AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON August 1, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
Amendment No. 1
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
STOCKGROUP.COM HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
COLORADO 6282 84-1379282
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code) Identification Number)
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SUITE 500 - 750 WEST PENDER STREET
VANCOUVER, BRITISH COLUMBIA, CANADA V6C 2T7 (604) 331-0995
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Executive Offices)
JOSEPH SIERCHIO, ESQ.
SIERCHIO & ALBERT, P.C.
150 EAST 58TH STREET
NEW YORK, NEW YORK 10155
(212) 446-9500
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
----------
If any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462 to Rule 426(b) under the Securities Act of 1933, check the following
box and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
Registration Statement number of the earlier Registration Statement for the same
offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act of 1933, check the following box and list the Securities Act
Registration Statement number of the earlier Registration Statement for the same
offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
Page 1 of 124 pages.
Exhibit Index appears on Page 91
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CALCULATION OF REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------------------
Title Of Each Class Of Securities Number of Shares To Be Proposed Maximum Proposed Maximum Amount of
To Be Registered Registered Offering Price Per Aggregate Offering Price Registration
Share Fee
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<S> <C> <C> <C> <C>
Common Stock,
no par share 8,280,432 (1) $ 2.50(2) $20,701,080 $ 2,897.47
------------------------------------------------------------------------------------------------------------------------------------
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(1) The shares of common stock being registered can be received by the holders
of convertible notes and warrants when and if they elect to convert such
notes and exercise such warrants. The number of shares being registered
represents our good faith estimate of the maximum number of shares we may
issue upon conversion of the notes and exercise of the warrants.
(2) Calculated in accordance with Rule 457(c) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
2
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and it is not soliciting an offer to buy these
securities, in any state where the offer or sale is not permitted. .
Subject to Completion, August 1, 2000
STOCKGROUP.COM HOLDINGS, INC.
8,280,432 Shares
COMMON STOCK
----------
We have prepared this prospectus to allow Deephaven Private Placement
Trading Ltd., Amro International, S.A., Jesup and Lamont Securities Corporation,
or their pledgees, donees, transferees or other successors in interest, to use a
"shelf" registration process to sell up to 4,276,580 shares of our common stock
which they have acquired or may acquire upon conversion of convertible notes and
exercise of warrants previously acquired by them in a private placement. We will
receive no proceeds from the sale of these shares, with the exception of the
proceeds from the exercise of the warrants.
Our common stock is listed on the O-T-C Bulletin Board under the symbol
"SWEB." On July 26, 2000, the closing price of our common stock was $2.50 per
share.
----------
See "Risk Factors" beginning on page 7 for a discussion of
material issues to consider before purchasing our common stock.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is ________________, 2000.
3
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TABLE OF CONTENTS
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<S> <C>
Prospectus Summary ........................................................... 5
Risk Factors ................................................................. 7
Our limited operating history makes it difficult for you to judge our
prospects ................................................................. 7
Our recent revenue growth may not continue in the future .................. 7
We anticipate losses for the
foreseeable future ........................................................ 7
Our success depends upon the widespread acceptance of the Internet as a key
source of information ..................................................... 7
Our long term liquidity and capital resources are
uncertain ................................................................. 8
We may not be able to generate sufficient advertising revenues ............ 8
Computer equipment problems and failures could adversely
affect our business ....................................................... 8
We may not be able to compete successfully against
current and future competitors ............................................ 9
We are controlled by our officers,
directors and entities affiliated with them ............................... 9
Our future performance is dependent on our ability to retain key
personnel ................................................................. 9
A majority of our senior management is
inexperienced in managing a public company ................................ 9
We may be unable to protect the
intellectual property rights upon which we rely ........................... 10
It is unclear how any existing and future laws enacted will
be applied to the Internet 10 industry and what effects
such laws will have on us ................................................ 10
We may be held liable for online information or products
provided by us or third parties ........................................ 10
Our strategy to commence international operations exposes
us to additional risks .................................................... 11
The value and transferability of our shares may be adversely impacted
by the limited trading market for our shares and the penny
stock rules ............................................................... 11
Future sales of shares may adversely impact the value of our
stock ..................................................................... 12
Cautionary Note Regarding Forward-Looking Statements ......................... 12
Use of Proceeds .............................................................. 13
Price Range of Common Stock and Dividend Policy .............................. 13
Selected Financial Data ...................................................... 13
Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................................ 14
Business ..................................................................... 22
Management ................................................................... 29
Selling Shareholders ......................................................... 35
Principal Shareholders ....................................................... 37
Description of Capital Stock ................................................. 40
Transfer Agent and Registrar ................................................. 45
Shares Eligible for Future Sale .............................................. 45
Plan of Distribution ......................................................... 46
Legal Matters ................................................................ 47
Experts ...................................................................... 47
Where You Can Find Additional Information .................................... 47
Index to Financial Statements ................................................ F-1
</TABLE>
4
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"smallcapcenter.com" and "InvestorMarketPlace" are trademarks and service
marks of Stockgroup.com. All other trademarks, service marks or tradenames
referred to in this prospectus are the property of their respective owners.
PROSPECTUS SUMMARY
Because this is only a summary, it does not contain all of the information
that may be important to you. You should read the entire prospectus, including
"Risk Factors" and our financial statements and the related notes, before
deciding to invest in our common stock.
STOCKGROUP.COM
Stockgroup.com is an Internet-based information center that provides news
and information on public companies which have a market capitalization of 750
million or less. Our Website, www.smallcapcenter.com, is used by investors as a
research tool, and provides investors with profiles of these companies, industry
news, stock quotes and charts, yearly market reports, news references, and other
research tools. We also work with public companies to help them improve their
investor relations communications and in using the Internet to increase public
awareness of these companies and their products and services.
In addition to our corporate headquarters at Suite 500 - 750 Pender Street,
Vancouver, British Columbia, Canada V6C 2T7, we have offices in New York, San
Francisco, Toronto, and Calgary. Our telephone number at our corporate
headquarters is (604) 331-0995.
THE OFFERING
Common stock offered by selling 8,280,432 shares
shareholders
Common stock to be outstanding 16,475,432 shares This number
after this offering does not include shares reserved
for issuance upon exercise
of outstanding stock options.
Use of proceeds Other than the proceeds from the
exercise of the warrants, none
of the proceeds from the sale of
the common stock offered by this
prospectus will be received by
us. Any proceeds received by us
will be utilized for working
capital and general corporate
purposes.
O-T-C Bulletin Board Symbol: SWEB
5
<PAGE>
Under our registration rights agreement relating to Deephaven, Amro and
Jesup, we are required to register twice as many shares of common stock as are
issuable upon conversion of their convertible notes, assuming they were fully
convertible on the date of this prospectus, and all of the shares that are
issuable upon exercise of their warrants. These numbers are reflected in the
number of shares shown as being offered by the selling shareholders. The number
of shares which the selling shareholders may receive upon conversion of their
convertible notes may differ from the number of shares registered.
SUMMARY FINANCIAL DATA
Set forth below are summary statements of operations data for the three
months ended March 31, 2000 and 1999, and years ended December 31, 1999 and
1998, and summary balance sheet data as of March 31, 2000 and 1999, and December
31, 1999 and 1998. This information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations", appearing
elsewhere in this prospectus.
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For the Years Ended
Three Months Ended December 31,
March 31, Year Year
2000 1999 1999 1998
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<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE
Revenues 1,241,207 179,194 1,920,052 857,591
Cost of revenues 397,066 60,392 1,208,033 172,343
---------- ---------- ---------- ----------
Gross profit 844,141 118,802 712,019 685,248
---------- ---------- ---------- ----------
EXPENSES
Sales and marketing 1,182,636 55,708 2,454,473 265,840
Product development 161,639 30,955 415,108 117,453
General and administrative 873,424 669,532 2,209,192 443,201
---------- ---------- ---------- ----------
Total expenses 2,217,699 756,195 5,078,773 826,494
---------- ---------- ---------- ----------
Loss from operations (1,373,557) (637,393) (4,366,754) (141,246)
Interest income 16,989 -- 123,260 --
Other income (expense) 554 232 961 (42,845)
---------- ---------- ---------- ----------
Loss before income taxes (1,356,014) (637,161) (4,242,533) (184,091)
Income tax provision (recovery) -- -- -- (34,802)
---------- ---------- ---------- ----------
Net loss (1,356,014) (637,161) (4,242,533) (149,289)
---------- ---------- ---------- ----------
Basic and diluted loss per share (0.17) (0.15) (0.60) (0.04)
BALANCE SHEET DATA:
Total assets 2,999,838 508,852 3,873,556 213,576
Total liabilities 1,556,518 270,650 1,110,507 230,657
Total shareholders' equity 1,443,321 238,201 2,763,049 (17,081)
</TABLE>
6
<PAGE>
RISK FACTORS
You should consider carefully the following risks before you decide to buy
our common stock. Our business, financial condition or results of operations
could be materially and adversely affected by any of the following risks.
Our limited operating history makes it difficult for you to judge our prospects.
We have a limited operating history upon which an evaluation of us, our
current business and our prospects can be based. You should consider any
purchase of our shares in light of the risks, expenses and problems frequently
encountered by all companies in the early stages of development.
Our recent revenue growth may not continue in the future.
There can be no assurance that the revenue growth we have experienced in
recent periods will continue or increase. Our limited operating history makes
the prediction of future results difficult or impossible and, therefore, our
recent revenue growth should not be taken as an indication of any growth that
can be expected in the future. Furthermore, our limited operating history leads
us to believe that period-to-period comparisons of our operating results may not
be meaningful and that the results for any period should not be relied upon as
an indication of future performance. In 1999 and in 2000, our revenues included
significant sales to three customers (35% to one customer in 1999, 41% to two
customers in the first quarter of 2000). These customers were of a contract
nature. No further revenues will be generated from two of these customers; the
third customer will provide us with reduced revenue until January 2003. To the
extent that revenues do not grow at anticipated rates, or that we are unable to
secure or retain large contracts similar to those obtained in prior periods, our
business, results of operations and financial condition would be materially and
adversely affected.
We anticipate losses for the foreseeable future.
We have not achieved profitability in the current period and we anticipate
that we may continue to incur net losses for the foreseeable future. The extent
and duration of these losses will depend, in part, on the amount of our growth
in revenues from advertising sales, client product and marketing services, and
sales revenues and subscription fees from our news services. As of December 31,
1999, we had an accumulated deficit of $(4,259,711). We expect that our
operating expenses will increase during the next several years, especially in
the areas of sales and marketing, product development and general and
administrative
7
<PAGE>
expenses. Thus, we will need to generate increased revenues to achieve
profitability. There can be no assurance that we will ever achieve or sustain
profitability or that our operating losses will not increase in the future.
Our success depends upon the widespread acceptance of the internet as a key
source of information.
Traditionally, the investing public has obtained current information on
public companies from brokers, securities analysts, newspapers and magazines.
Our business is based entirely on the premise that a significant portion of the
investing public will seek to obtain that information via the Internet. If that
does not occur, or if it occurs more slowly than expected, we will be materially
and adversely affected.
Our long term liquidity and capital resources are uncertain.
We expect that increasing revenues resulting from current operations,
combined with the fact that our start-up costs are substantially complete, will
reduce our use of cash going forward. However, there can be no assurance that
revenue will increase or that costs will be lower going forward.In addition, our
cash reserves may be insufficient if we respond to a prepayment demand from
certain of the selling shareholders by making a cash prepayment, rather than
electing to have the selling shareholders convert a portion of their convertible
notes into shares of our common stock. To the extent that either of these
possibilities seriously depletes our cash reserves, we may need to seek
additional capital. If we do, there can be no assurance that we will be
successful in raising a sufficient amount of additional capital or in internally
generating a sufficient amount of capital to meet our long term requirements. If
we are unable to generate the required amount of additional capital, our ability
to meet our obligations and to continue our operations may be adversely
affected.
We may not be able to generate sufficient advertising revenues.
We derive a significant portion of our revenues from the sale of
advertisements on our Web site, and we plan to continue to do so for the
foreseeable future. If our advertising revenues decrease or remain static while
costs increase, we will be materially and adversely affected. Our ability to
generate advertising revenues is subject to a number of risks, including the
following:
o advertisers may not accept the Internet as a viable advertising medium;
o we may not be able to develop or sustain a large enough base of usersfor
our Web site, which would result in our not having a sufficiently large
market for potential advertisers;
o substantially all of our advertising contracts are for a term of one to
three months, and we cannot predict whether they will be renewed;
o we may have to provide our advertisers with additionaladvertising in
fulfillment of our contracts, if we are unable to show sufficient audience
usage of our Web site;
8
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o widespread use of software programs that permit users to remove advertising
from a user's computer may make advertising on the Internet less attractive
to potential advertisers.
Computer equipment problems and failures could adversely affect our business.
Problems or failures in our Internet-related equipment, including our file
servers, computers and software, could result in interruptions or slower
response times on our Web site, which could reduce the attractiveness of our Web
site to advertisers and users. Equipment problems and failures could result from
a number of causes, including an increase in the number of users of our Web
site, computer viruses, outside programmers penetrating and disrupting our
software systems, human error, fires, floods, power and telecommunications
failures, and internal breakdowns. In addition, any disruption in Internet
access provided by third parties could materially and adversely affect us.
We may not be able to compete successfully against current and future
competitors.
We currently compete with thousands of corporate and individual Web sites
for viewers, corporate subscribers and advertisers. Many of these have
significantly greater financial resources, name recognition, and technical and
marketing resources, and virtually all of them are seeking to improve their
technology, products and services. We can not assure you that we will have the
financial resources or the technological expertise to successfully meet this
competition.
We are controlled by our officers, directors and entities affiliated with them.
In the aggregate, ownership of our shares by management represents
approximately 46% of our issued and outstanding shares of common stock. These
shareholders, if acting together, will be able to significantly influence all
matters requiring approval by our shareholders, including the election of
directors and the approval of mergers or other business combinations
transactions.
Our future performance is dependent on our ability to retain key personnel.
Our performance is substantially dependent on the performance of our senior
management and key technical personnel. In particular, our success depends on
the continued efforts of our senior management team, especially our Chief
Executive Officer, Marcus New and our President, Leslie Landes. The loss of the
services of any of our executive officers or other key employees could have a
material adverse effect on our business, results of operations and financial
condition. Although several senior management personnel have a substantial share
and/or stock options interests, with the exception of our President Leslie
Landes, we do not have employment agreements in place with our senior management
or key employees.
9
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Our future success also depends on our continuing ability to retain and
attract highly qualified technical, editorial and managerial personnel. We
anticipate that the number of our employees will increase in the next 12 months.
Wages for managerial and technical employees are increasing and are expected to
continue to increase in the foreseeable future due to the competitive nature of
this job market. We have experienced difficulty from time to time in attracting
the personnel necessary to support the growth of our business, and there can be
no assurance that we will not experience similar difficulty in the future. The
inability to attract and retain the technical and managerial personnel necessary
to support the growth of our business could have a material adverse effect upon
our business, results of operations and financial condition.
A majority of our senior management is inexperienced in managing a public
company.
The members of our current senior management, other than Mr. Landes and Mr.
Moyle, have not had any previous experience managing a public company or a large
operating company. There can be no assurance that we will be able to effectively
manage the expansion of our operations, that our systems, procedures or controls
will be adequate to support our operations or that our management will be able
to achieve the rapid execution necessary to fully exploit the market opportunity
for our products and services. Any inability to manage growth effectively could
have a material adverse effect on our business, results of operations and
financial condition.
We may be unable to protect the intellectual property rights upon which our
business relies.
We regard substantial elements of our Web site and underlying technology as
proprietary and attempt to protect them by relying on intellectual property
laws, including trademark, service mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods. We also
generally enter into confidentiality agreements with our employees and
consultants and in connection with our license agreements with third parties,
and we seek to control access to our proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain or
use our proprietary information without authorization or to develop similar
technology independently. Moreover, effective trademark, service mark, copyright
and trade secret protection may not be available in every country in which our
services are distributed or made available through the Internet, and policing
unauthorized use of our proprietary information is difficult. There can also be
no assurance that our business activities will not infringe upon the proprietary
rights of others, or that other parties will not assert infringement claims
against us, including claims that by directly or indirectly providing hyperlink
text links to Web sites operated by third parties, we have infringed upon the
proprietary rights of other third parties.
It is unclear how any existing and future laws enacted will be applied to the
internet industry and what effect such laws will have on us.
10
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A number of legislative and regulatory proposals under consideration by
federal, state, provincial, local and foreign governmental organizations may
lead to laws or regulations concerning various aspects of the Internet,
including, but not limited to, online content, user privacy, taxation, access
charges, liability for third-party activities and jurisdiction. Additionally, it
is uncertain how existing laws will be applied by the judiciary to the Internet.
The adoption of new laws or the application of existing laws may decrease the
growth in the use of the Internet, which could in turn decrease the demand for
our services, increase our cost of doing business or otherwise have a material
adverse effect on our business, results of operations and financial condition.
We may be held liable for online information or products provided by us or third
parties.
Because materials may be downloaded by the online or Internet services
offered by us or the Internet access providers with which we have relationships,
and because third party information may be posted by third parties on our Web
site through discussion forums and otherwise there is the potential that claims
will be made against us for defamation, negligence, copyright or trademark
infringement, or other theories. Such claims have been brought against providers
of online services in the past. The imposition of liability based on such claims
could materially and adversely affect us.
Even to the extent such claims do not result in liability to us, we could
incur significant costs in investigating and defending against such claims. The
imposition on us of potential liability for information or products carried on
or disseminated through our Web site could require us to implement measures to
reduce our exposure to such liability, which may require the expenditure of
substantial resources and limit the attractiveness of our services to members
and users.
Our general liability insurance may not cover all potential claims to which
we are exposed or may not be adequate to indemnify us for all liability that may
be imposed. Any imposition of liability that is not covered by insurance or is
in excess of insurance coverage could have a material adverse effect on our
business, results of operations and financial condition.
Our strategy to commence international operations exposes us to additional
risks.
A part of our growth strategy is to expand into international markets. The
success of any additional foreign operations we initiate in the future will be
dependent upon local service providers and/or partners. In addition to the risks
attendant to our business in the United States and Canada, we may experience
difficulty in managing international operations as a result of the following:
o difficulty in locating effective foreign service providers and/or partners;
11
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o competition;
o technical problems;
o local laws and regulations;
o language and cultural differences;
o unexpected changes in regulatory requirements;
o trade barriers;
o fluctuations in currency exchange rates;
o longer payment cycles;
o difficulty in enforcing contracts;
o political and economic instability; and potential adverse tax consequences.
There can be no assurance that one or more of such factors will not have a
material adverse effect on our future international operations and,
consequently, on our business, results of operations and financial condition.
The value and transferability of our shares may be adversely impacted by the
limited trading market for our shares and the penny stock rules.
There is only a limited trading market for our shares. Our common stock is
traded in the over-the-counter market and "bid" and "asked" quotations regularly
appear on the O-T-C Bulletin Board under the symbol "SWEB". There can be no
assurance that our common stock will trade at prices at or about its present
level, and an inactive or illiquid trading market may have an adverse impact on
the market price. In addition, holders of our common stock may experience
substantial difficulty in selling their securities including as a result of the
"penny stock rules," which restrict the ability of brokers to sell certain
securities of companies whose assets or revenues fall below the thresholds
established by those rules.
Future sales of shares may adversely impact the value of our stock.
In addition to the shares being offered by this prospectus, we have
reserved, as of April 28, 2000, 2,000,000 shares of common stock for issuance
upon the exercise of non-qualified stock options. The total amount of shares
covered by this prospectus, plus the shares reserved for such options, would
represent 91.4% of the number of our outstanding shares on the date of this
prospectus (taking into account that we are registering 200% of the number of
shares that can actually be obtained through the conversion of notes held by
certain of the selling shareholders). If required, we will seek to raise
additional capital through the sale of our common stock. Future sales of shares
by us or our stockholders, including the selling stockholders, could cause the
market price of our common stock to decline.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements." In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should,"
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"could," "expects," "plans," "intends," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of such terms and other
comparable terminology.
These forward-looking statements include, without limitation, statements
about:
o our market opportunity;
o our strategies;
o competition;
o expected activities and expenditures as we pursue our business plan; and
o the adequacy of our available cash resources.
These statements appear in a number of places in this report and include
statements regarding the intent, belief or current expectations of the Company,
its directors or its officers with respect to, among other things: (i) trends
affecting the Company's financial condition or results of operations, (ii) the
Company's business and growth strategies, (iii) the Internet and Internet
commerce and (iv) the Company's financing plans. Although we believe that the
expectations reflected in the forward-looking statement are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements.
The accompanying information contained in this prospectus, including,
without limitation, the information set forth under the headings "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business" identify important factors that could adversely
affect actual results and performance. All forward-looking statements
attributable to us are expressly qualified in their entirety by the foregoing
cautionary statement.
USE OF PROCEEDS
Other than the proceeds from the exercise of the warrants, none of the
proceeds from the sale of the common stock offered by this prospectus will be
received by us. The holders of the warrants are not obligated to exercise their
warrants, and there can be no assurance that we will receive any additional
proceeds. If, however, all the warrants are exercised, the gross proceeds to us
would be $899,999. We intend to use such proceeds for currently unspecified
general corporate purposes that may include salaries and wages, investor
relations, legal and accounting, or other operating expenses. Pending these
uses, the proceeds received by us will be invested in short-term, investment
grade instruments, certificates of deposit or direct or guaranteed obligations
of the United States.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock has been quoted for trading on the O-T-C Bulletin Board
since March 17, 1999. Accordingly, there has been a limited public market for
our common stock. The following table sets forth high and low bid prices for the
common stock for the periods
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ending March 31, 1999, June 30, 1999, September 30, 1999, December 31, 1999,
March 31, 2000, and June 30, 2000. These prices represent quotations between
dealers without adjustment for retail markup, markdown or commission and may not
represent actual transactions.
Quarter Ending: High Low Volume
--------------- ---- --- ------
March 31, 1999 $10.25 $6.00 3,339,000
June 30, 1999 $9.00 $3.125 4,859,200
September 30, 1999 $5.00 $2.125 3,297,500
December 31, 1999 $3.625 $1.312 1,927,700
March 31, 2000 $5.031 $1.562 2,623,600
June 30, 2000 $3.50 $.760 1,732,700
On April 28, 2000, we had 32 registered shareholders owning 8,195,000
shares.
We have not declared, and do not foresee declaring, any dividends now or
into the foreseeable future.
We have reserved, as of April 28, 2000, 2,000,000 shares of common stock
for issuance upon the exercise of non-qualified stock options.
SELECTED FINANCIAL DATA
Set forth below are summary statements of operations data for the three
months ended March 31, 2000 and 1999, and the years ended December 31, 1999 and
December 31, 1998, and summary balance sheet data as of March 31, 2000 and 1999,
and December 31, 1999 and 1998. This information should be read in conjunction
with the Consolidated Financial Statements and Notes thereto appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
For the Years ended
Three Months Ended December 31,
2000 1999 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE
Revenues 1,241,207 179,194 1,920,052 857,591
Cost of revenues 397,066 60,392 1,208,033 172,343
---------- ---------- ---------- ----------
Gross profit 844,141 118,802 712,019 685,248
---------- ---------- ---------- ----------
EXPENSES
Sales and marketing 1,182,636 55,708 2,454,473 265,840
Product development 161,639 30,955 415,108 117,453
General and administrative 873,424 669,532 2,209,192 443,201
---------- ---------- ---------- ----------
Total expenses 2,217,699 756,195 5,078,773 826,494
---------- ---------- ---------- ----------
Loss from operations (1,373,557) (637,393) (4,366,754) (141,246)
Interest income 16,989 -- 123,260 --
Other income (expense) 554 232 961 (42,845)
---------- ---------- ---------- ----------
Loss before income taxes (1,356,014) (637,161) (4,242,533) (184,091)
Income tax provision (recovery) -- -- -- (34,802)
---------- ---------- ---------- ----------
Net loss (1,356,014) (637,161) (4,242,533) (149,289)
---------- ---------- ---------- ----------
Basic and diluted loss per share (0.17) (0.15) (0.60) (0.04)
BALANCE SHEET DATA:
Total assets 2,999,838 508,852 3,873,556 213,576
Total liabilities 1,556,518 270,650 1,110,507 230,657
Total shareholders' equity 1,443,321 238,201 2,763,049 (17,081)
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of Stockgroup.com should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this prospectus.
This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
but not limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus.
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Results of Operations
We incurred a net loss of $(1,356,015) for quarter ended March 31, 2000.
This compared with a net loss of $(637,161) for the first quarter of 1999. These
losses are a function of implementation of our strategic plans and had been
anticipated.
Revenues
During the first quarter, we generated revenues of $1,241,207, a 593%
increase over the $179,194 generated in the quarter ended March 31, 1999. The
growth in revenues was primarily due to major Web site development projects in
Singapore and Texas (accounting for 41% of first quarter 2000 sales), higher
sales of Internet marketing services to corporations, and increased advertising
sales. The growth in sales was largely due to our significantly increased sales
force, from 5 in the first quarter of 1999 to 15 in the second quarter of 2000.
Growth in sales staff was spread across all offices. Revenues will continue from
our Singapore project throughout the balance of the year. The most significant
portion occured in the second quarter as we completed the Web site in July. We
are also working to improve on other sales through increased sales staff and
improvements to our Web site. A portion of our revenue is recurring in nature,
derived from Website
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maintenance, giving us a base source of revenue on a continuing basis. Gross
margins should remain consistent as our primary cost of sales is programming and
design staff directly attributable to the project in question, which costs are
anticipated when the contract is negotiated.
In the first quarter of 2000 we introduced our subscription news service
product through www.smallcapcenter.com and we are continuing to increase our
base of journalists to support this product. In January, we also introduced a
new product named InvestorMarket Place, which is a Web site that profiles public
companies, and which we believe is generating strong demand from our clients.
Expenses
Sales and marketing expenses increased from $55,708 in the first quarter of
1999 to $1,182,636 in the same period in 2000. The factors which contributed to
this increase are larger than usual advertising purchases and an increase in
sales staff. Advertising purchases were for the purpose of establishing our
"brand name" in the marketplace and are expected to have long term residual
effects. The size of the staff, particularly in sales, increased significantly
quarter over quarter. This, and our overall increased sales costs, were in line
with our strategic plans to position the company for future growth.
General and administrative expenses increased from $669,532 in quarter one
1999 to $873,424 over the first quarter of 2000. Items accounting for a majority
of the increases in general and administrative included legal expenses, higher
office rent expenses due to an expansion of our branch network, increased
staffing costs, costs related to temporary data entry staff used for site
development, and travel. Although most of the increased cost was attributable to
the need to support growth in sales, a portion of the increase in costs was
incurred as a result of our becoming a public company, which costs were not
incurred in the first quarter of 1999 as we were not yet public at that time.
Costs going forward may continue to increase if supported by increases in sales,
although much of our investment in infra-structure is complete. Costs of the
convertible debenture financing acquired in the second quarter were significant,
and may cause total costs to increase in the third quarter.
Assets
Changes in assets were consistent with our operations, with the exception
of the continuing decrease in prepaid expenses. At the end of the third quarter
of 1999, prepaid expenses totaled $1.29 million, then declined to $0.9 million
at the end of the fourth quarter, and then to $0.19 at the end of the first
quarter of 2000. This pattern in prepaid expenses relates to the significant
expenditures we incurred as part of our revenue plan starting when we became a
public company in 1999. Significant amounts of advertising were undertaken, and
the majority of this advertising had to be paid in advance, accounting for the
increase in prepaid expenses at the end of the third quarter of 1999. The
subsequent reductions in prepaid expenses occurred as this advertising took
place and the advertising campaign ended.
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FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Results of Operations
The year ended December 31, 1999, was the most significant period of growth
and development in our history. During the year, we expanded the scope of our
news division by hiring 10 professional journalists, including our Editor in
Chief, David Andelman. During 1999 we also expanded our productive capacity and
developed and launched www.smallcapcenter.com, our state of the art Web site
dedicated to serving the needs of small cap investors. This project required a
significant investment of resources and, along with other initiatives, resulted
in the addition of 31 new staff to our programming and design teams. The launch
of www.smallcapcenter.com also included the creation of our advertising image
based on the slogan: `Where to find the next big thing'. The accompanying ad
campaign included commercials on media such as CNBC and print ads in The Wall
Street Journal, U.S. News and World Report and other major publications.
During the year, we also expanded our news bureau/sales office branch
network through the addition of offices in San Francisco and New York.
Supporting financing for our strategic plan was raised through private
placements with aggregate cash proceeds of $5.4 million which were completed
after March 11, 1999.
Revenues
The year ended December 31, 1999, was a year of record revenue for
Stockgroup.com. During that year we generated revenues of $1,920,052 versus
$857,591 for the year ended December 31, 1998. This represents a 123% increase
in year over year revenue.
A substantial part of growth in revenues was due to an increase in
Advertising and Media Services sales, which saw year over year growth of 393%.
Web site Design and Development also saw gains, with an increase of 61%, and Web
site Maintenance and Marketing saw a decrease of (12)%. Over the course of 1999
growth in Web site services overall was impacted by resources applied to the
development of our new enterprise financial news media Web site
www.smallcapcenter.com. In 2000, however, the programming and design capacity we
built up to complete the development of www.smallcapcenter.com are being
re-deployed to revenue generating projects and should enhance our ability to
expand sales.
As part of our strategic plan to increase revenues, as of year end 1999 we
hired Tim Bush, a 17 year veteran sales professional, as our Vice President of
Sales. Mr. Bush came to us from Ingram Micro Inc., one of the world's largest
wholesale providers of technology products and services, where he was the
Regional Sales Director. During his three-year tenure at Ingram Micro Inc., Mr.
Bush's team averaged over 30% sales growth per year with sales in excess of
CDN$400 million in his final year. Mr. Bush's immediate mandate is to
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execute our strategic sales plan by expanding our sales staff and increasing
sales in New York, San Francisco, Vancouver and other North American markets.
Expenses
The development and launch of www.smallcapcenter.com had a major bearing on
the operating expenses that we incurred during 1999. Cost of Revenues, which
includes items such as data feed costs, Internet connectivity costs, some of the
costs of our design team and third party advertising costs for advertising
purchased on behalf of clients, increased from $172,343 in 1998 to $1,208,033 in
1999, representing an increase of 601%. These costs are required to maintain the
infrastructure which support the delivery of financial information services on
the Internet. In 1997 cost of revenues was $137,447.
Sales and Marketing costs also saw significant increases primarily as a
function of advertising purchases related to the launch of
www.smallcapcenter.com and went from $265,840 in 1998 to $2,454,473 in 1999, an
increase of 823%. Funds expended for advertising have provided us with reach to
viewers and are expected to continue to provide value over the longer term. In
1998 and 1997, we had not yet undertaken significant initiatives with respect to
Sales and Marketing and our expenses were largely related to our commissioned
sales staff. From 1997 to 1998, Sales and Marketing expenses increased from
$238,964 to $265,840, or 11.2%.
Product Development costs, which consist of salaries for programmers and
design staff seconded to the development of www.smallcapcenter.com increased
from $117,453 in 1998 to $415,108 in 1999, an increase of 253%. We project that
expenses in this area will continue to grow as we hire more Internet design
specialists to deliver upon our anticipated expansion of Web site contract
commitments. With respect to year over year change between 1997 and 1998,
Product Development costs increased from $77,458 to $117,453, or an increase of
51.6% due to the addition of more programming staff.
General and Administrative costs also saw a large relative increase from
$443,201 in 1998 to $2,209,192 in 1999, or 398%. Notable expenses in this area
came as a result of the addition of two new offices, the moving of our head
office to larger premises, amortization of expenses for employee stock options,
increased salaries and wages for new management and executive staff, and
increased legal and accounting fees and consulting fee charges related to the
reverse acquisition described above. We project that General and Administrative
expenses will increase marginally during 2000. In 1998, General & Administrative
expenses increased to $443,201 which represented a marginal increase of 5.5%
from the $419,993 incurred in 1997.
Other Income and Income Taxes
We earned Interest and Other Income of $124,221 in 1999 primarily on
investment of our cash resources. Due to our net loss position, we did not incur
tax in 1999. At present we
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have tax loss carry forwards of $3,369,000 in Canada which expire in 2006, and
tax loss carry forwards of $845,000 in the U.S. which expire in 2019.
Net Income
During 1999 we incurred a net loss of $(4,242,533) versus a net loss of
$(149,289) in 1998 and a profit of $74,213 in 1997. The loss incurred in 1999
was the result of our strategic investment in the development of our enterprise
financial Web site and supporting advertising program, the addition of
significant development capacity in our programming and design teams and the
initial investment in our editorial operations.
The most significant component of investment in 1999 was
www.smallcapcenter.com which was launched on October 5, 1999. Moving forward, we
anticipate further losses in 2000 and 2001 as we further develop
www.smallcapcenter.com and our Small Cap News Service. The news service is being
expanded in 2000 and includes a subscription component wherein viewers pay to
subscribe to premium quality unbiased original news stories on small cap
companies and markets delivered throughout the trading day.
Assets
Changes in assets were consistent with our operations, with the exception
of the continuing decrease in prepaid expenses. At the end of the third quarter
of 1999, prepaid expenses totaled $1.29 million, then declined to $0.9 million
at the end of the fourth quarter. This pattern in prepaid expenses relates to
the significant expenditures we incurred as part of our revenue plan starting
when we became a public company in 1999. Significant amounts of advertising were
utilized, and the majority of this advertising had to be paid in advance,
accounting for the increase in prepaids at the end of the third quarter of 1999.
The subsequent reductions in prepaid expenses occurred as this advertising took
place and the advertising campaign was ended.
Allowance for doubtful accounts was also much lower as a percentage of
sales or accounts receivable at the end of 1999 compared to 1998, in spite of a
large increase in accounts receivable. This effect is caused because our
allowance for doubtful accounts is determined by assessing the collectibility of
each individual account, rather than using an estimate based on sales or the
size of accounts receivable. At the end of 1998, the number of accounts deemed
likely to be uncollectible was higher than it was at the end of 1999.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Results of Operations
1998 was a transition year for us, when we started to implement our long
term business plan. As a result, profits suffered due to significant increases
in costs for research and development and infrastructure-building.
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Net revenues decreased from 1997 to 1998, going from $830,644 to $685,248.
This decrease was largely due to an increase in direct costs of producing the
revenue under the changing business methods.
Expenses also increased slightly, caused in large part by an increase in
research and development expenses. In 1997 they were $736,415 and in 1998 they
were 826,494. Management had expected this increase as part of the long term
business plan.
Overall net income went from $74,213 in 1997 to a loss of $(149,289) in
1998.
LIQUIDITY AND CAPITAL RESOURCES
We ended 1999 with a cash position of $1,658,822. As we continue to expand
our operations and develop our Small Cap News Service to a global level, we will
require significant additional financial resources, which we may seek to obtain
through public or private equity offerings, including in the United Kingdom,
Western Europe, or Asia. We currently believe that we will have sufficient cash
to fund our operations through April, 2001, as a result of internally generated
sales, and as a result of the $3,000,000 financing that we closed in April,
2000. We will need to seek additional capital to sustain our operations if
revenue does not increase or if we respond to a prepayment demand from certain
of the selling shareholders by making a cash prepayment, rather than electing to
have the selling shareholders convert a portion of their convertible notes into
shares of our common stock. To the extent that either of these possibilities
seriously depletes our cash reserves, we may need to seek additional capital. If
we do, there can be no assurance that we will we be successful in raising a
sufficient amount of additional capital or in internally generating a sufficient
amount of capital. If we are unable to generate the required amount of
additional capital, our ability to meet our obligations and to continue our
operations may be adversely affected. No specific plans exist for such a
financing at this time.
CORPORATE DEVELOPMENTS
A synopsis of our corporate highlights are as follows:
1. Reverse acquisition completed March 11, 1999 - Stock Research Group, Inc.
acquired I-Tech Holdings Group, Inc. (now Stockgroup.com Holdings, Inc.)
through a reverse takeover.
2. New U.S. subsidiary formed - We incorporated "Stockgroup.com, Ltd." as an
operating subsidiary, domiciled in the State of Nevada. On April 9, 1999,
Stockgroup.com, Ltd. was provided with a Certificate of Qualification to
transact business in the State of California, and Stockgroup.com began
operations in California through this subsidiary.
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3. Private placement during the second quarter of 1999 - We completed a
private placement totaling an aggregate of $5.4 million through the
issuance of 900,000 shares of our common stock at $6.00 per share. These
shares are deemed "restricted shares" as that term is defined under U.S.
securities laws.
4. Marketing initiatives during 1999 - We entered into a series of advertising
contracts which provided us with significant exposure on the Yahoo! Excite,
and Webcrawler Search engines. Under these agreements, banner ads which
showcased www.stockgroup.com and subsequently www.smallcapcenter.com appear
on these sites.
5. Advertising and public relations initiative - As part of the launch of
www.smallcapcenter.com, we retained New York-based RocketScience Creative,
Ltd. in 1999 as our agency of record for an advertising and brand-building
awareness campaign. The agency was responsible for a variety of advertising
and marketing activities aimed at positioning www.smallcapcenter.com as a
leading source of information on the Internet for companies with a market
capitalization of $750 million or less, which we refer to as small cap
companies.
6. Southam private placement - We completed a private placement in 1999 with
Southam, Inc. for the issuance of 200,000 shares in exchange for
advertising in Southam publications. Southam, Inc. is a subsidiary of
Hollinger International (NYSE: HLR), a leading newspaper publishing
company.
7. New York office opening on September 1, 1999 - We opened our New York
branch. This office is home to our Editorial News center and is also
headquarters for our U.S. operations.
8. Launch of smallcapcenter.com on October 5, 1999 - We launched our new
on-line investment information community www.smallcapcenter.com. This event
represented the culmination of a significant investment of time and
resources on our part.
The launch of www.smallcapcenter.com and its national advertising campaign
marked two significant achievements in the implementation of our strategic
plan. We believe the introduction of www.smallcapcenter.com has solidified
our position as a leading Internet content provider of information on small
cap companies. This is supported by our ability to charge for advertising
on our Web site at rates higher than the industry average for banner
advertising, and by the fact that Forbes business magazine rated us best of
the Web for our class of service. The look, feel, and functionality of
www.smallcapcenter.com represent a significant improvement in the features
offered on our previous www.stockgroup.com site. Additionally, the daily
real time editorial and news reporting and increased access to small cap
company information not previously available on the Internet characterize
some of the features on the site.
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Additionally, we believe our advertising campaign based around the slogan
"Where to Find The Next Big Thing" has significantly increased our profile
with investors in North America. To date, some of the prominent media
purchases we have made include full and partial page ads and/or commercials
in U.S. News & World Report, the Chicago Sun Times, the National Post,
CNBC, and the Wall Street Journal.
9. Commenced implementation of strategic sales plan - We hired a Vice
President of Sales, Tim Bush, who is pursuing our goal of expanding the
sales force, both in terms of total sales people as well as number of
geographical locations. We have located sales offices in strategic North
American financial centers - Toronto, Calgary, New York, San Francisco, and
Dallas to date. Later this year, a sales person responsible for enterprise
sales will be hired. This person will complement the efforts of our
executive team in developing global opportunities for developing financial
Web sites similar to the ones we have developed for Asia Exchange
Information Service Pte Ltd., based in Singapore, and eStockAnalyst, Inc.,
based in Texas. We have also created a business development department
based in Vancouver that is responsible for developing new sales
opportunities with the financial and brokerage communities and other
Internet sites. We have retained the services of Big House Communications,
a Vancouver-based advertising firm, in the marketing of our service
products to corporations. We have also retained the services of Rubinstein
& Associates, Inc., a New York City-based pubic relations firm, in the
marketing of our smallcapcenter.com Web site. We expect these activities to
yield increasing sales as we develop awareness of our company and its
products and Web site.
10. Board of Directors strengthened - At our 1999 Annual General Meeting on
October 7, 1999, shareholders voted to ratify our appointees for the Board
of Directors. Our Board of Directors is now composed of the following
persons:
Marcus New - Chairman & CEO
Louis deBoer II - President of MediaFutures, Inc.
David N.Caddey, B.Sc., M.Sc., - Vice President of MacDonald Dettwiler and
Associates
Craig Faulkner - Chief Technology Officer
Leslie Landes - President & Chief Operating Officer
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11. Editor-in-Chief appointed - In December 1999, David A. Andelman was
appointed as Editor-in-Chief of our news operations. Mr. Andelman has three
decades of experience in news and broadcasting, most recently as News
Editor at Bloomberg, following international financial markets, media and
communications, securities and investment banking, real estate, insurance
and finance. Before joining Bloomberg, Mr. Andelman served as Washington
correspondent for CNBC, Paris correspondent for CBS News (CBS: NYSE), and a
bureau chief and correspondent for the New York Times (NYT: NYSE). He is a
graduate of Harvard College and the Columbia University Graduate School of
Journalism.
Mr. Andelman's mandate is to develop a world class news organization
focused on small cap companies and markets and he has been actively
recruiting a team of seasoned financial reporters and editors in New York.
12. Expansion into Asia - On January 18, 2000 Stockgroup.com began its global
expansion by entering into an arrangement with two Singapore publicly
listed companies to build an enterprise financial site for Asia Exchange
Information Service Ptd Ltd. (AsiaXIS).
13. Syndication strategy launched - Early in 2000 Stockgroup.com began the
implementation of its syndication strategy, signing agreements with Web
content aggregators and distributors. The purpose of the syndication
program is to raise the profile of smallcapcenter.com's content, to drive
traffic to smallcapcenter.com and to generate revenues through licensing
fees and revenue sharing agreements. Stockgroup.com syndicates content
available from the public access (free) areas of smallcapcenter.com and
some of its proprietary tools. The structure of the terms of each agreement
and the revenue model is dependent on the size of the user base of the
other site and the requirements of the other site.
BUSINESS
OVERVIEW
We were incorporated under the laws of Colorado on December 6, 1994, as
I-Tech Holdings Group, Inc. We changed our name to Stockgroup.com Holdings, Inc.
on May 5,1999. Prior to March 11, 1999 we had very limited operations seeking to
assist companies design Web sites. However on March 11, 1999 we became the
parent company of Stock Research Group, Inc. (since re-named as Stockgroup.com
Media Inc), a British Columbia Corporation which was incorporated on May 4,
1995. The financial statements and
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operating results set forth in this prospectus are a continuation of the
financial statements of Stock Research Group.
The transaction in which we became the parent of Stock Research Group is
known as a reverse acquisition, because the shareholders of Stock Research Group
acquired control of us. This transaction is considered a recapitalization of
Stock Research Group for accounting purposes and an acquisition of us by Stock
Research Group. Accordingly, the transaction has been accounted for as a
purchase of the net assets of Stockgroup.com Holdings, Inc. by Stock Research
Group, however Stockgroup.com Holdings, Inc. continues as the legal parent.
Prior to the reverse acquisition, between 1995 and 1999, Stock Research Group
had carried on active operations based on the business model described in this
prospectus.
Neither we nor any of our related companies have ever undergone bankruptcy,
receivership, or similar proceeding.
Our investment information on-line Internet community has viewers in the
United States, Canada and abroad. The community model is based on the creation
and fostering of an Internet site which provides members with a range of
services and content which are targeted toward a certain area of interest.
Community sites are generally designed to provide users with a stimulating
interactive experience which encourages them to return to the community on a
frequent basis. The essence of the community model is to provide an on-line home
which wins the loyalty of viewer members. Content is usually based around themes
of interest such as News, Business, Investing, Career Information, Travel,
Medical & Life Issues, Technology, Sports & Entertainment, etc. Generally, a
community's revenues rely on the sale of advertising, e-mail commerce
arrangements and the sale of membership subscriptions for premium content or
other special services.
Our main Web site, www.smallcapcenter.com, acts as a focal point for
investors researching, analyzing, and discussing small cap stocks and markets.
This Web site provides newsworthy small cap information to our investor viewers
and disseminates information about our corporate clients. This information
includes detailed profiles of companies, industry news, stock quotes, charts,
daily market reports, news releases and other investment tools. Our community is
multi-tiered and includes both general interest and industry-specific areas
including:
o Computers/Telcomm;
o Consumer Goods;
o Energy;
o Finance/Real Estate;
o Food & Beverage;
o Healthcare; Internet;
o Manufacturing;
o Natural Resources;
o Services; and
o Transportation.
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We believe that we have become a primary provider of timely, accurate
investment information to small cap investors.
We are also a provider of Web site design and Internet financial products
and marketing services for small cap companies, a market segment that
traditionally has not had the same market profile as larger public companies.
Some of the specialty products we produce include private label quotes and
charts, database tools for building relationships with shareholders, "traffic"
reports which allow a company's management to assess the impact of Web site use
by its viewers, and design services and maintenance contracts.
DESCRIPTION OF BUSINESS MODEL
Our business model is based on serving two complementary target markets.
Target Market One - Small Cap Investors Seeking Reliable Information
Investors have difficulty obtaining timely, accurate investment information
on small cap companies due to a lack of objective news sources. Most media
organizations, investment firms and brokerage houses tend to focus a significant
majority of their attention on larger public companies. As a result, small cap
investors have not had access to the level of non-biased third party information
or traditional sources of company research reports they desire. This lack of
information is coupled with the increasing shift of investors from traditional
retail brokerages to discount and on-line alternatives. This shift has created
an increased interest in personal investment research on the part of individual
investors. However, investor interest in the small cap sector has not been
accompanied by an increased coverage of the small cap sector by traditional
media, traditional brokerage firms or alternative on-line and discount
investment service providers. As a result, investors have turned to other
resources on the Internet as a method of obtaining the timely financial
information needed to make small cap investment decisions.
Target Market Two - Small Cap Companies Seeking Better Exposure to
Investors
As described above, small cap companies do not receive the same coverage as
large public companies. Over the last few years, the Internet has become a
cost-effective solution to enhance their profile, but many small cap companies
have lacked the skills and knowledge to take full advantage of this opportunity.
This had led to the outsourcing of Internet related services. Requirements of
small cap companies are broad and range from the design, development and
maintenance of investor relations oriented Web sites to the creation of
effective on-line advertising campaigns. Stockgroup.com has become a significant
provider of these types of services.
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We do not act as a public relations or investor relations firm, but rather
provide an array of products and services, which facilitate the investor
relations functions of client companies.
To meet the needs of its two complementary target markets, we have created
www.smallcapcenter.com, an Internet information community which provides a wide
range of services to investors interested in small cap companies and markets. A
significant feature which differentiates smallcapcenter.com from other financial
Web sites is its on-line news reporting. We employ a staff of professional
journalists who produce breaking stories throughout the trading day on topics of
interest to small cap investors. A major goal of our business model is to
develop and expand this news service into a world class news organization with
bureaus and contributors throughout North America. Services on the site are
currently offered on a free trial basis and we are projecting future revenues
will arise from the conversion of viewers of the site into purchasers of
subscription based services.
By satisfying our viewers' investment information needs, we seek to become
the dominant single source of small cap information on the Internet.
OUR SOURCES OF REVENUE
Historically, we have had three sources of revenue:
o advertising and media services, which made up 64% of 1999 total revenue;
o Web site design and development, which made up 18% of 1999 total revenue;
o and Web site maintenance and marketing services, which made up 18% of 1999
total revenue.
Additionally, we have recently commenced initiatives based on the sale of our
technology tools and content to other corporations who offer financial Web sites
on the Internet. "Tools" refers to applications on our Web site that assist
investors in evaluating stocks, such as most actively traded stocks, and indices
on small cap sectors.
ADVERTISING AND MEDIA SERVICES
We derive revenue from corporate advertisers who see benefit in presenting
their products and services to smallcapcenter.com's Internet audience. Many
advertisers seek and are willing to pay premium rates to advertise on
smallcapcenter.com, due to its highly specific demographics and heavy traffic.
The investor demographic profile, which consists of well educated, technically
savvy, mid to high-income level earners and higher risk investors is very
attractive to numerous advertisers. Corporate advertisers have included such
companies as IBM, Microsoft, VISA, Salomon Smith Barney, Datek Securities,
Standard & Poors, CIBC, Bank of America, Charles Schwab, Intel, Ameritrade,
Quicken, The Toronto Stock Exchange, and Discover Brokerage. In addition, we
provide advertising management services, essentially acting as an on-line
advertising agency providing advertisement design and
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placement services for our clients. We also place ads, as a function of client
budgets, on other Web sites we believe will provide the client with the greatest
exposure to the investment community. A large contract for services of this kind
was completed with Incite Marketing Group, Inc. in 1999, with sales to this one
customer accounting for 35% of 1999 revenues.
WEB SITE DESIGN AND DEVELOPMENT
We offer specialized Web site design services and other Web services such
as private label quotes and charts, database tools for building relationships
with shareholders and management traffic reports to track investor usage of Web
sites and inquiries. In addition, unlike other Web hosting and design companies,
we develop Web sites with the investment community in mind.
We offer packages which can be tailored to include some or all of our
services and graphic design levels, depending on the needs and budget of each
client.
WEB SITE MAINTENANCE AND MARKETING SERVICES
As a means of providing small cap companies with greater exposure, we offer
a maintenance service which keeps clients' Web sites current and fresh. As part
of this service we also link clients' sites to our proprietary information
community and offer paid one-time access to our proprietary email listing of
over 35,000 investors. Typically our corporate clients will use this email
listing to disseminate news and information on their company.
SALE OF TECHNOLOGY TOOLS AND SERVICES
We are developing opportunities for the sale of our expertise in the
development of enterprise financial Web sites. One of these initiatives involves
a contract with Asia Exchange Information Service Pte Ltd. for the creation of
AsiaXIS, a Web site based in Singapore dedicated to providing Internet financial
information on the Southeast Asian economic markets. A second initiative
involved the creation of eStockAnalyst.com, a similar web site for
eStockAnalyst, Inc. based in Texas. Revenue from these two contracts accounted
for 41% of total sales in the first quarter of 2000.
RESEARCH AND DEVELOPMENT
During 1998 and 1999 we invested approximately $211,566 and $771,992,
respectively, on research and development related to new products and services
and the creation of www.smallcapcenter.com.
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<PAGE>
COMPETITION
Competition for viewers, corporate subscribers and advertisers, as well as
competition in the news and information dissemination market, is intense and is
expected to increase significantly. As barriers to entry are relatively
insubstantial, we may face competitive pressures from many additional companies
both in the United States, Canada and abroad.
We believe that the principal competitive factors for companies seeking to
create communities on the Internet are:
o critical mass (i.e., depth of content and range of features of interest to
viewers);
o functionality of the Web site;
o brand recognition;
o viewer affinity and loyalty;
o broad demographic focus; and
o open access for visitors.
In the future, Internet communities may be developed or acquired by
companies currently operating other communities or by Web directories, search
engines, archives and content sites, by commercial online service providers,
Internet Service Providers and other entities, certain of which may have more
resources than us. We compete for users and advertisers with other content
providers and with thousands of Web sites operated by individuals, the
government and educational institutions. In addition, we could face competition
in the future from traditional media companies, such as newspaper, magazine,
television and radio companies, a number of which, including The Walt Disney
Company, CBS Corporation and The National Broadcasting Company, have recently
made significant acquisitions of or investments in Internet companies. By
focusing on the small cap niche, our goal is to differentiate Stockgroup.com by
avoiding direct competition with large cap information providers such as
TheStreet.com, the WSJ Online, The Motley Fool and CBS Marketwatch.
We believe that the principal competitive factors in attracting advertisers
include:
o the amount of traffic on our Web site;
o brand recognition;
o customer service;
o the demographics of the Community's members and users;
o our ability to offer targeted audiences; and
o the overall cost effectiveness of the advertising medium offered by us.
We believe that the number of Internet companies relying on Internet-based
advertising revenue, as well as the number of advertisers on the Internet and
the number of users, will increase substantially in the future. Accordingly, we
will likely face increased competition, resulting in increased pricing pressures
on its advertising rates, which could have a material adverse effect on us.
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EMPLOYEES
As of April 28, 2000 we employed 98 people on a full-time basis. Of the
total, 50 were in design, programming, product research and development, 18 in
sales, marketing, and support, 14 in publishing (plus an additional 5 freelance
writers), and 16 in administration and finance. Our success is highly dependent
on our ability to attract and retain qualified employees. Competition for
employees is intense in the Internet industry. To date, we believe that we have
been successful in our efforts to recruit and retain qualified employees, but
there is no assurance that we will continue to be as successful in the future.
None of our employees are subject to collective bargaining agreements. We
believe relations with our employees are good.
REGULATORY ISSUES
We are not subject to governmental regulation in our Internet publishing
efforts other than local state and municipal sales tax licenses.
SUBSIDIARIES
We have six subsidiaries. In Canada our British Columbia subsidiaries are
Stockgroup.com Media, Inc. and 579818 B.C. Ltd., our Alberta subsidiary is
Stockscores Analytics, Inc. (which is owned 50% by Tyler Bollhorn), and in the
U.S. we operate through Stockgroup.com, Ltd., a Nevada Corporation. We also own
two non-operating Bahamas corporations, Stockgroup.com (Bahamas) Ltd. and
Stockgroup.com International, Inc. which are currently dormant.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND DOMAIN NAMES
We protect our intellectual property through a combination of trademark and
copyright law, trade secret protection and confidentiality with our employees,
customers, independent contractors and strategic partners. We pursue the
registration of our domain names, trademarks and service marks in the United
States and internationally. Effective trademark, service mark, copyright and
trade secret protection may not be available in every country in which our
services and products are made available on-line. We create a majority of our
content and obtain rights to use the balance of our content from third parties.
It is possible that we could become subject to infringement actions based upon
the content obtained from these third parties. In addition, others may use this
content and we may be subject to claims from our licensors. We currently have no
patents or patents pending and do not anticipate that patents will become a
significant part of our intellectual property in the future. We seek to enter
into confidentiality agreements with our employees and independent consultants
and have instituted procedures to control access to and distribution of our
technology, documentation and other proprietary information and the proprietary
information of others from whom it licenses content. The steps we take to
protect our
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<PAGE>
proprietary rights may not be adequate and third parties may infringe or
misappropriate our copyrights, trademarks, service marks and similar proprietary
rights. In addition, other parties may assert claims of infringement of
intellectual property or other proprietary rights against us. The legal status
of intellectual property on the Internet is currently subject to various
uncertainties.
LEASEHOLD
We operate five leased offices, all located in recognized financial
districts of their respective cities. Our leaseholds are summarized as follows:
City Monthly Payment Lease Expiry Date
--------------------------------------------------------------------
Vancouver CDN $19,969 7 years June -- 2006
New York $8,154 7 years August -- 2006
Toronto CDN $4,204 3 years July -- 2002
San Francisco $4,276 3 years January -- 2002
Calgary CDN $1,612 5 years September -- 2002
EQUIPMENT
We have made a substantial investment in servers and computer equipment
required for our Web site and we have dedicated staff assigned to maintenance
and support of these operations.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
Our directors, executive officers and other key employees, and their ages,
as of April 28, 2000 are as follows:
Name Age Position with the Company
---- --- -------------------------
Marcus A. New 29 Chairman of the Board; Chief Executive Officer
David Caddey 50 Director
Louis deBoer II 47 Director
Leslie Landes 56 Director, President, Chief Operating Officer
Craig Faulkner 29 Director, Chief Technical Officer, Secretary
Lindsay Moyle 35 Chief Financial Officer
David Andelman 53 Editor in Chief
Tim Bush 40 Vice President Sales
30
<PAGE>
The backgrounds of our directors, executive officers and significant
employees are as follows:
Marcus New is the founder, and has been Chairman and Chief Executive
Officer since May 1995, of Stockgroup.com. Mr. New formed the vision for
Stockgroup.com in 1995 and developed the company from an idea to the goal of
becoming the dominant single source for small cap information on the Internet.
Over the last five years he has grown the company by re-investing internally
generated capital and has successfully built a substantial corporate client
roster based on development of his ideas for Internet marketing. Similar to
other successful Internet pioneers, Mr. New created Stockgroup.com based on
identification of the ways in which the Internet could be used to provide
services which were not otherwise available. Mr. New is also a director of
iWave.com, which provides custom corporate research, fundraising research,
executive searches, and software services; Golden Maritime Resources, a
commercial fishery; and WorldTradeShow.com, which provides online tradeshow
schedule information, all of which are public companies.
David Caddey has been a Director of Stockgroup.com since May 1995 and has
over 26 years experience in the business and program management field. Since
July 1998 he has served as an Executive Vice President of MacDonald Dettwiler
and Associates Ltd., a wholly-owned subsidiary of Orbital Sciences Corp. (NYSE:
ORB), a space technology and satellite services company that designs,
manufactures, operates and markets a broad range of space products and services.
During this period he has also served as the General Manager of that company's
Space Missions Group where he is responsible for managing the construction of
the Radarsat-2 spacecraft and associated ground infrastructure program, valued
at over $350 million, as well as the construction of the Space Station Mobile
Servicing System. From July 1994 to June 1998, Mr. Caddey worked as a Vice
President and General Manager of the Space and Defense Systems Business Area of
MacDonald Dettwiller and Associates Ltd.. In this capacity he was responsible
for marketing and sales, project management, technical management and post
delivery support. From 1990 to 1994 he served as Vice President and General
Manager of Geo-information Systems of MacDonald Dettwiller and Associates Ltd.,
where he managed the development of Radarsat I Ground Segment Program.
Louis de Boer has served as a director of Stockgroup.com since October
1999. Since May 1998, he has served as President of MediaFutures, Inc., which
provides consulting services to clients in the Internet and cable broadcasting
industries, including such companies as Hearst New Media, Cox Enterprises,
Rainbow Programming as well as several emerging growth companies. From June 1996
to April 1998, he was Chief Executive Officer at New Century Network, an online
company formed by a consortium of the nine leading US newspaper organizations,
including, Advance Communications, Cox Communications, The Chicago Tribune,
Hearst, Gannett, Knight-Ridder, Inc., The New York Times, The Washington Post
and Times-Mirror. At New Century Networks, Mr. de Boer managed the team of
experts that aggregated content and marketed and sold space to over 150
newspaper Web sites. From 1977 to December 1994, Mr. de Boer was employed at HBO
culminating in the positions of Executive Vice President of HBO Inc. and
President of its International division, where he played an instrumental role in
helping negotiate and broker deals that
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<PAGE>
significantly increased that company's presence in its international markets.
Mr. de Boer is also a director of Click TV, an online television listings
service, and Nextplay, both of which are public companies.
Leslie Landes has served as Stockgroup.com's President and Chief Operating
Officer since August 1998 and has been an advisor to Stockgroup.com since its
inception. Since January 1992, Mr. Landes has served as the President and as a
director of Landes Enterprises Limited, which he founded, and which is an
interim turnaround management consulting company that advised and counseled
clients in several industries, including telecommunications and technology on
issues ranging from mergers and acquisitions to international marketing
campaigns. Since July 1996 he has also served as the Chairman of Netset Home
Solutions, Inc., an Internet training company. Prior to forming Landes
Enterprises in 1992 Mr. Landes spent 13 years with the Jim Pattison Group,
Canada's third largest privately held company with sales in excess of CDN$3
Billion, with over 13,000 employees. He served as President of The Jim Pattison
Sign Group, Outdoor Group, and Communications Group, which included radio and
television stations and paid subscription print publications. Ultimately he was
appointed President of Jim Pattison Industries Ltd. and Senior Vice President of
the parent Jim Pattison Group, responsible for the Group's acquisitions and
divestitures, and with involvement in the management of the Group's 50
diversified companies. He successfully initiated and completed the acquisitions
of other companies in a number of diverse industries in which the Group was
active. Under his direction the Sign Group was built into the largest electric
sign company in the world. Mr. Landes is also a director of TIR Systems Ltd., a
lighting technology company, which is a public company.
Craig Faulkner has served as Stockgroup.com's Chief Technical Officer and
as a member of Stockgroup.com's board of directors since January 1995. Early in
his career with Stockgroup.com, Mr. Faulkner led Stockgroup.com to co-develop
one of the first portfolio tracking tools, LivequoteSRG, based 100 percent on
the use of Java. Mr. Faulkner manages the programming and information management
team at Stockgroup.com, initiates solutions with data and hardware vendors,
while maintaining a senior management role and board membership. Under Mr.
Faulkner's direction, Stockgroup.com has implemented a sophisticated blend of
both Sun Solaris and Microsoft NT solutions. Stockgroup.com's main site is
hosted on IBM Netfinity servers, while client sites are hosted on Sun Enterprise
machines.
David A. Andelman has served as Editor in Chief of Stockgroup.com since
December 1999. Mr. Andelman is a leading international journalist and
communications professional who has spent more than 30 years in print and
broadcast media. From July 1995 to November 1999 he served as news editor of
Bloomberg News. Mr. Andelman began his career as a domestic and foreign
correspondent and bureau chief for The New York Times in the U.S., Southeast
Asia and Eastern Europe. For seven years he served as European correspondent for
CBS News, based in Paris and as Washington correspondent for CNBC before joining
Bloomberg in 1995. He is the author of two books, and has written articles for
such magazines as Harper's, The Atlantic, The New Republic and Readers Digest.
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<PAGE>
Tim Bush has served as Vice President-Sales of Stockgroup.com since January
2000. From January 1996 to December 1999, he served as the Regional Sales
Director for one of the world's largest computer products and services
distributors, Ingram Micro Inc. From January 1991 to December 1996, he was
Regional Sales Director for computer distributor Merisel, Inc. During his
three-year tenure at Ingram, his team enjoyed over 30% annual sales growth per
year with sales in excess of CDN$400 Million in his final year, and have
consistently enjoyed a dominant market share position and high customer
retention and satisfaction.
Lindsay Moyle has served as the Chief Financial Officer of Stockgroup.com
since May 2000. From July, 1995 to April, 1999 he was the Chief Financial
Officer of NTS Computer Systems, a publicly traded specialty computer
manufacturer, where he helped the company grow from annual revenues of CDN$1
Million to CDN$35 Million.
Executive Compensation
The following summary compensation table reflects all compensation awarded
to, earned by, or paid to our Chief Executive Officer and our President for all
services rendered to us in all capacities during each of the years ended
December 31, 1997, 1998 and 1999. None of our other executive offices received
salary and bonus exceeding $100,000 during those years.
Summary Compensation Table
<TABLE>
<CAPTION>
All Annual
----------
Name and Principal Position Year Salary Bonus Compensation
--------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Marcus New 1997 $ 47,436 $ 0 $ 47,436
Chief Executive Officer, 1998 $ 40,192 $ 0 $ 40,192
Chairman and Director 1999 $111,073 $ 0 $111,073
Leslie Landes 1997 N/a N/a N/a
President & Chief Operating Officer 1998 $ 38,781 $ 0 $ 38,781
1999 $122,654 $ 0 $122,654
</TABLE>
The following table presents information concerning stock options granted
to or exercised by the named executive officers during 1999 for services
rendered to Stockgroup.com.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Number of
Securities # of Total
Underlying Options Granted
Options Granted to Employees in Exercise of Base
Name (#) Fiscal Year Price ($/share) Expiration Date
--------- --------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Marcus New 325,000 18.22% 2.50 March 11, 2004
Leslie Landes 105,000 5.89% 0.01 August 1, 2004
640,800* 35.93% 0.94 August 1, 2004
</TABLE>
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<PAGE>
The 325,000 options to Mr. New will vest and be exercisable in equal
amounts of 65,000 shares each year on March 11, commencing in 2000. Of Mr.
Landes' options, 53,800 to purchase shares at a price of $0.94 will vest and be
exercisable each year on December 31 of that year only if Stockgroup.com attains
sales performance levels of $16,500,000 and $28,500,000, respectively, in the
fiscal years ending December 31, 2000 and 2001. The remaining 533,200 options to
Mr Landes at $0.94 will vest and be exercisable in equal amounts of 106,640
shares each year on August 1, commencing in 1999, with the exception that the
options vesting in 1999 are not exercisable ukntil the same date in 2000. The
105,000 options to Mr Landes for $0.01 will vest and be exercisable in equal
amounts of 52,500 shares each year on August 4, commencing in 2002.
AGGREGATED OPTION EXERCISE IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares underlying Value Unexercised
Unexercised Options at In-the -Money Options at
December 31, 1999 December 31, 1999
Shares acquired Value ---------------------------- -----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marcus New 0 0 0 325,000 0 0
Leslie Landes 0 0 0 105,000 0 $169,574
0 0 0 640,800 0 $438,948
</TABLE>
Directors' Compensation
We compensate our Directors by issuing each one options to acquire 20,000
shares of common stock which fully vest after one year of service on our board
of directors. Mr. David Caddey was granted such options on March 11, 1999 which
have an exercise price of $2.50 per share and became fully vested and
exercisable on March 11, 2000. Mr. Louis deBoer II was granted such options on
October 7, 1999 which have a exercise price of $2.75 per share and become fully
vested and exercisable on October 7, 2000.
Employment and Severance Agreement
We have an employment agreement with our President Leslie Landes. This
agreement was signed on August 4, 1998 and has a term of 5 years. Under the
agreement Mr. Landes receives compensation of $150,000 per annum. The agreement
may be terminated by
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<PAGE>
us or Mr. Landes on 30 days notice, and if termination is initiated by us, Mr.
Landes is to receive a severance payment equal to 12 months compensation.
1999 Incentive Stock Option Plan
The purposes of our 1999 Incentive Stock Option Plan are to enhance our
profitability and shareholder value by enabling us to offer stock based
incentives to employees, directors and consultants. The 1999 Stock Option Plan
authorizes the grant, to our, and our subsidiaries, employees, directors,
consultants and advisors, of:
o stock options;
o restricted shares (which would generally provide for a substantial
risk of forfeiture for a period of time);
o deferred shares, which would generally provide for shares to be issued
upon services being rendered; and
o performance shares, which would generally provide for shares to be
issued upon the attainment of specified performance goals.
Under the 1999 Stock Option Plan, we may grant incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, and
non-qualified stock options. Incentive stock options may only be granted to our
employees.
The number of shares available for grants under the 1999 Stock Option Plan
is 2,000,000. The 1999 Stock Option Plan is administered by the board of
directors, although the board has the right to appoint a committee of two or
more non-employee directors to administer the Plan. Subject to the provisions of
the Plan, the board and the committee have authority to determine the employees,
directors, consultants and advisors who are to receive awards and the terms of
such awards, including:
o the number of shares subject to the award;
o the fair market value of the shares subject to options;
o the exercise price per share;
o the terms of vesting, including whether vesting accelerates upon a
change of control, which may also be granted to participants at any
time after an award has been granted; and other terms.
Grants of options may consist of incentive stock options, non-qualified
stock options, or a combination of both. Incentive stock options must have an
exercise price equal to at least 100% of the fair market value of a share on the
date of the award and non-qualified stock options must have an exercise price at
least equal to 75% of the fair market value of a share on the date of the award.
If the grant of an incentive stock option is to a shareholder holding more than
10% of our voting stock, the exercise price must be at least 110% of the fair
market value on the date of grant. Terms and conditions of awards are set forth
in written agreements
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<PAGE>
between us and the respective option holders. Awards under the 1999 Stock Option
Plan may not be made after March 11, 2009, and stock options granted before that
date may not have a term beyond that date.
If the employment with us of the holder of a stock option is terminated for
any reason other than as a result of a voluntary termination with the consent of
the board or the holder's death or disability, the holder's stock option
terminates on the same date. If the termination is due to such a voluntary
termination the holder may exercise the option, to the extent exercisable on the
date of termination of employment, until 3 months after the date of termination.
If an option holder dies or becomes disabled, stock options may generally be
exercised, to the extent exercisable on the date of death or disability, by the
option holder or the option holder's survivors until six months after the date
of death or disability.
As of April 28, 2000, options to purchase up to 1,882,300 shares of common
stock had been granted under the 1999 Stock Option Plan, and options to purchase
117,700 shares were available for future grants. We have registered the shares
subject to issuance under our 1999 Stock Option Plan, pursuant to our
registration statement on Form S-8 filed with the Securities and Exchange
Commission on November 16, 1999.
LIMITATION OF LIABILITY AND INDEMNIFICATION
We intend to enter into indemnification agreements with our directors and
officers. These agreements will provide, in general, that we will indemnify and
hold harmless such directors and officers to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement, and expenses incurred
in connection with, or in any way arising out of, any claim, action or
proceeding against, or affecting, such directors and officers resulting from,
relating to or in any way arising out of, the service of such persons as our
directors and officers. Currently, directors and officers are entitled to the
benefits of the limitation of liability provided under our charter documents and
the laws of the State of Colorado.
Insofar as indemnification for liabilities arising under the Securities Act
of 1993 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than our payment of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
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<PAGE>
SELLING SHAREHOLDERS
This prospectus relates to the offering by the selling shareholders of
shares of our common stock acquired by them upon conversion of convertible notes
and exercise of warrants which the selling shareholders received in a private
placement. All of the shares of common stock offered by this prospectus are
being offered by the selling shareholders for their own accounts.
Deephaven Private Placement Trading Ltd. ("Deephaven") and Amro
International S.A. ("Amro") purchased an aggregate of $3 million of convertible
notes and warrants from us in a private placement transaction which closed on
April 3, 2000. As part of that private placement, Deephaven and Amro were issued
notes that may be converted into our common stock and warrants to acquire our
common stock. The notes and the warrants are described in more detail on page 58
of this prospectus. Holders of the notes and warrants are prohibited from using
them to convert into and acquire shares of our common stock to the extent that
such conversion or acquisition would result in such holder, together with any
affiliate thereof, beneficially owning in excess of 4.999% and 9.999%,
respectively, of the outstanding shares of our common stock following such
conversion or acquisition. This restriction may be waived by the holder on not
less than 61 days' notice to us. Since the number of shares of our common stock
issuable upon conversion of the notes will change based upon fluctuations of the
market price of our common stock prior to a conversion, the actual number of
shares of our common stock that will be issued under the notes, and consequently
the number of shares of our common stock that will be beneficially owned by
Deephaven and Amro, cannot be determined at this time. Because of this
fluctuating characteristic, we have agreed to register a number of shares of our
common stock that exceeds the number of shares beneficially owned by Deephaven
and Amro. The number of shares of our common stock listed in the table below as
being beneficially owned by Deephaven and Amro includes the shares of our common
stock that are issuable to them, subject to the 4.999% and 9.999%, respectively,
limitation, upon conversion of their notes and exercise of their warrants.
However, the 4.999% and 9.999%, respectively, limitation would not prevent
Deephaven and Amro from acquiring and selling in excess of 4.999% and 9.999%,
respectively, of our common stock through a series of conversions and sales
under the notes and acquisitions and sales under the warrants.
Deephaven is a private investment fund that is owned by its investors and
that is managed by Deephaven Capital Management LLC. Deephaven Capital
Management LLC has voting and investment control over the shares listed above as
owned by Deephaven.
Amro is a private investment fund that is owned by its investors and that
is managed by Ultrafinance. Mr. H.U. Bachofen is a director and principal of
Ultrafinance and as such has investment control over the shares listed above as
owned by Amro.
Jesup is owned 100% by Jesup and Lamont Group Holdings, which is owned 80%
by Mr. Howard F. Curd.
Deephaven and Amro have represented to us that (i) they acquired the
securities listed above in the ordinary course of business, and (ii) they did
not have any agreement or
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<PAGE>
understanding, directly or indirectly, with any person to distribute the
securities at the time that the securities being registered above were acquired.
The following table sets forth information with respect to the common stock
beneficially owned by the selling shareholders as of the date of this
prospectus, including shares obtainable under convertible notes and warrants
exercisable within 60 days of such date. To our knowledge, each of the selling
shareholders has sole voting and investment power over the shares of common
stock listed in the table below. No selling shareholder, has had a material
relationship with us during the last three years, other than as an owner of our
common stock or other securities.
<TABLE>
<CAPTION>
NUMBER OF SHARES
SELLING NUMBER OF NUMBER OF OWNED AFTER THE PERCENT
SHAREHOLDERS SHARES SHARES OFFERED OFFERING 0F CLASS
------------ ------ -------------- -------- --------
<S> <C> <C> <C> <C>
Deephaven Private 121,212 5,459,682 0 0
Placement Trading Ltd.
Amro International 60,606 2,729,841 0 0
Jesup and Lamont Securities 90,909 90,909 0 0
Corp.
</TABLE>
The number of shares of common stock shown for Deephaven, Amro and Jesup
consists of 200% of the number of shares issuable upon conversion of notes,
being 5,338,470 shares, and 2,669,235 shares, respectively and 121, 212 shares,
60,606 shares, and 90,909 shares, respectively, issuable upon exercise of
warrants. This estimate is based on the conversion rate of the convertible notes
and the exercise price of the warrants in effect on the date of this prospectus.
The notes may only be converted if we do not make payment on a noteholder's
prepayment request, or if we seek to prepay the notes.
We have assumed the sale of all of the common stock offered under this
prospectus will be sold. However, as the selling shareholders can offer all,
some or none of their shares of common stock, no definitive estimate can be
given as to the number of shares that the selling shareholders will hold after
this offering. Holders of the notes and warrants are prohibited form using them
to convert into or acquire shares of our common stock to the extent that such
conversion or acquisition would result in such holders, together with any
affiliate thereof, beneficially owning in excess of 4.999% and 9.999%,
respectively, of the outstanding shares of our common stock following such
conversion or acquisition. This restriction may be waived by the holder on not
less than 61 days notice to us.
As of the date of this prospectus the conversion price was $0.768. The
number of shares to be issued upon exercise of the warrants is based upon an
exercise price of $3.30.
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<PAGE>
PRINCIPAL SHAREHOLDERS
Security Ownership of Certain Beneficial Owners
The following table sets forth as of April 28, 2000 the beneficial ownership of
common stock of each person known to us who owns more than 5% of our issued and
outstanding common stock.
Name and address* of Amount and Nature Percent of
Beneficial Owner of Beneficial Ownership Class
-------------------- ----------------------- ----------
Marcus New 2,882000 35.16%
Yvonne New 2,747,000 33.52%
518464 B.C. Ltd. 2,245,000 27.39%
Craig Faulkner 954,000 11.64%
569358 B.C. Ltd. 665,000 8.11%
----------
* Unless otherwise referenced, the address for each of the above mentioned
parties is c/o Stockgroup.com Holdings, Inc. Suite 500 - 750 West Pender
Street, Vancouver, B.C. Canada V6C 2T7.
On March 11, 1999, we entered into a Share Exchange and Share Purchase
Agreement with 579818 B.C. Limited, a British Columbia wholly-owned subsidiary
of ours; Stock Research Group, Inc., a British Columbia corporation; and all of
the shareholders of Stock Research Group. Under that Agreement we acquired all
of the issued and outstanding shares of Stock Research Group, in consideration
of which 579818 B.C. Limited issued to the Stock Research Group shareholders
3,900,000 Class A Exchangeable Shares. We also issued to Stock Trans, Inc., our
transfer agent, 3,900,000 shares of our common stock, to hold as trustee for the
benefit of the Stock Research Group shareholders. The exchangeable shares may be
converted, at the option of the holder, into an equal number of shares of the
our common stock held by the trustee. Pending any such conversion, each holder
of the exchangeable shares may direct the trustee to vote an equivalent number
of shares of our common stock. The trustee has no discretion as to voting or
disposition of our common stock.
As a result of these transactions, each of the former Stock Research Group
shareholders has the right to vote, or to direct the trustee to vote on their
behalf, a number of shares of our common stock equal to the number of
exchangeable shares held of record by them. In the aggregate, shares of our
common stock issued to the trustee represent approximately 47.59% of our issued
and outstanding shares of common stock.
The trust created by these transactions will continue until the earliest to
occur of the following events:
o no outstanding exchangeable shares are held by any former Stock Research
Group shareholder;
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o each of 579818 B.C. Limited and Stockgroup.com acts in writing to terminate
the trust and such termination is approved by the holders of the
exchangeable shares; and o December 31, 2098.
Of the amount shown for Marcus New, 47.62% (or 1,372,500 shares) of the
exchangeable shares are owned by Yvonne New, Mr. New's wife.
Mr. Marcus New and his wife, Yvonne New, each own directly 250,000
exchangeable shares, and indirectly, through 518464 B.C. Ltd., a British
Columbia company owned by Mr. New as to 50% and his wife Yvonne New as to 50%,
2,245,000 exchangeable shares. Mr. New also owns 2,000 shares of common stock
which were purchased in the open market. Accordingly, Marcus and Yvonne New
beneficially own 2,747,000 shares of our common stock, which represent
approximately 33.52% of our issued and outstanding common stock.
In addition to this amount, 70,000 shares are held in trust for the benefit
of Mr. New. This trust is a non-voting trust. Mr. New was also granted options
to purchase 325,000 shares of common stock at an exercise price of $2.50 per
share. The initial vesting of 65,000 options took place on March 11, 2000. In
combination with Mr. New's 2,745,000 exchangeable shares, 2,000 shares of common
stock, and 70,000 shares of common stock held in trust, these 65,000 optioned
shares create a beneficial ownership position in the company of 2,882,000 shares
representing approximately 34.89% of our issued and outstanding common stock.
Of the amount shown for Craig Faulkner, Mr. Faulkner owns directly 250,000
exchangeable shares and indirectly, through 569358 B.C. Ltd., a British Columbia
company owned by Mr. Faulkner, 665,000 exchangeable shares. Mr. Faulkner has
also been granted options to acquire 195,000 shares of common stock at an
exercise price of $2.50 per share. Mr. Faulkner was granted these options on
March 11, 1999. The options have a five year term and vest 20% per year. The
initial vesting of 39,000 options took place on March 11, 2000. In combination
with his direct and indirect holdings of 915,000 exchangeable shares, Mr.
Faulkner beneficially owns 954,000 shares representing approximately 11.59% of
our issued and outstanding common stock.
Security Ownership of Management
The tables below and the paragraphs that follow present certain information
concerning our directors, executive officers and significant employees. Mr.
David Caddey is Mr. Marcus New's wife's uncle. Other than this relationship,
none of our directors, executive officers or significant employees has any
family relationship with any other director, executive officer or significant
employee.
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<TABLE>
<CAPTION>
Executive Shares of Common Stock
Officer/Director Beneficially Owned As of Percent of
Name Age Position with Company Since April 28, 2000 Class
---- --- --------------------- ----- -------------- -----
<S> <C> <C> <C> <C> <C>
Directors:
Marcus A. New 29 Chairman of the Board, Chief 05/04/95 2,882,000 34.89%
Executive Officer, Director
Craig D. Faulkner 29 Chief Technology Officer, 05/04/95 954,000 11.59%
Director
Leslie Landes 56 President, Chief Operating 08/04/98 Nil Nil
Officer, Director
David Caddey 50 Director 05/04/95 80,000 0.97%
Louis deBoer II 47 Director 10/07/99 Nil Nil
Lindsay Moyle 35 Chief Financial Officer 05/23/00 Nil Nil
Executive Officers and significant employees who are not Directors:
David Andelman 53 Editor in Chief 12/16/99 6,000 .07%
Tim Bush 40 Vice President Sales 01/03/00 6,000 .07%
All Directors, Executive Officers and 3,928,000 47.22%
Significant employees as a group
</TABLE>
Of the amount shown for Mr. Caddy, 50% (or 30,000 shares) are owned by Ms.
Donna Caddey, Mr. Caddey's wife.
Mr. David Caddey and his wife, Donna Caddey, each own directly 20,000
exchangeable shares. In addition, 20,000 shares of common stock are owned
jointly by David and Donna Caddey. Accordingly, Mr. and Ms. Caddey beneficially
owns 60,000 shares of our common stock which represents approximately 0.73% of
our issued and outstanding common stock.Mr. Caddey has been granted options to
purchase 20,000 shares of common stock at an exercise price of $2.50 per share.
Mr. Caddey was granted these options on March 11, 1999. The options have a six
year term and full vesting of the 20,000 options took place on March 11, 2000
and the beneficial ownership calculation here includes 20,000 shares of common
stock underlying these options. In combination with his direct and indirect
holdings of 40,000 exchangeable shares and direct and indirect holdings of
20,000 shares of common stock, Mr. Caddey beneficially owns 80,000 shares
representing approximately 0.97% of our issued and outstanding common stock.
Mr. David Andelman and Mr. Tim Bush each respectively own 6,000 shares of
common stock purchased in the open market.
Mr. Leslie Landes has been granted options to purchase 745,800 shares of
our common stock at a price of $0.01 per share as to 105,000 shares and $0.94
per shares as to the
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<PAGE>
balance. Mr. Landes was granted these options on March 11, 1999. The options may
be exercised, to the extent vested, only after August 1, 2000. As at August 1,
1999, 106,640 of the options had vested. In addition, 107,600 of Mr. Landes'
options to purchase shares at a price of $0.94 will vest and be exercisable only
if Stockgroup.com attains sales performance levels $16,500,000 and $28,500,000
respectively in fiscal years ending December 31, 2000 and 2001. As at April 28,
2000, none of Mr. Landes' options provide him with beneficial ownership of any
of our issued and outstanding common stock.
Mr. Louis deBoer II, has been granted options to purchase 20,000 shares of
our common stock at an exercise price of $2.75 per share. Mr. deBoer was granted
these options on October 7, 1999. The options have a six year term and full
vesting of the 20,000 options will take place on October 7, 2000. As at April
28, 2000, none of Mr. deBoer's options provide him with beneficial ownership of
any of our issued and outstanding common stock.
Mr. David Andelman was granted options to purchase 100,000 shares at an
exercise price of $1.62. These options were granted to Mr. Andelman on December
16, 1999, have a six year term and vest as to 20% per year starting December 16,
2000. As at April 28, 2000, Mr. Andelman's vested options are nil, and he owned
6,000 shares representing 0.07% of our issued and outstanding common stock.
Mr. Tim Bush was granted options to purchase 50,000 shares at an exercise
price of $1.625. These options were granted to Mr. Bush on January 3, 2000, have
a six year term and vest as to 20% per year starting January 3, 2001. As at
April 28, 2000, Mr. Bush's vested options are nil, and he owned 6,000 shares
representing 0.07% of our issued and outstanding common stock.
Mr. Moyle's employment agreement provides that he will be granted an option
to acquire 25,000 shares of common stock. The terms of the grant have not as yet
been determined.
DESCRIPTION OF CAPITAL STOCK
The following description of our securities and various provisions of our
Articles of Incorporation and our bylaws are summaries. Statements contained in
this prospectus relating to such provisions are not necessarily complete, and
reference is made to the Articles of Incorporation and bylaws, copies of which
have been filed with the Securities and Exchange Commission as exhibits to our
registration statement of which this prospectus constitutes a part, and
provisions of applicable law. Our authorized capital stock consists of
75,000,000 shares of common stock, no par value, of which 8,195,000 shares were
issued and outstanding as of April 28, 2000, and 5,000,000 shares of preferred
stock, no par value, of which no shares were issued and outstanding as of April
28, 2000. As of April 28, 2000, there were approximately 32 holders of record of
our common stock.
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<PAGE>
COMMON STOCK
Each share of common stock is entitled to share pro rata in dividends and
distributions with respect to the common stock when, as and if declared by the
board of directors from funds legally available therefor. No holder of any
shares of common stock has any pre-emptive right to subscribe for any of our
securities. Upon dissolution, liquidation or winding up of Stockgroup.com, the
assets will be divided pro rata on a share-for-share basis among holders of the
shares of common stock after any required distribution to the holders of
preferred stock, if any. All shares of common stock outstanding are fully paid
and nonassessable.
Each shareholder of common stock is entitled to one vote per share with
respect to all matters that are required by law to be submitted to shareholders.
The shareholders are not entitled to cumulative voting in the election of
directors. Accordingly, the holders of more than 50% of the shares voting in the
election of directors will be able to elect all the directors if they choose to
do so.
Currently, our bylaws provide that shareholder action may be taken at a
meeting of shareholders and may be affected by a consent in writing if such
consent is signed by the holders of the majority of outstanding shares, unless
Colorado law requires a greater percentage. Our Articles of Incorporation
provide that they may be amended by the affirmative vote of a majority of the
shares entitled to vote on such an amendment. These are the only provisions of
our bylaws or Articles of Incorporation that specify the vote required by
security holders to take action.
PREFERRED STOCK
The board of directors is authorized, without further shareholder approval,
to issue from time to time up to an aggregate of 5,000,000 shares of preferred
stock. The preferred stock may be issued in one or more series and the board of
directors may fix the rights, preferences and designations thereof. No shares of
preferred stock are currently outstanding and we have no present plans to issue
any shares of preferred stock. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of our outstanding voting stock.
NOTES AND WARRANTS
On April 3, 2000, we entered into a Convertible Note Purchase Agreement
pursuant to which we obtained $3 million in a financing with two institutional
investors.
The funding included $3 million of 8% Convertible Debenture Notes, and
5-year Callable Warrants. The notes mature on March 31, 2002 and are convertible
into common stock only after July 31, 2000. The notes may only be converted if
we do not make payment on a note holder's prepayment request, or if we seek to
prepay the notes. The initial conversion price for the notes is $3.72, and the
exercise price of the warrants is $3.30. The
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<PAGE>
initial conversion price and the exercise price are subject to adjustment upon
the happening of certain events, such as the payment of a stock dividend, or the
issuance of warrants at a below market price or at a price below the conversion
price. Prepayments on the notes are subject to a tiered prepayment schedule that
increases as the number of days between the closing date and the prepayment date
increases, being 105%, 110%, and 115% of principal from days 1-60, 61-120, and
after 120 days, respectively. Interest accrues on the notes at the rate of 8%
per annum, and is payable on each conversion date and at maturity. Interest may
be paid in the form of cash or registered stock, at our option. The lenders have
the right to put back to us up to 25% of the unconverted amount of the notes
during any 30 day period after July 31, 2000. Upon the lenders' exercise of such
right, we have the option of prepaying the portion of the notes sought to be
converted, such prepayment to be in accordance with the tiered prepayment
schedule set forth above. If we do not make such prepayment within 10 days after
our receipt of a "put" notice, the conversion rate of the note changes to the
lesser of (a) the initial conversion price, and (b) 88% of the five lowest
closing prices of our common stock during the 30 trading days prior to the date
of conversion.
The warrants permit the holders to acquire up to 272,727 shares of our
stock. The warrants may be called by us, at a purchase price of $.01 per
underlying share, if our common stock trades at the level of 175% of the initial
conversion price of $3.72 for any 20 consecutive trading days after the
effective date of our registration statement, provided that the holders have the
right to exercise the warrants within 30 days after their receipt of such a
call.
The placement agent in the transaction received warrants to purchase 90,909
shares of common stock on the same terms as the warrants issued to the lenders.
Assuming that the notes were fully convertible as of the date of this
prospectus, conversion of the entire $3,000,000 principal amount of the
convertible notes and accrued interest at 8% thereon, would yield 4,003,853
shares of common stock, given a conversion price of $0.768 per share. Based upon
the interest rate and the conversion price of $0.768 which is subject to
adjustment as described above, the number of shares of common stock issuable
upon conversion of the notes will increase by approximately 856 shares daily
until conversion.
If the notes have not been converted or redeemed on March 30, 2002, they
will automatically convert into shares of common stock as of that date. Upon the
occurrence of events specified in the Convertible Note Purchase Agreement, the
holders of the notes may elect to have us redeem the notes at a premium to their
purchase price. These events include, but are not limited to:
o failure by us to issue shares of our common stock upon conversion of the
notes;
o failure by us to keep the specified number of shares of our common stock
reserved for issuance upon conversion of the notes; and
o our making an assignment for the benefit of our creditors or our
bankruptcy, insolvency, reorganization or liquidation.
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<PAGE>
The warrants issued to Deephaven, Amro and Jesup may be exercised at any
time during the five-year period following their issuance. The exercise price
for the warrants is subject to adjustment for stock dividends, stock splits,
recapitalizations, reclassifications, combinations, and dilutive issuances of
securities. The notes and warrants contain provisions which limit the number of
shares of common stock into which the notes are convertible and the warrants are
exercisable. Under these provisions, the number of shares of common stock into
which the notes are convertible and the warrants are exercisable on any given
date, together with any additional shares of common stock held by Deephaven or
Amro, will not exceed 4.99% of our then outstanding common stock.
The foregoing has been a brief description of some of the terms of the
notes and warrants. For a more detailed description of the rights of the holders
of the notes and warrants, prospective investors are directed to the actual
forms of the notes and warrants, and the Convertible Note Purchase Agreement
under which they were issued, which were all filed as exhibits to our Form 8-K
filed with the SEC on April 18, 2000.
REGISTRATION RIGHTS
Under a Registration Rights Agreement with Deephaven and Amro entered into
on April 3, 2000, we agreed to register the shares of common stock issuable to
Deephaven and Amro upon conversion of their notes and exercise of their
warrants. We also agreed to register the shares issuable to Jesup upon
conversion of its warrants. This prospectus is part of the registration
statement intended to satisfy this obligation. The registration rights agreement
requires us to file a registration statement with respect to the shares within a
specified period of time and to have the registration statement be declared
effective within a specific period of time. We must also keep the registration
statement effective until all of the securities offered have been sold. We are
responsible for the payment of all fees and costs associated with the
registration of the securities, except that we are not responsible for legal
fees generated by Deephaven's, Amro's and Jesup's counsel, and we are not
responsible for brokerage commissions and discounts. We are required to
indemnify and hold harmless Deephaven, Amro and Jesup, and their agents and
representatives, against:
o any untrue statement of a material fact in a registration statement;
o any untrue statement or alleged untrue statement contained in any
preliminary prospectus if used prior to the effective date of the
registration statement; or
o any violation or alleged violation of the Securities Act of 1933 or the
Securities Exchange Act of 1934.
Specific procedures for carrying out such indemnification are set forth in
the Agreement.
Under the Registration Rights Agreement, Deephaven, Amro and Jesup also
have the right to include all or a part of their common stock in a registration
filed
45
<PAGE>
by us for purposes of a public offering in the event that we fail to satisfy our
other obligations as to the registration of the common stock acquired them.
ANTITAKEOVER EFFECTS OF COLORADO LAW AND OUR ARTICLES OF INCORPORATION AND
BYLAWS
Colorado law does not contain provisions which are intended to have the
effect of delaying or deterring a change in control or management of
Stockgroup.com.
Our Articles of Incorporation permit the issuance of up to 5,000,000 shares
of preferred stock, having such rights, preferences and privileges as the board
of directors may determine. The issuance of preferred stock, while providing
desirable flexibity in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from acquiring, a majority of our
outstanding voting stock.
Provisions of our bylaws which are summarized below may affect potential
changes in control of Stockgroup.com. The board of directors believes that these
provisions are in the best interests of shareholders because they will encourage
a potential acquirer to negotiate with the board of directors, which will be
able to consider the interests of all shareholders in a change in control
situation. However, the cumulative effect of these terms may be to make it more
difficult to acquire and exercise control of Stockgroup.com and to make changes
in management more difficult.
The bylaws provide the number of directors of Stockgroup.com will be
established by the board of directors, but shall be no less than one. Between
shareholder meetings, the board of directors may appoint new directors to fill
vacancies or newly created directorships. A director may be removed from office
by the affirmative vote of 66-2/3% of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the election of
directors.
As discussed above, our bylaws further provide that shareholder action may
be taken at a meeting of shareholders and may be effected by a consent in
writing if such consent is signed by the holders of the majority of outstanding
shares, unless Colorado law requires a greater percentage.
We are not aware of any proposed takeover attempt or any proposed attempt
to acquire a large block of our common stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
We believe that provisions of our Articles of Incorporation and bylaws will
be useful to attract and retain qualified persons as directors and officers. Our
Articles of Incorporation limit the liability of directors and officers to the
fullest extent permitted by Colorado law. This is intended to allow our
directors and officers the benefit of Colorado's corporation law which
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provides that directors and officers of Colorado corporations may be relieved of
monetary liabilities for breach of their fiduciary duties as directors, except
under circumstances which involve acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or the payment of unlawful
distributions.
We intend to obtain officer and director liability insurance with respect
to liabilities arising out of certain matters, including matters arising under
the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act
of 1993 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than our payment of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
TRANSFER AGENT AND REGISTRAR
Stocktrans, Inc. is the transfer agent and registrar for our capital stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this prospectus, 8,195,000 shares of our common stock
were outstanding, 1,882,300 shares of common stock were subject to options
granted under our 1999 stock option plan, and 4,276,580 shares of common stock
were issuable upon exercise of the convertible notes and warrants held by the
selling shareholders. Of the outstanding shares, 3,195,000 shares of common
stock are immediately eligible for sale in the public market without restriction
or further registration under the Securities Act of 1933, unless purchased by or
issued to any "affiliate" of ours, as that term is defined in Rule 144
promulgated under the Securities Act of 1933, described below. All other
outstanding shares of our common stock are "restricted securities" as such term
is defined under Rule 144, in that such shares were issued in private
transactions not involving a public offering and may not be sold in the absence
of registration other than in accordance with Rule 144, 144(k) or 701
promulgated under the Securities Act of 1933 or another exemption from
registration.
The shares of common stock issuable upon conversion or exercise of the
convertible notes and warrants held by the selling shareholders are being
registered in the registration statement of which this prospectus is a part.
Upon effectiveness of that registration statement,
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such shares will also be immediately eligible for sale in public market subject
to restrictions included in our agreements with the selling shareholders. We
also filed a registration statement to register for resale the 2,000,000 shares
of common stock reserved for issuance under our stock option plan. That
registration statement became effective immediately upon filing. Accordingly,
shares covered by that registration statement are eligible for sale in the
public market subject to vesting restrictions. As of April 28, 2000, 162,200 of
these options were exercisable.
Sales of substantial amounts of our common stock under Rule 144, this
prospectus or otherwise could adversely affect the prevailing market price of
our common stock and could impair our ability to raise capital through the
future sale of our securities.
PLAN OF DISTRIBUTION
The selling shareholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling shareholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling shareholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such method of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling shareholders may also engage in short sales against the box,
puts and calls and other transactions in securities of Stockgroup.com or
derivatives of our securities and may sell or deliver shares in connection with
these trades. The selling shareholders may pledge their shares to their brokers
under the margin provisions of customer agreements. If a selling shareholder
defaults on a margin loan, the broker may, from time to time, offer and sell
pledged shares.
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Broker-dealers engaged by the selling shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling shareholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
Stockgroup.com is required to pay all fees and expenses incident to the
registration of the shares, excluding the fees and disbursements of counsel to
the selling shareholders. Stockgroup.com has agreed to indemnify the selling
shareholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby has been
passed upon for us by Sierchio & Albert, P.C., New York, New York.
EXPERTS
The consolidated financial statements of Stockgroup.com Holdings, Inc. at
December 31, 1999 and 1998, and for each of the two years in the period ended
December 31, 1999, appearing in this prospectus and in the registration
statement have been audited by Ernst & Young LLP, independent chartered
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2. This prospectus, which is a part of the registration
statement, does not contain all of the information included in the registration
statement. Some information is omitted and you should refer to the registration
statement and its exhibits. With respect to references made in this prospectus
to any contract, agreement or other document of Stockgroup.com, such references
are not necessarily complete and you should refer to the exhibits attached to
the registration statement for copies of the actual contract, agreement or other
document. You may review a copy of the registration statement, including
exhibits, at the Securities and Exchange Commission's public reference room at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or Seven World
Trade Center, 13th Floor, New York, New York 10048 or Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661.
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The public may obtain information on the operation of the public reference
room by calling the Securities and Exchange Commission at 1-800-SEC-0330.
We will also file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information on file at the public
reference rooms. You can also request copies of these documents, for a copying
fee, by writing to the Securities and Exchange Commission.
Our Securities and Exchange Commission filings and the registration
statement can also be reviewed by accessing the Securities and Exchange
Commission's Internet site at http://www.sec.gov, which contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission.
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INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999 (unaudited).........................................F-2
Consolidated Statement of operations for the three months ended
ended March 31, 2000 and 1999 (unaudited).................................F-3
Consolidated Statement of Cash Flows operations for the three
months ended March 31, 2000 and 1999 (unaudited)..........................F-4
Notes to (unaudited) Consolidated Financial Statements.......................F-5
Auditors' Report.............................................................F-8
Consolidated Balance Sheets as at December 31, 1999 and 1998.................F-9
Consolidated Statement of Operations for the years ended
December 31, 1999 and 1998...............................................F-10
Consolidated Statement of Shareholders' Equity for the years
ended December 31, 1999 and 1998.........................................F-11
Consolidated Statement of Cash Flows for the years ended
December 31, 1999 and 1998...............................................F-12
Notes to Consolidated Financial Statements..................................F-13
<PAGE>
Stockgroup.com Holdings, Inc.
CONSOLIDATED BALANCE SHEET
As at March 31, 2000
(UNAUDITED - Expressed in U.S. Dollars)
Unaudited
March 31, December 31,
2000 1999
$ $
ASSETS
Current
Cash and cash equivalents $ 609,208 $ 1,658,822
Accounts receivable, net 1,136,177 855,170
Due from shareholder 32,216 31,973
Prepaid expenses 185,062 887,223
----------- -----------
TOTAL CURRENT ASSETS $ 1,962,663 $ 3,433,188
Property and equipment, net $ 537,175 $ 440,368
Investments and advances 500,000 --
----------- -----------
$ 2,999,838 $ 3,873,556
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Bank indebtedness $ 141,784 $ 21,004
Accounts payable 620,262 732,392
Accrued payroll liabilities 29,298 126,566
Deferred revenue 765,174 230,545
----------- -----------
TOTAL CURRENT LIABILITIES $ 1,556,518 $ 1,110,507
----------- -----------
TOTAL LIABILITIES $ 1,556,518 $ 1,110,507
----------- -----------
SHAREHOLDERS' EQUITY
COMMON STOCK, No Par Value
Authorized shares - 75,000,000
Issued and Outstanding shares - 8,195,000 $ 6,761,483 6,761,483
PREFERRED STOCK, non-voting, no par value
Authorized shares - 5,000,000
Issued and outstanding - nil -- --
ADDITIONAL PAID-IN CAPITAL 297,563 261,277
ACCUMULATED DEFICIT $(5,615,726) $(4,259,711)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,443,320 2,763,049
----------- -----------
$ 2,999,838 $ 3,873,556
=========== ===========
The Accompanying Notes Are An Integral Part
Of These Unaudited Financial Statements.
F-2
<PAGE>
Stockgroup.com Holdings, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2000
(UNAUDITED - Expressed in U.S. Dollars)
Unaudited Unaudited
Three Months Three Months
Ended March Ended March
31, 2000 31, 1999
----------- -----------
(unaudited) (unaudited)
REVENUE
Revenues $ 1,241,207 $ 179,194
Cost of revenues 397,066 60,392
----------- -----------
Gross profit $ 844,141 $ 118,802
EXPENSES
Sales and marketing $ 1,182,636 $ 55,708
Product development 161,639 30,955
General and administrative 873,424 669,532
----------- -----------
$ 2,217,699 $ 756,195
----------- -----------
INCOME (LOSS) FROM OPERATIONS $(1,373,558) $ (637,393)
Interest income 16,989 0
Other income (expense) 554 232
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES $(1,356,015) $ (637,161)
Income tax provision (recovery) -- --
----------- -----------
NET INCOME (LOSS) $(1,356,015) $ (637,161)
=========== ===========
Basic and diluted earnings (loss)
Per share (0.17) (0.15)
=========== ===========
Weighted average shares used in
the calculation of basic and
diluted net loss per share 8,195,000 4,265,769
=========== ===========
F-3
<PAGE>
Stockgroup.com Holdings, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS For the Three Months
Ended March 31, 2000
(UNAUDITED - Expressed in U.S. Dollars)
Unaudited Unaudited
Three Months Three Months
Ended March Ended March
31, 2000 31, 1999
----------- ----------
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net Income (Loss) $(1,356,015) $(637,161)
Add (deduct) non-cash items
Depreciation and amortization 28,804 6,723
Provision for doubtful accounts (113) --
Common stock issued for services -- 450,000
Compensation expense on stock options 36,286 39,320
----------- ---------
(1,291,038) (141,118)
Net changes in non-cash working capital
Accounts receivable (280,893) (14,222)
Due from shareholder (243) (10,990)
Prepaid expenses 702,161 (7,359)
Accounts payable (547,130) 131,851
Accrued liabilities (97,268) (15,837)
Deferred revenue 34,629 2,261
----------- ---------
CASH PROVIDED BY (USED) IN OPERATING ACTIVITIES $(1,479,782) $ (55,414)
----------- ---------
FINANCING ACTIVITIES
Net deposit on common stock to be inserted 435,000 402,451
(Repayments) proceeds on bank indebtedness 120,780 (60,553)
(Repayments) proceeds on long-term debt -- (8,260)
(Repayments to) advances from shareholders -- (12,069)
Due to (from) related company -- --
----------- ---------
CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES $ 555,780 $ 321,569
INVESTING ACTIVITIES
Purchase of property and equipment (125,612) (69,466)
Investments 0 --
Net cash acquired in reverse acquisition -- 3,272
----------- ---------
CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES $ (125,612) $ (66,194)
----------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,049,614) 199,961
Cash and cash equivalents, beginning of period 1,658,822 --
----------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 609,208 $ 199,961
=========== =========
F-4
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three
Months Ended March 31, 2000
(UNAUDITED)
1. NATURE OF BUSINESS
Stockgroup.com Holdings, Inc. ("Stockgroup.com") is a leading provider of
Internet financial news and information services focusing on the North American
small-cap and micro-cap markets. Stockgroup.com also provides Internet
advertising and Website design and maintenance services to publicly traded
companies. Stockgroup.com is incorporated under the laws of Colorado and is
publicly traded on the NASD OTC Bulletin Board.
2. BASIS OF PRESENTATION AND COMPARATIVE AMOUNTS
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, the Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the financial statements and the notes thereto included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1999.
The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) which
are, in the opinion of management, necessary to state fairly the results for the
three month period ended March 31, 2000. The results for the three month period
ended March 31, 2000 are not necessarily indicative of the results expected for
the full fiscal year.
These consolidated financial statements are presented in U.S. dollars and are
prepared in accordance with accounting principles generally accepted in the
United States ("U.S. GAAP"). Prior to year end 1999, the Company reported its
financial results using Canadian GAAP and Canadian Dollars. The Company changed
its reporting to U.S. GAAP. In this report comparative figures have been
retroactively restated to conform to the U.S. GAAP presentation. The comparative
figures have been recast into U.S. dollars in accordance with FASB Statement No.
52, Foreign Currency Translation.
3. CALCULATION OF EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed based on the weighted average number
of common shares outstanding during each year. Diluted earnings (loss) per share
is computed based on the weighted average number of common shares outstanding
during each year, plus the dilutive potential of options outstanding during the
year, in accordance with FASB Statement No. 128, Earnings Per Share.
The following table sets forth the computation of earnings (loss) per share:
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
$ $
-------------- --------------
Net income (loss) for the quarter (1,356,013) (637,161)
Weighted average number of common shares
used in computation 8,195,000 4,265,769
Basic and diluted earnings (loss) per share (0.17) (0.15)
F-5
<PAGE>
For the quarter ended March 31, 2000, all of the Company's common shares
issuable upon the exercise of stock options were excluded from the determination
of diluted earnings (loss) per share as their effect would be anti-dilutive.
4. COMPREHENSIVE INCOME
The Company follows FASB Statement No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and displaying comprehensive income
and its components in the consolidated financial statements. For the quarters
ended March 31, 2000 and March 31, 1999, the Company did not have any components
of comprehensive income.
5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes new standards for
recording derivatives in interim and annual financial statements. This statement
requires recording all derivative instruments as assets or liabilities, measured
at fair value. Statement No. 133, as amended by FASB Statement No. 137, is
effective for fiscal years beginning after June 15, 2000. Management has not
determined the impact, if any, that the adoption of the new statement will have
on the consolidated results of operations or financial position of the Company.
6. SEGMENTED INFORMATION
The Company operates in one industry segment and derives its revenue from the
following services:
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
$ $
-------------- --------------
Advertising and media services $ 174,539 $ 79,717
Website design and development 169,415 49,500
Website maintenance and marketing 394,122 49,977
Enterprise Financial Website development 503,131 --
------------ ------------
$ 1,241,207 $ 179,194
============ ============
During the first quarter 2000, the Company had two customers from whom revenue
received by the Company represented 41% of total revenue. No other customers
represented greater than 10% of revenue.
7. SUBSEQUENT EVENT
Financing Arrangement
On April 3, 2000, Stockgroup.com entered into a Convertible Note Purchase
Agreement pursuant to which it obtained $3 million in a financing led by
Deephaven Capital Management LLC, a subsidiary of Knight/Trimark. Amro
International S.A., managed by Rhino Advisors was an additional lender in the
funding. Jesup and Lamont Securities Corporation served as the placement agent
for the transaction.
The funding included $3 million of 8% Convertible Notes (the "Notes"), and
5-year Callable Warrants (the "Warrants"). The Notes mature on March 31, 2002
and are convertible into Stockgroup.com common shares only after July 31, 2000.
The Notes may
F-6
<PAGE>
only be converted if Stockgroup.com does not make payment on a Noteholder's
prepayment request, or if Stockgroup.com seeks to prepay the Notes. The initial
conversion price (the "Initial Conversion Price") for the Notes is $3.72, and
the exercise price (the "Exercise Price") of the Warrants is $3.30. The Initial
Conversion Price and the Exercise Price are subject to adjustment upon the
happening of certain events, such as the payment of a stock dividend, or the
issuance of warrants at a below market price or at a price below the conversion
price. Prepayments on the Notes are subject to a tiered prepayment schedule that
increases as the number of days between the closing date and the prepayment date
increases, being 105%, 110%, and 115% of principal from days 1-60, 61-120, and
after 120 days, respectively. Interest accrues on the Notes at the rate of 8%
per annum, and is payable on each conversion date and at maturity. Interest may
be paid in the form of cash or registered stock, at Stockgroup.com's option. The
lenders have the right to put back to Stockgroup.com up to 25% of the
unconverted amount of the Notes during any 30 day period after July 31, 2000.
Upon the lenders' exercise of such right, Stockgroup.com has the option of
prepaying the portion of the Notes sought to be converted, such prepayment to be
in accordance with the tiered prepayment schedule set forth above. If
Stockgroup.com does not make such a prepayment within 10 days after its receipt
of a "put" notice, the conversion rate of the Notes changes to the lesser of (a)
the Initial Conversion Price, and (b) 88% of the 5 lowest closing prices of
Stockgroup.com's common shares during the 30 trading days prior to the date of
conversion.
The Warrants permit the holders to acquire up to 181,818 common shares.
Stockgroup.com has agreed to file a registration statement covering these
shares, and the shares underlying the Notes. The Warrants may be called by
Stockgroup.com, at a purchase price of $.01 per underlying share, if
Stockgroup.com's common shares trade at the level of 175% of the Warrant
exercise price of $3.30 for any 20 consecutive trading days after the effective
date of the registration statement, provided that the holders have the right to
exercise the warrants within 30 days after their receipt of such a call.
The placement agent in the transaction received a fee of $120,000 and Warrants
to purchase 90,909 common shares on the same terms as the Warrants issued to the
lenders.
Funds from this loan arrangement will be used for ongoing working capital
purposes.
F-7
<PAGE>
AUDITORS' REPORT
To the Board of Directors of
Stockgroup.com Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Stockgroup.com
Holdings, Inc. as at December 31, 1999 and 1998, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
two years in the period ended December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Stockgroup.com Holdings, Inc. as at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the two
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
Vancouver, Canada,
January 28, 2000.
(except for Note 13[b], which Ernst & Young LLP
is as of April 3, 2000). Chartered Accountants
F-8
<PAGE>
Stockgroup.com Holdings, Inc.
CONSOLIDATED BALANCE SHEETS
As at December 31 (expressed in US dollars)
<TABLE>
<CAPTION>
1999 1998
$ $
-------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS [notes 7 and 8]
Current
Cash and cash equivalents [note 3] 1,658,822 --
Accounts receivable (net of allowances for doubtful
accounts of $20,786 in 1999 and $60,139 in 1998) [note 4] 855,170 98,818
Due from shareholder [note 5] 31,973 --
Prepaid expenses 887,223 39,005
-------------------------------------------------------------------------------------
Total current assets 3,433,188 137,823
-------------------------------------------------------------------------------------
Due from shareholder [note 5] -- 18,033
Property and equipment, net [note 6] 440,368 57,720
-------------------------------------------------------------------------------------
3,873,556 213,576
=====================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current
Bank indebtedness [note 7] 21,004 101,077
Accounts payable 732,392 51,712
Accrued payroll liabilities 126,566 15,837
Deferred revenue 230,545 41,702
Current portion of long-term debt [note 8] -- 8,260
-------------------------------------------------------------------------------------
Total current liabilities 1,110,507 218,588
-------------------------------------------------------------------------------------
Due to shareholder -- 12,069
-------------------------------------------------------------------------------------
Total liabilities 1,110,507 230,657
-------------------------------------------------------------------------------------
Commitments and contingencies [note 9]
Shareholders' equity (deficiency) [note 10]
Common stock, no par value 6,761,483 97
Authorized shares - 75,000,000
Issued and outstanding shares - 8,195,000 in 1999
and 3,660,000 in 1998
Preferred stock, non-voting, no par value -- --
Authorized shares - 5,000,000
Issued and outstanding - nil in 1999 and 1998
Additional paid-in capital 261,277 --
Accumulated deficit (4,259,711) (17,178)
-------------------------------------------------------------------------------------
Total shareholders' equity (deficiency) 2,763,049 (17,081)
-------------------------------------------------------------------------------------
3,873,556 213,576
=====================================================================================
</TABLE>
See accompanying notes
F-9
<PAGE>
Stockgroup.com Holdings, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31 (expressed in US dollars)
1999 1998
$ $
--------------------------------------------------------------------------------
REVENUE
Revenues 1,920,052 857,591
Cost of revenues 1,208,033 172,343
--------------------------------------------------------------------------------
Gross profit 712,019 685,248
--------------------------------------------------------------------------------
EXPENSES
Sales and marketing 2,454,473 265,840
Product development 415,108 117,453
General and administrative 2,209,192 443,201
--------------------------------------------------------------------------------
5,078,773 826,494
--------------------------------------------------------------------------------
Loss from operations (4,366,754) (141,246)
Interest income 123,260 --
Other income (expense) 961 (42,845)
--------------------------------------------------------------------------------
Loss before income taxes (4,242,533) (184,091)
Income tax provision (recovery) [note 11] -- (34,802)
--------------------------------------------------------------------------------
Net loss (4,242,533) (149,289)
================================================================================
Basic and diluted loss per share [note 10] (0.60) (0.04)
================================================================================
See accompanying notes
F-10
<PAGE>
Stockgroup.com Holdings, Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Year ended December 31 (expressed in US dollars)
Retained
Additional earnings Total
Common stock paid-in (accumulated shareholders'
Common stock amount capital deficit) equity
# of shares $ $ $ $
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 3,660,000 97 -- 132,111 132,208
Net loss -- -- -- (149,289) (149,289)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 3,660,000 97 -- (17,178) (17,081)
Issuance of common stock pursuant to private placement [note 10] 240,000 402,451 -- -- 402,451
Deemed issuance of common stock pursuant to
reverse acquisition [notes 1 and 10] 3,120,000 672 -- -- 672
Issuance of common stock pursuant to a consulting
agreement [note 10] 75,000 450,000 -- -- 450,000
Issuance of common stock pursuant to private placements,
net of share issue costs of $167,737 [note 10] 900,000 5,232,263 -- -- 5,232,263
Issuance of common stock pursuant to an advertising
agreement [note 10] 200,000 676,000 -- -- 676,000
Compensation related to grant of stock options [note 10] -- -- 261,277 -- 261,277
Net loss -- -- -- (4,242,533) (4,242,533)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 8,195,000 6,761,483 261,277 (4,259,711) 2,763,049
====================================================================================================================================
</TABLE>
See accompanying notes
F-11
<PAGE>
Stockgroup.com Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31 (expressed in US dollars)
1999 1998
$ $
--------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss (4,242,533) (149,289)
Add (deduct) non-cash items
Depreciation and amortization 85,601 19,459
Provision for doubtful accounts (39,352) 44,715
Consulting services received for common stock 450,000 --
Advertising services received for common stock 676,000 --
Compensation expense on stock options 261,277 --
--------------------------------------------------------------------------------
(2,809,007) (85,115)
Net changes in non-cash working capital
Accounts receivable (717,000) (19,539)
Due from shareholder (13,940) --
Prepaid expenses (848,218) (2,312)
Accounts payable 678,080 43,144
Accrued liabilities 110,729 (10,524)
Income taxes payable -- (199)
Deferred revenue 188,843 (39,993)
--------------------------------------------------------------------------------
Cash provided by (used in) operating activities (3,410,513) (114,540)
--------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net proceeds from issuance of common stock 5,634,714 --
(Repayments) proceeds on bank indebtedness (80,073) 75,825
(Repayments) proceeds on long-term debt (8,260) (17,105)
(Repayments to) advances from shareholders (12,069) 6,010
Due to (from) related company -- 39,186
--------------------------------------------------------------------------------
Cash provided by (used in) financing activities 5,534,312 103,916
--------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of property and equipment (468,249) (21,092)
Net cash acquired in reverse acquisition 3,272 --
--------------------------------------------------------------------------------
Cash provided by (used in) investing activities (464,977) (21,092)
--------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 1,658,822 (31,716)
Cash and cash equivalents, beginning of year -- 31,716
--------------------------------------------------------------------------------
Cash and cash equivalents, end of year 1,658,822 --
================================================================================
Supplemental disclosure of cash flow information
Interest paid 10,500 4,100
Income taxes paid -- --
================================================================================
See accompanying notes
F-12
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
[a] Nature of business and continuing entity
Stockgroup.com Holdings, Inc. ("Stockgroup.com") is a leading provider of
Internet financial news and information services focusing on the North American
small-cap and micro-cap markets. Stockgroup.com was incorporated under the laws
of Colorado on December 6, 1994 under the former name of I-Tech Holdings Group,
Inc. ("I-Tech"), a United States non-operating company registered on the NASD
OTC Bulletin Board.
These consolidated financial statements are issued under the name of
Stockgroup.com but are a continuation of the financial statements of Stock
Research Group Inc. ("SRG"), a British Columbia corporation which was
incorporated on May 4, 1995. On March 11, 1999, pursuant to a reverse
acquisition, SRG acquired the net assets of I-Tech.
[b] Reverse acquisition of Stockgroup.com
Pursuant to a share exchange agreement dated March 11, 1999, the shareholders of
SRG sold their 100% interest in SRG to Stockgroup.com in consideration for
3,900,000 shares of Stockgroup.com which represented a controlling interest of
approximately 56%. This transaction is considered a recapitalization of SRG and
an acquisition of Stockgroup.com (the accounting subsidiary/legal parent) by SRG
(the accounting parent/legal subsidiary). Accordingly, the transaction has been
accounted for as a purchase of the net assets of Stockgroup.com by SRG in these
consolidated financial statements.
In these consolidated financial statements, SRG's assets and liabilities are
included at their historical carrying amounts. Operating results to March 11,
1999 are those of SRG. For purposes of the acquisition, the fair value of the
net monetary assets of Stockgroup.com of $672 is ascribed to the 3,120,000
previously outstanding common shares of Stockgroup.com deemed to be issued in
the acquisition as follows:
$
--------------------------------------------------------------------------------
Net assets acquired
Cash 3,272
Accounts payable 2,600
--------------------------------------------------------------------------------
672
Deemed consideration
3,120,000 shares of Stockgroup.com 672
================================================================================
F-13
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of Stockgroup.com
Holdings, Inc. (the "Company") and its wholly owned subsidiaries, Stockgroup.com
Media Inc. (British Columbia, Canada) (formerly Stock Research Group Inc.) and
Stockgroup.com, Ltd. (Nevada, United States). All significant intercompany
accounts and transactions have been eliminated.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Foreign exchange
The reporting currency and the functional currency of the Company during the
fiscal year ended December 31, 1999 is the U.S. dollar. The accounts of the
Company's Canadian subsidiary are translated into U.S. dollars such that
monetary assets and liabilities are translated at exchange rates in effect at
the balance sheet date and non-monetary items are translated at exchange rates
prevailing at the transaction date. Operating revenues and expenses are
translated at average exchange rates prevailing during the year. Any
corresponding foreign exchange gains and losses are included in income.
Foreign currency transactions are translated into U.S. dollars at the rate of
exchange in effect at the date of the transaction. Foreign currency balances of
monetary assets and liabilities are translated using the rate of exchange in
effect at the balance sheet date. Foreign exchange gains and losses on
transactions during the year and on the year end translation of the accounts are
included in income.
Cash equivalents
Cash equivalents consist of short-term deposits with original maturities of
ninety days or less and are recorded at amortized cost.
F-14
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
Property and equipment
Property and equipment are carried at cost less depreciation and amortization.
Depreciation and amortization are provided at the following annual rates with
one-half of the depreciation and amortization provided in the year of
acquisition:
Computer equipment 30% straight line
Computer software 100% straight line
Office furniture and equipment 20% straight line
Leasehold improvements 20% straight line
Income taxes
The Company utilizes the liability method of accounting for income taxes. Under
this method, deferred taxes are determined based on the differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates. A valuation allowance is provided against deferred tax assets for which
it is more likely than not that the asset will not be realized.
Fair value of financial instruments
The Company's financial instruments consist principally of cash and cash
equivalents, accounts receivable, bank indebtedness, accounts payable and
long-term debt. The carrying values of all financial instruments approximate
fair value due to their short-term maturities.
Revenue recognition
The Company's revenue is derived from various services, resulting in the
following types of revenue recognition:
o Website design and development is recognized upon customer acceptance.
o Website maintenance and marketing is recognized on a pro-rata basis over
the term of the contract.
o Advertising and media services is recognized on a pro-rata basis over the
term of the contract.
Deferred revenue consists of deposits paid in advance of services rendered.
F-15
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
Advertising costs
Advertising costs are expensed in the period incurred and are included as a
component of sales and marketing expenses. Advertising expense for the years
ended December 31, 1999 and 1998 was $1,670,000 and $23,000 respectively.
Product development expenditures
Product development expenditures, which are primarily related to Website
development, are expensed in the period incurred.
Stock-based compensation
The Company accounts for fixed stock-based awards to employees in accordance
with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations and has adopted the disclosure-only
alternative of FASB Statement No. 123, Accounting for Stock-Based Compensation.
Accordingly, compensation expense for stock options issued to employees is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock.
Earnings per share
Basic earnings (loss) per share is computed based on the weighted average number
of common shares outstanding during each year. Diluted earnings (loss) per share
is computed based on the weighted average number of common shares outstanding
during each year, plus the dilutive potential of options outstanding during the
year, in accordance with FASB Statement No. 128, Earnings Per Share.
Comprehensive income
The Company follows FASB Statement No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and displaying comprehensive income
and its components in the consolidated financial statements. For the years ended
December 31, 1999 and 1998, the Company did not have any components of
comprehensive income.
F-16
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
Recent accounting pronouncements
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes new standards for
recording derivatives in interim and annual financial statements. This statement
requires recording all derivative instruments as assets or liabilities, measured
at fair value. Statement No. 133, as amended by FASB Statement No. 137, is
effective for fiscal years beginning after June 15, 2000. Management has not
determined the impact, if any, that the adoption of the new statement will have
on the consolidated results of operations or financial position of the Company.
3. CASH AND CASH EQUIVALENTS
1999 1998
$ $
--------------------------------------------------------------------------------
Cash 13,822 --
Short-term deposits 1,645,000 --
--------------------------------------------------------------------------------
1,658,822 --
================================================================================
The short-term deposits are issued by a major Canadian chartered bank. The
effective interest rates on the short-term deposits existing at year-end range
from 5.21% to 5.48%. Interest income earned on short-term deposits for the years
ended December 31, 1999 and 1998 was $123,260 and $nil respectively.
4. ACCOUNTS RECEIVABLE
Included in accounts receivable is an amount of $575,000 due from one customer
representing 67% of the total balance. Management's best estimate as at December
31, 1999 is that the realization of this amount is probable. Because of the
uncertainties inherent in this estimation process, management's estimate of
credit loss on this account may change in the near term. No other customers
represented greater than 10% of the total balance in any other year.
F-17
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
5. DUE FROM SHAREHOLDER
Amounts due from shareholder consist of $12,850 [1998 - $nil] in short-term
advances and a $19,123 [1998 - $18,033] non-interest bearing loan. The loans and
advances are expected to be repaid in the next fiscal year.
6. PROPERTY AND EQUIPMENT
Accumulated Net book
Cost amortization value
$ $ $
--------------------------------------------------------------------------------
1999
Computer equipment 360,552 85,571 274,981
Computer software 24,074 12,037 12,037
Office furniture and equipment 146,595 21,608 124,987
Leasehold improvements 31,596 3,233 28,363
--------------------------------------------------------------------------------
562,817 122,449 440,368
================================================================================
1998
Computer equipment 74,100 30,386 43,714
Computer software -- -- --
Office furniture and equipment 20,097 6,425 13,672
Leasehold improvements 371 37 334
--------------------------------------------------------------------------------
94,568 36,848 57,720
================================================================================
7. BANK INDEBTEDNESS
1999 1998
$ $
--------------------------------------------------------------------------------
Operating line of credit -- 75,825
Demand loan 21,004 25,252
--------------------------------------------------------------------------------
21,004 101,077
================================================================================
The Company has an approved operating line of credit of $500,000 bearing
interest at prime plus 1/4%. Interest expense for the years ended December 31,
1999 and 1998 was $8,400 and $1,300 respectively.
F-18
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
7. BANK INDEBTEDNESS (cont'd.)
The demand loan bears interest at prime plus 1%, is repayable in blended monthly
principal and interest payments of $635, and is due December 31, 2002. Interest
expense for the years ended December 31, 1999 and 1998 was $1,800 and $1,800
respectively.
Bank indebtedness is collateralized by a general security agreement on all
assets of the Company. The weighted average effective prime rate for 1999 was
6.44% [1998 - 6.60%].
8. LONG-TERM DEBT
Long-term debt consisted of a special term loan bearing interest at prime plus
1%, repayable in blended monthly principal and interest payments of $800, due
December, 1999. The loan was collateralized by a general security agreement on
all assets of the Company. Interest expense for the years ended December 31,
1999 and 1998 was $300 and $1,000 respectively.
9. COMMITMENTS AND CONTINGENCIES
[a] The Company has operating lease commitments with respect to office premises
with minimum annual payments as follows:
$
---------------------------------------------------------------------------
2000 350,000
2001 339,000
2002 278,000
2003 256,000
2004 and thereafter 655,000
---------------------------------------------------------------------------
1,878,000
===========================================================================
Net rental expense included in general and administrative expenses for the
years ended December 31, 1999 and 1998 was $204,000 and $72,000
respectively.
F-19
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
9. COMMITMENTS AND CONTINGENCIES (cont'd.)
[b] The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties will be fully resolved.
10. SHAREHOLDERS' EQUITY
Stock split
During 1998, SRG effected a split of its common stock on the basis of 18,300
common shares for each common share outstanding. This increased the outstanding
share capital to 3,660,000 common shares which has been restated as the opening
common stock as if the split had happened at the beginning of the periods
presented.
Issuance of common stock pursuant to private placement
During January and February of 1999, the Company completed a private placement
to certain institutions and individuals for the issuance of 240,000 common
shares at $1.68 per share for net cash proceeds of $402,451.
Issuance of common stock pursuant to reverse acquisition
By a share exchange agreement dated March 11, 1999, the Company entered into a
series of transactions whereby 3,900,000 issued and outstanding shares of SRG
were exchanged for 3,900,000 shares of 579818 B.C. Ltd. a Canadian subsidiary of
Stockgroup.com. The exchanged shares are convertible into shares of
Stockgroup.com through a trustee, Stocktrans Inc., who holds the exchangeable
shares of the parent in trust for the Company pursuant to a voting and exchange
agreement giving the SRG shareholders effective control over Stockgroup.com. For
purposes of the reverse acquisition, the fair value of the net assets of
Stockgroup.com of $672 is ascribed to the 3,120,000 previously outstanding
common shares of Stockgroup.com deemed to be issued in the acquisition.
F-20
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
10. SHAREHOLDERS' EQUITY (cont'd.)
Issuance of common stock for consulting services
On March 15, 1999, the Company issued 75,000 shares in exchange for consulting
services provided in respect of the reverse acquisition. The transaction was
recorded at a fair value of $450,000 based on an average closing price of the
stock in the first week of trading subsequent to the reverse acquisition.
Issuance of common stock pursuant to private placement
During the spring and summer of 1999, the Company completed a private placement
to certain institutions and individuals for the issuance of 900,000 common
shares at $6.00 per share for net cash proceeds of $5,232,263.
Issuance of common stock for advertising services
On September 17, 1999 the Company completed a private placement with a media
company for the issuance of 200,000 common shares in exchange for advertising
services. The transaction was recorded at a fair value of $676,000 based on the
closing price of the stock on the day of the agreement.
Earnings (loss) per share
The following table sets forth the computation of earnings (loss) per share:
1999 1998
$ $
--------------------------------------------------------------------------------
Net loss for the year (4,242,533) (149,289)
Weighted average number of common shares
used in computation 7,055,151 3,660,000
Basic and diluted loss per share (0.60) (0.04)
================================================================================
For the year ended December 31, 1999, all of the Company's common shares
issuable upon the exercise of stock options were excluded from the determination
of diluted loss per share as their effect would be anti-dilutive.
Prior to the reverse acquisition described in note 1, the deemed number of
common shares outstanding is equal to the common shares issued to the
shareholders of SRG adjusted to take into account the effect of the change in
the number of issued shares of SRG in the earlier periods.
F-21
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
10. SHAREHOLDERS' EQUITY (cont'd.)
1999 Incentive Stock Option Plan
The Company's 1999 Incentive Stock Option Plan ("1999 Plan"), which became
effective March 11, 1999 (the "Plan Effective Date"), is available to directors,
employees and consultants, and is intended to serve as the successor equity
incentive program to the 1999 Incentive Stock Option Plan of Stock Research
Group, Inc. ("1999 SRG Plan").
Under the 1999 SRG Plan, 1,441,300 options, representing 1,441,300 common shares
were granted in February, 1999. In March 1999, outstanding options under the
1999 SRG Plan were incorporated into the 1999 Plan, and no further grants may be
made under the 1999 SRG Plan. The incorporated options will continue to be
governed by their existing terms, unless the Plan Administrator elects to extend
one or more features of the 1999 Plan to those Options.
Under the 1999 Plan, a total of 2,000,000 common shares have been authorized for
issuance. Such share reserve consists of (i) the number of shares issued under
the 1999 SRG Plan incorporated into the 1999 Plan on the Plan Effective Date;
and (ii) an additional increase of 558,700 shares of common stock.
Options issued under the 1999 Plan generally begin vesting one year after grant,
at which time vesting occurs in equal installments of one-fifth of the grant
total per year for a period of five years. Options immediately become
exercisable once vested. Any options which do not vest as the result of a
grantee leaving the Company are cancelled and the shares underlying them are
returned to the reserve. The Board has the authority to vary the vesting
provisions of grants at its discretion.
Activity under the 1999 Plan is set forth below:
<TABLE>
<CAPTION>
Options outstanding
------------------------------------------------------
Shares Weighted
available for Number of Price per average
grant shares share exercise price
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 -- -- -- --
Additional shares reserved 2,000,000 -- -- --
Options granted (1,827,800) (1,827,800) 0.01 - 5.625 $1.855
Options canceled 44,500 44,500 2.50 - 5.625 $3.921
---------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 216,700 1,783,300 0.01 - 4.437 $1.803
===============================================================================================================
</TABLE>
F-22
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
10. SHAREHOLDERS' EQUITY (cont'd.)
The weighted average remaining contractual life and weighted average exercise
price of options outstanding and of options exercisable as of December 31, 1999
are as follows:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------------------ -------------------------
Weighted
average Weighted Weighted
Number of remaining average average
shares contractual exercise Shares exercise
outstanding life (years) price exercisable price
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Range of exercise prices
$0.01 - 0.94 745,800 4.58 $0.809 -- --
$1.50 - 1.75 128,500 5.96 $1.609 -- --
$2.25 - 2.937 784,000 5.26 $2.506 5,000 2.500
$3.00 - 4.437 125,000 5.59 $3.530 -- --
================================================================================================
</TABLE>
The Company recorded $261,277 in compensation expense in the year ended December
31, 1999 for the difference between the exercise price of certain of the
Company's options granted under the 1999 SRG Plan and the fair market value of
the underlying common stock on the date of grant. This amount has been recorded
as additional paid-in capital.
A total of 107,600 of the outstanding options are performance based and vest
equally in 2000 and 2001 if the Company achieves predetermined annual revenues.
These options are classified as variable, whereby, compensation expense is
measured as the excess, if any, of the quoted market price of the Company's
stock at the measurement date over the amount the employee must pay to acquire
the stock. With variable options, the measurement date is established when it
appears probable that the Company will meet the performance targets. Because of
the uncertainty of achieving the annual revenue targets, no compensation expense
has been recorded.
Pro forma disclosure of the effect of Stock Based Compensation Plan
Pro forma information regarding results of operations and net income (loss) per
share is required by FASB Statement No. 123 for stock-based awards to employees
as if the Company had accounted for such awards using a valuation method
permitted under Statement No. 123. The value of the Company's stock-based awards
granted to employees in 1999 have been valued using the Black-Scholes option
pricing model. Among other things, the Black-Scholes model considers the
expected volatility of the Company's stock price, determined in accordance with
Statement No. 123, in arriving at an option valuation.
F-23
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
10. SHAREHOLDERS' EQUITY (cont'd.)
The fair value of the Company's stock-based awards granted to employees in 1999
was estimated assuming no expected dividends, a weighted average expected life
of 4.55 years, a risk free interest rate of 5.06% and an expected volatility of
151%. The weighted average fair value of options granted during 1999 was $1.701.
For pro forma purposes, the estimated value of the Company's stock-based awards
to employees is amortized over the vesting period of the underlying options. The
results of applying Statement No. 123 to the Company's stock-based awards to
employees would approximate the following:
1999 1998
$ $
--------------------------------------------------------------------------------
Net loss
As reported (4,242,533) (149,289)
Pro forma (5,091,330) (149,289)
Basic and diluted loss per share
As reported (0.60) (0.04)
Pro forma (0.72) (0.04)
================================================================================
11. INCOME TAXES
The Company is subject to United States federal and state income taxes at an
approximate rate of 40%. The Company's Canadian subsidiary is subject to
Canadian federal and provincial taxes of approximately 45%. For 1998 and prior
years, the Company qualified as a Canadian Controlled Private Corporation and
was subject to a lower tax rate of 22%. The Company is no longer eligible for
this low tax rate.
F-24
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
11. INCOME TAXES (cont'd.)
The reconciliation of the provision (recovery) for income taxes at the United
States federal statutory rate compared to the Company's income tax expense is as
follows:
1999 1998
$ $
--------------------------------------------------------------------------------
Tax expense (recovery) at U.S. statutory rates (1,698,000) (74,000)
Lower (higher) effective income taxes of
Canadian subsidiary (170,000) 33,000
Net operating losses not recognized for
accounting purposes 1,856,000 --
Non-deductible expenses 12,000 6,198
--------------------------------------------------------------------------------
Current income tax expense (recovery) -- (34,802)
================================================================================
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred taxes are as follows:
1999 1998
$ $
--------------------------------------------------------------------------------
Net operating loss carryforwards 1,856,000 --
Valuation allowance (1,856,000) --
--------------------------------------------------------------------------------
Net deferred tax asset -- --
================================================================================
The tax loss carryforwards expire as follows:
$
--------------------------------------------------------------------------------
Canada
2006 3,369,000
U.S.
2019 845,000
--------------------------------------------------------------------------------
4,214,000
================================================================================
F-25
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
12. SEGMENTED INFORMATION
The Company operates in one industry segment and derives its revenue from the
following services:
1999 1998
$ $
--------------------------------------------------------------------------------
Website design and development 343,928 214,085
Website maintenance and marketing 347,243 394,350
Advertising and media services 1,228,881 249,156
--------------------------------------------------------------------------------
1,920,052 857,591
================================================================================
During 1999, the Company had one customer whose revenue represented 35% of total
revenue. No other customers represented greater than 10% of the revenue in any
other year.
Predominantly all of the Company's revenues are generated in Canada based on the
location of customers. The majority of the Company's property and equipment are
located in Canada.
13. SUBSEQUENT EVENTS
[a] On January 18, 2000, the Company entered into a contract in Singapore which
expands the Company's operation into Asia and entails the development of an
enterprise financial site for Asia Exchange Information Service Pte Ltd.
(AsiaXIS). Under the terms of the agreement, the Company will receive
approximately US$1,500,000 for development and upgrade of the initial site
in Singapore. The agreement also provides for AsiaXIS to develop 13
additional financial enterprise sites throughout Asia, Australia and New
Zealand. The Company will be paid a licensing fee for its technology, a
development fee for building and customizing each additional financial
enterprise site, ongoing maintenance and support fees and royalties for
each of the markets that AsiaXIS enters. The Company has also secured
access to the content that will be created by AsiaXIS in its international
news development. As part of the contract, the Company has agreed to
acquire an equity position of 19.4% in AsiaXIS for US$500,000.
F-26
<PAGE>
Stockgroup.com Holdings, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1999 (expressed in US dollars)
13. SUBSEQUENT EVENTS (cont'd.)
[b] On April 3, 2000, the Company entered into a Convertible Note Purchase
Agreement pursuant to which it obtained $3 million in a financing
consisting of 8% Convertible Notes (the "Notes"), and 5-year Callable
Warrants (the "Warrants"). The Notes mature on March 31, 2002 and are
convertible into common shares only after July 31, 2000 at an initial
conversion price of $3.72. The Warrants permit the holders to acquire up to
181,818 common shares at an exercise price of $3.30. Both the initial
conversion price of the Notes and the exercise price of the Warrants are
subject to adjustment upon the happening of certain events, such as the
payment of a stock dividend, or the issuance of additional warrants at a
below market price or at a price below the conversion price. The placement
agent in the transaction received a fee of $120,000 and Warrants to
purchase 90,909 common shares on the same terms as the Warrants issued to
the lenders.
F-27
<PAGE>
STOCKGROUP.COM HOLDINGS, INC.
8,280,432 Shares of
Common Stock
--------------------
PROSPECTUS
--------------------
_________, 2000
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of various expenses, all of
which we will pay, in connection with the sale and distribution of the
securities being registered. All of the amounts shown are estimates, except the
Securities and Exchange Commission registration fee.
Securities and Exchange Commission Registration Fee $ 2,897.47
Accounting Fees and Expenses $15,000
Legal Fees and Expenses $25,000
Miscellaneous $ 3,500
Total $47,897.47
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Colorado Law provides that a corporation may indemnify a person made a
party to a proceeding because the person is or was a director against liability
incurred in the proceeding if:
(a) the person conducted himself or herself in good faith; and
(b) the person reasonably believed:
(I) in the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best
interests; and
(II) in all other cases, that his or her conduct was at least not
opposed to the corporation's best interest.
The law also provides that a corporation may not indemnify a director:
II-1
<PAGE>
(a) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation;
or
(b) in connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not involving action in an
official capacity, in which proceeding the director was adjudged liable on
the basis that he or she derived an improper personal benefit.
Indemnification permitted under Colorado law in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding. Unless limited by its
articles of incorporation, Colorado law provides that a corporation shall
indemnify a person who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the person was party because the person is or
was a director, against reasonable expenses incurred by him or her in connection
with the proceeding.
Colorado law further provides that a corporation may pay for or reimburse
the reasonable expenses incurred by a director who is a party to a proceeding in
advance of final disposition of the proceeding if:
(a) the director furnishes to the corporation a written affirmation of
the director's good faith belief that he or she met the standard of conduct
described in the law;
(b) the director furnishes to the corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance if it
is ultimately determined that he or she did not meet the standard of
conduct; and
(c) a determination is made that the facts then known to those making
the determination would not preclude indemnification under Colorado law.
A corporation may not indemnify a director under Colorado law unless
authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in the law. A corporation may
not advance expenses to a director unless authorized in the specific case after
the written affirmation and undertaking required by the law are received and the
determination required by the law has been made.
The determinations required by Colorado law shall be made:
(a) by the board of directors by a majority vote of those present at a
meeting at which a quorum is present, and only those directors not parties
to the proceeding shall be counted in satisfying the quorum; or
(b) if a quorum cannot be obtained, by a majority vote of a committee
of the board of directors designated by the board of directors, which
committee shall consist of two or more directors not parties to the
proceeding; except that directors who are parties to the proceeding may
participate in the designation of directors for the committee.
Alternatively, the determination required to be made by the law may be
made:
II-2
<PAGE>
(a) by independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified above or, if a quorum of
the full board cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board of
directors; or
(b) by the shareholders.
Authorization of indemnification and advance of expenses shall be made in
the same manner as the determination that indemnification or advance of expenses
is permissible; except that, if the determination that indemnification or
advance of expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of the expenses shall be made by
the body that selected such counsel.
Colorado law also provides that, unless otherwise provided in the articles
of incorporation:
(a) an officer is entitled to mandatory indemnification, and is
entitled to apply for court-ordered indemnification, in each case to the
same extent as a director;
(b) a corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and
(c) a corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for by its
bylaws, general or specific action of its board of directors or
shareholders, or contract.
Colorado law further provides a corporation may purchase and maintain
insurance on behalf of a person who is or was a director, officer, employee,
fiduciary, or agent of the corporation, or who, while a director, officer,
employee, fiduciary, or agent of the corporation, is or was serving at the
request of the corporation as a director, officer, partner, trustee, employee,
fiduciary, or agent of another domestic or foreign corporation or other person
or of an employee benefit plan, against liability asserted against or incurred
by the person in that capacity or arising from his or her status as a director,
officer, employee, fiduciary, or agent, whether or not the corporation would
have power to indemnify the person against the same liability under Colorado
law.
Our articles of incorporation provide that the board of directors has the
power to:
(a) Indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right Stockgroup.com), by reason of the fact that he or she is or
was a director, officer, employee or agent of Stockgroup.com or is or was
serving at our request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he reasonably believed to be in our best interests and, with respect to any
criminal action or proceedings, had no reasonable cause to believe his or her
conduct was unlawful.
II-3
<PAGE>
(b) Indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of Stpclgroup.com to procure a judgment in its favor by reason of the fact
that he or she is or was a director, officer, employee or agent of
Stockgroup.com or is or was serving at our request as a director, officer,
employee or agent of Stockgroup.com request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorney's fees) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he or she
reasonably believed to be in our best interests; but no indemnification shall be
made in respect of any claim, issue or matter as to which such person has been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to Stockgroup.com unless and only to the extent that the court in which
such action or suit was brought determines upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
(c) Indemnify a director, officer, employee or agent of Stockgroup.com to
the extent that such person has been successful on the merits in defense of any
action, suit or proceeding referred to in subparagraph (a) or (b) above or in
defense of any claim, issue, or matter therein, against expenses (including
attorney's fees) actually and reasonable incurred by him or her in connection
therewith.
(d) Authorize indemnification under subparagraph (a) or (b) above (unless
ordered by a court) in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
subparagraph (a) or (b). Such determination shall be made by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or, if such a quorum is not
obtainable or even if obtainable a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or by the shareholders.
(e) Authorize payment of expenses (including attorney's fees) incurred in
defending a civil or criminal action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding as authorized in subparagraph (d)
above upon receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount if it is ultimately determined that he or
she is not entitled to be indemnified by Stockgroup.com.
(f) Purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of Stockgroup.com or who is or was serving
at our request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him or her in any such capacity or arising
our of his or her status as such, whether or not we would have the power to
indemnify him or her against such liability under the provision of our Articles
of Incorporation.
The indemnification provided by our Articles of Incorporation is not
exclusive of any other rights to which those indemnified may be entitled under
the bylaws, any agreement, vote of shareholders or disinterested directors or
otherwise, and any procedure provided for by any of the foregoing, both as to
action in his or her official capacity and as to action in another while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of heirs, executors
and administrators of such a person.
II-4
<PAGE>
Our by-laws give effect to the foregoing provision's of our Articles of
Incorporation.
We intend to enter into indemnification agreements with our directors and
officers. These agreements provide, in general, that we will indemnify such
directors and officers for, and hold them harmless from and against, any and all
amounts paid in settlement or incurred by, or assessed against, such directors
and officers arising out of or in connection with the service of such directors
and officers as a director or officer of Stockgroup.com or its affiliates to the
fullest extent permitted by Colorado law.
The Company intends to obtain liability insurance for its directors and
officers covering, subject to exceptions, any actual or alleged negligent act,
error, omission, misstatement, misleading statement, neglect or breach of duty
by such directors or officers, individually or collectively, in the discharge of
their duties in their capacity as directors or officers of Stockgroup.com.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth in chronological order is information regarding shares of common
stock issued and options and warrants and other convertible securities granted
by us during the past three years. Also included is the consideration, if any,
received by us for such shares and options and information relating to the
section of the Securities Act of 1933 (the "1933 Act"), or rule of the
Securities and Exchange Commission under which exemption from registration was
claimed.
Transactions described in Items (1) through (3) below took place prior to
March 11, 1999, the date of the reverse acquisition of Stockgroup.com. The
transactions described in Items (4) through (8) below took place on or after
March 11, 1999.
1. In June 1995 I-Tech Holdings Group Inc. ("I-Tech") sold and issued 380,000
shares of common stock, in an aggregate amount of $380, under the exemption
provided by Regulation D, Rule 504 of the 1933 Act.
2. In March through May 1997, I-Tech sold and issued 20,000,000 shares of its
common stock to 41 individuals in an aggregate amount of $10,000.00 under
the exemption provided by Regulation D, Rule 504 of the 1933 Act.
3. I-Tech, in January1997, sold and issued 300,000 shares of its preferred
stock in an aggregate amount of $3,000 to two corporate entities under the
exemption provided by Section 4(2) of the 1933 Act.
The facts relied upon by I-Tech to make the exemptions available include
the following: (i) the aggregate offering price for the offerings of the
shares of common stock did not exceed $1,000,000, less the aggregate
offering price for all securities sold within the twelve months before the
start of and during the offering of the shares in reliance on any exemption
under Section 3(b) of, or in violation of Section 5(a) of, the Act; (ii)
the required number of manually executed originals and true copies of Form
D, were duly and timely filed with the Securities and Exchange Commission;
(iii) no general solicitation or advertising was conducted by I-Tech in
connection with the offering of any of its shares; and (iv) the fact that
I-Tech had not been, since its inception (a) subject to the reporting
requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, as amended, (b) an
II-5
<PAGE>
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or (c) a development stage company that either has no
specific business plan or purpose or has indicated that its business plan
is to engage in a merger or acquisition with an unidentified company or
companies, or other entity or person. An offering memorandum was used in
connection with the June 1997 Rule 504 offering.
4. Pursuant to a Share Exchange and Share Purchase Agreement dated March 11,
1999 (the "SEA") by and among I-Tech, 579818 B.C. Ltd., a British Columbia,
Canada corporation wholly-owned by I-Tech (the "Subsidiary"), Stock
Research Group Inc., a British Columbia, Canada corporation ("Stock Group")
and all of the shareholders of Stock Group, being nine persons
(collectively, the "Stock Group Shareholders"), I-Tech acquired (the
"Acquisition") all of the issued and outstanding common shares of Stock
Group from the Stock Group Shareholders in consideration of the issuance by
(i) the Subsidiary to the Stock Group Shareholders, on a pro-rata basis, of
3,900,000 Class A Exchangeable Shares (the "Exchangeable Shares") and (ii)
by I-Tech issuing to Stocktrans, Inc. as trustee for the Stock Group
Shareholders (the "Trustee") 3,900,000 shares of common stock (the
"Corporation's Shares") to be held under the terms of an Exchange and
Voting Agreement dated March 11, 1999 (the "Trust Agreement") by and among
I-Tech, the Trustee, the Subsidiary and the Stock Group Shareholders. These
shares were issued to the trustee under the exemption provided by Section
4(2) of the 1933 Act and to the Stock Group Shareholders pursuant to
Regulation S promulgated under the 1933 Act, and the shares were deemed
restricted..
5. On March 15, 1999, Stockgroup.com issued 75,000 shares in exchange for
consulting services. The transaction was recorded at a fair value of
$450,000 based on an average closing price of the stock in the first week
of trading subsequent to the reverse acquisition. The issuances were made
under Section 4(2) of the 1933 Act and were made without general
solicitation or advertising. The purchasers were sophisticated investors
with access to all relevant information necessary to evaluate these
investments, and who represented to Stockgroup.com that the shares were
being acquired for investment. The shares were deemed restricted.
6. During the spring and summer of 1999, Stockgroup.com completed a private
placement to five Non -U.S. institutions and one Non-U.S. individual for
the issuance of 900,000 common shares at $6.00 per share for net cash
proceeds of $5,232,263. The issuances were made under Regulation S and the
shares deemed "restricted."
7. On September 17, 1999 Stockgroup.com completed a private placement with
Southam, Inc., a media company in Canada for the issuance of 200,000 common
shares in exchange for advertising services. The transaction was recorded
at a fair value of $676,000 based on the closing price of the stock on the
day of the agreement. The issuances were made under Regulation S and the
shares deemed "restricted."
8. On April 3, 2000, Stockgroup.com entered into a Convertible Note Purchase
Agreement pursuant to which it obtained $3 million in a financing led by
Deephaven Capital Management LLC, a subsidiary of Knight/Trimark. Amro
International S.A., managed by Rhino Advisors was an additional lender in
the funding. The funding included $3 million of 8% Convertible Notes (the
"Notes"), and 5 year Callable Warrants (the "Warrants"). The Notes are
convertible into common stock only after July 31, 2000. The Notes may only
be converted if Stockgroup.com does not make payment on a Noteholder's
prepayment request, or if Stockgroup.com seeks to prepay the Notes.
Interest may be paid in the
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<PAGE>
form of cash or registered stock, at the option of Stockgroup.com. The
Warrants permit the holders to acquire up to 181,818 shares of common
stock. The placement agent in the transaction received Warrants to purchase
90,909 common shares on the same terms as the Warrants issued to the
lenders. The issuances were made under Section 4(2) of the 1933 Act and/or
Regulation D promulgated under the Securities Act of 1933 and were made
without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary
to evaluate these investments, and who represented to Stockgroup.com that
the shares were being acquired for investment.
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<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
The following Exhibits are either attached hereto incorporated herein by
reference or will be filed by amendment:
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT AND FILING REFERENCE
2.1 Share Exchange and Share Purchase Agreement dated March 11, 1999, among
I-Tech Holdings Group, Inc. (the "Registrant") the former shareholders
of the Registrant, 579818 B.C. Ltd. ("B.C. Ltd"), Stock Research Group,
Inc. ("SRG"), and the former shareholders of SRG effecting a change in
control of Registrant. (incorporated by reference to the Exhibits filed
with Form 8K filed March 19, 1999, Form 8K/A filed March 24, 1999 and
Form 8K/A filed May 10, 1999)
3.1 Articles of Incorporation (incorporated by reference to the Exhibits
filed with Form 10SB12G filed January 29, 1998, and Amendments to
Articles of Incorporation filed herewith)
*3.2 Amended and Restated Bylaws
4.1 1999 Stock Incentive Plan (incorporated by reference to the Exhibits
filed with Form S-8 filed November 16, 1999)
4.2 Convertible Note Purchase Agreement, ("Note Purchase Agreement") dated
March 21, 2000, among the Registrant, Deephaven Private Placement
Trading Ltd. ("Deephaven") and Amro International, S.A. ("Amro")
(incorporated by reference to the Exhibits filed with Form 8K filed on
April 18, 2000)
4.3 Form of 8% Convertible Note issued to each of Deephaven and Amro
pursuant to the Note Purchase Agreement (incorporated by reference to
the Exhibits with Form 8K filed on April 18, 2000)
4.4 Form of Callable Warrant issued to Deephaven, Amro, and Jesup and Lamont
Securities Corporation pursuant to the Note Purchase Agreement
(incorporated by reference to the Exhibits filed with Form 8K filed on
April 18, 2000)
4.5 Registration Rights Agreement, dated March 31, 2000, among the
Registrant, Deephaven and Amro (incorporated by reference to the
Exhibits filed with Form 8K filed on April 18, 2000)
**5.1 Opinion of Sierchio & Albert, P.C., regarding the legality of the
securities being registered
9.1 Exchange and Voting Agreement dated March 11, 1999, among the
Registrant, B.C. Ltd., SRG and the individual signatories thereto,
incorporated by reference to the Exhibits filed with Form 8K filed on
March 19, 1999
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<PAGE>
***10.1 Enterprise Financial Website Development & Software Licensing Agreement,
dated January 2000, between the Registrant and PTE Ltd.
**10.2 Employment Agreement, dated August 1, 1998, between the Registrant and
Leslie Landes.
*11.1 Statement re: computation of per share earnings - see Note 10 to
financial statements
16.1 Letter regarding change in certifying accountant (incorporated by
reference to Exhibits filed with Form 8K filed July 9, 1999)
21.1 Subsidiaries of the Company (incorporated by reference to Exhibits filed
with Form 10KSB/A filed May 1, 2000)
**23.1 Consent of Sierchio & Albert, P.C. (included in Exhibit 5.1)
**23.5 Consent of Ernst & Young LLP
**24.1 Power of Attorney. Reference is made to II-11.
*27.1 Financial Data Schedule
*27.2 Financial Data Schedule
*27.3 Financial Data Schedule
----------
* Previously filed.
** Filed herewith.
*** Filed herewith. Subject to request for confidential treatment.
(B) FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules omitted because the information is included
in the Financial Statements of notes thereto.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 14 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate
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<PAGE>
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually, or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement; notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
(230.424(b) of this Chapter) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post- effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
Offering.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Vancouver, Province of British Columbia, on July 28, 2000.
STOCKGROUP HOLDINGS INC.
By: /S/ Marcus New
Marcus New
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints each one of them, acting
individually and without the other, as his attorney-in-fact, each with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective amendments),
and to sign any registration statement for the same Offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chief Executive Officer, July 28, 2000
/S/ MARCUS A. NEW Secretary and Director
------------------------- (principal executive officer)
Marcus A. New
/S/ DAVID N. CADDEY President and Director July 31, 2000
-------------------------
David N. Caddey
/S/ LOUIS DEBOER II Director July 29, 2000
-------------------------
Louis deBoer II
/S/ LESLIE LANDES Director July 28, 2000
-------------------------
Leslie Landes
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<PAGE>
/S/ CRAIG FAULKNER Director July 28, 2000
-------------------------
Craig Faulkner
/S/ LINDSAY MOYLE Chief Financial Officer, July 28, 2000
------------------------- (principal accounting officer
Lindsay Moyle and principal financial officer)
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<PAGE>
EXHIBIT INDEX
The following Exhibits are either attached hereto or incorporated herein by
reference:
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT AND FILING REFERENCE
Page
2.1 Share Exchange and Share Purchase Agreement dated March
11, 1999, among I-Tech Holdings Group, Inc. (the
"Registrant") the former shareholders of the Registrant,
579818 B.C. Ltd. ("B.C. Ltd"), Stock Research Group, Inc.
("SRG"), and the former shareholders of SRG effecting a
change in control of Registrant. (incorporated by
reference to the Exhibits filed with Form 8K filed March
19, 1999, Form 8K/A filed March 24, 1999 and Form 8K/A
filed May 10, 1999) ____
3.1 Articles of Incorporation (incorporated by reference to
the Exhibits filed with Form 10SB12G filed January 29,
1998, and Amendments to Articles of Incorporation filed
herewith) ____
*3.2 Amended and Restated Bylaws ____
4.1 1999 Stock Incentive Plan (incorporated by reference to
the Exhibits filed with Form S-8 filed November 16, 1999) ____
4.2 Convertible Note Purchase Agreement, ("Note Purchase
Agreement") dated March 21, 2000, among the Registrant,
Deephaven Private Placement Trading Ltd. ("Deephaven")
and Amro International, S.A. ("Amro") (incorporated by
reference to the Exhibits filed with Form 8K filed on
April 18, 2000) ____
4.3 Form of 8% Convertible Note issued to each of Deephaven
and Amro pursuant to the Note Purchase Agreement
(incorporated by reference to the Exhibits with Form 8K
filed on April 18, 2000) ____
4.4 Form of Callable Warrant issued to Deephaven, Amro, and
Jesup and Lamont Securities Corporation pursuant to the
Note Purchase Agreement (incorporated by reference to the
Exhibits filed with Form 8K filed on April 18, 2000) ____
4.5 Registration Rights Agreement, dated March 31, 2000,
among the Registrant, Deephaven and Amro (incorporated by
reference to the Exhibits filed with Form 8K filed on
April 18, 2000) ____
**5.1 Opinion of Sierchio & Albert, P.C., regarding the
legality of the securities being registered 93
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<PAGE>
9.1 Exchange and Voting Agreement dated March 11, 1999, among
the Registrant, B.C. Ltd., SRG and the individual
signatories thereto, incorporated by reference to the
Exhibits filed with Form 8K filed on March 19, 199 ____
***10.1 Enterprise Financial Website Development & Software
Licensing Agreement, dated January 2000, between the
Registrant and PTE Ltd 95
**10.2 Employment Agreement, dated August 1, 1998, between the
Registrant and Leslie Landes. 113
11.1 Statement re: computation of per share earnings - see
Note 10 to financial statements ____
16.1 Letter regarding change in certifying accountant -
incorporated by reference to Exhibits filed with Form 8K
filed July 9, 1999 ____
21.1 Subsidiaries of the Company (incorporated by reference to
Exhibit filed with Form 10KSB/A filed May 1, 2000) ____
**23.1 Consent of Sierchio & Albert, P.C. (included in Exhibit
5.1) 93
**23.5 Consent of Ernst & Young LLP 124
**24.1 Power of Attorney. Reference is made to II-11. ____
*27.1 Financial Data Schedule ____
*27.2 Financial Data Schedule ____
*27.3 Financial Data Schedule ____
--------
* Previously filed.
** Filed herewith.
*** Filed herewith. Subject to request for confidential treatment.
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