As filed with the United States Securities and Exchange
Commission, via EDGAR, on March 27, 1997
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 20-F/A
(Amendment No. 1)
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended ___________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to _________________
Commission file number __________________________________________
Display.IT Holdings plc
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
England and Wales
------------------------------------------------------
(Jurisdiction of incorporation or organization)
46 Cannon Street, London EC4N 6JJ
------------------------------------------------------
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each Exchange
on which registered
None None
------------------- ---------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Title of Class
------------------------------------------
American Depositary Shares of 5 pence each
Ordinary Shares of 5 pence each*
- -------------------------
* Not for trading, but only in connection with the Registration of American
Depositary Shares, pursuant to the requirements of the Securities and
Exchange Commission.
<PAGE>
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
None
----------------
(Title of Class)
As of January 31, 1997, there were outstanding 15,556,720 ordinary
shares of 5 pence each (the "Ordinary Shares") of the Registrant.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d)of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
--- ---
Indicate by check mark which financial statement item the Registrant
has elected to follow.
Item 17 Item 18 X
----- ---
Pursuant to a Deposit Agreement (the "Deposit Agreement") to be entered
into between the Registrant, the Depositary and the owners and holders from time
to time of American Depositary Receipts ("ADRs") evidencing ADSs, the Depositary
will be able to charge any party depositing or withdrawing Shares (as defined in
the Deposit Agreement) or any party surrendering ADRs or to whom ADRs are issued
(including, without limitation, issuance pursuant to a stock dividend or stock
split declared by the Registrant or an exchange of stock regarding the ADRs or
Deposited Securities (as defined in the Deposit Agreement) or a distribution of
ADRs pursuant to the Deposit Agreement), a fee of $1.50 or less per certificate
for an ADR or ADRs for transfers made pursuant to the Deposit Agreement. See
"Item 14. Description of Securities to be Registered -- Description of American
Depositary Receipts -- Charges of Depositary."
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
Item 1. Description of Business..................................... 1
Item 2. Description of Property .................................... 19
Item 3. Legal Proceedings .......................................... 19
Item 4. Control of Registrant....................................... 19
Item 5. Nature of Trading Market ................................... 20
Item 6. Exchange Controls and Other Limitations
Affecting Security Holders ................................. 21
Item 7. Taxation ................................................... 22
Item 8. Selected Financial Data..................................... 25
Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................ 28
Item 10. Directors and Officers of Registrant ....................... 35
Item 11. Compensation of Directors and Officers ..................... 38
Item 12. Options to Purchase Securities from
Registrant or Subsidiaries ............................... 38
Item 13. Interest of Management in Certain Transactions ............. 40
Part II
Item 14. Description of Securities to be Registered ................. 42
Part III*
Item 15. Defaults Upon Senior Securities*
Item 16. Changes in Securities and Changes in
Security for Registered Securities*
- --------------------
* Not applicable
-i-
<PAGE>
Page
----
Part IV
Item 17. Financial Statements*
Item 18. Financial Statements ....................................... 56
Item 19. Financial Statements and Exhibits .......................... 56
- --------------------
* Not applicable
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Registration Statement on Form 20-F and other materials filed or to be filed by
the Company with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
the Company) contains statements that are forward-looking, such as statements
relating to plans for increased functionality of existing software and other
software development activities, as well as plans relating to various methods of
future revenue generation, entering into various business-enhancing agreements,
future expansion, other capital spending, financing sources and the effects of
competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, those relating to software
development activities, product acceptance, the ability to keep pace with
technological evolution, competition, dependence on existing management, global
economic conditions and the possibility of future restrictive governmental
regulation of the financial information industry.
-ii-
<PAGE>
INTRODUCTORY NOTE
Unless the context indicates otherwise, (i) "Display.IT Holdings"
refers to Display.IT Holdings plc, a public limited company incorporated in
England and Wales under the Companies Act of 1985 of Great Britain (the
"Companies Act"), (ii) "Display.IT Limited" refers to Display.IT Limited, a
private company limited by shares incorporated in England and Wales under the
Companies Act, and (iii) the "Company" or "Display.IT" refers collectively to
Display.IT Holdings and Display.IT Limited, a wholly owned subsidiary of
Display.IT Holdings.
The Company publishes its consolidated financial statements expressed
in United Kingdom ("U.K.") pounds sterling. In this Registration Statement,
references to "$" are to United States ("U.S.") dollars and references to
"(pound sterling)" or "pounds sterling" or "pounds" and "pence" or "p" are to
U.K. currency. For historical information regarding rates of exchange between
U.S. dollars and pounds sterling, see "Item 8. Selected Financial Data --
Exchange Rate Information." On March 19, 1997, the noon buying rate in New York
City for cable transfers in pounds sterling as certified for customs purposes by
the Federal Reserve Bank of New York (the "Noon Buying Rate") was $1.5968 to
(pound sterling) 1.00.
Any cash dividends paid by Display.IT Holdings will be in pounds
sterling, and exchange rate fluctuations will affect the U.S. dollar amounts
received by holders of American Depositary Receipts ("ADRs") on conversion of
such dividends. Moreover, fluctuations in the exchange rates between pounds
sterling and the U.S. dollar will affect the dollar equivalent of the pounds
sterling price of the ordinary shares of 5 pence each of Display.IT Holdings
(the "Ordinary Shares") trading off exchange in London, England on a trading
facility known as OFEX ("OFEX"), and, as a result, are likely to affect the
market price of Display.IT Holdings' American Depositary Shares of 5 pence each
("ADSs") which are represented by the ADRs in the United States.
Display.IT Holdings will furnish The Bank of New York (the
"Depositary"), with annual reports containing Consolidated Financial Statements
and an opinion thereon by independent public accountants. Such financial
statements will be prepared on the basis of accounting principles generally
accepted in the U.K. ("U.K. GAAP"). The annual reports will contain a
reconciliation to accounting principles generally accepted in the U.S. ("U.S.
GAAP") of net income and shareholders' equity. Although it is not required to do
so, Display.IT Holdings anticipates that it will also furnish the Depositary
with semi-annual reports prepared in conformity with U.K. GAAP, which will
contain unaudited interim consolidated financial information. Upon
-iii-
<PAGE>
receipt thereof, the Depositary will mail all such reports to record holders
("Record Holders") of ADRs, evidencing ADSs. Display.IT Holdings will also
furnish to the Depositary all notices of shareholders' meetings and other
reports and communications that are made generally available to shareholders of
Display.IT Holdings. The Depositary will make such notices, reports and
communications available for inspection by Record Holders of ADRs and will mail
to all Record Holders of ADRs notices of shareholders' meetings received by the
Depositary. Display.IT Holdings is not required to report quarterly financial
information.
All references herein to the Ordinary Shares, the prices thereof, or to
options to acquire Ordinary Shares give retroactive effect to a four-for-one
bonus issue (the "Bonus Issue") whereby on December 6, 1996 shareholders of
Display.IT Holdings were issued four additional Ordinary Shares for each
Ordinary Share held.
-iv-
<PAGE>
PART I
Item 1. Description of Business.
General Development of Business
On June 19, 1995, Display.IT Limited was incorporated in England and
Wales as a private company limited by shares under the Companies Act with
authorized capital of 10,000 ordinary shares of (pound sterling)1 each. All of
Display.IT Limited's outstanding ordinary shares were issued to Peter Levin.
Display.IT Limited, under the direction of Mr. Levin, began the development of
the Display.IT software with the goal of creating a Windows-based software
package that would enable users involved in financial markets to access near
real-time financial data and news freely available over the Internet and
real-time financial data and other information available from certain
third-party providers of financial information. See "Item 1. Description of
Business -- Industry Overview" and "-- Products and Services -- Display.IT
Software."
On May 3, 1996, Display.IT Holdings was incorporated in England and
Wales under the Companies Act as Law 737 Limited, a private company limited by
shares. On June 20, 1996, Display.IT Holdings entered into an agreement (the
"Share Exchange Agreement") with Mr. Levin whereby Display.IT Holdings acquired
from Mr. Levin all of the outstanding ordinary shares of Display.IT Limited (the
"Display.IT Limited Shares") in exchange for the crediting as fully paid up the
200 Ordinary Shares held by Mr. Levin and the issuance to him of an additional
9,999,800 Ordinary Shares. Display.IT Limited thereby became a wholly owned
subsidiary of Display.IT Holdings. See "Item 13. Interest of Management in
Certain Transactions -- Acquisition of Display.IT Limited Shares."
On June 24, 1996, Display.IT Holdings was re-registered as a public
limited company and its name was changed to Display.IT Holdings plc. Also on
that date, Display.IT Holdings commenced the offering of 5,000,000 Ordinary
Shares at a price of (pound sterling)0.20 per Ordinary Share to certain persons
in the United Kingdom (the "U.K. Private Placement"). By June 27, 1996, 19
investors had purchased all of the Ordinary Shares offered in the U.K. Private
Placement. On June 28, 1996, the Ordinary Shares began trading on OFEX. See
"Item 5. Nature of Trading Market."
On December 6, 1996, an extraordinary general meeting of Display.IT
Holdings was convened at which resolutions were passed approving the Bonus
Issue. Under the terms of the Bonus Issue, shareholders of Display.IT Holdings
were entitled to receive four additional Ordinary Shares for each Ordinary Share
held. All references in this Registration Statement to the Ordinary Shares, the
prices thereof, or to options to acquire Ordinary Shares give retroactive effect
to the Bonus Issue. In addition, on December 13, 1996, Display.IT Holdings
received the authorization of its shareholders to sell up to 3,500,000 Ordinary
Shares in a private placement transaction or series of
-1-
<PAGE>
such transactions. In connection therewith, as of January 31, 1997, the Company
had sold an aggregate of 506,720 Ordinary Shares to two investors in return for
an aggregate consideration of (pound sterling)1,839,996.
Industry Overview
According to Waters Information Services, Inc. ("Waters"), in 1995,
participants in the financial information industry generated approximately $5.3
billion in revenues world wide. Waters' research indicates that approximately
34.4% of these revenues were generated by participants in North America, 40.6%
by participants in Europe and the remaining 25% by participants in Asia and the
Pacific.
Generally, the financial information industry consists of three types
of participants: those that capture or develop information ("originators"),
those that deliver the information ("information or data providers") and those
that ultimately use the information ("end-users"). Originators, such as stock
exchanges and the Nasdaq Stock Market, capture or develop financial data, which
include equity and bond prices and certain information regarding mutual funds,
currencies and commodities, and originators such as Reuters Holdings PLC
("Reuters") and Bloomberg L.P. ("Bloomberg") capture or develop financial news.
Information providers serve as conduits through which information obtained from
originators (or, in some cases, other information providers) is delivered to
end-users.
Financial data can be delivered to end-users either simultaneously as
it is generated ("real-time financial data") or subject to a brief delay,
typically 15 to 20 minutes ("near real-time financial data"). Most information
providers that deliver real-time financial data, such as Bloomberg, Dow Jones
Markets ("Telerate") and Reuters (Bloomberg and Reuters are both originators of
financial news and information providers of financial news and data), do so
through dedicated information feeds and special computer terminals which can be
used only to access the financial data and news made available by that
information provider. Certain of these information providers have developed
extensive, proprietary non-Internet delivery mechanisms and other
infrastructures for the provision of their information to end-users, and, in
certain instances, have developed software enabling delivery to personal
computers ("PCs").
The Company is an information provider that has developed software
that, utilizing the Internet as a non-proprietary delivery mechanism, delivers
in a format that management believes is familiar to professional end-users and
intuitive for non-professional end-users (i) near real-time financial data and
financial news available from originators and other information providers via
the Internet without charge, and (ii) real-time financial data and other
information available from certain other information providers via the Internet
for a charge. See "Item
-2-
<PAGE>
1. Description of Business -- Products and Services -- Display.IT Software" and
"-- Risks of New Product Development."
Operations
The Display.IT software was under development throughout 1996 and a
working model of the product was first available in late April 1996. Development
and testing of the Display.IT software continued until late November 1996 when
management determined that the product was ready for release to the public. The
Company anticipates that marketing of the Display.IT software will be conducted
globally by resellers, consisting of hardware manufacturers, software
distribution companies, telecommunications providers, marketing companies and
consultants, that will make the Display.IT software available to end-users. See
"Item 1. Description of Business -- Principal Markets" and "-- Distribution."
During the first half of 1997, the Company intends to aggressively
promote and market the Display.IT software through resellers, and will seek to
enter into marketing agreements with resellers to distribute the Display.IT
software through various channels in a manner designed to increase revenues
generated from sales of the product. The Company intends to target resellers
with access to markets all over the world. As of January 31, 1997, the Company
had entered into agreements with two resellers. On November 24, 1996, the
Company entered into a cooperation and distribution agreement with a marketing
company (the "Marketing Company") pursuant to which the Marketing Company has
agreed to serve as a non-exclusive world wide distributor of Display.IT
software. The agreement gives the Marketing Company the right to sell the
software via the Internet, telemarketing and direct field sales, and to receive
as a sales commission a percentage of the price for which each Display.IT
software unit is sold. In January 1997, the Company entered into a
distributorship agreement (the "Distributorship Agreement") with an information
services company (the "Information Services Company") pursuant to which the
Information Services Company has also agreed to serve as a non-exclusive world
wide distributor of Display.IT products. See "Item 1. Description of Business --
Distribution," "-- Preliminary Arrangements," "-- Agreements With the
Information Services Company -- Distributorship Agreement" and "-- Development
Stage Company; Expectation of Losses; Negative Cash Flows."
In addition, the Company has been engaged in discussions with several
other resellers located principally in the U.S. and the U.K. contemplating the
purchase of Display.IT software for resale through retail channels and directly
to end-users. See "Item 1. Description of Business -- Distribution" and "--
Preliminary Arrangements."
From the date of the Display.IT software's introduction through March
15, 1997, the Company had sold only a minimal number of Display.IT software
units, principally to customers in the U.K. During the first two months of 1997,
the Company generated revenues from product sales of approximately (pound
sterling) 14,595. Since introduction, management has focused the Company's
sales, marketing and distribution efforts in a manner designed to maximize the
number of Display.IT software units disseminated. In an effort to achieve this
goal, the Company has sought to distribute Display.IT software to potential
end-users free of charge. Of the potential end-users to whom Display.IT software
has been distributed or otherwise made available, those end-users who have
actually installed the product are located primarily in the U.S. and Europe.
While this method of distribution predominates, sales and revenues may be
adversely affected; however, management believes that the strategy will benefit
the Company over the longer term.
Since it commenced operations, the Company has outsourced, and for
1997, the Company intends to continue to outsource, where possible, cost
centers, such as software development, accounting and marketing activities, as
well as end-user assistance, or
-3-
<PAGE>
"help desk" services (which have been outsourced to British Telecommunications
plc ("BT")). Management believes that outsourcing the Company's cost-centers
enables management to focus on the Company's core business functions, including
directing the execution of software development and information management, and
enables the Company to minimize staffing levels and related fixed costs. See
"Item 1. Description of Business -- Products and Services -- Customer Support"
and "-- Distribution."
The Company currently anticipates that during 1997 it will spend
approximately (pound sterling)300,000 on research and development in an effort
designed to maintain its position in the market for Internet delivery-based
financial information products, to continue development of the Display.IT
software to enhance and improve its features, and to design new products based
on or related to the Display.IT software. The Company, pursuant to a software
development agreement, retained a software development firm to assist in the
development of the Display.IT software and anticipates that it will retain the
same and/or other software development firms to assist the Company in the
development of any enhancements and improvements to the Display.IT software and
any new software products, although no assurance to that effect can be given.
See "Item 1. Description of Business -- Risks of New Product Development" and
"-- Research and Development Policy."
In 1997 and beyond, the Company may seek to acquire businesses,
products and/or technologies that extend or enhance the Company's current
business and product offerings. The Company does not currently have any
agreements, arrangements or understandings, and is not involved in any
negotiations, with respect to any such acquisition. See "Item 9. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
Products and Services
Display.IT Software
General. The Display.IT software first became available to end-users in
late November 1996. Once installed on a Windows-based PC, the Display.IT
software displays on the end-user's PC near real-time financial data and
financial news available without charge via the Internet, and real-time
financial data and other financial information available via the Internet for a
fee from certain information providers, in a format which management believes is
familiar to professional users, and intuitive for non-professional users. This
information is currently gathered from approximately 250 sites on the Internet's
World Wide Web (the "Web") and covers over 100,000 instruments ranging from the
traditional -- including, without limitation, equities, bonds, options,
commodities and currency exchange rates -- to the highly specialized -- such as
Japanese tin futures.
-4-
<PAGE>
Conceptually, the Display.IT software can be regarded as operating in
two parts. First, information identifying the location on the Web of financial
data and news has been organized by the Display.IT software into a directory.
Second, the Display.IT software, in response to the query of an end-user,
accesses requested financial information using the directory to locate the
information, and then displays it on the end-user's PC. For example, a typical
stock price request is translated by the software into a search through the
directory for the most up-to-date information available through known sources on
the Internet relating to the particular stock for which pricing and other data
are available. The Display.IT software does not store or replicate any financial
data; rather, it uses information in the directory to identify a source of the
data on the Internet and the location of the data within that source, and then
retrieves that data via the Internet for display on the end-user's PC.
Display.IT software is Microsoft Corporation ("Microsoft") accredited
and compliant which makes it compatible with any PC running Windows 95 or
Windows NT. The Company has developed the Display.IT software to be Microsoft
compatible so that end-users would have the ability to include financial data,
such as stock, bond and mutual fund prices, delivered to end-users via the
software in a database and to use other Microsoft applications to manipulate the
data in order to, among other things, develop graphs and spreadsheets. As of
December 31, 1996, the data storage and manipulation feature was still
undergoing testing and not available to end-users. See "Item 1. Description of
Business -- Risks of New Product Development."
As of January 31, 1997, financial data and information ("Fee-Based
Information") consolidated by Green Eye Limited ("Green Eye"), Standard & Poor's
ComStock ("S&P ComStock") and Emerging Markets Data plc ("EMD") (collectively,
the "Fee-Based Information Providers") was available to Display.IT end-users for
a fee payable by the end-users to the appropriate Fee-Based Information
Provider. The Fee-Based Information consolidated by Green Eye consists of
three-to-five year old historical financial data pertaining to various business
entities; the Fee-Based Information consolidated by S&P ComStock consists of
real-time financial data; and the Fee-Based Information consolidated by EMD
consists of real-time financial data and financial news regarding business
entities in emerging markets. In January 1997, the Company entered into an
agreement (the "Intermoney Agreement") with the Information Services Company
pursuant to which Fee-Based Information consolidated by the Information Services
Company, which consists of forward-looking, predictive market information based
on extensive research, may become available to Display.IT end-users. In addition
to Fee-Based Information, certain information consolidated by the Fee-Based
Information Providers and the Information Services Company is available to
Display.IT end-users free of charge (other than the cost of the Display.IT
software and any upgrades). See "Item 1. Description of Business -- Products and
Services -- Display.IT Software -- Access to Third Party Data" and "--
Agreements With the Information Services Company -- Intermoney Agreement."
End-users obtaining Fee-Based Information through the Display.IT
software will have access to a dynamic body of
-5-
<PAGE>
financial information consolidated, updated and maintained by the Fee-Based
Information Providers that make the information available. On the other hand,
the body of information available to end-users who obtain access only to the
near real-time financial data available through the Display.IT software is
static -- i.e., there is a set number of Web sites that the software will access
to obtain financial information. In order to have the number of Web sites that
the Display.IT software will access increased, end-users must pay for software
upgrades which will be periodically released by the Company. An end-user who
does not obtain Fee-Based Information or purchase software upgrades generally
will not have access to financial information regarding, for instance, new
issues of equity securities. BT currently provides limited customer support
services to Display.IT end-users and the Company is seeking to enter into an
agreement with BT whereby BT, pursuant to service contracts, would offer varying
levels of expanded customer support to Display.IT end-users. It is currently
anticipated that certain of the service contracts offered would entitle
Display.IT end-users to software upgrades at no cost (other than that of the
service contract). See "Item 1. Description of Business -- Products and Services
- -- Customer Support" and "-- Preliminary Arrangements."
The Company anticipates that it will generate revenues from, among
other things, sales of the Display.IT software, and that sales will be made
pursuant to license agreements. See "Item 1. Description of Business --
Development Stage Company; Expectation of Losses; Negative Cash Flows," "--
Intellectual Property" and "Item 9. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Other Operating Income."
Delivery Mechanism. Generally, providers of access ("access providers")
to the Web utilize infrastructures that often include public telephone lines.
When an end-user connected to the Web via such an access provider accesses a Web
site connected to the Web by an access provider utilizing a different
infrastructure, the information retrieved by the end-user undergoes a series of
"hops" from one infrastructure to the next until it reaches the infrastructure
of the access provider through which the end-user is connected to the Web. The
hops that the information undergoes do not follow a predictable path, and it is
possible for information to travel thousands of miles through the Web to get to
an end-user located only a short distance from the Web site accessed. The
combination of these factors -- i.e., hopping and the use of public telephone
lines -- can lead to delays in the transmission of information to the end-user.
In order to minimize transmission delays which could compromise the
value of the real-time and near real-time financial data delivered to end-users
by the Display.IT software, the Company is connected to the Web through BT, an
access provider utilizing the Concert InternetPlus infrastructure. BT, through a
series of peering agreements with other premium
-6-
<PAGE>
Internet access providers, has created a global infrastructure, Concert
InternetPlus, that reduces hops. The Concert InternetPlus infrastructure
utilizes international private leased circuits ("IPLCs") of high-bandwidth for
the transmission of information through the Web. These IPLCs generally have
fewer users than public telephone lines and their high-bandwidth allows for
great resiliency, which generally results in significantly faster information
transmission among end-users and Web sites connected to Concert InternetPlus,
regardless of the distance between them.
The Company seeks to educate its end-users as to the decreased
information transmission times that generally can be achieved when they connect
to the Web through access providers utilizing the Concert InternetPlus
infrastructure. The Company anticipates that by educating its end-users in this
way, they will be more likely to take advantage of the efficiency of the Concert
InternetPlus infrastructure which should result in increased end-user
satisfaction with the Display.IT software. The Company is seeking to enter into
agreements with BT and other access providers providing access to the Web via
the Concert InternetPlus infrastructure that would reduce the cost associated
with access to the Web through such companies to both Display.IT and its
end-users. See "Item 1. Description of Business -- Preliminary Arrangements."
The Company has an understanding (the "CellNet Understanding") with
CellNet, a telecommunications company that owns and operates one of the two
mobile telephone networks in the United Kingdom and which allows for mobile
connectivity to the Concert InternetPlus infrastructure. Pursuant to the CellNet
Understanding, the Company is to encourage its end-users who require mobile
connectivity to the Internet to utilize the CellNet network in order to obtain
such connectivity, and, in return, CellNet is to pay a percentage of all
revenues generated by it in connection with the Display.IT software to the
Company. Management expects that within the next few months the Company will
enter into a definitive written agreement with CellNet based on the CellNet
Understanding. However, no assurance can be given that the Company will be
successful in entering into such a written agreement, or, in the event such a
written agreement is entered into, that such agreement will be on terms similar
to those of the CellNet Understanding. See "Item 9. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Other Operating
Income."
Access to Third Party Data. The Company utilizes the Internet access
and transmission services offered by telecommunications companies to provide a
medium for the delivery to end-users of financial data and news developed or
compiled by certain originators and other information providers. Some of these
information providers supply a wide range of real-time price and analytical
information to their subscribers. This data is available through the Display.IT
software to end-users.
-7-
<PAGE>
Management believes that, prior to the introduction of the Display.IT
software, data providers have had three choices to deliver information to
customers. First, like Reuters, Telerate and Bloomberg have done, they have had
the option of developing their own non-Internet data delivery mechanism, which
management believes, in certain instances, may be expensive and time consuming.
Second, they have been able to provide their data through one or more
other information providers with existing delivery mechanisms, such as Reuters,
Telerate and Bloomberg. This method enables only end-users who pay the
information provider with the existing delivery mechanism for service to access
the information desired. In addition, in order to obtain the desired
information, the end-user, in most instances, must have a dedicated information
feed and, in certain instances, may have a special computer terminal installed.
Third, they have been able to establish their own Internet Web sites
allowing end-users to display financial data in the form presented. Generally,
end-users obtaining financial data from these Web sites cannot store and
manipulate the data accessed to develop, among other things, graphs and
spreadsheets. In addition, management believes that, to date, financial data Web
sites have not provided a standardized display mechanism.
Display.IT has developed a fourth method for the delivery of financial
data to end-users. By utilizing the existing, well-developed infrastructure of
the Internet, the Company has avoided the cost of having to develop its own data
delivery mechanism, thereby allowing it to deliver real-time and near real-time
financial data and financial news to its end-users free of charge (not including
the cost of the software and any upgrades). Management believes that use of the
Internet as a delivery mechanism also allows data providers disseminating
real-time financial data through the Display.IT software to charge lower rates
to Display.IT's end-users accessing such data than those charged by information
providers using their own non-Internet data delivery mechanisms for the
provision of real-time financial data to end-users. No assurance can be given,
however, that data providers delivering real-time financial data via the
Display.IT software will charge lower rates to end-users than would be charged
by data providers delivering such data via proprietary delivery mechanisms.
The Company has entered into agreements with S&P ComStock and EMD, and
has an understanding with Green Eye (the "Green Eye Understanding"), pursuant to
which end-users will be granted access through the Display.IT software to the
real-time financial data and other financial information consolidated by those
information providers. In addition, the Company has entered into the Intermoney
Agreement pursuant to which Fee-Based Information consolidated by the
Information Services Company, which consists of forward-looking, predictive
market information based on extensive research, may become available to
Display.IT end-users. In order to obtain Fee-Based Information from any of the
Fee-Based Information Providers, Display.IT end-users enter into agreements with
the Fee-Based Information Provider or Fee-Based Information Providers whose
-8-
<PAGE>
information they wish to obtain pursuant to which the end-users pay fees
directly to the Fee-Based Information Provider or Fee-Based Information
Providers for access to its or their information. Each of the agreements between
the Company, on the one hand, and the Information Services Company, S&P ComStock
and EMD, on the other, and the Green Eye Understanding, obligate the Fee-Based
Information Providers and the Information Services Company to pay to the Company
a percentage of the fees they receive in connection with the Fee-Based
Information accessed via the Display.IT software. Display.IT intends to seek to
enter into similar agreements with additional real-time financial data providers
and providers of other types of value-added financial data and information. See
"Item 1. Description of Business -- Preliminary Arrangements," "-- Agreements
With the Information Services Company -- Intermoney Agreement," "-- Development
Stage Company; Expectation of Losses; Negative Cash Flows" and "Item 9.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Other Operating Income." With respect to the Green Eye
Understanding, management expects that within the next few months the Company
will enter into a definitive written agreement with Green Eye based on the Green
Eye Understanding. However, no assurance can be given that the Company will be
successful in entering into such a written agreement, or, in the event such a
written agreement is entered into, that such agreement will be on terms similar
to those of the Green Eye Understanding.
The Company is seeking to generate an additional source of recurring
revenue in connection with information providers by pursuing an agreement with
an Internet access provider pursuant to which the access provider would pay a
royalty or finder's fee to the Company for each information provider that, on
the Company's recommendation, agrees to transmit data via the Internet through
the access provider. As of December 31, 1996, no such agreement had been entered
into. See "Item 1. Description of Business -- Preliminary Arrangements," "--
Development Stage Company; Expectation of Losses; Negative Cash Flows" and "Item
9. Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Other Operating Income."
Customer Support
The Company has entered into an agreement with BT whereby BT has agreed
to provide the Company's end-users with help desk and other technical support
services during normal office hours in the United Kingdom (i.e., 8:00 a.m. to
5:30 p.m. United Kingdom local time). End-users seeking help at other times have
the option of leaving a message to which BT will respond during its normal
office hours. This agreement expires on March 31, 1997. The Company is currently
engaged in negotiations with BT with respect to renewal of the agreement or
entering into a new agreement with BT containing similar terms. There can be no
assurance that the Company will be successful in having the agreement renewed or
entering into a new agreement with BT containing similar terms, or, in the event
that it is, that such renewal agreement or new agreement will be on terms
favorable to the Company.
The Company is seeking to enter into another agreement with BT pursuant
to which BT would agree to offer a range of service contracts to Display.IT
end-users so that the end-user may select the level of service most appropriate
to their needs. For example a busy global trading floor may require 24-hour
support,
-9-
<PAGE>
whereas an occasional user may prefer to pay for services as needed by incurring
premium rate telephone charges, such as "900" services. It is anticipated that
this agreement will require BT to pay the Company a portion of the revenues that
it generates from the sale of service contracts, although no assurance to that
effect can be given. See "Item 1. Description of Business -- Preliminary
Arrangements," "-- Development Stage Company; Expectation of Losses; Negative
Cash Flows" and "Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Other Operating Income."
Principal Markets
Professional
Real-Time Financial Data. Based on research conducted by Waters, as of
December 31, 1995, the world wide market for financial screens among
professionals, including PCs, workstations and other proprietary hardware, was
estimated to be about 760,000 screens. Securities dealers, brokers and analysts
and other financial professionals obtain real-time financial data and other
information with respect to stocks, bonds, currencies, commodities and futures
through these screens. Historically, these financial screens have been displayed
on either special purpose computer terminals installed by real-time financial
data providers, such as Reuters and Bloomberg, or networked PCs to which
real-time financial data is distributed through in-house servers.
Management believes that end-users can access real-time financial data
through the Display.IT software for less cost than they can from real-time
financial data providers that use dedicated information feeds and special
computer terminals to deliver and display their information. Management believes
that these information providers must take into account the costs associated
with the development and maintenance of a non-Internet delivery mechanism and
installation of dedicated information feeds and special computer equipment in
determining what to charge end-users of their information. A real-time financial
data provider allowing for access to its data via the Display.IT software incurs
none of these costs as it uses the Internet as its delivery mechanism (which
obviates the need for a dedicated information feed) and the information is
displayed on an ordinary PC with the Display.IT software installed.
Management believes that it is also less costly to access real-time
financial data through the Display.IT software than through an in-house server
and networked PCs. In-house servers require the utilization of floor space
(which is generally expensive and can often be put to more efficient use) and a
Management Information Systems ("MIS") Department to monitor and maintain them.
Management believes that these costs can be reduced when real-time financial
data is accessed through the Display.IT software because the software can be
directly
-10-
<PAGE>
installed in a number of PCs (and thus does not need to be distributed by an
in-house server), and all maintenance of the software can be handled by BT
pursuant to service contracts, which management believes generally entail less
cost than establishing and maintaining an MIS Department. An additional
advantage associated with not routing real-time financial data through in-house
servers is that at times of peak information demand, the servers can become
overloaded which can lead to delays in the delivery of real-time financial data
to end-users.
End-users may also incur less cost by accessing real-time financial
data through the Display.IT software than by accessing such data by either of
the other two methods because they will be able to avoid the duplication of
exchange fees. Typically, an originator of real-time financial data, such as a
stock exchange or the Nasdaq Stock Market, charges fees for the use of such
data. These fees are generally assessed by the originator with respect to each
financial screen displaying such data. If an end-user of real-time financial
data displays data captured by a particular originator on special computer
terminals installed by more than one data provider, the end-user is typically
assessed fees with respect to each screen on which the data is displayed. The
Display.IT software avoids any duplication of exchange fees by allowing
end-users to access real-time financial data delivered by multiple data
providers on one PC.
Management believes that the delivery of real-time financial data via
the Display.IT software offers professional end-users advantages in addition to
cost savings. When using PC networks to distribute financial screens,
custom-designed software packages are required to manage and display the data,
which may be developed or compiled from various sources. Management believes
that these software packages often cause financial data to be presented in
nonstandard formats or formats that are not familiar to professional end-users.
Management believes that the Display.IT software, by presenting the screens in a
standard format that management believes is familiar to financial professionals,
offers such end-users the advantages associated with reduced training
requirements and increased operator efficiency.
Also, the Display.IT software gives end-users the capability to access
real-time financial data from outside of the office. In order to obtain
financial data through the Display.IT software, the end-user need only be able
to connect to the Internet. Lap-top computers can be equipped with cellular
phone lines and access to the Internet can be obtained through such phone lines
from practically anywhere. Real-time financial data providers that utilize
dedicated information feeds and special computer equipment for the delivery of
their information cannot offer this degree of accessibility as their terminals
are not mobile and their delivery mechanisms cannot be accessed through cellular
phone lines.
-11-
<PAGE>
For these reasons, management believes, but cannot assure, that
Display.IT will be able to capture a portion of the professional market for
financial screens from companies providing real-time financial data through
dedicated information feeds and special computer equipment and through in-house
servers to networked PCs. In addition, management believes that the relatively
low cost of obtaining real-time financial data through the Display.IT software
makes it marketable to professional end-users who traditionally did not have
access to such data. It is anticipated that this marketability could lead to the
expansion of the professional market for real-time financial data screens. No
assurance to this effect can be given, however.
Near Real-Time Financial Data. In addition to the professional market
for access to real-time financial data, research conducted by Waters indicates
that there is demand for screen-based financial data from employees (typically
middle and back office, management and analysts) of financial and related
institutions who do not require real-time financial data, and do not merit its
expense. Management believes, but cannot assure, that the Company can obtain a
share of this segment of the professional market because of the low data costs
associated with, and the professional display format utilized by, the Display.IT
software in connection with its provision of near real-time financial data to
end-users.
Consumer
Management believes that consumers who own PCs and who are interested
in their personal savings and investment represent a potential market for the
Display.IT software. The Display.IT software organizes and displays near
real-time financial data freely available over the Internet from numerous
sources, and real-time financial data delivered through the Internet for a
charge, in a format convenient and intuitive for the household end-user. The
Display.IT software is Microsoft accredited and compliant and therefore
compatible with any PC running under Windows 95 or Windows NT. The Company has
developed the Display.IT software to be Microsoft compatible so that end-users
would have the ability to include financial data, such as stock, bond and mutual
fund prices, delivered to the end-user via the software in a database and to use
other Microsoft applications to manipulate the data in order to, among other
things, develop graphs and spreadsheets. As of December 31, 1996, the data
storage and manipulation feature was still undergoing testing and not available
to end-users. See "Item 1. Description of Business -- Risks of New Product
Development."
The Company anticipates that while a market among sophisticated
consumers will develop for real-time financial data delivered through the
Display.IT software, the greatest demand for the Display.IT software among
consumers will emanate from consumers interested only in obtaining access to the
near real-time financial data and news delivered by the software.
-12-
<PAGE>
Distribution
The Company anticipates that sales and distribution to end-users of the
Display.IT software will be conducted through resellers that generally have
distribution networks in place and access to wide customer bases to whom they
can market the Display.IT software. In order to target both the professional and
consumer markets, the Company is currently negotiating with five types of
companies -- hardware manufacturers, software distribution companies,
telecommunications providers, marketing companies and consultants -- in order to
reach agreements for the purchase by such companies of Display.IT software for
resale. Management intends to enter into agreements with resellers whereby the
resellers agree to commit to purchase a certain number of Display.IT software
packages per year for resale, although it realizes that alternative arrangements
may be necessary. See "Item 1. Description of Business -- Preliminary
Arrangements."
The Company has identified and had discussions with certain companies
within each of the five aforementioned categories and management believes that
significant interest in the product exists. On November 24, 1996, the Company
entered into a cooperation and distribution agreement with the Marketing Company
pursuant to which the Marketing Company has agreed to serve as a non-exclusive
world wide distributor of Display.IT software. The agreement gives the Marketing
Company the right to sell the software via the Internet, telemarketing and
direct field sales, and to receive as a sales commission a percentage of the
price for which each Display.IT software package is sold. The initial term of
the agreement is one year and it is to continue thereafter for successive
one-year renewal terms, until terminated by either party on not less than three
months' prior written notice effective on the expiration of the initial term or
then current renewal term. The agreement may also be terminated by either party
by delivering written notice to the other not less than 90 days before the end
of the first six months of the initial term (effective 90 days after such six
month period), or in connection with certain occurrences such as a change of
control, bankruptcy, insolvency or default of the other party. In order to
accomplish Internet sales, the Marketing Company will maintain a Web site
through which the Display.IT software can be ordered and downloaded over the
Internet directly to the end-user's PC. The Company's Web site has a button
which, when pushed, gives end-users interested in purchasing the Display.IT
software access to the Marketing Company's Web site.
In January 1997, the Company entered into the Distributorship Agreement
with the Information Services Company, pursuant to which the Information
Services Company also agreed to serve as a non-exclusive world wide distributor
of Display.IT products. In addition, the Company has been engaged in discussions
with several other resellers contemplating the purchase of Display.IT software
for resale through retail channels and directly to end-users. See "Item 1.
Description of Business -- Preliminary Arrangements" and "-- Agreements With the
Information Services Company -- Distributorship Agreement."
-13-
<PAGE>
From the date of the Display.IT software's introduction through March
15, 1997, the Company had sold only a minimal number of Display.IT software
units, principally to customers in the U.K. During the first two months of 1997,
the Company generated revenues from product sales of approximately (pound
sterling) 14,595. Since introduction, management has focused the Company's
sales, marketing and distribution efforts in a manner designed to maximize the
number of Display.IT software units disseminated. In an effort to achieve this
goal, the Company has sought to distribute Display.IT software to potential
end-users free of charge. Of the potential end-users to whom Display.IT software
has been distributed or otherwise made available, those end-users who have
actually installed the product are located primarily in the U.S. and Europe.
While this method of distribution predominates, sales and revenues may be
adversely affected; however, management believes that the strategy will benefit
the Company over the longer term.
Management believes that by outsourcing marketing activities the
Company will be able to reduce product marketing costs and concentrate its
marketing efforts on procuring real-time financial data providers and providers
of other types of value-added financial information, from which management
anticipates Display.IT will derive a large portion of its recurring revenues.
Typically, data providers consolidating real-time financial data and other types
of value-added financial information will pay a proportion of revenues generated
in connection with the Display.IT software to Display.IT. These types of data
providers are numerous, and a senior executive has been recently recruited to
develop income from them. See "Item 1. Description of Business -- Products and
Services -- Display.IT Software -- Access to Third Party Data," "-- Development
Stage Company; Expectation of Losses; Negative Cash Flows" and "Item 9.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Other Operating Income."
Preliminary Arrangements
The Company is seeking to enter into agreements with a variety of
vendors and service providers in an effort to enhance the marketability of the
Display.IT software and to market the Display.IT software to end-users. Included
in those agreements the Company is seeking to enter into with third parties are:
(i) agreements whereby real-time financial data providers and providers of other
types of value-added financial information would offer access to their
information via the Display.IT software for a charge to end-users and pay a
portion of the charges received to the Company, (ii) agreements with Internet
access providers utilizing the Concert InternetPlus infrastructure for less
expensive connection to the Internet for the Company and its end-users, (iii)
agreements with resellers for purchase of the Display.IT software for resale,
(iv) an agreement with an access provider for royalties or finder's fees to be
paid to the Company with respect to each information provider that, on the
Company's recommendation, agrees to connect to the Internet via the access
provider, and (v) an agreement with BT whereby BT would offer a range of service
contracts to Display.IT end-users and pay a portion of the revenues received
-14-
<PAGE>
in connection therewith to the Company. There can be no assurance that the
Company will be successful in entering into any of these agreements or other
agreements upon which the success of the Company's business and its prospects
may depend or may, in the future, come to depend. Furthermore, even if the
Company is able to enter into such agreements, there can be no assurance that
the terms of such agreements will be favorable to the Company or permit it to
operate profitably.
Agreements With the Information Services Company
Distributorship Agreement
The Distributorship Agreement was entered into in January 1997 and has
an initial, and automatic renewal, term of three years. Either party may
terminate the Distributorship Agreement on not less than six months' prior
written notice to the other, or in connection with the bankruptcy, insolvency or
default of the other party. In addition, the Information Services Company has
the right to terminate the Distributorship Agreement in the event that: (i) the
Intermoney Agreement or an agreement (the "Licensing Agreement") pursuant to
which the Company has licensed the Information Services Company to utilize
certain Display.IT technology in connection with the development, maintenance
and updating and upgrading of certain software being developed for the
Information Services Company (the "ISC Software") terminate for any reason, or
(ii) the ISC Software has not reached certain development milestones by March
31, 1997 and April 30, 1997. The Distributorship Agreement terminates
automatically in the event the ISC Software is not made available to the public
by June 1, 1997. Most of the events that give rise to the right of the
Information Services Company to terminate the Distributorship Agreement, or to
automatic termination thereof, are beyond the control of the Company.
Accordingly, the Company is unable to affect whether such events will occur and
therefore cannot assure that the Distributorship Agreement will not terminate
automatically or become terminable by the Information Services Company.
The Distributorship Agreement obligates the Company for the term of the
Distributorship Agreement and three years thereafter not to engage in any
business in competition with the Information Services Company; not to customize
Display.IT software for certain information providers including McCarthy,
Crisanti and Maffi ("MCM"), Reuters, Automated Data Processing Inc. ("ADP"),
Telerate, Bloomberg, Bridge Information Services ("Bridge"), Thompson Financial
("Thompson"), Stone & McCarthy ("Stone") and 4cast; and not to include access
through the Display.IT software to data consolidated by certain information
providers including MCM, ADP, Thompson (only with respect to certain financial
information provided thereby), Stone and 4cast. The latter restriction is
inapplicable, however, in the event the Information Services Company exercises
its right to terminate the Intermoney Agreement upon six months' prior written
notice to the Company.
Intermoney Agreement
The Intermoney Agreement was entered into in January 1997 and obligates
the Information Services Company to make its Fee-Based Information available to
Display.IT end-users at such time as it shall determine in its absolute
discretion, but, in no event, later than 60 days after the ISC Software is made
available to the public. The Intermoney Agreement has an initial term of three
years and an automatic three-year renewal term. Either party may terminate the
Intermoney Agreement on not less than six months' prior written notice to the
other, or in connection with the bankruptcy, insolvency or material breach of
the other party. In addition, the Information Services Company has the right to
terminate the Intermoney Agreement in the event of termination of the
Distributorship Agreement, the Licensing Agreement or the agreement between the
Information Services Company and a software developer relating to development of
the ISC Software. The Intermoney Agreement terminates automatically in the event
the ISC Software is not made available to the public by June 1, 1997. Most of
the events that give rise to the right of the Information Services Company to
terminate the Intermoney Agreement, or the automatic termination thereof, are
beyond the control of the Company. Accordingly, the Company is unable to affect
whether such events will occur and therefore cannot assure that the Intermoney
Agreement will not terminate automatically or become terminable by the
Information Services Company.
During the term thereof and for three years thereafter, the Intermoney
Agreement obligates the Company to comply with the same restrictions regarding
competition with the Information Services Company, the customization of the
Display.IT software for certain information providers and the accessability
through the Display.IT software of information consolidated by certain
information providers applicable to the Company under the Distributorship
Agreement.
Risks of New Product Development
The Company has only recently introduced the Display.IT software and
thus there can be no assurance that, despite testing by the Company and
potential customers, errors will not be found in the software, or, if
discovered, successfully corrected in a timely and cost-effective manner.
Moreover, with respect to enhancements of the Display.IT software, such as the
data storage and manipulation feature, and any future products that may be
developed by the Company, no assurance can be given that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of such enhancements and products. In the event
errors in the Display.IT software are discovered and not corrected on a timely
and cost-effective basis, or, if the development, introduction and marketing of
product enhancements and new products is hindered by difficulties of a technical
nature or otherwise, the Company's operating results and financial condition
could be materially adversely affected.
Development Stage Company; Expectation of Losses; Negative Cash Flows
The Company was founded in June 1995 and, as a development stage
company, has not yet generated revenues in connection with the Display.IT
software. As of December 31, 1996, the Company had cumulative net losses since
inception of (pound sterling)848,073, and the Company expects to continue to
incur losses and negative cash flow for an indeterminate period of time in the
future. No assurance can be given that the Company will be able to generate
revenues in connection with the Display.IT software or any other products that
it may develop, or, that if it does, as to the amount, sources or composition of
such revenues. Whether or not revenues will be generated in connection with such
products will be largely dependent upon matters beyond the control of the
Company, including, without limitation, product acceptance, technological
evolution, competition, global economic conditions, taxes, the availability of
(and ability to retain) the services of talented personnel and the possibility
of future restrictive governmental regulation of the financial information
industry. In the event revenues are generated in connection with the Display.IT
software and any future products, there can be no assurance that such revenues
will be sufficient to allow the Company to operate profitably or become cash
flow positive at any time in the future.
-15-
<PAGE>
Composition of Total Sales and Revenue
A working model of the Display.IT software was completed in late April
1996, and the product has been available for sale since late November 1996. The
Company anticipates that sales, marketing and distribution of Display.IT
software will be conducted on a global basis by resellers, consisting of
hardware manufacturers, software distribution companies, telecommunications
providers, marketing companies and consultants. The Company has been engaged in
discussions with several resellers located in the U.S. and the U.K.
contemplating the purchase of Display.IT products for resale. As of January 31,
1997, the Company had entered into agreements with two resellers, the Marketing
Company and the Information Services Company, regarding distribution of
Display.IT products. See "Item 1. Description of Business -- Operations," "--
Distribution" and "-- Agreements With the Information Services Company --
Distributorship Agreement."
From the date of the Display.IT software's introduction through March
15, 1997, the Company had sold only a minimal number of Display.IT software
units, principally to customers in the U.K. During the first two months of 1997,
the Company generated revenues from product sales of approximately (pound
sterling) 14,595. Since introduction, management has focused the Company's
sales, marketing and distribution efforts in a manner designed to maximize the
number of Display.IT software units disseminated. In an effort to achieve this
goal, the Company has sought to distribute Display.IT software to potential
end-users free of charge. Of the potential end-users to whom Display.IT software
has been distributed or otherwise made available, those end-users who have
actually installed the product are located primarily in the U.S. and Europe.
While this method of distribution predominates, sales and revenues may be
adversely affected; however, management believes that the strategy will benefit
the Company over the longer term. See "Item 1. Description of Business --
Development Stage Company; Expectation of Losses; Negative Cash Flows" and "Item
9. Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Other Operating Income."
Research and Development Policy
Display.IT Limited was continuously engaged in research and development
in order to create the Display.IT software from early January 1996 to June 20,
1996, when Display.IT Limited was acquired by Display.IT Holdings. The Company
continued that effort until late November 1996, when the development and testing
of the Display.IT software was completed. Since November 1996, the Company has
continued to make research and development expenditures in an effort to keep the
Display.IT software current with evolving technology, to enhance and improve
upon the Display.IT software and to design new products related to and/or based
on the Display.IT software. See "Item 1. Description of Business -- Risks of New
Product Development," "Item 9. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Research and Development" and "--
Development Costs."
The Company, pursuant to a software development agreement, retained a
software development firm to assist in the development of the Display.IT
software. The Company anticipates that it will retain the same and/or other
software development firms to assist in the development of any enhancements and
improvements to the Display.IT software and any new software products, although
no assurances to that effect can be given.
The following table sets forth the estimated amount spent by Display.IT
Limited and/or the Company, as applicable, in each of 1995 and 1996, on
company-sponsored research and development:
Research and
Development Expenditures(Pound Sterling)
----------------------------------------
Year Ended December 31, 1995 --
January 1, 1996 to December 31, 1996 312,223
-16-
<PAGE>
Intellectual Property
Management believes that Display.IT holds all relevant intellectual
property rights to the Display.IT software and source code. These rights are
held by Display.IT either as owner or as licensee in relation to third party
components included in the software.
Display.IT relies primarily on a combination of copyright and trade
secret laws, as well as confidentiality agreements and contractual protection,
to protect its proprietary rights in the software and source code. Patent
protection has not been sought for the Display.IT software in either the U.S. or
the U.K. Management believes that the Company is the rightful owner of
copyrights in, or holds relevant copyright licenses in respect of, the
Display.IT software under U.K. copyright law, and that such ownership rights or
licenses would be recognized in the U.S. With respect to trademark protection,
the Company submitted a trademark application for "DISPLAY IT" on December 6,
1995 in the U.K. As of March 15, 1997, the application was pending and subject
to objection of the U.K. Registry of Trademarks that the mark is descriptive. A
hearing has been requested with respect to this objection, but, as of March 15,
1997, no date had been set. Management believes that any inability to obtain
such trademark protection will not have a material adverse effect on the
Company. The Company has not submitted an application for trademark registration
in the U.S.
The Display.IT software is sold pursuant to software license
agreements, which, in most cases, grant end-user customers a non-exclusive,
non-transferable license to use the software and contain terms and conditions
prohibiting the unauthorized reproduction or transfer of the software. In
addition, the Company's key employees and distributors are required to give
confidentiality undertakings with respect to the Display.IT software. Despite
these protective measures, it may be possible for unauthorized third parties
(including competitors) to copy aspects of the Company's product or to obtain
the use of information that the Company regards as confidential and proprietary.
Any such misappropriation could have an adverse material effect on the Company's
operating results and financial condition.
The Company does not believe that the Display.IT software infringes
upon the proprietary rights of any third parties. There can be no assurance,
however, that one or more third parties will not make a contrary assertion. The
cost of responding to any such assertion may be material, regardless of whether
or not there is merit to the assertion. See "Item 3. Legal Proceedings."
Employees
As of December 31, 1996, the Company had four employees, all of whom
were based in the United Kingdom. None of the Company's employees is a member of
any union and thus the Company is not party to any collective bargaining
agreements.
The Company recognizes the contribution of committed and well-motivated
employees, who are rewarded through the Display.IT Holdings Share Option Scheme.
Employee participation in the Company is encouraged and all of the Company's
employees are option holders. See "Item 12. Options to Purchase Securities from
Registrant or Subsidiaries -- Share Option Scheme."
Management believes that relations with its employees are generally
good.
-17-
<PAGE>
Competition
The Company faces competition from other information providers such as
Bloomberg, Bridge, Reuters and Telerate, all of which have significantly greater
financial, marketing and technical resources than the Company. A number of these
competitors, such as Reuters, Bloomberg and Telerate, provide special computer
terminals for the display of financial information as well as the data feeds
that supply the terminals with information. The products of certain of these
competitors are capable of utilizing PCs. These competitors generally limit the
data available on their terminals to data that they compile and noncompetitive
data from other information providers that usually pay substantial royalties for
the display and distribution of their data. Access to the information made
available by these competitors is generally by subscription only. Display.IT
differentiates itself from these companies by providing access through the
Display.IT software to near real-time and real-time financial data and other
financial information consolidated by numerous sources, and using the Internet
as the delivery mechanism. Pursuant to certain agreements entered into with the
Information Services Company, the Company is prohibited from providing access to
information consolidated by certain information providers for a certain period
of time. See "Item 1 -- Description of Business -- Agreements With the
Information Services Company."
Unlike a number of its competitors, Display.IT provides access to near
real-time financial data and related information free of charge (other than the
cost of the software and any upgrades). No subscription is necessary for access
to such information. Display.IT is able to do this because, unlike these
competitors, the Company utilizes the established infrastructure of the Internet
as its delivery mechanism, thereby avoiding the cost of development and
maintenance of its own proprietary delivery mechanism. Management believes that
use of the Internet also allows real-time financial data providers disseminating
real-time financial data through the Display.IT software to charge lower rates
to Display.IT end-users accessing such data than those charged by information
providers using their own non-Internet delivery mechanisms for the provision of
real-time financial information to end-users. No assurance can be given,
however, that information providers delivering real-time financial information
via the Display.IT software will charge lower rates than those charged by
information providers delivering such data via proprietary delivery mechanisms.
Some of Display.IT's competitors that utilize dedicated feeds and
utilize or are capable of utilizing special computer terminals to provide
information to end-users, such as Bloomberg and Reuters, have Web sites that are
linked to their proprietary delivery mechanisms through which access to their
data can be obtained. However, the end-user must subscribe for such access and
the information obtainable is generally limited to a single source. The Company
is aware that Reuters and Bloomberg are in the process of developing products to
supply their financial information over the Internet; however, as of March 15,
1997, management believes neither had made such a product available. Bridge has
recently made available a product that, like the Display.IT software, uses the
Internet in order to deliver financial information to end-users. It is
management's understanding, however, that, unlike the Display.IT software,
Bridge's product provides access to financial data and related information
consolidated by only one source.
Management believes that with respect to Bridge's product, and in the
event that the competitive products being developed by Reuters and Bloomberg
reach the market, Display.IT will be able to compete effectively due to its
delivery of financial data consolidated from numerous sources. Display.IT does
not provide or re-publish any financial data, and as a result of its seeking to
enter into agreements with real-time financial data providers and providers of
other types of value-added financial information in addition to the Fee-Based
Information Providers, the Company anticipates that the choice of data available
to Display.IT software users will increase, rather than being tied to one
particular source of data which is often the case with the solutions offered by
other information providers. See "Item 1. Description of Business -- Preliminary
Arrangements." There can be no assurance, however, that the competitive products
of which management is aware, or other competitive products, will not render the
Display.IT software obsolete, be perceived by end-users to be superior to the
Display.IT software or otherwise obtain greater market acceptance than the
Display.IT software, in the event such products reach the market. The occurrence
of any such event would likely have a material adverse effect on the Company's
operating results and financial condition. Pursuant to certain agreements
entered into with the Information Services Company, the Company is prohibited
from providing access to information consolidated by certain information
providers for a certain period of time. See "Item 1 -- Description of Business
- -- Agreements With the Information Services Company."
The Company also faces competition from a number of other information
providers that utilize the Internet and various other media for the transmission
of information to end-users. There are many companies that, unlike Bloomberg and
Reuters, do not originate any financial information, but pay originators for
such information and resell it to end-users ("data revendors"). A number of data
revendors, such as NY Quotes and Quote.com, deliver this information over the
Internet. Management believes that financial information can be obtained through
the Display.IT software more cost-effectively than it can be obtained through
data revendors because the Company does not incur overhead expenses relating to
billing its customer base (which is done on behalf of the Company by resellers
and Fee-Based Information Providers) or originator and information provider
relations, to the extent such expenses are incurred by data revendors. There is
also software available, such as that provided by the Pointcast Network, that
allows users to access near real-time financial information available on the Web
free of charge. Unlike the Display.IT software, the Pointcast product is based
on an advertising revenue model and derives revenues from the advertisements it
displays rather than for providing access to financial information. Management
believes that products based on advertising revenue models are designed for use
mainly by consumers. Moreover, the Pointcast product does not provide access to
real-time financial data, and management believes that the array of near
real-time financial data to which it provides access is not as extensive as that
to which the Display.IT software provides access. The Display.IT software also
competes with a number of Web sites, such as those provided by PC Quote and Data
Broadcasting Corporation ("DBC"), that provide access to near real-time
financial data and information free of charge. These Web sites, like the
Pointcast Network, are generally based on an advertising revenue model, but also
seek to generate revenues by marketing real-time financial data for a fee.
Management believes that, unlike the Display.IT software, the data revendors,
such as NY Quotes and Quote.com, the software packages, such as Pointcast
Network, and Web sites, such as PC Quote and DBC, do not display the financial
data and related information to which they provide access in a standardized
format that is familiar to professional users and intuitive for non-professional
users. Additionally, the Company faces competition from television programs and
newspapers that provide access to financial information, although the
information obtained from these sources will generally not be as current as the
information provided by the Display.IT software.
-18-
<PAGE>
Item 2. Description of Property.
The Company currently occupies approximately 1,250 square feet of
administrative, marketing and research and development space at 46 Cannon
Street, London EC4N 6JJ pursuant to an agreement to enter into a lease. The
property serves as the principal executive offices for the Company. The Company
pays approximately (pound sterling)3,230 per month in rent and service charges
for this space.
Management is in the process of negotiating a lease for the space. It
is anticipated, but no assurances can be given, that the terms of the lease will
include, among other things, monthly rent and service charges in the same amount
as the Company is currently paying for the space and an expiration date of June
1, 2009, subject to the unilateral right of the Company to terminate on either
June 24, 2001 or June 24, 2004 on six months' notice to the lessor. Management
anticipates, but cannot assure, that there will be no option to extend the term
of the lease.
Item 3. Legal Proceedings.
Solicitors to Reuters wrote to the Company on September 13, 1996
alleging that Display.IT's product infringed Reuter's copyright and was being
passed off as being connected in the course of trade with Reuters. The letter
threatened legal action within 14 days unless certain undertakings were given.
Display.IT vigorously denies Reuters' allegations. A detailed rebuttal of the
allegations has been made, and further correspondence has been exchanged, and,
as of March 15, 1997, no legal action had been taken by Reuters in relation to
its threat against Display.IT. See Note 17 to the Consolidated Financial
Statements of the Company.
Management believes that the main purpose of Reuters' allegations was
to seek to exclude Display.IT from the market either temporarily or permanently.
Accordingly, on October 25, 1996, the Company submitted a complaint to the
European Commission in Brussels, Belgium which sets out Display.IT's argument
that Reuters' allegations are unfounded and Display.IT's belief that certain of
Reuters' business practices may infringe the competition rules of the European
Union. On January 21, 1997, Reuters responded to the Company's complaint and on
or about February 20, 1997, the Company replied to Reuters' response.
Item 4. Control of Registrant.
As far as known to management, Display.IT Holdings is not directly or
indirectly owned or controlled by another corporation or by any foreign
government.
-19-
<PAGE>
The following table sets forth the number of, and the percentage of the
then outstanding, Ordinary Shares owned as of January 31, 1997 by (i) any person
known by the Company to be the owner of more than 10 percent of the Ordinary
Shares, the sole class of Display.IT Holdings' voting securities, and (ii) the
officers and directors of Display.IT Holdings as a group:
Identity of Number of Ordinary Percent
Person or Group Shares Owned of Total(1)
--------------- ------------------ -----------
Peter Levin 10,000,000 64.28%
All officers and
directors as a group 10,000,000 64.28%
- ----------
(1) Based on 15,556,720 Ordinary Shares outstanding on January 31,
1997. This number includes 50,000 Ordinary Shares issued upon the
exercise of options on December 11, 1996 by a securities broker who
rendered services to the Company in connection with the U.K.
Private Placement. See "Item 12. Options to Purchase Securities
from Registrant or Subsidiaries -- Options Issued in Connection
with the U.K. Private Placement."
For information concerning the number of Ordinary Shares under option
held by directors and officers of the Company, see "Item 12. Options to Purchase
Securities from Registrant or Subsidiaries -- Share Option Scheme" and "--
Ordinary Shares for Which Management Options May Be Exercised."
As of January 31, 1997, there were no arrangements known to the
Company, the operation of which may at a subsequent date result in a change in
control of Display.IT Holdings.
Item 5. Nature of Trading Market.
As of December 31, 1996, the only non-United States trading market for
the Ordinary Shares was OFEX, through which the Ordinary Shares have been
qualified for trading since June 28, 1996. Prior to such date, there was no
public market for the Ordinary Shares. OFEX is an off-exchange mechanism for
London Stock Exchange member firms to deal between each other to effect trades
in the securities of certain companies. J.P. Jenkins, LTD. ("J.P. Jenkins")
operates OFEX and serves as its only market maker. J.P. Jenkins generally makes
a market only in those securities in which at least a moderate level of investor
interest is expressed, and it usually sets a bid and offer price, based on a
fixed spread, for the securities in which it makes a market. As of January 9,
1997, the spread for the Ordinary Shares was 20 pence.
Over the course of the second (beginning on June 28) and third quarters
of 1996, the extent of trading in the Ordinary Shares was very limited. Over the
course of the fourth quarter of 1996 and the first quarter of 1997 (ending
January 31), however, the extent of trading in the Ordinary Shares increased to
a level where approximately 5,000 to 10,000 Ordinary Shares changed hands daily.
There can be no assurance that this level of trading will be sustained.
-20-
<PAGE>
As of December 31, 1996, there was no United States trading market for
the Ordinary Shares or the ADSs.
The prices set forth in the following table represent the high and low
averages of the bid and offer prices set by J.P. Jenkins for the Ordinary
Shares, for each full quarterly period since the Ordinary Shares became
qualified for trading on OFEX on June 28, 1996:
<TABLE>
<CAPTION>
Price per Ordinary Share
Year ended -------------------------------------
December 31, High Low
------------ ---- ---
1996
- ----
<S> <C> <C>
Second Quarter (since June 28) (pound sterling)0.54 (pound sterling)0.40
Third Quarter (pound sterling)0.76 (pound sterling)0.55
Fourth Quarter (pound sterling)5.60 (pound sterling)0.70
1997
- ----
First Quarter (through March 25) (pound sterling)8.09 (pound sterling)5.49
</TABLE>
To the knowledge of the Company, as of January 31, 1997, approximately
385,000 Ordinary Shares, or approximately 2.47% of all Ordinary Shares
outstanding on such date, were held in the United States by approximately 35
accounts in the United States.
Item 6. Exchange Controls and Other Limitations Affecting Security Holders.
There is currently no U.K. law, decree or regulation which restricts
the export or import of capital, including, but not limited to, U.K. foreign
exchange controls, or that affects the remittance of dividends (except as
otherwise set forth under Item 7. "Taxation") or other payments to nonresident
holders of the Ordinary Shares or ADSs.
Members of Display.IT Holdings entitled to vote on matters affecting
Display.IT Holdings generally do so in person or by proxy at annual or
extraordinary general meetings. The Articles of Association of Display.IT
Holdings provide that notice shall
-21-
<PAGE>
be given in connection with either type of meeting, however, such Articles also
provide that any member who has failed to supply Display.IT Holdings with an
address within the U.K. for the service of notices shall not be entitled to
receive notices from Display.IT Holdings. Other than as set forth above in this
paragraph, there are no limitations under U.K. law or Display.IT Holdings'
Memorandum or Articles of Association on the right of nonresident or foreign
owners to hold or vote the Ordinary Shares or ADSs.
Item 7. Taxation.
U.K. Income Tax
The following discussion of taxation is intended only as a descriptive
summary, and it does not purport to be a complete technical analysis or listing
of all potential tax effects relevant to the Ordinary Shares or ADSs. The
statements of U.K. and U.S. tax law set forth below are based (i) on the laws of
the U.K., the U.K. Inland Revenue practice and published Statements of Practice,
the U.S. Internal Revenue Code of 1986, as amended, applicable Treasury
Regulations and administrative and judicial interpretations thereof in force as
of the date of this report and (ii) in part on representations of the Depositary
and assumes that each obligation in the deposit agreement among Display.IT
Holdings, the Depositary and the holders from time to time of ADRs and any
related agreement will be performed in accordance with its terms. The statements
herein are subject to any changes occurring after the date of this report in
U.K. or U.S. law, or in the double taxation conventions between the United
States and the United Kingdom with respect to income and capital gains taxes
(the "Income Tax Convention") and with respect to estates and gifts taxes (the
"Estate Tax Convention").
When paying a dividend, Display.IT Holdings is generally required to
account to the U.K. Inland Revenue for an advance payment of corporation tax
("ACT"). The rate of ACT for dividends paid in the year to April 5, 1996 was 1/4
of the cash dividend paid. A UK resident individual holding an Ordinary Share or
ADR and in receipt of a dividend from Display.IT Holdings will be liable for
income tax on an amount equal to the sum of the cash dividend paid to him plus a
tax credit equal to 1/4 of the amount of the cash dividend. The tax credit is
available to be set off against the individual's tax liability on the dividend
and may in appropriate cases be refunded to him.
Under the current Income Tax Convention, a U.S. resident individual or
corporate holder of an Ordinary Share or ADR who or which satisfied the
following conditions (an "Eligible U.S. Holder"):
(i) is resident in the United States for the purposes of the
Income Tax Convention (and, in the case of
-22-
<PAGE>
a corporation, not also resident in the United Kingdom for
U.K. tax purposes);
(ii) is not a corporation which, alone or together with one or more
associated corporations, controls, directly or indirectly, 10%
or more of the voting stock of Display.IT Holdings;
(iii) whose holding of the Ordinary Shares or ADRs is not
effectively connected with a permanent establishment in the
United Kingdom through which such holder carries on a business
or with a fixed base in the United Kingdom from which such
holder performs independent personal services; and
(iv) under certain circumstances, is not an investment or holding
company 25% or more of the capital of which is owned, directly
or indirectly, by persons that are neither individual
residents nor citizens of the United States,
will generally be entitled under the current Income Tax Convention to receive,
in addition to any dividend paid by Display.IT Holdings, an amount equal to the
tax credit available to U.K. resident shareholders in respect of such dividend,
but subject to withholding tax equal to 15% of the sum of the dividend paid and
the tax credit.
For example with the tax credit at the rate of 1/4 of the cash
dividend, a dividend of (pound sterling)80.00 will entitle such a holder to
receive, upon compliance with the refund procedures described below an
additional payment of (pound sterling)5.00 (i.e., the tax credit of (pound
sterling)20.00 less withholding tax of (pound sterling)15.00). The refund may
not be available in certain circumstances if the holder is exempt from U.S. tax
on the dividend received.
Arrangements have been made by the Depositary so that, subject to
certain exemptions, the tax credit will be refunded, net of the withholding tax,
to a U.S. ADR holder if the ADR holder completes the declaration on the reverse
of the dividend check and presents the check for payment within three months
from the date of issue of the check. The exceptions include certain investment
or holding companies.
ADR holders who do not satisfy the foregoing requirements, and holders
of Ordinary Shares, must, in order to obtain a refund of tax credit (net of the
withholding tax), file in the manner and at the time described in U.S. Revenue
Procedure 80-18, 1980-1 C.B. 623, and U.S. Revenue Procedure 81-58, 1981-2 C.B.
678, a claim for refund of tax credit identifying the dividends with respect to
which the tax credit was paid. Claims for refund of tax credit must be made
within six years of the U.K. year of assessment (the 12-month period ending
April 5 in each year) in which the related dividend was paid. The first claim
for a
-23-
<PAGE>
refund of tax credit is made by sending the appropriate U.K. form in duplicate
to the Director of the Internal Revenue Service Center with which the holder's
last federal income tax return was filed. Forms may be obtained from the IRS
Assistant Commissioner (International), 950 L'Enfant Plaza South, S.W.,
Washington, D.C. 20024, Attention: Taxpayers Service Division. Because a refund
claim is not considered made until the U.K. tax authorities receive the
appropriate form from the Internal Revenue Service, forms should be sent to the
Internal Revenue Service well before the end of the applicable limitation
period. Any claim for refund of tax credit by a U.S. holder after the first
claim should be filed directly with FICO International, Fitzroy House, P.O. Box
46, Nottingham NG2 1BD, England.
Dividends (including amounts in respect of the tax credit and any
amounts withheld) must be included in gross income by a U.S. holder, and will
generally constitute foreign source "passive" or "financial services" income for
purposes of applying the foreign tax credit limitations. Such dividends will
generally not be eligible for the dividends received deduction allowed to U.S.
corporations. Subject to certain limitations, the applicable U.K. withholding
tax will be treated as a foreign tax eligible for credit against such holder's
U.S. federal income tax.
U.K. Taxation on Capital Gains
Under the current Income Tax Convention, the United States and the
United Kingdom each may, in general, tax capital gains in accordance with the
provisions of its domestic law. Under current U.K. law, residents of the United
States who are not resident or ordinarily resident in the United Kingdom will
not be liable for U.K. capital gains tax on capital gains made on the disposal
of their ADRs or Ordinary Shares unless those ADRs or Ordinary Shares are held
in connection with a trade carried on through a permanent U.K. establishment. A
U.S. holder of an ADR or Ordinary Share will be liable for U.S. federal income
tax on such gains to the same extent as on any other gains from sales of stock.
U.K. Inheritance Tax
Under the current Estate Tax Convention, ADRs or Ordinary Shares held
by an individual who for the purpose of the convention is domiciled in the
United States and is not a national of the United Kingdom will not, provided any
tax chargeable in the United States is paid, be subject to U.K. inheritance tax
on the disposal of ADRs or Ordinary Shares by way of gift or upon the
individual's death unless the ADRs or Ordinary Shares are part of the business
property of a permanent U.K. establishment of the individual or, in the case of
a holder who performs independent personal services, pertain to a fixed base
situated in the United Kingdom. In the exceptional case where the ADRs or
Ordinary Shares are subject both to United
-24-
<PAGE>
Kingdom inheritance tax and to U.S. federal gift or estate tax, the Estate Tax
Convention generally provides for double taxation to be relieved by means of
credit relief.
U.K. Stamp Duty and Stamp Duty Reserve Tax
Transfer of ADRs will not be subject to U.K. stamp duty provided that
the transfer instrument is not executed in, and at all times remains outside of,
the United Kingdom.
Under the Finance Act of 1986, stamp duty or stamp duty reserve tax
("SDRT") at a rate of 1 1/2% is payable on all transfers to the Depositary, or
its nominee, of Ordinary Shares for inclusion in ADRs. Such stamp duty or SDRT
is calculated on the purchase price or market value of the Ordinary Shares so
transferred.
Item 8. Selected Financial Data.
The summarized financial data (expressed in pounds sterling) set out
below should be read in conjunction with "Item 9. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of the Company and the Notes thereto included elsewhere in
this Registration Statement.
The selected financial data for the year ended December 31, 1996 and as
at December 31, 1996 have been extracted from, and are qualified in their
entirety by reference to, the audited Consolidated Financial Statements of the
Company and the Notes thereto included elsewhere in this Registration Statement,
which have been audited by Deloitte & Touche, independent auditors.
The Consolidated Financial Statements of the Company have been prepared
in accordance with U.K. GAAP, which differ in certain significant respects from
U.S. GAAP. The principal differences between U.K. GAAP and U.S. GAAP are
summarized in Note 20 to the audited Consolidated Financial Statements of the
Company.
-25-
<PAGE>
Consolidated Profit and Loss Account Data (1)
<TABLE>
<CAPTION>
Company Display.IT Holdings
Year ended May 3, 1996 to
December 31, 1996 December 31, 1996
----------------- -------------------
(Pound Sterling) (Pound Sterling)
<S> <C> <C>
Amounts in accordance
with U.K. GAAP and U.S.
GAAP
Research and development (130,478) --
Administrative expenses (779,538) (26,003)
Other operating income 42,500 --
--------- -------
Operating loss (867,516) (26,003)
Interest receivable and
similar income 27,770 --
Interest payable and
similar charges (6,466) --
--------- -------
Loss on ordinary
activities before
taxation (846,212) (26,003)
Taxation (1,861) --
--------- -------
Loss for the year (848,073) (26,003)
========= =======
Loss per share (3) 6.75p
=========
Consolidated Cash Flow Statement Data (1)
Amounts in accordance
with U.K. GAAP
Net cash outflow from
operating activities (689,292) --
========= =======
Net cash outflow from
returns on investments
and servicing of finance (7,444) --
========= -------
Net cash outflow from
investing activities (324,673) --
========= =======
Net cash inflow from
financing 1,322,835 --
========= =======
</TABLE>
-26-
<PAGE>
Amounts in accordance
with U.S. GAAP
Net cash used in
operating activities (681,848) --
========= =======
Net cash used in
investing activities (324,673) --
========= =======
Net cash provided by
financing activities 1,322,835 --
========= =======
Consolidated Balance Sheet Information
Amounts in accordance with U.K. GAAP and U.S. GAAP
Company Company (2)
December 31, December 31,
1996 1995
------------ ------------
(Pound Sterling) (Pound Sterling)
Fixed assets
Intangible assets 181,745 --
Tangible assets 133,072 --
Investments -- --
Current assets
Debtors 85,830 2
Cash at bank and in hand 316,314 --
--------- ---------
Total assets 716,961 2
Creditors: amounts falling
due within one year (256,057) --
--------- ---------
Equity shareholders' funds 460,904 2
========= =========
- -----------------
(1) The Company did not trade during the preceding financial period and
there were no cash flows. No profit and loss nor cash flow information
is therefore presented.
(2) Display.IT Holdings was incorporated on May 3, 1996 and, under merger
accounting principles, a comparative group balance sheet is presented.
See Note 1 to Notes to the Company's Consolidated Financial Statements.
(3) Under U.S. GAAP, the primary loss per share is 6.44p and the
fully diluted loss per share is 6.43p.
-27-
<PAGE>
Dividends
The Company has not paid dividends on Ordinary Shares since inception.
It is currently anticipated that the Company will retain all of its earnings to
finance its operations and future growth and does not expect to pay any cash
dividends in the foreseeable future.
Exchange Rate Information
The table below sets forth, for the periods and dates indicated,
certain information concerning the exchange rate between pounds sterling and
U.S. dollars, based on the Noon Buying Rate for pounds sterling, expressed in
U.S. dollars per (pound sterling)1.00. Fluctuations in the exchange rate between
the pound sterling and the U.S. dollar will affect, among other things, the U.S.
dollar amount received by holders of ADRs on conversion by the Depositary of any
cash dividends paid in pounds sterling on the Ordinary Shares.
Period Period
Year ended December 31, High Low Average(1) End
- ----------------------- ---- --- ---------- ------
1992 . . . . . . . . . 2.0035 1.5095 1.7555 1.5130
1993 . . . . . . . . . 1.5900 1.4175 1.4965 1.4775
1994 . . . . . . . . . 1.6368 1.4615 1.5393 1.5665
1995 . . . . . . . . . 1.6440 1.5302 1.5803 1.5535
1996 . . . . . . . . . 1.7123 1.4948 1.5733 1.7123
- ---------------
(1) The average of the Noon Buying Rates on the last business day of each
full month during the period.
Item 9. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis should be read in conjunction
with "Item 8. Selected Financial Data" and the Consolidated Financial Statements
of the Company and the Notes thereto included elsewhere in this Registration
Statement.
The Consolidated Financial Statements have been prepared in accordance
with U.K. GAAP, which differs in certain significant respects from U.S. GAAP. A
summary of the principal differences between U.K. GAAP and U.S. GAAP as they
relate to the Company is
-28-
<PAGE>
included in Note 20 to the Consolidated Financial Statements of the Company.
The discussion below relates to the operations for the year ended
December 31, 1996 and is based upon the audited Consolidated Financial
Statements of the Company. The Company did not trade during the period ended
December 31, 1995.
Overview
Display.IT Limited, a wholly owned subsidiary of Display.IT Holdings,
develops, markets and supports Display.IT software, a software package which,
when installed in a PC, displays near real-time financial data and financial
news freely available via the Internet. The Display.IT software may also be used
to access real-time financial data and other types of value-added financial
information available for a charge from certain information providers through
the Internet.
The Display.IT software was under development throughout 1996 with a
working model being first available at the end of April of that year.
Development work continued until late November 1996 when the software became
available to end-users.
Development has continued since November 1996 and it is intended that
software upgrades will be released periodically over the course of the coming
years to keep the information available to end-users who obtain only near
real-time financial data and information through the Display.IT software
current, and to keep the product current with evolving technologies. End-users
will be charged for software upgrades. See "Item 1. Description of Business --
Products and Services -- Display.IT Software."
The Company has been actively marketing the product to resellers
throughout the year. As of January 31, 1997, the Company had entered into
agreements with two resellers for distribution of the Display.IT software and
was in the process of negotiating distribution contracts with a number of other
resellers. See "Item 1. Description of Business -- Operations," "--
Distribution" and "-- Preliminary Arrangements."
Company Structure
Display.IT Holdings was incorporated on May 3, 1996 and acquired the
entire share capital of Display.IT Limited on June 20, 1996 in exchange for the
issuance to Peter Levin of 10,000,000 Ordinary Shares of Display.IT Holdings.
See "Item 1. Description of Business -- General Development of Business" and
-29-
<PAGE>
"Item 13. Interest of Management in Certain Transactions -- Acquisition of
Display.IT Limited Shares."
Display.IT Holdings and Display.IT Limited have been consolidated using
merger accounting principles as discussed in Note 1 of Notes to the Company's
Consolidated Financial Statements. Display.IT Holdings is primarily a holding
company with Display.IT Limited being the main trading company.
Results of Operations
Consolidated
year ended
December 31, 1996
-----------------
(Pound Sterling)
Research and development (130,478)
Administrative expenses (779,538)
Other operating income 42,500
--------
Operating loss (867,516)
Interest receivable and
similar income 27,770
Interest payable and similar
charges (6,466)
--------
Loss on ordinary activities
before taxation (846,212)
========
Research and Development
Research and development represents the cost of development of the
Display.IT software product prior to the establishment of a working model in
April 1996, development costs incurred since the release of the product in
November and amortization of capitalized development costs. See "Item 9.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Development Costs."
Administrative Expenses
Administrative expenses relate to staff costs, office expenses,
consultancy and sales and marketing costs. Staff costs, including fees paid
to directors totalling (pound sterling)176,757, were a significant component of
administrative expenses for the year ended December 31, 1996.
-30-
<PAGE>
Marketing costs for the year of (pound sterling)72,825 were also
significant and reflect the efforts made by the Company to promote the
Display.IT software.
Consultancy costs for the year of (pound sterling)121,554 have been
incurred principally on reseller agreements. Other expenses included travel and
telephone, respectively (pounds sterling)38,170 and 22,363.
Professional fees charged to the profit and loss account for the year
totaled (pound sterling)246,847 and relate to set up costs, costs associated
with the OFEX listing and the preparation of this Registration Statement.
See "Item 5. Nature of Trading Market." Professional fees of (pound sterling
53,028 have been charged to the share premium account during the year. See
"Item 9. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
The balance of administrative expenses relates to a number of less
significant items such as insurance and printing costs.
Other Operating Income
Other operating income relates to an amount invoiced to a third party
for specific development work. The Company does not expect that it will perform
specific development work in the future on a regular basis, if at all.
There is no line item for revenue or sales because no revenue in
connection with the distribution of the Display.IT software was generated during
1996.
Management expects that revenues generated by the Company in the
future, if any, will fall into two categories -- fixed revenues and recurring
revenues. Fixed revenues are expected to be generated from sales of the
Display.IT software to resellers. Recurring revenues are expected to be
generated from a number of sources: (i)(A) agreements between the Company and
information providers (as of January 31, 1997, the Company had entered into
three such agreements and was seeking to enter into more), (B) a prospective
agreement between the Company and BT and (C) the CellNet Understanding, all of
which are anticipated to provide for royalties to be paid to the Company, (ii) a
prospective agreement between the Company and an access provider which is
anticipated to provide for royalties or finder's fees to be paid to the Company
and (iii) sales of Display.IT software upgrades. See "Item 1. Description of
Business -- Products and Services -- Display.IT Software," "-- Customer
Support," "-- Preliminary Arrangements" and "-- Development Stage Company;
Expectation of Losses; Negative Cash Flows."
Management expects, but cannot assure, that over the course of the
following 18-month period, sales of the Display.IT software to resellers will
account for the vast majority of any
-31-
<PAGE>
revenues generated by the Company. Management believes that over time recurring
revenues will account for an increasing percentage of total revenue, although no
assurances to that effect can given. See "Item 1. Description of Business --
Development Stage Company; Expectation of Losses; Negative Cash Flows."
Interest Receivable and Similar Income
Interest receivable of (pound sterling)13,910 has been earned on funds
deposited at Arbuthnot Latham & Co. Limited during the year.
Foreign exchange gains of (pound sterling)13,860 have resulted from
fluctuations in exchange rates during the year in relation to transactions
associated with a loan from a director during the year as discussed in Note 14
of the Notes to the Company's Consolidated Financial Statements. See "Item 13.
Interest of Management in Certain Transactions -- Loan Transaction."
Interest Payable and Similar Charges
Interest payable of (pound sterling)6,466 related to interest on a loan
from a director for part of the year. See "Item 13. Interest of Management in
Certain Transactions -- Loan Transaction."
Development Costs
Display.IT Limited has incurred development costs for the year ended
December 31, 1996 of (pound sterling)312,223. See "Item 1. Description of
Business -- Research and Development Policy."
In accordance with U.K. GAAP and U.S. GAAP, software development costs
since the establishment of a working model have been capitalized. The
capitalized development costs have been amortized since the Display.IT software
launch. Costs incurred prior to establishment of technical feasibility have been
written off as incurred.
Technical feasibility was established in April 1996 and the completed
Display.IT software was launched at the end of November 1996. Development costs
incurred prior to April 30, 1996 of (pound sterling)72,500 have therefore been
written off during the year and costs incurred between April 30, 1996 and
November 30, 1996 of (pound sterling)187,223 have been capitalized on the
balance sheet.
The Display.IT software is considered to have a three year life from
the date of launch provided that regular updates are made. Amortization has
therefore commenced on December 1, 1996 and an amortization charge of
(pound sterling)5,478 has been included in cost of
-32-
<PAGE>
sales for the year. The cost of software upgrades will be expensed as
incurred and (pound sterling)52,500 of such costs were incurred between
December 1, 1996 and December 31, 1996.
All software development expenditure incurred during the year was
pursuant to a software development agreement for the development of the
Display.IT software product.
The software development agreement included all design and development,
including writing of source code, and testing up to the acceptance testing
stage. Acceptance testing was performed by the Company with support from the
software developer. The original agreement was for a fixed price, however, the
agreement provided for modifications.
The Company retains all interests (source code and intellectual
property rights) in the developed software and no restrictions exist on the use
of the software. No revenue sharing arrangements exist for product sales and no
royalties are payable by the Company to any party. The software developer has
indemnified the Company against claims made by third parties for infringement of
copyright as a consequence of use of the developed software.
Liquidity and Capital Resources
Since inception, the Company's primary capital needs have been to fund
research and development, working capital requirements and capital expenditures
necessary to provide for the development, marketing and distribution of the
Display.IT software. See "Item 9. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Research and Development," "--
Administrative Expenses" and "-- Development Costs."
Display.IT is a development-stage company and development and testing
of the Display.IT software, the Company's only product as of December 31,
1996, was not completed until late November 1996. As of December 31, 1996, the
Company had not generated any revenue in connection with sales of the product.
In the first two months of 1997, the Company generated revenues from product
sales of approximately (pound sterling)14,595. Cash flows from operations have
been negative since the inception of the Company. See "Item 1. Description of
Business -- Development Stage Company; Expectation of Losses; Negative Cash
Flow" and "Item 9. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Other Operating Income."
The Company's net cash used by operating activities was (pound
sterling)689,292 for fiscal 1996, including (pound sterling)125,000 to fund
research and development. During 1996, the Company's capital expenditures
totaled approximately (pound sterling)137,450. Capital expenditures have
generally been comprised of purchases of computer hardware and software as well
as leasehold improvements related to leased facilities and capitalized software
development costs. See "Item 9. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Research and Development" and
"-- Development Costs."
At December 31, 1996, the Company's primary source of liquidity was
(pound sterling)316,314 in cash and cash equivalents. The Company's primary
sources of financing have been the private placement of equity securities and
loans. In April 1996, Marjorie Moe, a director of the Company, loaned $210,000
((pound sterling)139,944) to Display.IT Limited. The Company repaid the loan in
full, including (pound sterling)6,466 in interest, in two installments during
the year. Exchange gains of (pound sterling)13,860 were realized on the
transaction. See "Item 13. Interest of Management in Certain Transactions --
Loan Transaction." In June 1996, the Company raised (pound sterling)1,000,000
through the U.K. Private Placement.
-33-
<PAGE>
Professional fees of (pound sterling)53,028 were incurred in connection with the
U.K. Private Placement and charged against the share premium account. On
December 11, 1996, the Company raised (pound sterling)12,000 in connection with
the exercise of options for Ordinary Shares, and on December 13, 1996, the
Company raised (pound sterling)350,003 through an allotment of Ordinary Shares.
See "Item 1. Description of Business -- General Development of Business" and
"Item 12. Options to Purchase Securities from Registrant or Subsidiaries --
Options Issued in Connection With U.K. Private Placement."
Financing
Share capital (1)
Private placing
Share capital subscribed 1,000,000
Share capital expenses (53,028)
Exercise of options 12,000
Allotment of shares 350,003
---------
1,308,975
=========
Loan capital
Loan from director 139,944
Repayment of loan (29,757)
Repayment of loan (96,327)
Exchange difference (13,860)
---------
--
=========
- ---------------
(1) All amounts are in pounds sterling.
Management believes, but cannot assure, that existing cash and cash
equivalents together with cash flows currently expected to be generated from
operations will be sufficient to meet the Company's presently anticipated
operating requirements through the end of 1997, as well as any increases therein
due to increases in development activities to a level in excess of that which is
presently anticipated.
Before the end of 1997, the Company may engage in acquisitions of
complementary businesses, products and/or technologies, which could increase
cash requirements. The Company does not currently have any agreements,
arrangements or understandings, and is not involved in any negotiations, with
respect to any such acquisition.
-34-
<PAGE>
Management believes, but cannot assure, that the Company will be able
to obtain financing for operations, to the extent necessary, or for acquisitions
that alone or together with existing cash and cash equivalents and expected
operational cash flows will be sufficient to cover any such increased cash
requirements.
Item 10. Directors and Officers of Registrant.
The directors and officers, and certain key employees, of Display.IT
Holdings as of December 31, 1996 were as follows:
Initially
Name Age Position Appointed
---- --- -------- ---------
Peter Levin 40 Managing Director June 20, 1996
and Chief
Executive Officer
David G. Familiant 68 Chairman and Non- June 24, 1996
executive Director
Marjorie Moe 47 Non-executive June 20, 1996
Director
Catita Edward 52 Non-executive June 24, 1996
Director
Gerald R. Giombetti 61 Non-executive October 22, 1996
Director
Duncan Coward 29 Software Projects October 1, 1996
Manager
T. Mark Proffitt 33 Sales Manager November 26, 1996
Thomas A. Mackay 47 Secretary June 20, 1996
Mr. Levin founded Display.IT Holdings in May of 1996 and has served as
its Managing Director and Chief Executive Officer since that date. Prior
thereto, Mr. Levin worked for CSK Micrognosis, ltd. ("CSK Micrognosis") a
worldwide trading room systems company, which he joined in 1993. In 1994, Mr.
Levin was promoted to Vice President of Marketing and Field Operations of CSK
Micrognosis. Prior to joining CSK Micrognosis, in 1989, Mr. Levin founded and
directed the operations of TransTech Management, an international investment and
consulting firm for the high-technology industry.
-35-
<PAGE>
Mr. Familiant has served as Chairman and non-executive director of
Display.IT Holdings since June 24, 1996. Mr. Familiant also currently serves as
Executive Vice President of the Gartner Group, an organization he joined in
1988. Over the course of his career, Mr. Familiant has amassed some 44 years of
experience in the information technology and management industry and worked with
companies such as IBM and Control Data Corporation.
Ms. Moe has served as a non-executive director of Display.IT Holdings
since June 20, 1996. Ms. Moe is also currently self-employed as a U.S.-based
consultant to a number of world-wide companies in the trading technology
industry. Prior to joining Display.IT Holdings and developing her consulting
business, Ms. Moe was employed by Micrognosis Inc., a trading information
systems company, for 17 years. Ms. Moe was involved in the start-up of
Micrognosis Inc., was responsible for operations for nine years, in 1986 ran the
company's newly formed Asia/Pacific Region and in 1991 was given responsibility
for international account management and global sales support. During her tenure
at Micrognosis Inc., Ms. Moe also served as a director of the company for 13
years, as well as serving as a director of a number of its subsidiaries.
Mrs. Edward has served as a non-executive director of Display.IT
Holdings since June 24, 1996. Mrs. Edward also currently serves as Senior Vice
President of Marketing and Sales for the German American Trade Center, a
division of GATC Corp., a company that provides various services to a number of
German companies with headquarters in the United States. Mrs. Edward began
working for the German American Trade Center in February 1996. Prior thereto,
since 1988, Mrs. Edward was self-employed and provided international marketing,
sales and strategic planning consulting services to a number of companies.
Mr. Giombetti has served as a non-executive director of Display.IT
Holdings since October 22, 1996. Mr. Giombetti also currently serves as Manager
of the European office of the U.S. law firm of Frederikson & Byron where he
specializes in international corporate and commercial matters. Mr. Giombetti
joined Frederikson & Byron in 1992. Prior thereto, Mr. Giombetti served as Vice
President and Assistant General Counsel of Control Data Corporation, a computer
software and services integration company, which he joined in 1990.
Mr. Coward joined Display.IT Holdings, on October 1, 1996 as its
Software Projects Manager. Prior thereto, Mr. Coward was employed by CSK
Micrognosis, which he joined on January 1, 1991. Mr. Coward's last position at
CSK Micrognosis was Product Manager.
-36-
<PAGE>
Mr. Proffitt began working for Display.IT Holdings on November 26, 1996
as its Sales Manager. Prior to joining Display.IT Holdings, Mr. Proffitt served
as a Senior Account Manager for S&P ComStock, where he began in July 1995. Prior
thereto, Mr. Proffitt had been employed as a Major Account Manager by Telerate
from August 1992 to July 1995 and as an Account Director by Bull Information
Systems from August 1990 to August 1992.
Mr. Mackay has served as Secretary of Display.IT Holdings since June
20, 1996. Mr. Mackay is a partner at the City of London law firm, Taylor Joynson
Garrett, specializing in Stock Exchange and Venture Capital work. Mr. Mackay has
been with Taylor Joynson Garrett since 1993. Prior thereto, Mr. Mackay served as
the head of the legal department at the London Stock Exchange, where he began in
1991. Before his work with the London Stock Exchange, Mr. Mackay served as a
director and head of the legal department of 3i plc, a venture capital
organization he joined in 1978.
Mr. Levin and Mrs. Edward are brother and sister. Mr. Levin and Ms. Moe
are engaged to be married.
On June 24, 1996, Mr. Levin entered into an employment agreement with
Display.IT Holdings to serve as its Managing Director and Chief Executive
Officer. The employment agreement is terminable by either party on 12 months'
notice or, in any event, on Mr. Levin's reaching 65 years of age. Each of the
non-executive Directors, other than Mr. Giombetti, has been appointed for a
term of three years from June 24, 1996, subject to re-election when appropriate
at annual general meetings. See "Item 13. Interest of Management in Certain
Transactions -- Employment Arrangements."
As Managing Director of Display.IT Holdings, Mr. Levin will not be
subject to retirement by rotation after the expiration of his employment
agreement, and can continue as a director as long as he holds such office or
until he resigns or is removed. All of the other directors are subject to
retirement by rotation, one-third (or, if their number is not a multiple of
three, the number nearest to but not greater than one-third) retiring and being
eligible for reappointment by the shareholders at each annual general meeting.
The Secretary serves at the discretion of the Board of Directors.
-37-
<PAGE>
Item 11. Compensation of Directors and Officers.
In fiscal 1996, the aggregate amount of compensation paid by the
Company to all of its directors and officers as a group for services in all
capacities was approximately (pound sterling)170,072. In fiscal 1996, the
Company did not set aside or accrue any funds to provide pension, retirement or
similar benefits for its directors and officers.
The following table sets forth the name of each director and officer
with respect to whom the Company has previously provided compensation
information to its shareholders and the approximate amount of compensation paid
to each by the Company for services in all capacities in 1996.
Director or Officer Compensation (Pound Sterling)
------------------- -----------------------------
Peter Levin 137,752
David G. Familiant 5,711
Marjorie Moe 4,846
Catita Edward 4,846
Gerald R. Giombetti --
Item 12. Options to Purchase Securities from Registrant or Subsidiaries.
Share Option Scheme
As of December 31, 1996, options to subscribe for 1,615,705 Ordinary
Shares had been granted by Display.IT Holdings of which 1,565,705 were
outstanding. Options to subscribe for 415,705 of such Ordinary Shares were
granted under Display.IT Holdings' share option scheme (the "Share Option
Scheme"). All directors and employees of Display.IT Holdings (other than Peter
Levin), and of any of its subsidiaries nominated as eligible to participate by
the committee (the "Committee") that administers the Share Option Scheme, may,
at the discretion of the Committee, be invited to apply for options ("Options"),
each exercisable for an Ordinary Share. Pursuant to the Share Option Scheme,
Options are exercisable at a price not lower than the nominal value of an
Ordinary Share or the average of the middle market quotations or, in relation to
the Nasdaq Stock Market only, the last sale price of an Ordinary Share as
derived from a screen-based financial information system (if the Ordinary Shares
are traded on OFEX) or the Daily Official List of the London Stock Exchange (if
the Ordinary Shares are
-38-
<PAGE>
listed on the Official List or traded on the Alternative Investment Market) or
the Wall Street Journal (if the Ordinary Shares are listed on the Nasdaq Stock
Market) for the three consecutive dealing days immediately preceding the day on
which the invitation to apply for an Option was issued.
The name of each director and officer, and certain key employees, with
respect to whom the Company has previously provided Option information to its
shareholders, as well as the number of Options granted to each such director,
officer or key employee as of December 31, 1996, and the exercise price and
latest date of expiration of each such Option are as follows:
<TABLE>
<CAPTION>
Exercise
Name Number Price(Pound Sterling) Expiration Date
---- ------ -------------------- ---------------
<S> <C> <C> <C>
David G. Familiant 62,855 0.70 October 4, 2001
Marjorie Moe 51,425 0.70 October 10, 2001
Catita Edward 51,425 0.70 October 10, 2001
Duncan Coward 75,000 0.70 October 10, 2001
T. Mark Proffitt 150,000 4.07 December 23, 2001
</TABLE>
Options Issued in Connection With the U.K. Private Placement
The remaining 1,200,000 options were granted to Alasdair N. Macleod, G.
W. Bennet Turnbull, John A. Scott and David R. J. Foster (each a "Broker" and
collectively, the "Brokers") for services rendered in connection with the U.K.
Private Placement, pursuant to agreements dated June 24, 1996. Each Broker was
granted options exercisable for 150,000 Ordinary Shares, exercisable at any time
before 5:00 p.m. on June 30, 2002, and options exercisable for an additional
150,000 Ordinary Shares exercisable at any time after June 30, 1999 and before
5:00 p.m. on June 30, 2002. The exercise price of the options granted to the
Brokers is (pound sterling)0.24. On December 11, 1996, options to purchase
50,000 Ordinary Shares were exercised by one of the Brokers. See "Item 9.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Ordinary Shares for Which Management Options May Be Exercised
Options exercisable for an aggregate of 390,705 Ordinary Shares which
have been granted to Mr. Familiant, Ms. Moe, Mrs. Edward, Mr. Coward and T. Mark
Proffitt pursuant to the Share
-39-
<PAGE>
Option Scheme, represent, as of December 31, 1996, all of the Ordinary Shares
called for by all options held by the directors and officers of Display.IT
Holdings as a group.
Item 13. Interest of Management in Certain Transactions.
Employment Arrangements
On June 24, 1996, Peter Levin entered into an employment agreement (the
"Employment Agreement") with Display.IT Holdings to serve as its Managing
Director and Chief Executive Officer. The Employment Agreement is terminable by
either party on 12 months' written notice and terminates automatically on the
date on which Mr. Levin reaches the age of 65. The Employment Agreement contains
various restrictive covenants relating to the disclosure of confidential
information, competition with Display.IT Holdings, solicitation of Display.IT
Holdings' customers and employees, and interference with Display.IT Holdings'
suppliers. Pursuant to the Employment Agreement, Mr. Levin is entitled to
receive an annual salary which must be reviewed by the Board of Directors not
less than annually, but which is not subject to reduction. As of December 31,
1996, Mr. Levin's salary was (pound sterling)144,000 per year.
Pursuant to letter agreements dated June 24, 1996, each of Catita
Edward, Marjorie Moe and David G. Familiant were appointed to serve on the Board
of Directors for three-year terms, subject to re-election when appropriate at
annual general meetings of Display.IT Holdings, and provided with directors'
stipends of (pound sterling)10,000 per annum. Currently, Mr. Familiant receives
an annual director's stipend of (pound sterling)11,000, and Ms. Moe, Mrs. Edward
and Gerald R. Giombetti each receive an annual director's stipend of (pound
sterling)9,000.
Acquisition of Display.IT Limited Shares
Prior to June 20, 1996, Mr. Levin owned the Display.IT Limited Shares.
Pursuant to the Share Exchange Agreement, Display.IT Holdings acquired the
Display.IT Limited Shares in exchange for crediting as fully paid up the 200
Ordinary Shares held by Mr. Levin and the issuance to him of an additional
9,999,800 Ordinary Shares. This transaction (the "Exchange") caused Display.IT
Limited to become, and as of December 31, 1996 it remained, the wholly-owned
subsidiary of Display.IT Holdings. See "Item 1. Description of Business --
General Development of Business."
-40-
<PAGE>
Loan Transaction
Pursuant to a loan agreement (the "Loan Agreement") dated April 22,
1996, Ms. Moe loaned $210,000 ((pound sterling)139,944) (the "Loan") to
Display.IT Limited. Interest on the Loan was to accrue at an interest rate of
10% per annum during the first year, 15% per annum during the second year, 16%
per annum during the third year, 18% per annum during the fourth year and 20%
per annum thereafter. As of December 31, 1996, the Company had repaid the Loan
in full, including (pound sterling)6,466 in interest. Exchange gains of (pound
sterling)13,860 were realized on the transaction. See "Item 9. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
As security for the Loan, pursuant to a debenture (the "Debenture")
dated April 22, 1996, Display.IT Limited granted a first mortgage and security
interest in all of its real and personal property and assets, both tangible and
intangible, to Ms. Moe. In addition, pursuant to a guarantee (the "Guarantee")
dated April 22, 1996, Mr. Levin guaranteed repayment of the Loan by Display.IT
Limited to Ms. Moe and, by way of a pledge agreement (the "Pledge Agreement")
dated April 22, 1996, secured such Guarantee with a pledge of the Display.IT
Limited Shares.
In order to facilitate the Exchange in accordance with the terms of the
Share Exchange Agreement which required that Mr. Levin convey the Display.IT
Limited Shares to Display.IT Holdings free and clear of any and all security
interests, liens, pledges, rights of others or other encumbrances, Ms. Moe,
pursuant to the Share Exchange Agreement, agreed to terminate the Pledge
Agreement. In consideration therefor, Mr. Levin entered into a new pledge
agreement (the "New Pledge Agreement") dated June 20, 1996 by the terms of which
he pledged to Ms. Moe the 10,000,000 Ordinary Shares owned by him.
In connection with the repayment of the Loan by the Company, the
Debenture, Guarantee and New Pledge Agreement were terminated.
Indebtedness of Management to Company
As of December 31, 1996, no director or officer or the Company, or any
associate thereof, was indebted to the Company in any amount.
Legal Services
Each of Frederikson & Byron, a law firm of which Mr. Giombetti, a
non-executive director of Display.IT Holdings, is a
-41-
<PAGE>
partner and Taylor Joynson Garrett, a law firm of which Thomas A. Mackay, the
Secretary of Display.IT Holdings, is a partner has provided legal services to
the Company at some time during the Company's last fiscal year and has, or will
likely, provide legal services to the Company in the current fiscal year. See
"Item 10. Directors and Officers of Registrant." For fiscal 1996, the aggregate
amount of fees paid by the Company to: (i) Frederikson & Byron did not exceed
five percent of the gross revenues of such law firm for 1996, and (ii) Taylor
Joynson Garrett did not exceed five percent of the gross revenues of such law
firm for 1996.
<PAGE>
PART II
Item 14. Description of Securities to be Registered.
As of January 31, 1997, the authorized share capital of Display.IT
Holdings was (pound sterling)1,500,000 divided into 30,000,000 Ordinary
Shares of 5 pence each. As of such date, 15,556,720 Ordinary Shares were
outstanding. Display.IT Holdings' Articles of Association empower it to create
and issue shares with such preferred or other special rights ("Preferred Stock")
as may be determined by resolution of the shareholders. The rights, preferences
and privileges of holders of Ordinary Shares are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
Preferred Stock which Display.IT Holdings may designate and issue in the future.
The following is a description of (i) the Ordinary Shares, (ii) the
ADRs, and (iii) the agreement that is expected to govern the deposit of ADSs,
each of which will represent one Ordinary Share, and the issuance by the
Depositary of ADRs.
Description of Ordinary Shares
Dividend Rights
Holders of Ordinary Shares are entitled to receive ratably such
dividends, if any, as may be declared by the shareholders by resolution (but no
such dividends shall exceed the sum recommended by the Board of Directors) out
of funds legally available therefor, subject to any preferential dividend rights
of any outstanding Preferred Stock. The Board of Directors may retain any
dividend or other moneys payable on or in respect of an Ordinary Share in which
Display.IT Holdings has a lien, and may apply the same in or towards
satisfaction of the obligations in respect of which the lien exists. The Board
may withhold dividends payable on Ordinary Shares after there has been a failure
to provide Display.IT Holdings with information
-42-
<PAGE>
concerning interests in such Ordinary Shares required to be provided by the
Companies Act as to past and present beneficial ownership of such shares until
such failure has been remedied.
Voting Rights
Holders of Ordinary Shares are entitled to one vote for each Ordinary
Share held on all matters submitted to a poll of the shareholders, and to one
vote on all matters to be decided by a show of hands of the shareholders. With
respect to a poll, the affirmative vote of a majority of the Ordinary Shares
entitled to vote is necessary to approve an action. With respect to a show of
hands, the affirmative vote of a majority of the holders of Ordinary Shares
present in person and entitled to vote is necessary to approve an action. At
shareholder meetings, resolutions are decided by a show of hands unless a poll
is demanded by the chairman of the meeting, not fewer than five shareholders
entitled to vote at the meeting, a shareholder or shareholders representing not
less than one-tenth of the total voting rights of all shareholders entitled to
vote at the meeting, or a shareholder or shareholders holding Ordinary Shares
entitled to vote at the meeting on which an aggregate sum has been paid up equal
to not less than one-tenth of the total sum paid up on all Ordinary Shares
entitled to vote at the meeting.
Liquidation Rights
Upon the liquidation, dissolution or winding up of Display.IT Holdings,
the holders of Ordinary Shares are entitled to receive ratably the net assets of
Display.IT Holdings available after payment of all debts and other liabilities
and subject to the prior rights of any outstanding Preferred Stock.
Pre-emptive, Conversion and Redemption Rights; Sinking Fund
Provisions
Holders of Ordinary Shares have statutory pre-emptive rights and no
conversion or redemption rights. There are no sinking fund provisions in effect
with respect to the Ordinary Shares.
Liability to Further Calls or to Assessment by Registrant
The Board of Directors may from time to time make calls upon the
holders of Ordinary Shares in respect of any money unpaid on their Ordinary
Shares (whether on account of the nominal value of the Ordinary Shares or, when
permitted, by way of premium) but subject always to the terms of issue of such
Ordinary Shares. A holder of Ordinary Shares upon whom a call is made shall
remain
-43-
<PAGE>
liable on such call notwithstanding the subsequent transfer of the Ordinary
Shares in respect of which the call was made.
Description of American Depositary Receipts and the Deposit
Agreement
The following is a summary of certain provisions of the Deposit
Agreement (the "Deposit Agreement"), to be entered into by Display.IT Holdings,
the Depositary, and the owners (the "Owners") and holders from time to time of
ADRs issued thereunder.
This summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the Deposit Agreement, including the
form of ADRs. Terms used herein and not otherwise defined will have the meanings
set forth in the Deposit Agreement. Copies of the Deposit Agreement and the
Articles of Association of Display.IT Holdings will be available for inspection
at the Corporate Trust Office of the Depositary, currently located at 101
Barclay Street, New York, New York 10286, and at the principal office of the
agent of the Depositary (the "Custodian"), currently located at the London
office of The Bank of New York - London. The Depositary's principal executive
office is located at 48 Wall Street, New York, New York 10286.
American Depositary Receipts
ADRs evidencing ADSs are issuable by the Depositary pursuant to the
Deposit Agreement. Each ADS will represent one Ordinary Share or evidence of the
right to receive one Ordinary Share (together with any additional shares of
Ordinary Shares at any time deposited or deemed deposited under the Deposit
Agreement and any and all other securities, cash and property received by the
Depositary or the Custodian in respect thereof and at such time held under the
Deposit Agreement) (the "Shares"). Only persons in whose names ADRs are
registered on the books of the Depositary will be treated by the Depositary and
Display.IT Holdings as Owners.
Deposit, Transfer and Withdrawal
The Depositary has agreed, subject to the terms and conditions of the
Deposit Agreement, that upon delivery to the Custodian of Shares (or evidence of
rights to receive Shares) and pursuant to appropriate instruments of transfer in
a form satisfactory to the Custodian, the Depositary will, upon payment of the
fees, charges and taxes provided in the Deposit Agreement, execute and deliver
at its Corporate Trust Office to, or upon the written order of, the person or
persons named in the notice of
-44-
<PAGE>
the Custodian delivered to the Depositary or requested by the person depositing
such Shares with the Depositary, an ADR or ADRs, registered in the name or names
of such person or persons, and evidencing any authorized number of ADSs
requested by such person or persons.
Upon surrender at the Corporate Trust Office of the Depositary of an
ADR for the purpose of withdrawal of the Deposited Securities represented by the
ADSs evidenced by such ADR, and upon payment of the fees of the Depositary for
the surrender of Receipts, governmental charges and taxes provided in the
Deposit Agreement, and subject to the terms and conditions of the Deposit
Agreement, the Owner of such ADR will be entitled to delivery, to him or upon
his order, of the amount of Deposited Securities at the time represented by the
ADS or ADSs evidenced by such ADR. The forwarding of share certificates, other
securities, property, cash and other documents of title for such delivery will
be at the risk and expense of the Owner.
Subject to the terms and conditions of the Deposit Agreement and any
limitations established by the Depositary, the Depositary may execute and
deliver ADRs prior to the receipt of Shares (a "Pre-Release") and deliver Shares
upon the receipt and cancellation of ADRs which has been Pre-Released, whether
or not such cancellation is prior to the termination of such Pre-Release or the
Depositary knows that such ADR has been Pre-Released. The Depositary may receive
ADRs in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release must
be (a) preceded or accompanied by a written representation from the person to
whom the ADRs or Shares are to be delivered that such person, or its customer,
owns the Shares or ADRs to be remitted, as the case may be, (b) at all times
fully collateralized with cash or such other collateral as the Depositary deems
appropriate, (c) terminable by the Depositary on not more than five (5) business
days' notice and (d) subject to such further indemnities and credit regulations
as the Depositary deems appropriate. The number of American Depositary Shares
which are outstanding at any time as a result of Pre-Releases will not normally
exceed thirty (30%) of the Shares deposited hereunder; provided, however, that
the Depositary reserves the right to change or disregard such limit from time to
time as it deems appropriate.
The Depositary may retain for its own account any compensation received
by it in connection with the foregoing.
Dividends, Other Distributions and Rights
The Depositary will convert or cause to be converted into
Dollars, to the extent that in its judgment it can do so on a
-45-
<PAGE>
reasonable basis and can transfer the resulting Dollars to the United States,
all cash dividends and other cash distributions denominated in a currency other
than Dollars, including pounds sterling ("Foreign Currency"), that it receives
in respect of the deposited Shares, and to distribute the resulting Dollar
amount (net of the expenses incurred by the Depositary in converting such
Foreign Currency) to the Owners entitled thereto, in proportion to the number of
ADSs representing such Deposited Securities evidenced by ADRs held by them,
respectively. Such distribution may be made upon an averaged or other
practicable basis without regard to any distinctions among Owners on account of
exchange restrictions or the date of delivery of any ADR or ADRs or otherwise.
The amount distributed to the Owners of ADRs will be reduced by any amount on
account of taxes to be withheld by the Company or the Depositary. See "Item 14.
Description of Securities -- Description of American Depositary Receipts --
Liability of Owner for Taxes."
If the Depositary determines that in its judgment any Foreign Currency
received by the Depositary cannot be converted on a reasonable basis into
Dollars transferable to the United States, or if any approval or license of any
government or agency thereof which is required for such conversion is denied or
in the opinion of the Depositary is not obtainable, or if any such approval or
license is not obtained within a reasonable period as determined by the
Depositary, the Depositary may distribute the Foreign Currency received by the
Depositary to, or in its discretion may hold such Foreign Currency uninvested
and without liability for interest thereon for the respective accounts of, the
Owners entitled to receive the same. If any such conversion of Foreign Currency,
in whole or in part, cannot be effected for distribution to some of the Owners
entitled thereto, the Depositary may in its discretion make such conversion and
distribution in U.S. Dollars to the extent permissible to the Owners entitled
thereto, and may distribute the balance of the Foreign Currency received by the
Depositary to, or hold such balance uninvested and without liability for
interest thereon for, the respective accounts of, the Owners entitled thereto.
If any distribution upon any Deposited Securities consists of a
dividend in, or free distribution of, Shares, the Depositary may, and will if
Display.IT Holdings so requests, distribute to the Owners of outstanding ADRs
entitled thereto, in proportion to the number of ADSs evidenced by the ADRs held
by them, respectively, additional ADRs evidencing an aggregate number of ADSs
that represents the amount of Shares received as such dividend or free
distribution, subject to the terms and conditions of the Deposit Agreement with
respect to the deposit of Shares and the issuance of ADSs evidenced by ADRs,
including the withholding of any tax or other governmental charge and the
-46-
<PAGE>
payment of fees of the Depositary as provided in the Deposit Agreement. The
Depositary may withhold any such distribution of ADRs if it has not received
satisfactory assurances from Display.IT Holdings that such distribution does not
require registration under the Securities Act or is exempt from registration
under the provisions of such Act. In lieu of delivering ADRs for fractional ADSs
in the event of any such dividend or free distribution, the Depositary will sell
the amount of Shares represented by the aggregate of such fractions and
distribute the net proceeds in accordance with the Deposit Agreement. If
additional ADRs are not so distributed, each ADS will thenceforth also represent
the additional Shares distributed upon the Deposited Securities represented
thereby.
If Display.IT Holdings offers or causes to be offered to the holders of
any Deposited Securities any rights to subscribe for additional Shares or any
rights of any other nature, the Depositary will have discretion as to the
procedure to be followed in making such rights available to any Owners of ADRs
or in disposing of such rights for the benefit of any Owners and making the net
proceeds available in Dollars to such Owners or, if by the terms of such rights
offering or for any other reason, the Depositary may not either make such rights
available to any Owners or dispose of such rights and make the net proceeds
available to such Owners, then the Depositary shall allow the rights to lapse.
If at the time of the offering of any rights the Depositary determines in its
discretion that it is lawful and feasible to make such rights available to all
Owners or to all or certain Owners but not to other Owners, the Depositary may
distribute to any Owner to whom it determines the distribution to be lawful and
feasible, in proportion to the number of ADSs held by such Owner, warrants or
other instruments therefor in such form as it deems appropriate. If the
Depositary determines in its discretion that it is not lawful and feasible to
make such rights available to all or certain Owners, it may sell the rights,
warrants or other instruments in proportion to the number of ADSs held by the
Owners to whom it has determined it may not lawfully or feasibly make such
rights available, and allocate the net proceeds of such sales for the account of
such Owners otherwise entitled to such rights, warrants or other instruments,
upon an averaged or other practical basis without regard to any distinctions
among such Owners because of exchange restrictions or the date of delivery of
any ADR or ADRs, or otherwise.
In circumstances in which rights would not otherwise be distributed, if
an Owner of ADRs requests the distribution of warrants or other instruments in
order to exercise the rights allocable to the ADSs of such Owner, the Depositary
will make such rights available to such Owner upon written notice from
Display.IT Holdings to the Depositary that (a) the Display.IT
-47-
<PAGE>
Holdings has elected in its sole discretion to permit such rights to be
exercised and (b) such Owner has executed such documents as Display.IT Holdings
has determined in its sole discretion are reasonably required under applicable
law. Upon instruction pursuant to such warrants or other instruments to the
Depositary from such Owner to exercise such rights, upon payment by such Owner
to the Depositary for the account of such Owner of an amount equal to the
purchase price of the Shares to be received in exercise of the rights, and upon
payment of the fees of the Depositary as set forth in such warrants or other
instruments, the Depositary will on behalf of such Owner, exercise the rights
and purchase of the Shares, and Display.IT Holdings shall cause the Shares so
purchased to be delivered to the Depositary on behalf of such Owner. As agent
for such Owner, the Depositary will cause the Shares so purchased to be
deposited, and will execute and deliver Receipts to such Owner, pursuant to the
Deposit Agreement.
The Depositary will not offer rights to Owners unless both the rights
and the securities to which such rights relate are either exempt from
registration under the Securities Act of 1933 with respect to a distribution to
all Owners or are registered under the provisions of such Act; provided, that
nothing in the Deposit Agreement will create, or be construed to create, any
obligation on the part of Display.IT Holdings to file a registration statement
with respect to such rights or underlying securities or to endeavor to have such
a registration statement declared effective. If an Owner of ADRs requests the
distribution of warrants or other instruments, notwithstanding that there has
been no such registration under such Act, the Depositary will not effect such
distribution unless it has received an opinion from recognized counsel in the
United States for Display.IT Holdings upon which the Depositary may rely that
such distribution to such Owner is exempt from such registration. The Depositary
will not be responsible for any failure to determine that it may be lawful or
feasible to make such rights available to Owners in general of any Owner in
particular.
Whenever the Depositary receives any distribution other than cash,
Shares or rights in respect of the Deposited Securities, the Depositary will
cause the securities or property received by it to be distributed to the Owners
entitled thereto, after deduction or upon payment of any fees and expenses of
the Depositary or any taxes or other governmental charges, in proportion to
their holdings, respectively, in any manner that the Depositary may deem
equitable and practicable for accomplishing such distribution; provided,
however, that if in the opinion of the Depositary such distribution cannot be
made proportionately among the Owners entitled thereto, or if for any other
reason (including, but not limited to, any requirement that
-48-
<PAGE>
the Company or the Depositary withhold an amount on account of taxes or other
governmental charges or that such securities must be registered under the
Securities Act of 1933 in order to be distributed to Owners or holders the
Depositary deems such distribution not to be feasible, the Depositary may adopt
such method as it may deem equitable and practicable for the purpose of
effecting such distribution, including, but not limited to, the public or
private sale of the securities or property thus received, or any part thereof,
and the net proceeds of any such sale (net of the fees of the Depositary) will
be distributed by the Depositary to the Owners entitled thereto as in the case
of a distribution received in cash.
If the Depositary determines that any distribution of property
(including Shares and rights to subscribe therefor) is subject to any taxes or
other governmental charges which the Depositary is obligated to withhold, the
Depositary may, by public or private sale, dispose of all or a portion of such
property in such amount and in such manner as the Depositary deems necessary and
practicable to pay such taxes or charges and the Depositary will distribute the
net proceeds of any such sale after deduction of such taxes or charges to the
Owners entitled thereto in proportion to the number of ADSs held by them,
respectively.
Upon any change in nominal or par value, split-up, consolidation or any
other reclassification of Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting Display.IT
Holdings or to which it is a party, any securities which shall be received by
the Depositary or Custodian in exchange for, in conversion of, or in respect of
Deposited Securities will be treated as new Deposited Securities under the
Deposit Agreement, and the ADSs will thenceforth represent, in addition to the
existing Deposited Securities, the right to receive the new Deposited Securities
so received in exchange or conversion, unless additional ADRs are delivered
pursuant to the following sentence. In any such case the Depositary may, and
will, if Display.IT Holdings so requests, execute and deliver additional ADRs as
in the case of a dividend in Shares, or call for the surrender of outstanding
ADRs to be exchanged for new ADRs specifically describing such new Deposited
Securities.
Record Dates
Whenever any cash dividend or other cash distribution shall become
payable or any distribution other than cash shall be made, or whenever rights
shall be issued with respect to the Deposited Securities, or whenever for any
reason the Depositary causes a
-49-
<PAGE>
change in the number of Shares that are represented by each ADS, or whenever the
Depositary shall receive notice of any meeting of holders of Shares or other
Deposited Securities, the Depositary will fix a record date, (a) for the
determination of the Owners who will be (i) entitled to receive such dividend,
distribution or rights, or the net proceeds of the sale thereof, or
(ii) entitled to give instructions for the exercise of voting rights at any such
meeting, or (b) on or after which each ADS will represent the changed number of
Shares, all subject to the provisions of the Deposit Agreement.
Voting of Deposited Securities
Upon receipt of notice of any meeting of holders of Shares or other
Deposited Securities, if requested in writing by Display.IT Holdings, the
Depositary will, as soon as practicable thereafter, mail to all Owners a notice,
the form of which notice will be in the sole discretion of the Depositary,
containing (a) such information included in such notice of meeting received by
the Depositary from Display.IT Holdings, and (b) a statement that the Owners as
of the close of business on a specified record date will be entitled, subject to
any applicable provision of U.K. law and of the Articles of Association of
Display.IT Holdings, to the amount of Shares or other Deposited Securities
represented by their respective ADSs. Upon the written request of an Owner on
such record date, received on or before the date established by the Depositary
for such purpose, the Depositary will endeavor, insofar as practicable, to vote
or cause to be voted the amount of Shares or other Deposited Securities
represented by the ADSs evidenced by such ADRs in accordance with the
instructions set forth in such request. The Depositary will not vote or attempt
to exercise the right to vote that attaches to the Shares or other Deposited
Securities, other than in accordance with such instructions.
There can be no assurance that the Owners generally or any Owner in
particular will receive the notice described in the preceding paragraph
sufficiently prior to the date established by the Depositary for the receipt of
instructions to ensure that the Depositary will vote the Shares or Deposited
Securities in accordance with the provisions set forth in the preceding
paragraph.
Reports and Other Communications
The Depositary will make available for inspection by ADR Owners at its
Corporate Trust Office any reports and communications, including any proxy
soliciting material, received from Display.IT Holdings, which are both
(a) received by the
-50-
<PAGE>
Depositary as the holder of the Deposited Securities and (b) made generally
available to the holders of such Deposited Securities by Display.IT Holdings.
The Depositary will also, upon written request, send to the Owners copies of
such reports when furnished by Display.IT Holdings pursuant to the Deposit
Agreement.
Amendment and Termination of the Deposit Agreement
The form of ADRs and any provisions of the Deposit Agreement may at any
time and from time to time be amended by agreement between Display.IT Holdings
and the Depositary in any respect which they may deem necessary or desirable
without the consent of the Owners of ADRs; provided, however, that any amendment
that imposes or increases any fees or charges (other than taxes and other
governmental charges, registration fees, cable, telex or facsimile transmission
costs, delivery costs or other such expenses), or which otherwise prejudices any
substantial existing right of ADR Owners, will not take effect as to outstanding
ADRs until the expiration of 30 days after notice of any amendment has been
given to the Owners of outstanding ADRs. Every Owner of an ADR, at the time any
amendment so becomes effective, will be deemed, by continuing to hold such ADR,
to consent and agree to such amendment and to be bound by the Deposit Agreement
as amended thereby. In no event will any amendment impair the right of the Owner
of any ADR to surrender such ADR and receive therefor the Deposited Securities
represented thereby, except to comply with mandatory provisions of applicable
law.
The Depositary will at any time at the direction of Display.IT Holdings
terminate the Deposit Agreement by mailing notice of such termination to the
Owners of the ADRs then outstanding at least 90 days prior to the date fixed in
such notice for such termination. The Depositary may likewise terminate the
Deposit Agreement by mailing notice of such termination to Display.IT Holdings
and the Owners of all ADRs then outstanding if, any time after 90 days have
expired after the Depositary will have delivered to Display.IT Holdings a
written notice of its election to resign and a successor depositary will not
have been appointed and accepted its appointment, in accordance with the terms
of the Deposit Agreement. If any ADRs remain outstanding after the date of
termination of the Deposit Agreement, the Depositary thereafter will discontinue
the registration of transfers of ADRs, will suspend the distribution of
dividends to the Owners thereof and will not give any further notices or perform
any further acts under the Deposit Agreement, except the collection of dividends
and other distributions pertaining to the Deposited Securities, the sale or
rights and the delivery of underlying Deposited Securities, together with any
dividends or other distributions
-51-
<PAGE>
received with respect thereto and the net proceeds of the sale of any rights or
other property, in exchange for surrendered ADRs (after deducting, in each case,
the fees of the Depositary for the surrender of an ADR and other expenses set
forth in the Deposit Agreement and any applicable taxes or governmental
charges). At any time after the expiration of one year from the date of
termination, the Depositary may sell the Deposited Securities then held
thereunder and hold uninvested the net proceeds of such sale, together with any
other cash, unsegregated and without liability for interest, for the pro rata
benefit of the Owners that have not theretofore surrendered their Receipts, such
Owners thereupon becoming general creditors of the Depositary with respect to
such net proceeds. After making such sale, the Depositary will be discharged
from all obligations under the Deposit Agreement, except to account for net
proceeds and other cash (after deducting, in each case, the fee of the
Depositary and other expenses set forth in the Deposit Agreement for the
surrender of an ADR and any applicable taxes or other governmental charges.
Charges of Depositary
The Depositary will charge any party depositing or withdrawing Shares
or any party surrendering ADRs or to whom ADRs are issued (including, without
limitation, issuance pursuant to a stock dividend or stock split declared by
Display.IT Holdings or an exchange of stock regarding the ADRs or Deposited
Securities or a distribution of ADRs pursuant to the Deposit Agreement)
whichever applicable: (1) taxes and other governmental charges; (2) such
registration fees as may from time to time be in effect for the registration of
transfers of Shares generally on the share register of Display.IT Holdings or
Foreign Registrar and applicable to transfers of Shares to the name of the
Depositary or its nominee or the Custodian or its nominee on the making of
deposits or withdrawals; (3) such cable, telex and facsimile transmission
expenses as are expressly provided in the Deposit Agreement to be at the expense
of persons depositing Shares or Owners; (4) such expenses are incurred by the
Depositary in the conversion of Foreign Currency pursuant to the Deposit
Agreement; (5) a fee of $5.00 or less per 100 ADSs (or portion thereof) for the
execution, delivery and surrender of ADRs pursuant to the Deposit Agreement;
(6) a fee of $.02 or less per ADS (or portion thereof) for any cash distribution
made pursuant to the Deposit Agreement including, but not limited to, Section
4.1 through 4.4 thereof; (7) a fee of $1.50 or less per certificate for an ADR
or ADRs for transfers made pursuant to the Deposit Agreement and; (8) a fee for
the distribution of securities pursuant to the Deposit Agreement, such fee being
in an amount equal to the fee for the execution and delivery of ADSs referred to
above which
-52-
<PAGE>
would have been charged as a result of the deposit of such securities (for
purposes of this clause (8) treating all such securities as if they were
Shares), but which securities are instead distributed by the Depositary to
Owners and the net proceeds distributed.
The Depositary, pursuant to the Deposit Agreement, may own and deal in
any class of securities of Display.IT Holdings and its affiliates and in ADRs.
Liability of Owner for Taxes
If any tax or other governmental charge shall become payable by the
Custodian or the Depositary with respect to any ADR or any Deposited Securities
represented by the ADRs, such tax or other governmental charge will be payable
by the Owner of such ADR to the Depositary. The Depositary may refuse to effect
any transfer of such ADR or any withdrawal of Deposited Securities underlying
such ADR until such payment is made, and may withhold any dividends or other
distributions, or may sell for the account of the Owner thereof any part or all
of the Deposited Securities underlying such ADR and may apply such dividends,
distributions or the proceeds of any such sale to pay any such tax or other
governmental charge and the Owner of such ADR will remain liable for any
deficiency.
General
Neither the Depositary nor Display.IT Holdings will be liable to any
Owner or holder of any ADR, if by reason of any provision of any present or
future law or regulation of the United States, or any other country, or of any
governmental or regulatory authority or stock exchange, or by reason of any
provision, present or future, of the Articles of Association of Display.IT
Holdings, or by reason of any act of God or war or other circumstances beyond
its control, the Depositary or Display.IT Holdings shall be prevented, delayed
or forbidden from, or be subject to any civil or criminal penalty on account of,
doing or performing any act or thing which by the terms of the Deposit Agreement
it is provided will be done or performed; nor will the Depositary or Display.IT
Holdings incur any liability to any Owner or holder of any ADR by reason of any
nonperformance or delay, caused as aforesaid, in the performance of any act or
thing which by the terms of the Deposit Agreement it is provided will or may be
done or performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for under the Deposit Agreement. Where, by the terms of a
distribution pursuant to the Deposit Agreement, or an offering or distribution
pursuant to the Deposit Agreement, or for any other
-53-
<PAGE>
reason, such distribution or offering may not be made available to Owners, and
the Depositary may not dispose of such distribution or offering on behalf of
such Owners and make the net proceeds available to such Owners, then the
Depositary will not make such distribution or offering, and will allow the
rights, if applicable to lapse.
Display.IT Holdings and the Depositary assume no obligation nor will
they be subject to any liability under the Deposit Agreement to Owners or
holders of ADRs, except that they agree to perform their respective obligations
specifically set forth under the Deposit Agreement without negligence or bad
faith.
The ADRs are transferable on the books of the Depositary, provided that
the Depositary may close the transfer books at any time or from time to time
when deemed expedient by it in connection with the performance of its duties. As
a condition precedent to the execution and delivery, registration of transfer,
split-up, combination or surrender of any Deposited Securities, the Depositary,
the Custodian or the Registrar may require payment from the person presenting
the ADR or the depositor of the Shares of a sum sufficient to reimburse it for
any tax or other governmental charge and any stock transfer or registration fee
with respect thereto (including any such tax or charge and fee with respect to
Shares being deposited or withdrawn) and payment of any applicable fees payable
by the Owners and holders of ADRs. The Depositary may refuse to deliver ADRs, to
register the transfer of any ADR or to make any distribution on, or related to,
Shares until it has received such proof of citizenship or residence, exchange
control approval or other information as it may deem necessary or proper. The
delivery, transfer, registration of transfer of outstanding ADRs and surrender
of ADRs generally may be suspended or refused during any period when the
transfer books of the Depositary, Display.IT Holdings or the Foreign Registrar
are closed or if any such action is deemed necessary or advisable by the
Depositary or Display.IT Holdings, at any time or from time to time.
Notwithstanding any other provision of the Deposit Agreement or the Receipts,
the surrender of outstanding Receipts and withdrawal of Deposited Securities may
not be suspended subject only to (i) temporary delays caused by closing the
transfer books of the Depositary or the Issuer or the deposit of Shares in
connection with voting at a shareholders' meeting, or the payment of dividends,
(ii) the payment of fees, taxes and similar charges, and (iii) compliance with
any U.S. or foreign laws or governmental regulations relating to the Receipts or
to the withdrawal of the Deposited Securities. Without limitation of the
foregoing, the Depositary shall not knowingly accept for deposit under the
Deposit Agreement any Shares required to be
-54-
<PAGE>
registered under the provisions of the Securities Act of 1933, unless a
registration statement is in effect as to such Shares.
The Depositary will keep books, at its Corporate Trust Office, for the
registration and transfer of ADRs, which at all reasonable times will be open
for inspection by the Owners, provided that such inspection will not be for the
purpose of communicating with Owners in the interest of a business or object
other than the business of Display.IT Holdings or a matter related to the
Deposit Agreement or the ADRs.
The Depositary may appoint one or more co-transfer agents for the
purpose of effecting transfers, combinations and split-ups of ADRs at designated
transfer offices on behalf of the Depositary. In carrying out its functions, a
co-transfer agent may require evidence of authority and compliance with
applicable laws and other requirements by Owners or persons entitled to ADRs and
will be entitled to protection and indemnity to the same extent as the
Depositary.
Governing Law
The Deposit Agreement will be governed by the laws of the State of New
York.
PART III
Item 15. Defaults Upon Senior Securities.
Not applicable.
Item 16. Changes in Securities and Changes in Security for Registered
Securities.
Not applicable.
PART IV
Item 17. Financial Statements.
Not applicable.
-55-
<PAGE>
Item 18. Financial Statements.
See pages F-1 through F-28, incorporated herein by reference.
Item 19. Financial Statements and Exhibits.
(a) Financial Statements.
The following financial statements, together with the report thereon of
Deloitte & Touche, are filed as part of this Registration Statement.
Page
----
Report of Independent Auditors with respect to the
financial statements of the Company.................... F-1
Financial Statements
Consolidated Profit and Loss Account of the Company
for the year ended December 31, 1996................... F-2
Profit and Loss Account of Display.IT Holdings for
the year ended December 31, 1996....................... F-3
Consolidated Balance Sheets of the Company as of
December 31, 1995 and December 31, 1996................ F-4
Balance Sheet of Display.IT Holdings as of
December 31, 1996...................................... F-5
Consolidated Statement of Cash Flows of the Company
for the year ended December 31, 1996................... F-6
Notes to the Financial Statements............................ F-8
Report of Independent Auditors with respect to the
financial statements of Display.IT Limited............. F-25
Financial Statements
Balance Sheet of Display.IT Limited as of
December 31, 1995...................................... F-26
Notes to the Financial Statements............................ F-27
(b) Exhibits.
The following Exhibits are filed as a part of this Registration Statement.
1.1 Memorandum of Association*
1.2 New Articles of Association*
2.1 Form of Deposit Agreement to be entered into by
and between Display.IT Holdings plc and The
Bank of New York*
The Company has not issued any, and is not party to any instrument
authorizing the issuance of, long-term debt securities.
-56-
<PAGE>
3.1 Share Exchange Agreement by and among
Display.IT Holdings plc, Peter Levin and
Marjorie Moe, dated June 20, 1996*
3.2 Form of Placing Letter entered into by and
between Display.IT Holdings plc and 19
investors, together with schedule of the 19
investors*
3.3 Option Deed by and between Display.IT Holdings
plc and Alasdair Norman Macleod, dated June 24,
1996, together with schedule of three other
parties who entered into substantially
identical Option Deeds with Display.IT Holdings
plc*
3.4 Bonus Option Deed by and between Display.IT
Holdings plc and Alasdair Norman Macleod, dated
June 24, 1996, together with schedule of three
other parties who entered into substantially
identical Bonus Option Deeds with Display.IT
Holdings plc*
3.5 Agreement for Share Subscription by and between
Display.IT Holdings plc and Independent
Economic Analysis (Holdings) Pte Limited, dated
November 25, 1996*
3.6 Agreement for Share Subscription by and between
Display.IT Holdings plc and Hestia Investments
S.A., dated December 19, 1996*
3.7 Service Agreement by and between Display.IT
Holdings plc and Peter Levin, dated June 24,
1996*
3.8 Letter Agreement by and between Display.IT
Holdings plc and David G. Familiant, dated June
24, 1996, together with schedule of two other
parties who have entered into substantially
identical Letter Agreements with Display.IT
Holdings plc*
3.9 Loan Agreement by and between Display.IT
Limited and Marjorie Moe, dated April 22, 1996*
3.10 Debenture by and between Display.IT Limited and
Marjorie Moe, dated April 22, 1996*
3.11 Guarantee by and between Marjorie Moe and Peter
Levin, dated April 22, 1996*
3.12 Pledge Agreement by and between Peter Levin and
Marjorie Moe, dated April 22, 1996*
3.13 Pledge Agreement by and between Peter Levin and
Marjorie Moe, dated June 20, 1996*
3.14 Rules of the Display.IT Holdings plc Share
Option Scheme*
- -----------------
*Previously filed.
-57-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Amendment No. 1 to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
DISPLAY.IT HOLDINGS PLC
Dated: March 27, 1997 By: /s/ PETER LEVIN
-------------------------------
Name: Peter Levin
Title: Managing Director
and Chief Executive
Officer
-58-
<PAGE>
FINANCIALS
<PAGE>
Company Registration No. 3194225
DISPLAY.IT HOLDINGS PLC
(a development stage company)
Report and Financial Statements
December 31, 1996
Deloitte & Touche
Hill House
1 Little New Street
London EC4A 3TR
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
REPORT AND FINANCIAL STATEMENTS 1996
CONTENTS Page
Auditors' report F-1
Consolidated profit and loss account F-2
Company profit and loss account F-3
Consolidated balance sheet F-4
Company balance sheet F-5
Consolidated cash flow statement F-6
Notes to the accounts F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT TO THE DIRECTORS AND SHAREHOLDERS
OF
DISPLAY.IT HOLDINGS PLC
(A DEVELOPMENT STAGE COMPANY)
We have audited the accompanying consolidated balance sheet of Display.IT
Holdings plc (a development stage company) and its subsidiary (together the
"group") as of December 31, 1996 and as of December 31, 1995, the balance sheet
of Display.IT Holdings plc (a development stage company) (the "company") as of
December 31, 1996, the related consolidated profit and loss account and cashflow
statement for the year ended December 31, 1996 and the profit and loss account
of the company for the period from May 3, 1996 to December 31, 1996. These
financial statements are the responsibility of the group's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing standards
in the United Kingdom and the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the group at December 31, 1996 and December
31, 1995, the company at December 31, 1996, the results of the group's
operations and the group's cash flows for the year ended December 31, 1996 and
the results of the company for the period from May 3, 1996 to December 31, 1996
in conformity with generally accepted accounting principles in the United
Kingdom (which differs in certain significant respects from generally accepted
accounting principles in the United States of America - see note 20).
DELOITTE & TOUCHE
Chartered Accountants
London, England
January 24, 1997
F-1
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended December 31, 1996
Note 1996
(Pound Sterling)
Research and development (130,478)
Administrative expenses (779,538)
Other operating income 42,500
--------
OPERATING LOSS 3 (867,516)
Interest receivable and similar income 4 27,770
Interest payable and similar charges 5 (6,466)
--------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (846,212)
Tax on loss on ordinary activities 6 (1,861)
--------
LOSS FOR THE YEAR 13 (848,073)
========
Loss per share 14 6.75p
========
All activities derive from continuing operations.
The group did not trade in the preceding financial period. There were no
recognized gains or losses attributable to shareholders other than the loss for
the year.
F-2
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
COMPANY PROFIT AND LOSS ACCOUNT
Period from May 3, 1996 (date of incorporation) to December 31, 1996
Period from
May 3, 1996
to December
31, 1996
Note (Pound Sterling)
Administrative expenses (26,003)
------
OPERATING LOSS (26,003)
LOSS FOR THE PERIOD 13 (26,003)
======
All activities derive from continuing operations.
The company was incorporated on May 3, 1996. There were no recognized gains or
losses attributable to the shareholders other than the loss for the period.
F-3
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
CONSOLIDATED BALANCE SHEET
December 31, 1996
<TABLE>
<CAPTION>
Note 1996 1995
(Pound Sterling) (Pound Sterling)
<S> <C> <C> <C>
FIXED ASSETS
Intangible fixed assets 7 181,745 --
Tangible fixed assets 8 133,072 --
-------- -------
314,817 --
-------- -------
CURRENT ASSETS
Debtors 10 85,830 2
Cash at bank and in hand 316,314 --
-------- -------
402,144 2
CREDITORS: amounts falling due within
one year 11 (256,057) --
-------- -------
NET CURRENT ASSETS 146,087 2
-------- -------
TOTAL NET ASSETS 460,904 2
======= =======
CAPITAL AND RESERVES
Called up share capital 12 758,238 100,000
Share premium account 13 650,737 --
Profit and loss account 13 (948,071) (99,998)
-------- -------
EQUITY SHAREHOLDERS' FUNDS 460,904 2
======== =======
</TABLE>
F-4
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
COMPANY BALANCE SHEET
December 31, 1996
Note 1996
(Pound Sterling)
FIXED ASSETS
Investment 9 100,000
CURRENT ASSETS
Debtors 10 1,288,683
CREDITORS: amounts falling due
within one year 11 (5,711)
---------
NET CURRENT ASSETS 1,282,972
=========
TOTAL NET ASSETS 1,382,972
=========
CAPITAL AND RESERVES
Called up share capital 12 758,238
Share premium account 13 650,737
Profit and loss account 13 (26,003)
---------
EQUITY SHAREHOLDERS' FUNDS 1,382,972
=========
The company was incorporated on May 3, 1996 and hence no corresponding period
balance sheet is presented.
F-5
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
CONSOLIDATED CASH FLOW STATEMENT
Year ended December 31, 1996
<TABLE>
<CAPTION>
Note 1996
(Pound Sterling)
<S> <C> <C>
Net cash outflow from operating activities 1 (689,292)
Returns on investments and servicing of
financing
Interest received 13,910
Interest paid (6,466)
----------
Net cash inflow from returns on
investments and servicing of finance 7,444
----------
Investing activities
Payments to acquire tangible fixed assets (137,450)
Investment in intangible fixed assets (187,223)
----------
Net cash outflow from investing activities (324,673)
----------
Net cash outflow before financing (1,006,521)
----------
Financing
Issue of ordinary shares (net of expenses) 3 1,308,975
Director loan advanced 3 139,944
Repayment of director loan 3 (126,084)
----------
Net cash inflow from financing 1,322,835
----------
Increase in cash and cash equivalent 2 316,314
==========
</TABLE>
The group did not trade in the preceding financial period and there were no cash
flows.
F-6
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE CASH FLOW STATEMENT
Year ended December 31, 1996
1. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW
FROM OPERATING ACTIVITIES
1996
(Pound Sterling)
Operating loss (867,516)
Depreciation of tangible fixed assets 4,378
Amortization of development costs 5,478
Increase in debtors (85,828)
Increase in creditors 254,196
--------
Net cash outflow from operating activities (689,292)
========
2. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS
DURING THE YEAR
(Pound Sterling)
Balance at January 1, 1996 --
Net cash inflow 316,314
-------
Balance at December 31, 1996 316,314
=======
3. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
<TABLE>
<CAPTION>
Share
capital
(including
share
premium) Loans
(Pound Sterling) (Pound Sterling)
---------------- ----------------
<S> <C> <C>
At January 1, 1996 100,000 --
Cash inflow from financing 1,308,975 139,944
Cash outflow from financing -- (126,084)
Foreign exchange movement -- (13,860)
--------- --------
At December 31, 1996 1,408,975 --
========= ========
</TABLE>
The share capital at January 1, 1996 represents notional share capital and
arises from consolidation using merger accounting principles (see note 1).
F-7
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
1. ACCOUNTING POLICIES
The financial statements are prepared in accordance with applicable
accounting standards. The particular accounting policies adopted are
described below.
Accounting convention
The financial statements are prepared under the historical cost
convention.
Basis of consolidation
The group accounts consolidate the accounts of Display.IT Holdings plc
and its subsidiary undertaking at the year end using merger accounting
principles.
Display.IT Holdings plc was incorporated on May 3, 1996 and acquired
the whole of the share capital of Display.IT Limited on June 20, 1996,
the consideration being satisfied by the allotment of fully paid shares
(see note 12). Consolidated financial statements have therefore been
presented for the current and preceding financial period.
The increased share capital of Display.IT Holdings plc is disclosed on
both the current and preceding period balance sheets with the share
capital in the balance sheet at December 31, 1995 being notional share
capital.
Tangible fixed assets and depreciation
Depreciation is provided on the cost of tangible fixed assets to write
them down to their estimated residual values over their expected useful
lives. The rates of depreciation are as follows:
Computer systems 4 years
Fixtures and fittings and office equipment 5 years
The carrying value of long-lived assets is reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable.
F-8
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
Software development costs
Costs incurred in developing new software products are written off
until technical feasibility has been ascertained and a working model
produced. Thereafter, further expenditure incurred prior to launching
the product is capitalized and amortized over a three year period based
upon a prudent assessment of the life of the product. Amortization
commences in the month of first release of the product.
All other research and development is written off in the year in which
it is incurred.
Foreign currencies
Monetary assets and liabilities denominated in foreign currency are
translated into sterling at the rates of exchange ruling at the balance
sheet date. Transactions denominated in foreign currencies are
translated into sterling at the rates ruling at the dates of the
transactions. Profits and losses on the translation of foreign
currencies arising from trading transactions are included in operating
profits, and profits and losses on translation of foreign currencies
arising from financing arrangements are included below operating profit
in the profit and loss account.
Leases
Rentals are charged to profit and loss in equal annual amounts over the
lease term.
Loss per share
The loss per share is based upon the weighted average number of
ordinary shares in issue throughout the period and is calculated on the
loss on ordinary activities after taxation.
Use of estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-9
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
2. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
1996
(Pound Sterling)
Directors' emoluments
Fees 15,403
Salaries and taxable benefits 137,752
-------
153,155
=======
Chairman's emoluments
Fees 5,711
=======
Emoluments of highest paid director
Salaries and taxable benefits 137,752
=======
Emoluments of the directors, excluding
pension contributions, were within
the following scales: No.
(Pound Sterling) 0 - (Pound Sterling) 5,000 4
(Pound Sterling) 135,001 - (Pound Sterling) 140,000 1
=======
Employees
Average number of employees, excluding
directors, in the year:
Sales and administration 1
=======
Staff costs, excluding directors, incurred during
the year in respect of these employees were:
Wages and salaries 21,416
Social security costs 2,186
-------
23,602
=======
There were no employees in the preceding period and there were no
emoluments paid to the directors in this preceding period.
F-10
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
3. OPERATING LOSS
1996
(Pound Sterling)
Operating loss is after charging:
Auditors' remuneration
Audit fees 5,000
Depreciation of tangible fixed assets 4,378
Amortization of development costs 5,478
Hire of equipment 6,514
Research and development 125,000
Rentals under operating leases:
Land and buildings 10,350
Other operating leases 1,196
=======
4. INTEREST RECEIVABLE AND SIMILAR INCOME
1996
(Pound Sterling)
Foreign exchange gains 13,860
Bank interest 13,910
-------
27,770
=======
5. INTEREST PAYABLE AND SIMILAR CHARGES
1996
(Pound Sterling)
Interest on borrowings 6,466
=======
F-11
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
6. TAX ON LOSS AND ORDINARY ACTIVITIES
1996
(Pound Sterling)
United Kingdom corporation tax at
25% based on the loss for the year 1,861
=======
Tax is charged on the interest received by Display.IT Limited in the
period before trading commenced.
7. INTANGIBLE FIXED ASSETS
Software
development
costs
(Pound Sterling)
Cost
At January 1, 1996 --
Additions 187,223
-------
At December 31, 1996 187,223
-------
Accumulated depreciation
At January 1, 1996 --
Charge for the year 5,478
-------
At December 31, 1996 5,478
-------
Net book value
At December 31, 1996 181,745
=======
F-12
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Fixtures
and fittings
Computer and office
systems equipment Total
(Pound Sterling) (Pound Sterling) (Pound Sterling)
Cost
<S> <C> <C> <C>
At January 1, 1996 -- -- --
Additions 105,011 32,439 137,450
------- ------- -------
At December 31, 1996 105,011 32,439 137,450
------- ------- -------
Accumulated depreciation
At January 1, 1996 -- -- --
Charge for the year 3,409 969 4,378
------- ------- -------
At December 31, 1996 3,409 969 4,378
------- ------- -------
Net book value
At December 31, 1996 101,602 31,470 133,072
======= ======= =======
</TABLE>
9. INVESTMENTS HELD AS FIXED ASSETS
Shares in
subsidiaries
(Pound Sterling)
At January 1, 1996 --
Addition 100,000
-------
At December 31, 1996 100,000
=======
On June 20, 1996 the company acquired the whole of the ordinary share
capital of Display.IT Limited, the consideration being satisfied by the
allotment of 2,000,000 ordinary shares of 5p each credited as fully
paid. The principal activity of Display.IT Limited is that of software
development and distribution. Display.IT Limited was incorporated in
Great Britain and registered in England and Wales.
Consolidated financial statements are prepared using merger accounting
principles. The fair value of the consideration was (pound
sterling)100,000. The loss of Display.IT Limited for the period from
January 1, 1996 to June 20, 1996 was (pound sterling)219,159 and
Display.IT Limited did not trade in the previous period.
F-13
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
10. DEBTORS
<TABLE>
<CAPTION>
Group Company
1996 1996
(Pound Sterling) (Pound Sterling)
<S> <C> <C>
Loan to subsidiary undertaking -- 1,286,058
Other debtors 79,615 2,625
Prepayments 6,215 --
------ ---------
85,830 1,288,683
====== =========
</TABLE>
The loan to subsidiary undertaking is due in greater than one year.
The debtor of (pound sterling)2 shown on the consolidated balance sheet
atDecember 31, 1995 represents called up share capital not paid. The
debtor was settled at December 31, 1996.
11. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
Group Company
1996 1996
(Pound Sterling) (Pound Sterling)
<S> <C> <C>
Trade creditors 209,115 --
Directors' current accounts 4,140 --
Accruals and deferred income 30,484 5,711
Other creditors including tax and social security 12,318 --
-------- -----
256,057 5,711
======== =====
</TABLE>
Other creditors including tax and social security include corporate tax
payable by the group of (pound sterling)1,861. The directors' current
accounts relate to balances owed to directors for expenses.
F-14
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
12. CALLED UP SHARE CAPITAL
1996
(Pound Sterling)
Authorized:
30,000,000 ordinary shares of 5p each 1,500,000
==========
Allotted and fully paid:
15,164,755 ordinary shares of 5p each 758,238
==========
Display.IT Holdings plc was incorporated in England and Wales with
limited liability on May 3, 1996 with an authorized share capital of
(pound sterling)1,000 divided into 1,000 shares of (pound sterling)1
each, of which two such shares were issued nil paid to the subscribers
to the Memorandum of Association of the company. On June 20, 1996 each
of the existing ordinary shares of (pound sterling)1 each in the
company was sub-divided into 20 ordinary shares of 5p each and the
authorized share capital was increased from (pound sterling)1,000 to
(pound sterling)200,000 by the creation of 3,980,000 ordinary shares of
5p each.
On June 20, 1996 the company acquired the whole of the ordinary share
capital of Display.IT Limited, the consideration being satisfied by the
allotment of 2,000,000 ordinary shares of 5p each credited as fully
paid.
On June 28, 1996 the company offered 1,000,000 shares of 5p each in a
private placing for trading on OFEX (off-exchange for the London Stock
Exchange). All shares were taken up at a price of 100p and the 95p
premium of each of these shares has been credited to the share premium
account. Legal and accounting fees incurred in connection with the
placing have been charged to the share premium account.
On December 6, 1996 the company passed an ordinary resolution to
increase the authorized share capital from (pound sterling)200,000 to
(pound sterling)1,500,000 by the creation of 26,000,000 new ordinary
shares of 5p each ranking pari passu in all respects with existing
ordinary shares.
Pursuant to the increase in the authorized share capital, the company
undertook a four for one bonus issue. The issued share capital for the
company increased as a result from 3,000,000 ordinary shares of 5p each
to 15,000,000 ordinary shares of 5p each. The sum of (pound
sterling)600,000 was transferred from the share premium account.
F-15
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
On December 11, 1996 holders of share options purchased 50,000 ordinary
shares of 5p each at 24p per share. Share premium of (pound
sterling)9,500 was credited to the share premium account.
On December 13, 1996 the company allotted 114,755 ordinary shares of 5p
each at (pound sterling)3.05 per share. Total proceeds were (pound
sterling)350,003 and share premium of (pound sterling)344,265 was
credited to the share premium account.
Employee options
Under the company's share option scheme, employees held options at
December 31, 1996 for 415,705 ordinary shares of 5p each (1995 - nil)
as follows:
<TABLE>
<CAPTION>
Number of Exercise
options price Date option granted Expiration date
(Pound Sterling)
<S> <C> <C> <C> <C>
David Familiant 62,855 0.70 October 4, 1996 October 4, 2001
Marjorie Moe 51,425 0.70 October 10, 1996 October 10, 2001
Catita Edward 51,425 0.70 October 10, 1996 October 10, 2001
Duncan Coward 75,000 0.70 October 10, 1996 October 10, 2001
Mark Proffitt 150,000 4.07 December 23, 1996 December 23, 2001
Dawn Sizer 25,000 4.07 December 23, 1996 December 23, 2001
</TABLE>
All options were granted at fair value. The number of options and
exercise price have been adjusted for the bonus issue on December 6,
1996.
Other options
On June 24, 1996 the company granted options to four third parties in
respect of 60,000 ordinary shares each at a price of (pound
sterling)1.20 per share. Subsequent to the bonus issue on December 6,
1996, the holders of these options are entitled to subscribe for
300,000 ordinary shares each at a price of 24p per share.
The option over the first 30,000 ordinary shares (150,000 ordinary
shares after the bonus issue) for each individual may be exercised up
to June 30, 2002 after which the options will lapse. The option over
the remaining 30,000 ordinary shares (150,000 ordinary shares after the
bonus issue) for each individual may be exercised between June 30, 1999
and June 30, 2002.
On December 11, 1996 holders of share options purchased 50,000 ordinary
shares. No other options were exercised at the year end.
F-16
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
13. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
Share Profit and
Group Share premium loss
capital account account Total
(Pound Sterling) (Pound Sterling) (Pound Sterling) (Pound Sterling)
<S> <C> <C> <C> <C>
At January 1, 1996 100,000 -- (99,998) 2
Private placing:
Share capital issued (net) 50,000 896,972 -- 946,972
Bonus issue 600,000 (600,000) -- --
Exercise of options 2,500 9,500 -- 12,000
Allotment of shares 5,738 344,265 -- 350,003
Loss for the year -- -- (848,073) (848,073)
-------- --------- -------- ---------
At December 31, 1996 758,238 650,737 (948,071) 460,904
======== ========= ======== =========
Company
At January 1, 1996 -- -- -- --
Shares issued on incorporation 2 -- -- 2
Shares issued on acquisition of
Display.IT Limited 99,998 -- -- 99,998
Private placing:
Share capital issued (net) 50,000 896,972 -- 946,972
Bonus issue 600,000 (600,000) -- --
Exercise of options 2,500 9,500 -- 12,000
Allotment of shares 5,738 344,265 -- 350,003
Loss for the period -- -- (26,003) (26,003)
-------- --------- -------- ---------
At December 31, 1996 758,238 650,737 (26,003) 1,382,972
======== ========= ======== =========
</TABLE>
The proceeds from the private placing are shown net of issue expenses
of (pound sterling)53,028.
The share capital at January 1, 1996 represents notional share capital
and arises on consolidation using merger accounting principles (see
note 1). The profit and loss account balance at January 1, 1996
represents the excess of par value of shares issued over par value of
shares of the merged company acquired.
F-17
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
14. LOSS PER SHARE
The loss per share is based upon a loss on ordinary activities after
taxation of (pound sterling)848,073 and a weighted average of
12,572,802 ordinary shares.
15. RELATED PARTY TRANSACTIONS
A non-executive director of the company, Marjorie Moe, granted a loan
of (pound sterling)139,944 to Display.IT Limited during the year. The
loan has been repaid in full during the year, together with interest of
(pound sterling)6,466.
Display.IT Limited generated income of (pound sterling)42,500 during
the year from a member of Display.IT Holdings plc, Independent Economic
Analysis (Holdings) PTE Limited.
16. FINANCIAL COMMITMENTS
At the year end the group was committed to making the following
payments during the next year in respect of operating leases:
<TABLE>
<CAPTION>
Land and
buildings Other Total
(Pound Sterling) (Pound Sterling) (Pound Sterling)
<S> <C> <C> <C>
Leases which expire:
Within two to five years 21,600 12,516 34,116
======= ======= ======
</TABLE>
The group leases its office premises, certain equipment and motor
vehicles under operating leases. The future financial years' minimum
operating lease commitments as at December 31, 1996 are as follows:
(Pound Sterling)
Year ending
December 31, 1997 34,116
1998 34,116
1999 31,512
2000 21,600
2001 10,800
Thereafter --
-------
--
132,144
=======
Peter Levin has an employment contract with the group to serve as its
managing director and chief executive officer. The employment contract
is terminable on 12 months' notice at any time after June 23, 1997. The
principal term of Mr. Levin's contract of employment is a current
salary of (pound sterling)144,000 per annum.
F-18
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
17. CONTINGENT LIABILITIES
The company has received an allegation that its product infringed
another party's copyright and was being passed off as being connected
with that third party. The company denies the allegations and has been
advised that they have no legal basis. A detailed rebuttal of the
allegations has been made and to date no legal action has been taken by
the third party in relation to its threat against the company.
Management believes that the main purpose of the allegations was to
seek to exclude Display.IT Limited from the market either temporarily
or permanently. Accordingly, the company has submitted a complaint to
the European Commission in Brussels, Belgium.
18. CONTROLLING SHAREHOLDER
Peter Levin had a beneficial interest in 10,000,000 ordinary shares of
the company at the year end. This represents a controlling interest in
the share capital of the company.
19. POST BALANCE SHEET EVENT
The company has issued a total of 391,965 ordinary shares subsequent to
the balance sheet date. Total proceeds were (pound sterling)1,489,993.
20. SUMMARY OF DIFFERENCES BETWEEN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP) IN THE UNITED KINGDOM AND
THE UNITED STATES
The consolidated financial statements are prepared in accordance with
UK GAAP, which differ in certain significant respects from US GAAP. The
differences that are significant to the group relate to the following
items:
Development costs
Display.IT Limited, the subsidiary of Display.IT Holdings plc, is a
development stage enterprise as defined in Statement of Financial
Accounting Standard No. 7 under US GAAP. Development expenditure
incurred since inception is (pound sterling)312,223 of which (pound
sterling)187,223 has been capitalized.
Display.IT Limited is developing an application to display financial
news and price information to the desktop via the Internet.
F-19
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
The risks faced by the group include:
o obtaining sufficient working capital;
o obtaining regulatory approval;
o obtaining sufficient customer demand for the product.
Under UK GAAP, development costs are classified as an intangible fixed
asset, whereas under US GAAP they are classified as an intangible
asset.
All software development expenditure incurred during the year was
pursuant to a software development agreement for the development of the
Display.IT software product.
The software development agreement included all design and development,
including writing of source code, and testing up to the acceptance
testing stage. Acceptance testing was performed by the group with
support from the software developer. The original agreement was for a
fixed price, however, the agreement provided for modifications.
The group retains all interests (source code and intellectual
property rights) in the developed software and no restrictions exist on
the use of the software. No revenue sharing arrangements exist for
product sales and no royalties are payable by the group to any party.
The software developer has indemnified the group against claims made
by third parties for infringement of copyright as a consequence of use
of the developed software.
Deferred taxation
Under UK GAAP, deferred taxation is provided at the rates at which the
taxation is expected to become payable. No provision is made for
amounts which are not expected to become payable in the foreseeable
future and no account is taken of deferred tax assets in accordance
with Statement of Standard Accounting Practice 15.
Under US GAAP, deferred taxation is provided on all temporary
differences under the liability method at rates at which the taxation
would be payable in the relevant future year as prescribed by Statement
of Financial Accounting Standard No. 109, "Accounting for Income
Taxes".
There is a deferred tax asset of (pound sterling)211,000 relating to
losses carried forward which is not recognized under UK GAAP. The
deferred tax asset under US GAAP is reduced to nil by a valuation
allowance of an equal amount.
Reconciliation of effective tax rate
Display.IT Holdings plc's effective tax rate varies from the statutory
tax rate as a result of the following factors:
1996
%
Statutory tax rate 33
Timing differences not provided for (25)
Non-qualifying expenditure (9)
----
Effective tax rate (1)
====
F-20
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
Loss per share
Under UK GAAP, loss per share is based upon the weighted average number
of ordinary shares in issue throughout the period and is calculated on
the loss on ordinary activities after taxation and after other finance
charges in respect of non-equity shares, but before equity dividends.
Under US GAAP, loss per share is based upon the weighted average number
of ordinary shares in issue throughout the period and is calculated on
the net loss for the period.
Primary loss per share 6.44p
The primary loss per share is based upon a net loss of (pound
sterling)848,073 and a weighted average of 13,164,387 ordinary shares,
after taking into account the diluting effect of the options
outstanding at the year end.
Fully diluted loss per share 6.43p
The fully diluted loss per share is based upon a net loss of (pound
sterling)848,073 and a weighted average of 13,193,345 ordinary shares,
after taking into account the maximum diluting effect of the options
outstanding at the year end.
Share options
At December 31, 1996, Display.IT Holdings plc has an employee share
option scheme and under US GAAP, the company is required to account
for the fair value of the plan in accordance with FASB Statement 123,
"Accounting for stock-based compensation." FASB Statement 123 requires
the compensation cost of the options at the grant date, based on fair
value of the options, to be recognized over the service period of the
options.
Under the employee share option scheme, the company may grant options
to its employees at the discretion of a committee chaired by a
non-executive director for up to 750,000 ordinary shares at an
exercise price of each option equal to the market value of the
company's shares on the date of grant. Options may be exercised
following the third anniversary of the date of grant and will lapse on
the fifth anniversary of the date of grant.
In addition, the company has granted options to a number of third
parties during the year. Half of the options granted may be exercised
from the date of grant and before June 20, 2002. 50,000 shares were
acquired under these options at the year end. The second half of the
options granted may be exercised at any time after June 30, 1999 and
before June 30, 2002.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants during the year:
<TABLE>
<CAPTION>
Grant date Number of shares Assummed exercise Assummed risk-free
date interest rate %
<S> <C> <C> <C>
Employee options
October 4, 1996 62,855 October 4, 1999 6.39
October 10, 1996 177,850 October 10, 1999 6.41
December 23, 1996 175,000 December 23, 1999 6.93
Other options
June 24, 1996 50,000 Exercised at year end 5.91
June 24, 1996 550,000 July 15, 1997 6.02
June 24, 1996 600,000 June 30, 1999 6.97
</TABLE>
Volatility is assumed to be 75% with no dividend yield.
A summary of the status of the company's share options at December 31, 1996 and
changes during the year is presented below:
<TABLE>
<CAPTION>
Employee share options Other options
Weighted Weighted
average average
Number of exercise Number of exercise
shares price shares price
(Pound Sterling) (Pound Sterling)
<S> <C> <C> <C> <C>
Outstanding at beginning of year -- -- -- --
Granted 415,705 2.12 1,200,000 0.24
Exercised -- -- (50,000) 0.24
Forfeited -- -- -- --
------- ---------
Outstanding at end of year 415,705 2.12 1,150,000 0.24
======= =========
Options exercisable at year end --
=======
Weighted average fair value of
options granted during the year (pound sterling)1.13 (pound sterling)0.10
======= =========
</TABLE>
The compensation cost which would be charged against income under FASB
Statement 123 for year ended December 31, 1996 is (pound sterling)42,567.
No compensation cost has been charged against income under UK GAAP nor in
determining net loss for calculating loss per share under US GAAP. Had
compensation cost calculated in accordance with FASB Statement 123 been
charged aginst income, the company's net loss and loss per share would have
been increased to the proforma amounts indicated below.
<PAGE>
<TABLE>
<CAPTION>
1996
<S> <C> <C>
Net loss As reported-UK/US GAAP (pound sterling) 848,073
Proforma (pound sterling) 890,640
Primary loss per share As reported-US GAAP 6.44p
Proforma 6.77p
Fully diluted loss per share As reported-US GAAP 6.43p
Proforma 6.75p
</TABLE>
The following table summarizes information about the share options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options outstanding Options exercisable at
Weighted December 31, 1996
average
Number of remaining Weighted Weighted
options at contractual average Number of average
December 31, life exercise options exercise
Exercise price 1996 Years price exercisable price
(Pound Sterling) (Pound Sterling) (Pound Sterling)
<S> <C> <C> <C> <C> <C>
Employee options
0.70 240,705 2.8 0.70 -- --
4.07 175,000 3.0 4.07 -- --
--------- -------
415,705 --
Other options
0.24 1,150,000 1.6 0.24 550,000 0.24
--------- -------
Total 1,565,705 550,000
========= =======
</TABLE>
Consolidated statements of cash flows
The consolidated statements of cash flows prepared under UK GAAP differ
in certain presentational respects from the format required under
Statement of Financial Accounting Standard ("SFAS") 95. Under UK GAAP,
a reconciliation of profit from operations to cash flows from operating
activities is presented in a note, and cash paid for interest and
income taxes are presented separately from cash flows from operating
activities. Under SFAS 95, cash flows from operating activities are
based on net profit, include interest and income taxes and are
presented on the face of the statement. UK GAAP requires cash and cash
equivalents to be presented net of overdrafts; SFAS 95 treats
overdrafts with financing activities.
F-21
<PAGE>
DISPLAY.IT HOLDINGS PLC
(a development stage company)
NOTES TO THE ACCOUNTS
Year ended December 31, 1996
A reconciliation between the consolidated statements of cash flows
presented in accordance with UK GAAP and US GAAP is set out below.
<TABLE>
<CAPTION>
(Pound Sterling)
<S> <C>
Operating activities
Net cash outflow from operating activities (UK GAAP) (689,292)
Interest received 13,910
Interest paid (6,466)
---------
Net cash used in operating activities (US GAAP) (681,848)
=========
Investing activities
Net cash outflow from investing activities (UK GAAP) (324,673)
---------
Net cash used in investing activities (US GAAP) (324,673)
=========
Financing activities
Net cash inflow from financing activities (UK GAAP) 1,322,835
---------
Net cash provided by financing activities (US GAAP) 1,322,835
=========
</TABLE>
Consolidation
The group accounts consolidate the accounts of Display.IT Holdings plc
and its subsidiary undertaking using merger accounting principles.
Under UK GAAP the difference between the nominal value of the shares
issued and the nominal value of the shares acquired may be taken to the
profit and loss reserve. Under US GAAP the difference is offset against
share capital.
F-22
<PAGE>
Registration No. 3069667
DISPLAY.IT LIMITED
(formerly Lamdis Limited)
Report and Financial Statements
June 19, 1995 (Date of Incorporation)
December 31, 1995
Deloitte & Touche
Hill House
1 Little New Street
London EC4A 3TR
F-23
<PAGE>
DISPLAY.IT LIMITED
(formerly Lamdis Limited)
REPORT AND FINANCIAL STATEMENTS 1995
CONTENTS Page
Auditors' report F-25
Balance sheet F-26
Notes to the accounts F-27
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT TO THE DIRECTORS AND SHAREHOLDERS
OF
DISPLAY.IT LIMITED
(FORMERLY LAMDIS LIMITED)
We have audited the accompanying balance sheet of Display.IT Limited as of
December 31, 1995. This financial statement is the responsibility of the
company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We have conducted our audit in accordance with generally accepted auditing
standards in the United Kingdom and the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of the company at December 31, 1995 in conformity with
generally accepted accounting principles in the United Kingdom and the United
States of America.
DELOITTE & TOUCHE
Chartered Accountants
London, England
September 24, 1996
F-25
<PAGE>
DISPLAY.IT LIMITED
(formerly Lamdis Limited)
BALANCE SHEET
December 31, 1995
Note 1995
(Pound Sterling)
CURRENT ASSETS
Debtors 2 2
=======
CAPITAL AND RESERVES
Called up equity share capital 3 2
=======
F-26
<PAGE>
DISPLAY.IT LIMITED
(formerly Lamdis Limited)
NOTES TO THE ACCOUNTS
Period ended December 31, 1995
1. ACCOUNTING POLICY
The financial statements are prepared in accordance with applicable
accounting standards. The particular accounting policy adopted is
described below.
Accounting convention
The financial statements are prepared under the historical cost
convention.
2. OTHER DEBTORS
Other debtors represent amounts unpaid in respect of equity share
capital. The debtor was subsequently settled.
3. CALLED UP EQUITY SHARE CAPITAL
1995
(Pound Sterling)
Authorized:
10,000 ordinary shares of(pound sterling)1 each 10,000
=======
Allotted and unpaid:
2 ordinary shares of(pound sterling)1 each 2
=======
4. PROFIT AND LOSS ACCOUNT
The company has not traded during the period, accordingly no profit and loss
account has been prepared. The audit fee of (pound sterling)2,000 has been
paid by the shareholder. The director did not receive any remuneration
during the period. There are no recognized gains or losses for the period.
F-27
<PAGE>
DISPLAY.IT LIMITED
(formerly Lamdis Limited)
NOTES TO THE ACCOUNTS
Period ended December 31, 1995
Under US GAAP, the audit fee of (pound sterling)2,000 would be recognized in
the profit and loss account for the period. The profit and loss account
would therefore show at net loss for the period of (pound sterling)2,000.
5. CASH FLOW STATEMENT
The company has not traded in the period and there were no cash flows.
Accordingly, no cash flow statement has been prepared.
6. RECONCILIATION OF MOVEMENT ON SHAREHOLDERS' FUNDS
1995
(Pound Sterling)
June 19 --
Issue of ordinary share capital 2
-------
December 31 2
=======
F-28
<PAGE>
EXHIBIT INDEX
The following Exhibits are filed as part of this Registration Statement.
<TABLE>
<S> <C>
1.1 Memorandum of Association*
1.2 New Articles of Association*
2.1 Form of Deposit Agreement to be entered into by and between Display.IT
Holdings plc and The Bank of New York*
The Company has not issued any, and is not party to any instrument
authorizing the issuance of, long-term debt securities.
3.1 Share Exchange Agreement by and among Display.IT Holdings plc, Peter
Levin and Marjorie Moe, dated June 20, 1996*
3.2 Form of Placing Letter entered into by and between Display.IT Holdings
plc and 19 investors, together with schedule of the 19 investors*
3.3 Option Deed by and between Display.IT Holdings plc and Alasdair
Norman Macleod, dated June 24, 1996, together with schedule of three
other parties who entered into substantially identical Option Deeds
with Display.IT Holdings plc*
3.4 Bonus Option Deed by and between Display.IT Holdings plc and Alasdair
Norman Macleod, dated June 24, 1996, together with schedule of
three other parties who entered into substantially identical Bonus
Option Deeds with Display.IT Holdings plc*
3.5 Agreement for Share Subscription by and between Display.IT Holdings plc
and Independent Economic Analysis (Holdings) Pte Limited, dated
November 25, 1996*
3.6 Agreement for Share Subscription by and between Display.IT Holdings plc
and Hestia Investments S.A., dated December 19, 1996*
3.7 Service Agreement by and between Display.IT Holdings plc and Peter
Levin, dated June 24, 1996*
3.8 Letter Agreement by and between Display.ITHoldings plc and David G. Familiant,
dated June 24, 1996, together with schedule of two other parties who have
entered into substantially identical Letter Agreements with Display.IT
Holdings plc*
3.9 Loan Agreement by and between Display.IT Limited and Marjorie Moe,
dated April 22, 1996*
3.10 Debenture by and between Display.IT Limited and Marjorie Moe, dated
April 22, 1996*
3.11 Guarantee by and between Marjorie Moe and Peter Levin, dated April 22,
1996*
3.12 Pledge Agreement by and between Peter Levin and Marjorie Moe, dated
April 22, 1996*
3.13 Pledge Agreement by and between Peter Levin and Marjorie Moe, dated
June 20, 1996*
3.14 Rules of the Display.IT Holdings plc Share Option Scheme*
</TABLE>
- ---------------------
*Previously filed.
<PAGE>
