbia on July 6, 2004.
YZAPP INTERNATIONAL INC.
BY: /s/ Brian Jaggard
-----------------------
Brian Jaggard, President
/s/ Brian Jaggard
-------------------
Brian Jaggard, Chief Financial Officer, Controller and
Principal Accounting Officer
In accordance with the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Brian Jaggard President, Chief Executive July 6, 2004
----------------- Officer, Chief Financial
Brian Jaggard Officer and Director
/s/ Douglas Dunn Chief Operations Officer July 6, 2004
---------------- and Director
Douglas Dunn
/s/ Carl Lacey Director July 6, 2004
--------------
Carl Lacey
II-7
EXHIBIT 5.1
DENNIS BROVARONE
ATTORNEY AND COUNSELOR AT LAW
18 Mountain Laurel Drive
Littleton, Colorado 80127
phone: 303 466 4092 / fax: 303 466 4826
July 7, 2004
Board of Directors
YzApp International Inc.
Re: Registration Statement on Form SB-2
Gentlemen:
You have requested my opinion as to the legality of the issuance by YzApp
International Inc., (the "Corporation") of up to 3,000,000 shares of Common
Stock being offered by the Corporation the "Shares"). The Shares are the subject
of the Registration Statement on Form SB-2 (the "Registration Statement") to be
filed on or about July 7, 2004.
Pursuant to your request I have reviewed and examined:(1).The Articles of
Incorporation of the Corporation, as amended (the "Articles"); (2). The Bylaws
of the Corporation, as certified by the Secretary of the Corporation; (3). The
minute book of the Corporation; (4). A copy of certain resolutions of the Board
of Directors of the Corporation; (5). The Registration Statement; (6) (7). The
applicable provisions of the Nevada constitution, statutes and reported judicial
decisions interpreting those laws; (8) and Such other matters as I have deemed
relevant in order to form my opinion.
Based upon the foregoing, I am of the opinion that the Shares, have been
duly authorized, legally issued, fully paid and non-assessable.
Not withstanding the above, I consent to the use of this opinion in the
Registration Statement and to the reference to me in the Legal Matters section
of the Prospectus contained in the Registration Statement. In giving my consent,
I do not admit that I come without the category of persons whose consent is
required under Section 7 of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
/s/ DENNIS BROVARONE
--------------------
Dennis Brovarone
EXHIBIT 10.3
This Agreement dated for reference September 3, 2003
BETWEEN:
YzApp Solutions Inc.
6584 Willoughby Way
Langley, B.C.
V2Y 1K4
("Principal")
AND:
Sawka Group
Suite 600-1311 Howe Street
Vancouver, BC V6Z 2P3
("Sawka Group")
Whereas the Principal wishes to market the following product/service:
YzApp Solutions Inc. has developed a new generation of credit application,
the Intelligent Credit Application(C) (ICA). The ICA interacts with the
borrower and the seller early in the application process in order to
improve the information flow to the lender. The ICA creates "mass
customisation" of the application process for the benefit of buyers,
sellers and lenders.
The Principal offers this agreement to cover the development and sale of a
customized version of the ICA for new and used Bombardier recreational equipment
dealers in Canada. Recreational Equipment (RE) for the purposes of this
agreement, is a term meant to cover all terrain vehicles, snowmobiles, personal
watercraft as well as motorcycles.
And whereas Sawka Group is prepared to partially pay for the software
customization or guarantee revenue and use their contacts to initiate sales and
help establish a network of clients for the service.
It is agreed as follows:
(1.0) Activity: Sawka Group shall use commercially reasonable efforts to
initiate sales for the product. Sawka Group will offer products only at pricing
approved in advance by the Principal.
(2.0) Materials Provided: The Principal shall assist Sawka Group in generating
sales by providing technical support, marketing material and other support as
requested by Sawka Group.
(3.0) Client Support: The Principal will provide the same training and support
to new users of the product introduced by Sawka Group as for any other of the
Principal's clients.
Page 1 of 4
(3.1) General and Technical Support: In consideration of ongoing commissions
outlined in Clause Four (4.0) of this agreement, the Principal agrees to provide
9 am to 5 p.m. Pacific Standard Time, Monday to Friday, (excluding statutory
holidays) technical and general customer support for the Principal's products,
for all clients outlined in Clause Four (4.0). If required on site support will
be provided to customers within 48 hours Monday to Friday, and within reasonable
period on weekends and holidays, although these site visits may be invoiced at
an hourly rate to either Sawka Group or the customer.
(4.0) Fees and Commissions: For Clients designated as Tier One - Individual
Bombardier Dealers, shall pay a fee of $150 per month per dealer plus applicable
taxes, and a one time set up fee of $450.00.
For clients designated as Tier One - Non-Bombardier Dealers, Sawka Group shall
pay a fee of $150 per month per dealer plus applicable taxes. After an
introductory period it is expected that Tier One - Non-Bombardier Dealers will
be charged on a different pricing structure than Bombardier Dealers.
For Clients designated as Tier Two Dealers' Associations or businesses that
re-sell the products of the Principal to dealers, the Principal shall pay a
commission of 10% on the first year gross revenues arising from clients
initiated by Sawka Group
Clients, either Tier 1 or Tier 2, introduced to the Principal by Sawka Group,
and whom Sawka Group does not personally complete the sale, but those clients do
enter into a contract with the Principal, will earn Sawka Group a $250 finder's
fee.
(4.1) Profit Sharing: As of September 31, 2004 and as long as 604757 has signed
over 150 dealers a 5% commission/profit sharing will commence on the monthly
revenue received from clients described in 4.0 as Bombardier or Tier One -
Non-Bombardier Dealers.
(4.2) Prospects which May be Solicited: Sawka Group will notify the Principal by
fax or email of non-Bombardier prospects initiated by Sawka Group and provide
all relevant contact and other information to allow the Principal to maintain
appropriate records. Sawka Group can approach any prospect in the new/used
recreational equipment retail sales industry in Canada.
(4.3) Date of Payments: Both the Principal and Sawka Group will pay by cheque or
direct deposit all fees and commissions due and payable, on the 15th of every
month on all fees and commissions accrued the previous month.
(4.4) Transaction Currency: All revenues earned in CDN dollars shall be paid in
CDN dollars.
(5.0) Auditing: The Principal shall make available upon request, starting at the
contract date, statements relevant to calculation of fees owed by Sawka Group
and to provide enough information for auditing purposes. Sawka Group shall have
the right to inspect client lists for auditing purposes. Sawka Group in turn
will maintain a database in Maximizer format (or other CRM system) of all
contacts made in relations to the Principal's services. The Principal or its
appointed agent will make this database available at any time for inspection.
Also, the database will supplied in its' entirety to the Principal if or when
this agreement is terminated.
Page 2 of 4
(6.0) Term: This agreement is meant to provide the basis of an ongoing and long
term relationship between the Principal and Sawka Group Therefore the term of
the agreement is one (1) year from the Reference date, and will renew annual for
one (1) year terms thereafter unless specifically terminated by either party.
Termination of the agreement can take place at any time by either party, by the
provision of a letter stating the decision to terminate, and unless otherwise
stated, will be effective as of the delivery date of said letter, it being
delivered by registered mail or by courier.
(7.0) General Provisions: If any provisions in this agreement are found to be
void or invalid it will not affect the balance or the spirit of the agreement.
(8.0) Assignment: Sawka Group can not assign this agreement without the written
approval of the Principal.
(9.0) Confidentiality: In the capacity as Consultant and therefore an agent of
the Principal, Sawka Group will have access to and will be entrusted with
confidential information of the Principal. Confidential information includes
information relating to the Principal's business, financial affairs, commission
and pricing structures, and technology, as well as client, prospect, and
supplier lists. Therefore, it is agreed that Sawka Group will not use or
disclose during or after the termination of the agreement, any such confidential
information except, as may be necessary, in the discharge of his duties under
this agreement.
(10.0) Noncompetition: In the event that this agreement is terminated with the
Principal, Sawka Group agrees not to create or participate in the creation of
products that would directly compete with the Principal in its given area of
business, in particular and not by way of limitation, expert system enhanced
credit application software, for a period of one year after the termination of
this agreement.
(11.0) Assignment of Innovations. While this agreement between Sawka Group and
the Principal is in place, Sawka Group may be engaged at times in developing
technical solutions for the ICA service, such as computer software and
electronic commerce configurations. It is understood that such solutions and
innovations created or possibly created are the property of the Principal.
(12.0) Disputes: If any dispute arises with respect to this agreement, Sawka
Group and the Principal will attempt to resolve the dispute; failing that, any
such dispute will be referred to a lawyer jointly chosen by Sawka Group and the
Principal and arbitration will be undertaken pursuant to the Commercial
Arbitration Act.
This agreement shall by governed by the laws of the Province of British
Columbia.
Page 3 of 4
SAWAKA HOLDINGS COMPANY LIMITED YZAPP SOLUTIONS INC.
/s/ Mike Sawka /s/ Brian Jaggard
-------------------- --------------------
(ACCEPTED BY - SIGNATURE) (ACCEPTED BY - SIGNATURE)
Mike Sawka Brian Jaggard
-------------------- --------------------
(PRINT NAME) (PRINT NAME)
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EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Registration Statement on Form SB-2 of
our report dated February 16, 2004, relating to the financial statements of
YzApp International Inc. for the fiscal period ended July 31, 2003, as well as
to the reference to N.I. Cameron Inc. Chartered Accountants in the Experts
section of the Prospectus contained in the Registration Statement.
/s/ N.I. Cameron and Assoc.
---------------------------
Vancouver, BC N.I. Cameron and Assoc.
July 7, 2004 Chartered Accountants
EXHIBIT 99.1
SECURITIES SUBSCRIPTION AGREEMENT
_______ __, 2004
YzApp International Inc.
6584 Willoughby Way,
Langley, British Columbia
Canada V2Y 1K4
1. YzApp International Inc, a Nevada corporation (the "Company"), has offered
for sale and the undersigned purchaser (the "Purchaser") hereby tenders this
subscription and applies for the purchase of ______ Shares of Common Stock at
the purchase price of $0.50 per Share (the "Offering"). Together with this
Subscription Agreement, the Purchaser is delivering to the Company the full
amount of the purchase price by check or wire transfer of funds for the
subscribed Shares to:
YzApp International Inc.
6584 Willoughby Way,
Langley, British Columbia
Canada V2Y 1K4
(NAME OF SUBSCRIBER)
Number of Shares Subscribed
2. The Offering is being conducted in reliance upon effectiveness of a
registration statement filed with the U.S. Securities and Exchange Commission
and the Prospectus (the "Prospectus") contained therein dated xxxx, 2004,
pursuant to the Securities Act of 1933 (the Act).
3. Representations and Warranties of Purchaser. In order to induce the Company
to accept this subscription, the Purchaser hereby represents and warrants to,
and covenants with, the Company as follows:
A. The Purchaser is purchasing the Shares for its own account for
investment purposes and not with a view towards distribution and has no present
arrangement or intention to sell the Common Stock;
B. The Purchaser is not an officer, director or "affiliate" (as that term
is defined in Rule 403 under the Act) of the Company;
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C. Purchaser is purchasing the Shares for its own account and Purchaser is
qualified to purchase the Shares under the laws of its jurisdiction of residence
and the offer and sale of the Shares will not violate the securities or other
laws of such jurisdiction;
D. The Purchaser has carefully reviewed the Company's Prospectus and has
had the opportunity to ask and receive answers to any and all questions the
Purchaser had with respect to the Company, its business, management and current
financial condition;
E. Except as set forth in this Agreement, no representations or warranties
have been made to the Purchaser by the Company, or any agent, employee or
affiliate of the Company and in entering into this transaction the Purchaser is
not relying upon any information, other than that which is contained in the
Prospectus, the receipt of which is hereby acknowledged and the results of any
independent investigation by the Purchaser;
F. The Purchaser has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder; and this Agreement is a
legally binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms; and
4. Representations of the Company.
The Company represents and warrants:
A. The Company is in full compliance, to the extent applicable, with all
obligations under Nevada, federal and Canadian law;
B. The execution, delivery and performance of this Agreement and the
consummation of the issuance of the Shares and the transactions contemplated by
this Agreement are within the Company's corporate powers and have been duly
authorized by all necessary corporate and stockholder action on behalf of the
Company;
C. The Prospectus provided to the Purchaser do not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statement therein in light of the
circumstances under which they were made, not misleading;
5. Non-Binding Until Acceptance. The Purchaser understands that this
subscription is not binding upon the Company until the Company accepts it, which
acceptance is at the sole discretion of the Company and is to be evidenced by
the Company's execution of this Agreement where indicated. This Agreement shall
be null and void if the Company does not accept it as aforesaid. Upon acceptance
by the Company and receipt of the total purchase price, the Company will issue
one or more certificates for the full number of shares of common stock and
warrants contained in the subscribed Shares.
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6. Non-Assignability. Neither this Agreement nor any of the rights of the
Purchaser hereunder may be transferred or assigned by the Purchaser.
7. Governing Law. This Agreement will be construed and enforced in accordance
with and governed by the laws of the State of Nevada, except for matters arising
under the Act, without reference to principles of conflicts of law. Each of the
parties consents to the exclusive jurisdiction of the federal courts whose
districts encompass any part of the State of Nevada or the state courts of the
State of Nevada in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
IN WITNESS WHEREOF, the Purchaser has executed this Securities Subscription
Agreement on the date set forth below.
(Print Name of Subscriber)
By:
(Signature)
Address for Shareholder Records:
Telephone Number
Number of Shares Subscribed:
(Minimum of _____ shares)
Purchase Price
(# of Shares X $0.50 per Share)
The foregoing Subscription is accepted this day of _______ 2004 by:
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