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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 2000
REGISTRATION NO. 333-34984
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO FORM F-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SIDEWARE SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
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BRITISH COLUMBIA, CANADA 7372
(State or other Jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
incorporation or organization) Classification Code Number)
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930 WEST FIRST STREET, SUITE 102, NORTH VANCOUVER,
BRITISH COLUMBIA, CANADA V7P 3N4
TELEPHONE (604) 988-0440
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
NATIONAL REGISTERED AGENT
1090 VERMONT AVENUE, SUITE 910
WASHINGTON, D.C. 20005
TELEPHONE (202) 371-8090
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
GRANT SUTHERLAND, CHAIRMAN, SIDEWARE SYSTEMS INC.
1600 - 777 Dunsmuir St.,
Vancouver, B.C. V7Y 1K4
Tel: (604) 688-0047; Fax: (604) 688-0094
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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, check the following box and list the Securities Act
registration statement number of the earlier effective 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. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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Common Shares...................... 5,000,000 $5.00 $25,000,000 $6,600.00
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(1) Pursuant to Rule 416, this Registration Statement shall be deemed to cover
an indeterminate number of additional common shares in the event the number
of outstanding shares of Sideware Systems Inc. is increased by stock split,
stock dividend and/or similar transactions.
(2) Pursuant to Rule 457(c), the proposed maximum offering price per common
share and the proposed maximum aggregate offering price have been calculated
on the basis of $5.00 per share, the average of the high and low prices
reported in the OTC Bulletin Board as of April 14, 2000
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 COMMISSION, ACTING PURSUANT TO SECTION 8(A), SHALL
DETERMINE.
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PROSPECTUS
SIDEWARE SYSTEMS INC.
3,719,434 COMMON SHARES
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This is an offering of up to 3,719,434 common shares of Sideware
Systems Inc., a Canadian corporation, by the persons named in this prospectus as
selling shareholders. Of these shares:
- 1,511,913 shares were issued to the selling shareholders in a private
placement which we completed in January 2000, and on the exercise of share
purchase warrants issued in the private placement.
- 2,207,521 shares are issuable on the exercise of warrants which remain
outstanding from the private placement.
Our common shares trade on the Canadian Venture Exchange under the symbol
"SYD.U" and through the OTC-Bulletin Board under the symbol "SDWSF." The closing
prices reported for our common shares on the Canadian Venture Exchange and the
OTC Bulletin Board on June 6, 2000 were US$5.85 and US$5.71, respectively.
The selling shareholders will control the number of shares offered for sale.
The selling shareholders are not required to sell all, or any, of the shares.
The selling shareholders will also control how the shares are offered for sale.
The selling shareholders may sell the shares either through the Canadian Venture
Exchange or the OTC-Bulletin Board, or in private sales at negotiated prices.
The selling shareholders may also enter into underwriting agreements, and may
pay underwriting discounts or commissions. The selling shareholders will control
the prices at which the shares are offered, and can reject any
proposed purchaser.
INVESTING IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENCE.
------------------------
The date of this prospectus is June 6, 2000
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You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The common shares are not being
offered in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate after the
date of the document.
Financial information in this prospectus is expressed in Canadian dollars
("$" or "Cdn$"), unless stated to be in United States dollars ("US$"). The
exchange rate for one Canadian dollar on June 6, 2000, based on the noon buying
rate in New York City for cable transfers payable in Canadian dollars, as
certified for customs purposes by the Federal Reserve Bank of New York, was
Cdn$1.00 = US$0.677.
ADDITIONAL INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act
of 1934 as a foreign private issuer, as defined in Rule 3b-4 of the Exchange
Act. In accordance with those requirements, we file annual reports on
Form 20-F, reports on Form 6-K, and other information with the Securities and
Exchange Commission. The reports and other information we file can be inspected
and copied at the Public Reference Room of the Commission, 450 Fifth Street,
N.W., Washington D.C. 20549 and at the Commission's regional offices at 500 West
Madison Street, Suite 1400, Chicago, IL 60661-2511 and 7 World Trade Center,
13th Floor, New York, NY 10048. You can obtain information on the operation of
the Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission also maintains a web site that contains reports and other information
that we file electronically. The address of the web site is HTTP://WWW.SEC.GOV.
INCORPORATED DOCUMENTS
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this prospectus. This means that we can disclose
important information to you by referring you to another document that we have
filed with the Commission. Information incorporated by reference is deemed to be
part of this prospectus, except for any information superseded by this
prospectus.
We incorporate by reference into this prospectus:
(a) our annual report on Form 20-F for the fiscal year ended December 31,
1999, as filed with the Commission on April 4, 2000; and
(b) our report on Form 6-K as filed with the Commission on May 31, 2000,
which included our unaudited quarterly financial statements for the
quarter ended March 31, 2000.
All subsequent annual reports which we file on Form 20-F, Form 40-F, or
Form 10-K, and any subsequent filings we make on Form 10-Q or Form 8-K, shall be
deemed to be incorporated by reference into this prospectus.
We may incorporate by reference subsequent filings on Form 6-K by
identifying in such Forms that they are being incorporated by reference into
this prospectus.
We will deliver to each person (including any beneficial owner) to whom this
prospectus has been delivered a copy of any or all of the information that has
been incorporated by reference into this prospectus, but not delivered with this
prospectus. We will provide this information upon written or oral request, and
at no cost to the requester. Requests should be directed to Grant Sutherland,
Chairman, Sideware Systems Inc., 777 Dunsmuir Street, Suite 1600, Vancouver,
British Columbia, Canada V7Y 1K4. Our telephone number at that location is
(604) 688-0047. Our corporate web site address is www.sideware.com. The
information on our web site is not intended to be a part of this prospectus.
ENFORCEMENT OF CIVIL LIABILITIES
Sideware Systems Inc. is a Canadian company and many of our assets are
located outside the United States. In addition:
- some of our directors and officers are residents of Canada;
- some or all of the experts named in this registration statement are
residents of Canada; and
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- all or a substantial portion of the assets of those parties may be located
outside the United States.
As a result, investors may not be able to:
- enforce civil liabilities created by federal securities laws of the United
States against us, or against the other parties listed above;
- effect service of process within the United States on the parties listed
above; or
- realize in the United States on judgments of courts of the United States.
There is also doubt as to whether Canadian courts will enforce liabilities
created by United States federal securities laws, or judgments of United States
courts based on those laws.
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PROSPECTUS SUMMARY
THE COMPANY
We provide software which facilitates Internet commerce. Our principal
product, Dr. Bean, allows companies operating e-commerce Web sites to open
direct, real time communication with their customers over the Web. Dr. Bean thus
gives e-commerce vendors the best of both worlds--the range and flexibility of
the Internet combined with the personalised service of traditional marketing
methods.
The Internet is growing rapidly in importance as a medium for conducting
business. In addition to retail trade, the Internet is becoming a centre of
business-to-business commerce. International Data Corporation has projected that
the total value of goods and services purchased over the Internet will grow from
approximately $50 billion in 1998 to over $734 billion by 2002.
We released the initial version of Dr. Bean in April 1999. In April 2000 we
released Dr. Bean 3.2, our current version. Dr. Bean 3.2 contains features which
perform a broad range of e-CRM (Electronic Customer Relations Management)
functions.
We have entered into marketing agreements with IBM which we believe will
assist us in gaining market exposure, and in developing distribution channels
for Dr. Bean. In addition, in July 1999 we initiated the Sideware Partner
Program, to enlist value added resellers for Dr. Bean. We presently have over 20
value added resellers.
We have a limited operating history, and have not yet generated material
operating revenues. In addition, we operate in a highly competitive market. An
investment in our shares is speculative and involves a high degree of risk. The
principal risks affecting our business and securities are set out below under
the heading "RISK FACTORS."
Our executive offices are located at 903 West 1st Street, Suite 102, North
Vancouver, British Columbia, Canada V7P 3N4, and our telephone number is
(604) 988-0440. Our world-wide web address is www.sideware.com.
THE OFFERING
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COMMON SHARES BEING OFFERED BY THE Up to 3,719,434 common shares. 1,511,913 shares were issued
SELLING SHAREHOLDERS: to the selling shareholders in a private placement which we
completed in January 2000, and on the exercise of share
purchase warrants issued in the private placement. 2,207,521
shares are issuable on the exercise of warrants which remain
outstanding from the private placement. The shares and share
purchase warrants were issued to United States purchasers
under exemptions from registration under the Securities Act
of 1933, and to Canadian purchasers.
RISK FACTORS: An investment in our common shares is speculative and
involves a high degree of risk. Before making an investment,
you should read this entire prospectus, and the information
incorporated in it by reference, carefully. You should also
consider the information under the heading "Risk Factors",
which begins on page 5.
USE OF PROCEEDS: We will not receive any proceeds from the sale of the common
shares offered by the selling shareholders. To the extent
that any of the warrants are exercised, we will receive the
warrant exercise price. Proceeds from the exercise of
warrants, if any, will be used for working capital purposes.
LISTING OR QUOTATION OF COMMON SHARES: Our common shares currently trade on the Canadian Venture
Exchange under the symbol "SYD.U" and quote on the OTC
Bulletin Board under the symbol "SDWSF".
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RISK FACTORS
INVESTMENT IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, AND IN THE DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, BEFORE PURCHASING OUR
COMMON SHARES.
BECAUSE WE DO NOT YET EARN SIGNIFICANT REVENUE, WE FACE A RISK THAT OUR BUSINESS
WILL FAIL.
We have never earned significant operating revenue. We have been dependent
on equity financing to pay operating costs and to cover operating losses.
We estimate that we have sufficient cash to pay ongoing operating expenses,
at their current level, for the balance of 2000, and for part of the first half
of 2001. To continue operation beyond that we will have to generate operating
revenue or raise additional capital. If we are unable to do so, we face a risk
that our business will fail, and that we may be unable to continue
in operation.
Our audited financial statements include disclosure stating that there is
substantial doubt about our ability to continue as a going concern. Our plans to
deal with this issue are presented in the preceding paragraph, in our comments
below, and in the documents that are incorporated by reference.
BECAUSE WE HAVE A LIMITED OPERATING AND SALES HISTORY, WE DO NOT HAVE A RELIABLE
BASIS FOR PREDICTING THAT WE WILL EARN REVENUE IN THE FUTURE.
We commenced operations under new management in May 1995. The first version
of our principal product, Dr. Bean, was released in April 1999. Dr. Bean is a
relatively new product, without an established user base. In addition, Dr. Bean
is being offered in a new and rapidly changing market. The prospects for
Dr. Bean are difficult to predict and may change rapidly and without warning. We
have not at any time generated significant sales revenue from any of our
products, including Dr. Bean, and we have incurred losses consistently since
entering the field of software development.
As a result of our limited operating and sales history, we have no assurance
that we will earn substantial revenue in the future, nor any basis for
predicting the level of any future revenues.
BECAUSE OF OUR LIMITED OPERATING AND SALES HISTORY, WE CANNOT MAKE RELIABLE
PROJECTIONS OF OUR FUTURE OPERATING COSTS.
We have recently increased our work force and operating costs substantially.
In order to generate substantial sales revenue we may have to continue hiring
additional personnel or incur substantial advertising costs. As a result of our
lack of historical sales we cannot make reliable projections of the number of
additional personnel we will require, the cost of employing those personnel, or
the level of marketing and overhead expenses we will incur. We thus have no
assurance that any revenue we earn will be sufficient to cover the cost of
earning that revenue, or to generate operating profits.
BECAUSE WE LACK PROVEN DISTRIBUTION CHANNELS, WE MAY BE UNABLE TO REACH
POTENTIAL CUSTOMERS FOR DR. BEAN.
We presently plan to market Dr. Bean through two principal distribution
channels, our direct sales force and value added resellers. To date, we have not
generated significant sales revenue through either channel. Accordingly, we have
no assurance that these methods of sale will be effective in reaching potential
customers for Dr. Bean.
If we do not achieve substantial revenue through our direct sales force, we
may be dependent on value added resellers to sell our products. Failure to
recruit a sufficient number of value added resellers, or failure of our value
added resellers to market our products effectively, could prevent us from
achieving substantial sales revenue.
BECAUSE OUR PRODUCTS ARE OFFERED IN AN EMERGING MARKET, THE POTENTIAL MARKET FOR
OUR PRODUCTS IS UNCERTAIN.
Our products address a new and emerging market for Web-based, interactive
electronic business solutions. Therefore, our future success depends
substantially upon the widespread adoption of the Web as a
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primary medium for commerce and business applications. The failure of this
market to develop, or a delay in the development of this market, will have a
material adverse effect on our business, financial condition and
operating results.
The Web has experienced, and is expected to continue to experience,
significant user and traffic growth. This, at times, has caused user frustration
with slow access and download times. The Web infrastructure may not be able to
support the demands placed on it by the continued growth upon which our
success depends.
Moreover, important issues concerning the commercial use of the Web, such as
security, reliability, cost, accessibility, and quality of service, remain
unsolved and may negatively affect the growth of Web use or the attractiveness
of business communication over the Web. There is also substantial uncertainty
about how governments may attempt to regulate use of the Web in the future, or
tax Web-based transactions. The imposition of new government regulations or
taxes may impede use of the Web for business purposes, and impair the market for
our products.
BECAUSE WE ARE NOT A LARGE COMPANY, WE MAY BE UNABLE TO COMPETE.
The market for interactive Web-based electronic business solutions is highly
competitive and rapidly changing. Many of our current and potential competitors
have longer operating histories, greater name recognition, and substantially
greater financial, technical, marketing, and other resources than we have. Our
competitors may be able to expand and develop their technologies more quickly,
to devote greater resources to the development and marketing of their products,
or to respond more quickly to changing opportunities or technologies.
In addition, we expect that new competitors will enter the market with
competing products as the size and visibility of the market increases. We
believe that barriers to entry in our market are relatively small. We also
expect that competition will increase through software industry consolidations
and formations of alliances among industry participants. Increased competition
could result in pricing pressure, reduced margins, or the failure of our
products to achieve or maintain market share.
The market for computer software is dominated by large corporations which
have assets much greater than ours, and which might be able to develop software
duplicating the features of our products at modest cost. We face a continual
risk that market opportunities or product features which we intend to exploit
can, within a short period of time, become dominated by much larger and
wealthier corporations, rendering our products obsolete or non-competitive.
BECAUSE WE HAVE NOT ACHIEVED SIGNIFICANT SALES REVENUE IN THE PAST, WE MAY NOT
HAVE ADEQUATE PERSONNEL OR SYSTEMS TO COPE WITH A RAPID INCREASE IN SALES.
We could experience rapid growth in orders, sales, and revenue. We cannot
assure that we will be able to manage the strains that future growth may place
on our administrative infrastructure, systems, and controls.
Qualified technical personnel are in great demand throughout the software
industry. Increased sales of our products may require us to hire additional
personnel to install and support our products. We may also be required to hire
additional technical personnel to continue development of our products. Our
success will depend, to a substantial degree, on our ability to attract, train,
motivate, and retain qualified personnel. We have no assurance that we will be
able to compete successfully in the job market, to attract or keep the qualified
employees we need.
BECAUSE MUCH OF OUR WORK FORCE HAS BEEN HIRED RECENTLY, WE ARE VULNERABLE TO
LOSS OF KEY EMPLOYEES.
We have increased our work force substantially during the last six months.
As a result, a substantial number of our employees are relatively new, and have
worked together for only a short period of time.
The success of our marketing efforts is substantially dependent on our
President, the President of Sideware Corp., and the Executive Vice
President/General Manager of US Operations for Sideware Corp.
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Continued development of our products and our technical work are substantially
dependent on our President and the programmers that head our Dr. Bean and Dr.
Bean On Call development teams.
The departure of a single employee or a small number of employees could hurt
our business. We cannot assure that we will be able to attract and retain
qualified personnel on acceptable terms. We do not have key man insurance on any
of our employees.
BECAUSE OUR BUSINESS IS DEPENDENT ON PROPRIETARY TECHNOLOGY, WE ARE VULNERABLE
TO MISAPPROPRIATION OF OUR TECHNOLOGY.
We rely heavily on our proprietary software technology. To protect our
proprietary technology we rely on confidentiality agreements with key employees
and third parties and on trade secret, trademark, and copyright laws. Although
we attempt to maintain confidentiality of our software technology, we cannot
assure that we have adequately protected our technology from misappropriation.
In addition, others may attempt to "reverse engineer" our products in order to
determine their method of operation and introduce competing products.
BECAUSE WE OPERATE IN A HIGH TECHNOLOGY FIELD, WE FACE A RISK OF INFRINGEMENT
CLAIMS FROM OTHER COMPANIES.
If any of our products violate third party proprietary rights we may be
required to re-engineer our products or seek licenses from third parties. We
have no reason to believe that any of our products infringe the proprietary
rights of third parties. However, we do not conduct comprehensive patent
searches to determine whether the technology used in our products infringes any
third party patents.
High tech markets are sometimes characterised by the existence of a large
number of patents with broad, and questionable, application. As the market for
our products develops, and the functionality of those products grows and
overlaps with products offered by competitors, our products may become
increasingly subject to infringement claims. Although we have no reason to
believe that any of our products infringe the proprietary rights of third
parties, there can be no assurance that infringement claims will not be asserted
against us, or that such claims will not require us to enter into royalty
arrangements or result in costly litigation.
BECAUSE OUR PRODUCTS INCORPORATE THIRD PARTY TECHNOLOGIES, WE MAY LOSE ACCESS TO
REQUIRED TECHNOLOGY.
Our Dr. Bean product incorporates software licensed from third parties. We
have no reason to believe that our license rights in respect of that software
will be terminated. However, we cannot assure that those license rights will
continue to be available to us. Loss of those license rights would require us to
license software performing similar functions from other parties, to develop
software performing those functions independently, or to re-engineer our
products to operate without the licensed software. This could result in
interruptions or delays in our ability to sell or continue development of our
products, or in loss of important features of our products.
BECAUSE OUR PRODUCTS ARE COMPLEX, THEY MAY CONTAIN UNKNOWN DEFECTS.
Software products are complex. Our products may contain undetected errors,
or bugs, which result in product failures. Our products may also be incompatible
with other software or hardware used by a substantial number of our potential
customers. Product performance failures could result in loss of revenues, loss
of market share, failure to achieve market acceptance, or injury to
our reputation.
During the week of April 26, 1999, we implemented the initial version of
Dr. Bean on IBM platforms, including principally the S390, AS400 and RS6000
platforms, and also the Windows NT, Linux and Sun Solaris operating systems, at
IBM facilities. During the implementation and testing, the initial version of
Dr. Bean operated successfully on the platforms and operating systems tested.
However, neither the original version of Dr. Bean, nor modifications which have
been added subsequently, have yet been in significant use under actual operating
conditions. Accordingly, we have no assurance that Dr. Bean will operate free of
material errors or defects.
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To the best of our knowledge, all of our products and internal systems are
Year 2000 compliant. However, we are subject to the possibility of unknown
Year 2000 problems affecting our products, our customers' systems, or our
internal systems.
BECAUSE WE HAVE NOT COMPLETED ANY LARGE INSTALLATIONS OF DR. BEAN, WE DO NOT
KNOW HOW WELL IT WILL OPERATE IN LARGE INSTALLATIONS.
To date, most of our installations of Dr. Bean have been small, involving
only a few customer service representative workstations. We have never completed
a large installation of Dr. Bean, or secured a contract for a large
installation. A large installation would require us to install several copies of
the Dr. Bean server, which would work together. Owing to our lack of experience
with large installations, we do not know how successfully Dr. Bean will run in
large installations.
BECAUSE WE HAVE LIMITED EXPERIENCE USING DR. BEAN UNDER ACTUAL OPERATING
CONDITIONS, WE COULD FACE SUBSTANTIAL PRODUCT LIABILITY CLAIMS.
Because of our limited operating history with Dr. Bean, we have no assurance
that it will not experience failures under actual operating conditions. If any
of our products fail, a customer may assert a claim for substantial damages
against us, regardless of whether we are responsible for the failure. Product
liability claims could require us to spend significant time and money in
litigation or to pay significant damages.
We currently carry limited insurance, which may not cover claims against us
for financial losses, and which will not be sufficient in amount to cover large
claims. In addition, there can be no assurance that any insurance coverage will
be available in the future on reasonable terms, that insurance we purchase will
be sufficient to cover any claims against us, or that insurers will not deny
coverage with respect to any future claim.
BECAUSE OUR BUSINESS HAS NOT BEEN PROFITABLE, AND BECAUSE OUR SHARE PRICE HAS
BEEN VOLATILE, WE MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL WE NEED.
We may require additional capital to continue the development of our
services and products, to pay the costs of marketing those products, or to cover
operating losses until we are able to become profitable. As we have never earned
operating profits, we may not be able to raise the amount of capital
we require. In addition, our share price has been highly volatile during 2000.
The volatility of our share price may deter potential investors.
To raise additional capital we may have to issue additional shares, which
may dilute the interests of existing shareholders substantially. Alternatively,
we may have to borrow large sums, and assume obligations to make substantial
interest and capital payments. We may also have to sell significant interests in
some or all of our products. If we are able to raise additional capital, we
cannot assure that it will be on terms that enhance the value of our
common shares.
BECAUSE WE HAVE NON-ARM'S LENGTH AGREEMENTS WITH RELATED COMPANIES, GOVERNMENTS
MAY CHALLENGE OUR TAX RETURNS.
We are party to agreements with non-arm's length parties, including Sideware
Corp. and Sideware International SRL, in jurisdictions outside Canada. We
believe that these agreements have been implemented in accordance with taxation
laws, regulations, treaties, and assessment practices prevailing in Canada, the
United States, and the other jurisdictions involved. However, Canadian or U.S.
taxation authorities may challenge the terms or tax effect of these agreements,
and issue taxation assessments requiring us to pay additional income taxes
beyond the amounts we consider to be owing. Such assessments could lead to tax
liabilities substantially greater than we expect, or to duplicate tax
liabilities in different jurisdictions on the same income.
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BECAUSE WE SHARE CERTAIN COSTS WITH ANOTHER DEVELOPMENT STAGE COMPANY, OUR
OPERATING COSTS COULD INCREASE IN THE FUTURE.
We share some of our premises and personnel with BrainTech, Inc.
BrainTech, Inc. is a public company whose shares trade on the OTC Bulletin
Board. Grant Sutherland, Owen Jones, and James Speros, members of our board of
directors, are also the directors of BrainTech, Inc. BrainTech, Inc. is a
development stage company which has not achieved profitable operation.
We currently share the cost of the common premises and personnel with
BrainTech, Inc. However, there is no assurance that BrainTech, Inc. will be able
to pay the portion of the costs for which it is responsible, with the result
that our cash requirements to continue operation may increase.
BECAUSE OF EXISTING LEGAL CLAIMS, WE FACE A RISK OF MATERIAL ADVERSE JUDGMENTS.
We are presently involved in several court proceedings with former
management. The principal court proceedings are described in the documents
incorporated by reference in this prospectus. In those proceedings, claims
totalling approximately $1.8 million have been advanced against us.
We are prosecuting our claims and defending our position in all of the
litigation proceedings. While we believe that our positions will be sustained,
there is a risk of losing some of the court actions. The results could include
substantial pecuniary judgments against us and the appointment of a receiver of
our assets.
BECAUSE THE MARKET PRICE OF OUR COMMON SHARES HAS BEEN PARTICULARLY VOLATILE,
INVESTORS IN OUR COMMON SHARES FACE A HIGH DEGREE OF MARKET RISK.
The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
companies, particularly Web-related companies, have been extremely volatile, and
have experienced price fluctuations that have often been unrelated or
disproportionate to the operating performance of these companies.
The price of our common shares has also experienced substantial
fluctuations. Between January 1, 2000 and May 31, 2000 our share price has
fluctuated between a high of US$25.50 and a low of US$3.30. The susceptibility
of our stock price to fluctuation exposes purchasers of our stock to a high
degree of risk.
As we have not at any time announced material earnings, we believe that the
fluctuations in our stock price have resulted primarily from market perceptions
of the speculative value of our business opportunities. The price of our common
shares could fall substantially if we do not generate future earnings that meet
the expectations of investors.
BECAUSE OUR STOCK MAY BE SUBJECT TO "LOW PRICE STOCK" RULES, THE MARKET FOR OUR
STOCK MAY BE LIMITED.
The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price less than US$5.00. The price of our stock has been volatile, and may be
subject to those rules. The penny stock rules require broker-dealers to make a
special suitability determination before selling our stock to investors who are
not either regular customers or accredited investors. As a result, the potential
market for our stock may be limited.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, and the other reports we have filed from time to time with
the Securities and Exchange Commission, contain forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Forward-looking statements deal with our current plans,
intentions, beliefs and expectations and statements of future economic
performance. Statements containing terms like "believes," "does not believe,"
"plans," "expects," "intends," "estimates," "anticipates," and other phrases of
similar meaning are considered to imply uncertainty and are forward-looking
statements.
Forward-looking statements involve known and unknown risks and uncertainties
that may cause our actual results in future periods to differ materially from
what is currently anticipated. We make cautionary statements throughout this
prospectus and the documents we have incorporated by reference, including those
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stated under the heading "Risk Factors." You should read these cautionary
statements as being applicable to all related forward-looking statements
wherever they appear in this prospectus, the materials referred to in this
prospectus, and the materials incorporated by reference into this prospectus.
We cannot guarantee our future results, levels of activity, performance or
achievements. Neither we nor any other person assumes responsibility for the
accuracy and completeness of these statements.
We are under no duty to update any of the forward-looking statements after
the date of this prospectus.
USE OF PROCEEDS
Except for exercise of warrants, as explained below, we will not receive any
proceeds from sale of the shares offered under this prospectus. The selling
shareholders will receive those proceeds.
If any of the selling shareholders exercise their warrants, we will receive
the exercise price of US$1.64 per share, for warrants exercised prior to
December 14, 2000, or US$1.89 per share, for warrants exercised between
December 14, 2000 and December 14, 2001. In the event that no warrants are
exercised, we will not receive any proceeds from this offering.
We will use funds received on the exercise of warrants, if any, for working
capital purposes.
SELLING SHAREHOLDERS
The shares offered for sale under this prospectus consist of up to:
- 1,511,913 shares which we issued in a private placement which we completed
in January 2000, and on the exercise of share purchase warrants issued in
the private placement; and
- 2,207,521 shares issuable on the exercise of share purchase warrants which
are still outstanding from the private placement.
On January 21, 2000 we issued 2,500,000 units to the selling shareholders.
Each unit consisted of one share and one share purchase warrant. Each share
purchase warrant entitled the holder to acquire one additional share for a
period of two years at a price of two years at a price of US$1.64 per share up
to December 14, 2000 or US$1.89 per share up to December 14, 2001. Up to
May 31, 2000, 292,479 of the warrants have been exercised. The price of the
units was US$1.64 per unit. The warrants are non-transferable.
Up to June 6, 2000:
(a) 292,479 of the warrants have been exercised; and
(b) the selling shareholders have sold 1,280,566 shares in offshore
transactions through the Canadian Venture Exchange.
The shares offered under this prospectus consist of the shares remaining
from the private placement, and shares issuable on the exercise of the remaining
share purchase warrants. The selling shareholders may resell all, a portion, or
none of the shares offered under this prospectus.
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The table below sets forth with respect to each selling shareholder, based
upon information available to us as at June 6, 2000, the number and percent of
outstanding common shares beneficially owned prior to this offering, the number
of shares offered under this prospectus, and the number and percent of
outstanding common shares that will be owned after the completion of this
offering (assuming that all of the shares offered are sold).
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING(3)(4) OFFERING(3)(6)
WARRANTS -------------------- SHARES --------------------
SELLING SHAREHOLDER UNITS(1) EXERCISED(2) # % OFFERED(5) # %
------------------- -------- ------------ --------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
James Streit.................... 62,500 Nil 125,000 * 125,000 Nil *
Andrew Fisher................... 750,000 Nil 1,076,800 1.8% 1,076,800 Nil *
Kevin J. Murray................. 62,500 Nil 125,000 * 97,900 Nil *
Brian C. Pennington............. 312,500 Nil 590,600 1.0% 590,600 Nil *
Joshua L. Mandell............... 125,000 Nil 183,000 * 183,000 Nil *
Jeffrey Rosenbluth.............. 166,667 141,667 166,667 * 166,667 Nil *
Dennis Keegan................... 62,500 Nil 225,000 * 125,000 100,000 *
Robert Stavis................... 166,667 Nil 166,667 * 166,667 Nil *
William Montgomery.............. 166,666 141,666 25,000 * 25,000 Nil *
Frank Jordan.................... 62,500 Nil 125,000 * 125,000 Nil *
Titan Investment Group, LLC..... 182,925 Nil 365,850 * 365,850 Nil *
MacroSoft eCommerce
Partners(7)................... 51,829 Nil 580,050 * 121,950 416,392 *
William Streib(8)............... 9,146 9,146 60,000 * 18,292 41,708
Reicher Capital Management...... 125,000 Nil 250,000 * 250,000 Nil *
Erica Hughes.................... 3,600 Nil 3,600 * 3,600 Nil *
Canaccord Capital Corp. ITF
Erica Hughes.................. 10,000 Nil 16,400 * 16,400 Nil *
Grant Sutherland(9)............. 60,000 Nil 2,376,000 4.0% 120,000 1,991,400 3.2%
Owen Jones(10).................. 60,000 Nil 4,087,500 6.6% 120,000 3,967,500 6.5%
James L. Speros(11)............. 60,000 Nil 2,437,000 3.9% 120,000 2,317,000 3.7%
</TABLE>
------------------------
* Less than one percent (1%).
(1) This column states the number of units acquired by each selling shareholder
initially in the January 2000 private placement. Each unit consisted of one
share and one share purchase warrant.
(2) This column states the number of warrants from the January 2000 private
placement that have been exercised.
(3) As used in this table, "beneficial ownership" means the sole or shared
voting and investment power of common shares. Unless otherwise indicated,
each selling shareholder listed below has sole voting and investment power
with respect to the common shares indicated as beneficially owned thereby. A
person is deemed to have "beneficial ownership" of any common shares that
that person has a right to acquire within sixty days of the date of this
prospectus. In accordance with Rule 13d-3 of the Exchange Act, any common
shares that any selling shareholder has the right to acquire within sixty
days of the date of this prospectus are deemed to be outstanding for the
purpose of computing the beneficial ownership percentage of that selling
shareholder, but have not been deemed outstanding for the purpose of
computing the percentage for any other selling shareholder.
(4) Figures stated in this column include a total of 1,531,000 shares issuable
within sixty days pursuant to stock options and 4,257,521 shares issuable
within sixty days pursuant to share purchase warrants.
(5) Figures stated in this column include 2,207,531 shares issuable on the
exercise of share purchase warrants from the January 2000 private placement.
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(6) Figures stated in this column assume that all shares offered under this
prospectus will be sold. Figures stated in this column include 1,531,000
shares issuable within sixty days pursuant to stock options and 2,050,000
shares issuable within sixty days pursuant to share purchase warrants.
(7) MacroSoft eCommerce Partners is a partnership whose principals include one
of our employees. Figures stated for MacroSoft eCommerce Partners include
shares owned by all of the principals of MacroSoft eCommerce partners.
(8) Mr. Streib is a former employee. The shares offered under this prospectus
for re-sale by Mr. Streib were acquired from MacroSoft eCommerce Partners,
of which Mr. Streib was a principal.
(9) Grant Sutherland is the Chairman of the Board of Directors. Figures stated
for Mr. Sutherland prior to the offering include 478,000 shares issuable
within sixty days pursuant to stock options and 60,000 shares issuable
within sixty days pursuant to share purchase warrants.
(10) Owen Jones is our President and one of our directors. Figures stated for
Mr. Jones prior to the offering include 678,000 shares issuable within sixty
days pursuant to stock options and 1,060,000 shares issuable within sixty
days pursuant to share purchase warrants.
(11) James Speros is one of our directors. Figures stated for Mr. Speros prior
to the offering include 375,000 shares issuable within sixty days pursuant
to stock options and 1,060,000 shares issuable within sixty days pursuant to
share purchase warrants.
The information stated in the table above was provided by the selling
shareholders, and is accurate to the best of our knowledge.
Erica Hughes is the wife of Clive Forth, who provides legal services to us.
Otherwise, except as otherwise disclosed above or in documents incorporated by
reference in this prospectus, the selling shareholders have not within the past
three years had any position, office or other material relationship with
our company.
The selling shareholders may have disposed of shares, either in private
transactions or in offshore transactions through the Canadian Venture Exchange,
or acquired additional shares, since the dates they provided the information
stated above. They may also dispose of, or acquire, shares after the date of
this prospectus, and may sell all, some, or none of the shares offered under
this prospectus. For these reasons we can only give an estimate, assuming the
selling shareholders sell all of the shares offered under this prospectus, of
the number of shares the selling shareholders will own after this offering.
PLAN OF DISTRIBUTION
The prospectus covers the sale of shares by the selling shareholders. It
also covers sales by people who receive shares from the selling shareholders by
way of gift, pledge, partnership distribution, or other non-sale related
transfer. Any distribution of the shares offered under this prospectus may be
effected by any of those parties from time to time in one or more of the
following transactions:
- to underwriters who will acquire securities for their own account and
resell them in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale;
- through brokers, acting as principal or agent, in transactions on the
Canadian Venture Exchange, through the OTC Bulletin Board quotation
service, or on any other market or exchange on which the securities are
then listed;
- directly or through brokers or agents in private sales at
negotiated prices;
- through put or call option transactions, or through short sales of our
common shares at market prices prevailing at the time of sale or at
negotiated prices; or
- by any other legally available means.
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Any public offering price and any discount or concessions allowed or paid to
underwriters may change from time to time. Sales through an exchange may involve
block transactions, special offerings, or exchange distributions, and may take
place at market prices prevailing at the time of sale, prices related to such
prevailing market prices, negotiated prices, or fixed prices.
The aggregate proceeds to the selling shareholders from the shares will be
the offering price less applicable commissions or discounts, if any. We do not
know if the selling shareholders will sell any of the shares.
The selling shareholders and their underwriters, brokers, dealers or agents,
upon effecting a sale of securities, may be considered "underwriters" as that
term is defined in the Securities Act. The selling shareholders will be subject
to the prospectus delivery requirements because the selling shareholders may be
deemed to be "underwriters" within the meaning of Section 2(a)(11) of the
Securities Act. Sales effected through agents, brokers, or dealers will
ordinarily involve payment of customary brokerage commissions, although some
brokers or dealers may purchase shares as agents for others or as principals for
their own account. The selling shareholders will pay any sales commissions or
similar selling expenses applicable to the sale of the shares. A portion of any
proceeds of sales and discounts, commissions, or other sellers' compensation may
be deemed to be underwriting compensation for purposes of the Securities Act.
Selling shareholders also may resell all or a portion of the shares:
- in open market transactions in compliance with the restrictions of
Rule 144 under the Securities Act; or
- through the Canadian Venture Exchange in reliance on Regulation S to the
Securities Act;
provided they meet the criteria and conform to the requirements of those
provisions.
Pursuant to applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares may not simultaneously engage
in market activities for our common shares for a period of five business days
prior to the commencement of the distribution. In addition, each selling
shareholder and any other person who participates in a distribution of the
securities will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including Regulation M. Those provisions may
limit the timing of purchases and may affect the marketability of the securities
and the ability of any person to engage in market activities for our
common shares.
At the time a particular offering of securities is made, to the extent
required, a prospectus supplement will be distributed which will set forth the
number of securities being offered and the terms of the offering, including the
purchase price or the public offering price, the name or names of any
underwriters, dealers, or agents, the purchase price paid by any underwriters
for securities purchased from the selling shareholders, any discounts,
commissions and other items constituting compensation from the selling
shareholders, and any discounts, commissions, or concessions allowed or paid to
dealers. In addition, we will file a supplement to this prospectus upon a
selling shareholder notifying us that a donee, pledgee, transferee, or other
successor-in-interest intends to sell more than 500 shares.
In order to comply with the securities laws of certain states, if
applicable, the securities will be sold in those jurisdictions, if required,
only through registered or licensed brokers or dealers. In addition, in certain
states the securities may not be sold unless the securities have been registered
or qualified for sale in the state or an exemption from registration or
qualification is available and the conditions of the exemption have
been satisfied.
We have agreed that we will bear all costs, expenses, and fees in connection
with the registration or qualification of the shares under federal and state
securities laws (currently estimated to be US$72,000). We and each selling
shareholder have agreed to indemnify each other and certain other persons
against certain liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act.
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DESCRIPTION OF SECURITIES TO BE REGISTERED
The shares offered under this prospectus are common shares without par value
in our capital stock. The holders of our common shares are entitled to receive
notice of, attend, and vote at all meetings of our members. The common shares
carry one vote per share and have no par value. The holders of the common shares
are entitled to receive dividends if, as, and when declared by our board of
directors. The common shares carry no pre-emptive rights, conversion rights,
redemption provisions, sinking fund provisions, or liability to further calls or
assessment. There are no restrictions on the repurchase or redemption of our
common shares by us, except under applicable securities laws and to the extent
that any such repurchase or redemption would render us insolvent.
Common shares without par value are the only class of shares authorised
under our memorandum of incorporation. As at May 31, 2000, we have 59,956,938
shares issued and outstanding.
MATERIAL CHANGES
Subsequent to our annual report filed April 4, 2000 covering the fiscal year
ended December 31, 1999, the following material changes have occurred.
PRODUCTS
At the Spring Internet World trade show in Los Angeles (April 5 - 7, 2000)
we released Dr. Bean 3.2 and demonstrated Dr. Bean On Call 1.0.
DR. BEAN 3.2
Dr. Bean 3.2 represents the current version of our product, and incorporates
the following principal features.
QUEUE MANAGEMENT
When all customer service representatives (CSR's) are busy, Dr. Bean can
establish a queue of customers waiting for service. When they come available,
CSR's can choose a new customer from the queue.
CUSTOMER INTERFACE
The customer interface is the graphical user interface shown to customers
when they first open Dr. Bean. Dr. Bean permits a company to adjust the size and
colour of the Dr. Bean window that its customers see, and to include corporate
logos and other "look and feel" components that the company wants.
Dr. Bean previously offered two versions of the graphical user interface,
one written as a Java applet, and one written in Hypertext Mark-up Language
("HTML"). In version 3.2 we presently plan to offer only an HTML version.
FIREWALL ROUTER
Dr. Bean operates compatibly with system firewalls, and can be configured to
operate within a company's established security environment.
DATA SOURCE MANAGER
The Date Source Manager permits Dr. Bean to read data from databases stored
in other components of a user's system. The data source manager can access
multiple databases, and multiple database servers, simultaneously. Dr. Bean is
compatible with a wide range of database software, including IBM's DB2 and
Oracle's 8i.
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SUPERVISOR MODULE
The supervisor module enables a supervisor to monitor various aspects of CSR
performance. The supervisor can view the chat messages being exchanged by a CSR.
The supervisor can also view, in graphical form, data analysing the level of
service being provided to customers. The type of data available can include such
items as the average queue time for customers or the number of CSR's available.
WEB PAGE PUSH
Dr. Bean permits a CSR to push web pages to a customer. This allows a CSR,
for example, to lead a customer to a web page covering a specific product the
customer is interested in.
WHITE BOARDING
Using the white boarding feature, a CSR can draw graphics on an image sent
to the customer. For example, a CSR can push a picture of a particular product
to the customer, and can circle a section of the picture, in much the same way
that telestrators are used in television broadcasts.
KNOWLEDGE BASED ROUTER
Dr. Bean can direct a customer to the most appropriate CSR (or CSR group)
through the following methods:
(a) icons in different locations on a company's website can direct a
customer to different CSR's; and
(b) keywords embedded in a web page can direct customers using that web page
to specified CSR's.
The criteria used by the intelligent routing can be customized to meet the
sales protocols and priorities of individual companies. For example, Dr. Bean
permits the company to designate groups of CSR's who will specialize in a common
area. Dr. Bean users can designate the criteria used for routing customers to a
particular CSR or group of CSR's.
COLLABORATIVE SERVICES
The collaborative services feature permits CSR's to communicate among
themselves while a customer chat session is under way. For example, if the
customer asks a question which the CSR is unable to answer, the CSR can contact
other CSR's to find the answer. The CSR can communicate with a specific
individual, or can send messages to a group.
ENTERPRISE REPORTING SERVICES
The enterprise reporting feature permits Dr. Bean users to assemble a broad
range of information and report relating to system performance. Examples could
include statistics concerning the activities of individual CSR's or a specific
group of CSR's, or the frequency of calls during specified periods of the day.
The enterprise reporting feature allows the user to specify the contents and
format of any report.
E-MAIL RESPONSE
Dr. Bean 3.2 allows CSR's to respond to customers through e-mail messages.
MULTI-CHANNEL INTEGRATION
The multi-channel integration feature is designed to permit companies to
integrate different channels of Internet-based customer service.
In its present configuration, the multi-channel integration feature permits
customers to request chat communication, e-mail communication, or a return call
by telephone. All of these requests are handled through a common queue. For
customers requesting telephone communication, Dr. Bean shows the CSR the
customer's name and telephone, and the date and time of the request. For
customers requesting e-mail
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communication, Dr. Bean shows the CSR the customer's e-mail address. When the
customer is chosen from the queue, the CSR can respond to the customer in the
manner the customer has chosen.
We plan to expand the multi-channel integration feature to include telephone
and fax transmissions, so that all incoming customer communications, regardless
of source, can be handled through a single queue. We also intend to add "voice
over Internet" capability to the multi-channel integration feature. We initially
planned to accomplish these enhancements through a "telephony bridge" to be
developed for us under contract by Science Applications International Corp.
("SAIC"). However, we are in the process of revising our development plans, and
presently expect that integration of telephone communications into the multi-
channel integration feature will be done principally through Call Path software
developed by IBM.
We expect that several months of development work will be required to add
telephone and fax communications to the multi-channel integration feature, and
to achieve "voice over Internet" capability. We do not yet have a definite
timetable to complete that development work, but we expect that we will have
these features available for sale to the public toward the end of 2000.
Dr. Bean 3.2 is installed on our own web site, where we plan to complete
further testing prior to installing Dr. Bean 3.2 at customer sites. We expect to
begin customer installations of Dr. Bean 3.2 during June 2000.
Certain features offered with previous versions of Dr. Bean are not offered
with version 3.2, either because we concluded that they did not enhance the
utility of Dr. Bean, or because we encountered technical difficulties with those
features, or because we found that we could only implement those features under
limited conditions, so that they would be unsuitable for many Dr. Bean users.
Those features include the following:
(a) Key word search. We were not able to make this feature work in a
satisfactory way.
(b) Full browner synchronization. This feature permitted a CSR to follow a
customer as he moved from one web page to another (in addition to pushing
web pages to the customer). We were only able to implement this feature
under limited operating conditions.
(c) Remote CSR connection. This feature could only be implemented through a
virtual private network or frame relay network, which we did not believe
would be acceptable to most Dr. Bean users.
(d) AutoService/Wizmaster. This feature was not sufficiently advanced to
enhance the utility of Dr. Bean.
To date, most of our installations of Dr. Bean have been small, involving
only a few CSR workstations. We have never completed a large installation of any
version of Dr. Bean, and we have no experience to confirm how well Dr. Bean will
operate in large installations. We presently believe that a large installation
would require us to install several copies of the Dr. Bean server, which would
work together. We expect within the next two months to test Dr. Bean 3.2 in
simulations of large systems, to determine what its capabilities are.
DR. BEAN ON CALL 1.0
Dr. Bean On Call was previously identified as Dr. Bean NG.
Dr. Bean On Call will permit us, or other companies we license Dr. Bean On
Call to, to sell Dr. Bean as a service as opposed to a product. Through
Dr. Bean On Call, companies will be able to receive customer communications
through a central server system which we, or a licensee, will establish.
Dr. Bean On Call will thus enable users to enjoy the principal features and
functions offered by Dr. Bean without having to purchase Dr. Bean as a product,
and without incurring the resulting system administration and
maintenance costs.
We plan to establish our own call centre for Dr. Bean On Call, and expect
that the call centre will be operational by July 31, 2000. We do not yet have
specific plans with respect to licensing Dr. Bean On Call to other companies who
wish to establish call centres of their own.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
On May 30, 2000 we published our quarterly financial statements for the
quarter ended March 31, 2000, with comparative figures for the quarter ended
March 31, 1999. The quarterly financial statements were included on our
Form 6-K filed with the Commission on May 31, 2000.
QUARTER ENDED MARCH 31, 2000 COMPARED WITH QUARTER ENDED MARCH 31, 1999
We did not realize any revenue from sales of software during either the
quarter ended March 31, 2000 or the quarter ended March 31, 1999. Revenue from
hardware sales decreased from $68,691 for the quarter ended March 31, 1999 to
$8,806 for the quarter ended March 31, 2000. Substantially all of the hardware
sales in each quarter were to BrainTech, Inc. and Techwest Management Inc.
Interest revenue increased from $2,970 for the quarter ended March 31, 1999
to $133,603 for the quarter ended March 31, 2000. The reason was higher cash
balances held during the quarter ended March 31, 2000.
Owing to the large increase in our work force, expenses increased in
virtually all categories from the quarter ended March 31, 1999 to the quarter
ended March 31, 2000.
Marketing expenses increased from $170,503 for the quarter ended March 31,
1999 to $1,174,680 for the quarter ended March 31, 2000. The principal factors
which contributed to this increase included the following:
(a) Salaries allocated to marketing increased from $52,039 to $194,883.
(b) Trade show costs increased from $9,882 to $206,552.
(c) Travel costs increased from $14,269 to $208,056.
(d) Direct marketing costs increased from $nil to $160,206.
Research and development expenses increased from $185,592 for the quarter
ended March 31, 1999 to $513,159 for the quarter ended March 31, 2000. Salaries
allocated to research and development increased from $173,575 to $374,110. In
addition, research and development expenses for the quarter ended March 31, 2000
included approximately $45,000 paid to Science Applications
International Corp., principally for work done on a "voice over Internet"
feature for Dr. Bean On Call. The payments to Science Applications
International Corp. represented a departure from our past practice of conducting
substantially all of our research and development through our own personnel.
Research and development expenses are reported net of government grants, which
totalled $2,827 for the quarter ended March 31, 2000 and $3,454 for the quarter
ended March 31, 1999.
Selling, general and administrative expenses increased from $380,446 for the
quarter ended March 31, 1999 to $2,371,199 for the quarter ended March 31, 2000.
Several factors contributed to the increase.
(a) Employee wages and benefits not allocated to other categories increased
from $95,597 to $1,131,663, as a result of the increase in our workforce.
(b) Facilities costs increased from $59,177 to $150,038, as a result of our
additional office space.
(c) Filing and transfer fees increased from $7,906 to $30,527.
(d) Our foreign exchange loss increased from $10,047 to $322,078. Our
foreign exchange losses result principally from adjusting entries made in
respect of transactions recorded in Canadian dollars, but actually
carried out in United States dollars.
(e) Office, printing, and sundry expenses increased from $29,147
to $137,192.
(f) Professional fees increased from $122,036 to $476,624. Within these
amounts, legal expenses increased from $32,506 to $221,549 and accounting
and auditing expenses increased from $48,273 to $88,810.
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Substantially all of these changes were the result of the substantial
increase in our workforce and in the general level of our business activity.
For US GAAP purposes, we recorded a compensation expense of $6,677,748 for
the quarter ended March 31, 2000, arising from the issuance of stock options at
prices below the trading prices of our shares. There was no such corresponding
expense for the quarter ended March 31, 1999.
PRIVATE PLACEMENT
On April 13, 2000 we completed a private placement of 1,084,000 units. Each
unit consists of one share and one share purchase warrant. Each share purchase
warrant entitles the holder to purchase one additional share for a period of
two years, commencing April 13, 2000, at a price of US$10.00 per share in the
first year or US$11.50 per share in the second year. The price of the units was
US$10.00 per unit. We paid finders' fees totalling US$428,500 in connection with
the private placement.
INCREASE IN WORK FORCE
Since the beginning of April 2000 we have increased our work force in both
Canada and the United States. Our work force in Canada has grown to
approximately 70 employees, and our work force in the United States has grown to
approximately 60 employees. Our monthly salary costs have increased to
approximately $450,000 per month in Canada and approximately $550,000 per month
in the United States.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 2000 our cash balance is approximately $25 million. We expect
that this will be sufficient to pay ongoing operating expenses, at their current
level, for the balance of 2000 and part of the first half of 2001.
SHARE PURCHASE WARRANTS
As at May 31, 2000 the following share purchase warrants are outstanding:
(a) 176,000 share purchase warrants permit the holder to purchase one
additional share at a price of $0.40 per share up to December 23, 2000.
These warrants were issued on the conversion of special warrants issued
on January 7, 1999. Each warrant entitled the holder to purchase one
additional share for a period of two years at a price of $0.35 per share
in the first year or $0.40 per share in the second year.
(b) 197,882 share purchase warrants permit the holder to purchase one
additional share at a price of US$0.383 per share up to March 26, 2001.
These warrants were issued on the conversion of special warrants issued
on April 7, 1999. Each warrant entitled the holder to purchase one
additional share for a period of two years at a price of US$0.333 per
share in the first year or US$0.383 per share in the second year.
(c) 2,000,000 share purchase warrants permit the holder to purchase one
additional share at a price of $0.63 per share up to April 7, 2001. These
warrants were issued on the conversion of special warrants issued on
April 15, 1999. Each warrant entitled the holder to purchase one
additional share for a period of two years at a price of $0.55 per share
in the first year or $0.63 per share in the second year.
(d) 1,593,106 share purchase warrants permit the holder to purchase one
additional share at a price of US$1.64 per share up to September 14, 2000
or a price of US$1.89 per share up to September 14, 2001. These warrants
were issued on September 14, 1999. Each warrant entitled the holder to
purchase one additional share for a period of two years at a price of
US$1.64 per share in the first year or US$1.89 per share in the
second year.
(e) 2,207,521 share purchase warrants permit the holder to purchase one
additional share at a price of US$1.64 per share up to December 14, 2000
or a price of US$1.89 per share up to December 14, 2001. These warrants
were issued on January 21, 2000. Each warrant entitled the holder to
17
<PAGE>
purchase one additional share for a period of two years at a price of
US$1.64 per share in the first year or US$1.89 per share in the second
year. Shares issued pursuant to these warrants are among the shares
qualified for re-sale under this prospectus.
(f) 1,084,000 share purchase warrants, issued in the private placement
described above, permit the holder to purchase one additional share at a
price of US$10.00 per share up to April 14, 2001 or a price of
US$11.50 per share up to April 14, 2002.
Of the share purchase warrants listed above, the following are held by our
directors and executive officers.
(a) Owen Jones holds 1,000,000 of the warrants described in (c) and 60,000
of the warrants described in (e);
(b) James Speros holds 1,000,000 of the warrants described in (c) and 60,000
of the warrants described in (e); and
(c) Grant Sutherland holds 60,000 of the warrants described in (e).
STOCK OPTIONS
We have announced the following transactions relating to our stock options:
(a) On April 20, 2000 we announced the granting of 4,900,000 stock options
at a price of US$5.10 per share. We also announced that we would not
proceed with the granting of 4,700,000 stock options at US$10.25 per
share, previously announced on February 10, 2000 and February 28, 2000.
(b) On April 27, 2000 we announced the granting of an additional
1,632,000 stock options at $5.10 per share.
Our 2000 stock option plan is subject to shareholder approval, and we will
be seeking that approval at our next shareholder meeting, which is scheduled for
June 28, 2000. None of the options described above will be exercisable prior to
shareholder approval being obtained.
All of the stock options will be subject to vesting schedules. Rules of the
Canadian Venture Exchange require that stock options granted pursuant to our
2000 stock option plan vest no more quickly than:
(a) 25% on the grant date;
(b) 25% six months following the grant date;
(c) 25% twelve months following the grant date; and
(d) 25% eighteen months following the grant date.
Recipients of the 6,532,000 stock options include the following directors
and executive officers.
<TABLE>
<S> <C>
Owen Jones............................................. 625,000 options
James Speros........................................... 625,000 options
Grant Sutherland....................................... 400,000 options
Jay Nussbaum........................................... 200,000 options
Edward White........................................... 25,000 options
Peter Kozicki.......................................... 25,000 options
Scott Friedlander...................................... 1,000,000 options
John Wedel............................................. 400,000 options
</TABLE>
ADDITIONAL LEASEHOLD PREMISES
We have entered into an agreement, through Techwest Management Inc., to add
another 2,000 square feet to our head office premises in North Vancouver,
British Columbia. The lease term for the additional premises will be three years
and three months, running from June 1, 2000 to August 31, 2003. Including
18
<PAGE>
operating costs, the rent for the additional space will begin at approximately
$3,000 per month. A formal lease amendment to include the additional space is
under preparation.
SIEBEL ALLIANCE PROGRAM
We have been accepted into the Siebel Alliance Program of Siebel Systems,
Inc., as a Siebel Premier Software Partner. Under the Siebel Alliance Program we
are entitled to participate in marketing programs organized by Siebel Systems,
Inc., to receive training in the use and installation of Siebel products, and to
use Siebel computer programs for demonstration and marketing purposes.
LEGAL MATTERS
Certain legal matters relating to the legality of the issuance of the shares
offered under this prospectus under Canadian law will be passed upon by
Swinton & Co., Vancouver, British Columbia.
EXPERTS
The consolidated financial statements of Sideware Systems Inc. as of
December 31, 1999 and December 31, 1998, and the related consolidated statements
of operations and deficit and cash flows for the year ended December 31, 1999,
the eight-month period ended December 31, 1998 and the years ended April 30,
1998 and April 30, 1997, incorporated by reference in this prospectus from our
annual report on Form 20-F, have been so incorporated by reference in reliance
on the report of KPMG LLP, independent chartered accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The report of KPMG LLP referred to above contains additional
comments for U.S. readers on Canada--U.S. reporting differences with respect to
conditions that cause substantial doubt as to our ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of that uncertainty.
SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
our corporate Articles of Incorporation or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against those
liabilities (other than the payment by us of expenses incurred or paid by one of
our directors, officers, or controlling persons 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
the indemnification is against public policy as expressed in the Securities Act.
We will be governed by the final judgment of that issue.
19
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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY SIDEWARE SYSTEMS INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IS UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Additional Information................ 1
Incorporated Documents................ 1
Enforcement of Civil Liabilities...... 1
Prospectus Summary.................... 3
Risk Factors.......................... 4
Special Note Regarding Forward-looking
Statements.......................... 8
Use of Proceeds....................... 9
Selling Shareholders.................. 9
Plan of Distribution.................. 11
Description of Securities to be
Registered.......................... 13
Material Changes...................... 13
Legal Matters......................... 19
Experts............................... 19
SEC Position on Indemnification for
Securities Act Liabilities.......... 19
</TABLE>
SIDEWARE SYSTEMS INC.
3,719,434 COMMON SHARES
---------------------
PROSPECTUS
---------------------
JUNE 6, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We will pay substantially all the expenses incident to the registration,
offering and sale of the shares to the public by the selling shareholders other
than fees, discounts and commissions of underwriters, dealers or agents, if any,
and transfer taxes. Those expenses are estimated as follows:
<TABLE>
<CAPTION>
AMOUNT(1)
-----------
<S> <C>
(STATED IN
US$)
SEC Registration Fee........................................ $ 6,600
Legal Fees and Expenses..................................... 20,000
Accounting Fees and Expenses................................ 10,000
Printing Expense............................................ 25,000
Miscellaneous Expenses...................................... 10,400
-------
Total................................................... $72,000
</TABLE>
------------------------
(1) All amounts have been estimated except the SEC registration fee. All of the
above expenses will be payable by us.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Articles of Incorporation of the company, subject to the
provisions of the Company Act British Columbia (the "Act"), the directors shall
cause the company to indemnify a director or former director of the company and
the directors may cause the company to indemnify a director or former director
of a corporation of which the company is or was a shareholder and the heirs and
personal representatives of any former director against all costs, charges and
expenses, including an amount to settle an action or satisfy a judgment,
actually and reasonably incurred by him or them including an amount paid to
settle an action or satisfy a judgment in a civil, criminal or administrative
action or proceeding to which he is or they are made a party by reason of his
being or having been a director including any action brought by the company.
Each director of the company on being elected or appointed shall be deemed to
have contracted with the company on the terms of this indemnity.
Subject to the provisions of the Act, the directors may cause the company to
indemnify any officer, employee or agent of the company or of a corporation of
which the company is or was a shareholder (notwithstanding that he is also a
director) and his heirs and personal representatives against all costs, charges
and expenses whatsoever incurred by him or them and resulting from his acting as
an officer, employee or agent of the company or the corporation. In addition,
the company shall indemnify the Secretary or an Assistant Secretary of the
company (if he shall not be a full-time employee of the company and
notwithstanding that he is also a director) and his respective heirs and legal
representatives against all costs, charges and expenses whatsoever incurred by
him or them and arising out of the functions assigned to the Secretary by the
Act or Articles.
The failure of a director or officer of the company to comply with the
provisions of the Act or of the Memorandum or the Articles shall invalidate any
indemnity to which he is entitled.
The directors may cause the company to purchase and maintain insurance for
the benefit of any person who is or was serving as a director, officer, employee
or agent of the company or as a director, officer, employee or agent of any
corporation of which the company is or was a shareholder and his heirs or
personal representatives against any liability incurred by him as a director,
officer, employee or agent.
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<PAGE>
ITEM 16. EXHIBITS
Index to Exhibits
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<S> <C>
3.1(1) Memorandum of Incorporation dated March 30, 1983
3.2(1) Articles of Incorporation dated March 30, 1983
3.3(1) Special Resolution dated January 12, 1984
3.4(1) Special Resolution dated June 15, 1989
3.5(1) Special Resolution dated September 27, 1990
3.6(1) Special Resolution dated December 18, 1996
3.7(1) Articles of Incorporation
3.8(1) Special Resolution dated January 29, 1998
4.1(1) Escrow Agreement dated June, 1996
4.2(1) Agreement dated November 23, 1998 between the Company and
certain warrant holders of the Company
4.3(1) Agreement dated April 14, 1999 between the Company and
certain warrant holders of the Company
4.4(2) Agreement dated October 28, 1999 between the Company and
certain warrant holders of the Company
4.5(4) 2000 Stock Option Plan
4.6 Agreement dated April 30, 2000 between the Company and
certain warrant holders of the Company
4.7 Amended 2000 Stock Option Plan
5.1 Opinion of Swinton & Co., Barristers & Solicitors
10.1(1) Operating Agreement between the Company and
BrainTech, Inc., dated October 18, 1996
10.2(2) Software Development and License Agreement dated
September 20, 1999 between the Company and
BrainTech, Inc.
10.3(2) Software Development License Agreement between the Company
and Sideware International SRL effective August 27, 1999
10.4(2) Research and Development Cost Sharing Agreement between the
Company and Sideware International SRL effective
August 27, 1999
10.5(2) Distribution and Sales Agreement between the Company and
Sideware Corp. effective January 1, 1999
10.6(1) Assignment of Lease and Modification of Lease Agreement
dated August 17, 1998 between HOOPP Realty Inc., Techwest
Management Inc., Sideware Systems Inc., and
BrainTech, Inc.
10.7(1) Lease Agreement dated January 25, 1999 between Sideware
Corp. and Elden Investments, LLC with Addendum dated
February 8, 1999
10.8(2) Agreement between the Company and IBM for participation in
the Enterprise Growth Opportunity program
10.9(2) Reseller agreement between the Company and Enterprise Soft
10.10(2) Software license agreement between the Company and ICEsoft
AS
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<S> <C>
10.11(2) Lease effective as of July 1, 1999 between the Company,
Techwest Management Ltd., BrainTech, Inc. and Pacific
Centre Leaseholds Ltd.
10.12(2) Assignment Agreement effective as of July 1, 1999 between
the Company, Techwest Management Ltd., BrainTech, Inc.,
and SJM Management Ltd.
10.13(2) Cost Sharing and Allocation Agreement dated October 29, 1999
between the Company and BrainTech, Inc.
10.14(2) Agreement between the Company and Advanced Contact
Solutions Inc.
10.15(2) Contract Agreement No. SDW001 between the Company and
Science Applications International Corp.
10.16(2) IBM International Independent Software Vendor Agreement
10.17(2) Distribution and Sales Agreement between Sideware Corp. and
Sideware International SRL
10.18(3) Lease Agreement dated March 6, 2000 between Sideware Corp.
and Reston L.L.C.
10.19(3) Lease Agreement between Sideware Corp. and Sanctuary Park
Realty Holding Company
10.20(3) Sub-Lease Agreement dated January 15, 2000 between San Jose
State University Foundation and Sideware Systems Inc.
10.21(3) Lease Agreement dated February 24, 2000 between CEO
Suites, Inc. and Sideware Corp.
10.22 Alliance Agreement with Siebel Systems, Inc.
11.1 Computation of net loss per share
21.1(3) List of Subsidiaries
23.1 Consent of KPMG LLP
</TABLE>
------------------------
(1) Exhibit already on file -- exhibit to our Form 20-F registration statement
filed in May 1999.
(2) Exhibit already on file -- exhibit to our Form F-1 registration statement
filed in December 1999.
(3) Exhibit already on file -- exhibit to our Form 20-F registration statement
covering the year ended December 31, 1999.
(4) Exhibit already on file -- exhibit to our Form F-3 registration statement
filed April 18, 2000.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
II-3
<PAGE>
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.
(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by Rule 3-19.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form F-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Vancouver, British Columbia, on June 7, 2000.
<TABLE>
<S> <C> <C>
SIDEWARE SYSTEMS INC.
By: GRANT SUTHERLAND
----------------------------------------------
W. Grant Sutherland
CHAIRMAN OF THE BOARD OF DIRECTORS
</TABLE>
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes W.
Grant Sutherland, as attorney-in-fact, with full power of substitution, to
execute in the name and on behalf of such person, individually and in each
capacity stated below, and to file, any and all amendments to this registration
statement, including any and all post-effective amendments.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director, Chairman of the Board of
GRANT SUTHERLAND Directors, Principal Financial
------------------------------------------- Officer, Principal Accounting June 7, 2000
W. Grant Sutherland Officer
* President, Chief Executive Officer
------------------------------------------- and Director (Principal Executive June 7, 2000
Owen L.J. Jones Officer)
*
------------------------------------------- Director June 7, 2000
James L. Speros
*
------------------------------------------- Director June 7, 2000
Edward A. White
</TABLE>
<TABLE>
<S> <C>
*By: GRANT SUTHERLAND
--------------------------------------
W. Grant Sutherland
ATTORNEY IN FACT
</TABLE>
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