AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 2000
================================================================================
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TOWNPAGESNET.COM PLC
(Exact name of Registrant as specified in its charter)
ENGLAND AND WALES 7361 NOT APPLICABLE
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification No.)
Classification Code
Number)
WELTON HOUSE, MILL LANE
ALTON, HAMPSHIRE
ENGLAND
GU34 1HD
UNITED KINGDOM
TELEPHONE: 011-44-1420-540-900; FACSIMILE: 011-44-1420-541-322
(Address and telephone number of Registrant's principal executive offices)
GREENBERG TRAURIG, LLP
200 PARK AVENUE, 15TH FLOOR
NEW YORK, NEW YORK 10166
REFERENCE: TOWN PAGES
TELEPHONE: (212) 801-9200; FACSIMILE: (212) 801-6400
(Name, address and telephone number of agent for service)
---------------------------
COPIES OF COMMUNICATIONS TO:
STEPHEN A. WEISS, ESQ.
ANTHONY MARSICO, ESQ.
GREENBERG TRAURIG, LLP
200 PARK AVENUE, 15TH FLOOR
NEW YORK, NEW YORK 10166
TELEPHONE: (212) 801-9200
FACSIMILE: (212) 801-6400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
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
of 1933, 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, please 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. [_]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================
TITLE OF EACH CLASS AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED SHARE (1) PRICE (1) FEES
REGISTERED
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<S> <C> <C> <C> <C>
Ordinary Shares
(pound)0.01 par value... 7,833,009 shares $0.66 $5,169,785.94 $1,364.82
===================================================================================================
</TABLE>
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act. Based on the average of the high and low
prices (rounded to the nearest cent) of the ordinary shares as reported on the
American Stock Exchange on December 12, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR DATES AS
MAY BE NECESSARY TO DELAY OUR 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 SAID SECTION 8(A), MAY DETERMINE.
<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. Neither this prospectus nor any
prospectus supplement is an offer to sell these securities or a solicitation of
an offer to buy these securities in any state where the offer or sale is not
permitted.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED DECEMBER 14, 2000
TOWNPAGESNET.COM PLC
7,833,009 ORDINARY SHARES
TownPagesNet.com plc is an English company that, through its subsidiaries,
provides information technology and web solutions and also produces and delivers
TownPages, an Internet-based online information service in the United Kingdom.
This is an offering of an aggregate of 7,833,009 of our ordinary shares,
from time to time by the selling stockholders named herein. Our ordinary shares
are represented by American Depositary Shares. Each ADS represents one of our
ordinary shares.
Our ADSs representing ordinary shares are listed on the American Stock
Exchange under the symbol "TPN." On December 12, 2000 the closing price of our
ADSs representing ordinary shares on the American Stock Exchange was $0.63 per
share.
YOU SHOULD CONSIDER THE RISKS WHICH WE HAVE DESCRIBED IN "RISK FACTORS"
BEGINNING ON PAGE 9 BEFORE DECIDING WHETHER TO INVEST IN OUR ORDINARY SHARES.
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.
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Prospectus dated December ___, 2000
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<PAGE>
TOWNPAGESNET.COM PLC
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TABLE OF CONTENTS
Page
Prospectus Summary...........................................................1
Cautionary Notice Regarding Forward-Looking Statements.......................7
Risk Factors.................................................................9
Use of Proceeds.............................................................22
Dividend Policy.............................................................22
Determination of Offering Price.............................................22
Selling Stockholders........................................................23
Plan of Distribution........................................................26
Legal Matters...............................................................27
Experts.....................................................................27
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities...............................................28
Incorporation of Certain Documents by Reference.............................28
Service of Process and Enforcement of Liabilities...........................29
Unaudited Condensed Proforma Consolidated Financial Information.............30
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
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i
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ADDITIONAL INFORMATION
We file annual, quarterly and special reports with the Securities and
Exchange Commission. You may read and copy any document we file at the following
locations:
o At the Public Reference Room of the Commission, Room 1024-Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549. You may obtain
information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330;
o At the public reference facilities at the Commission's regional
offices at Seven World Trade Center, 13th Floor, New York, New York
10048 or Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661;
o By writing to the Commission, Public Reference Section, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549;
o At the offices of the American Stock Exchange, Inc., 86 Trinity
Place, New York, New York 10006; or
o From the Commission's web site at http://www.sec.gov, which contains
reports, proxy and information statements, and other information
regarding issuers that file electronically.
Some of these locations may charge a prescribed or modest fee for copies.
We have filed with the Commission a registration statement on Form F-3
(No. 333-____) under the Securities Act of 1933, as amended, with respect to the
ordinary shares being offered by the selling stockholders. As permitted by the
Commission, this prospectus, which constitutes a part of the registration
statement, does not contain all the information included in the registration
statement. Such additional information may be obtained from the locations
described above. Statements contained in this prospectus as to the contents of
any contract or other document are not necessarily complete. You should refer to
the contract or other document for all the details.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding us and the securities we are offering for sale by means of
this prospectus and our financial statements and notes thereto appearing
elsewhere in this prospectus or incorporated by reference in this prospectus.
The summary highlights information contained elsewhere in this prospectus. It is
not complete and may not contain all of the information that you should consider
before investing in our securities.
--------------------
We publish our financial statements in pounds sterling. For your
convenience, this prospectus contains translations of certain pound sterling
amounts into United States dollar amounts. Unless otherwise indicated, all
amounts expressed in United States dollars are based upon conversions of amounts
of pounds sterling into United States dollars at the rate of $1.423 per pound
sterling, the noon buying rate in New York City for cable transfers in pounds
sterling certified for customs purposes by the Federal Reserve Bank of New York
on November 30, 2000. We have not actually converted our assets in pounds
sterling into United States dollars. If we were to convert our assets in pounds
sterling into United States dollars the conversion would be at a different rate.
THE COMPANY
We are a holding company that operates through our subsidiaries: Avatar
Interactive Limited (formerly known as Town Pages UK Limited), WWW.CO.UK
Limited, Morbria Limited, BuyersGuide plc, and Research Sales, Inc. (d/b/a
Rasmussen Research).
Our primary subsidiary, Avatar Interactive Limited currently provides new
media related services to both consumers and businesses. Prior to June 2000,
Avatar's primary business efforts and capital expenditures were focused on the
establishment of a large number of touch screen kiosks in certain towns and
cities in the United Kingdom.
WWW.CO.UK Limited and its associated companies provide cinema-related
services from Web site design through indoor cinema advertising and local
community content for our TownPages information service. Morbria and its
subsidiaries provide Web site design, advertising, marketing and communications
services.
BuyersGuide plc is an Internet-based business-to-government company. In
July 2000, Buyers Guide plc was admitted to trade on the Alternative Investment
Market of the London Stock Exchange following the raising of approximately
(pound)5 million ($7.1 million).
Research Sales, Inc. is a polling and market research company. Our
kiosks and Web site provide additional opportunities for data collection for
the Research Sales, Inc. Portrait of America Web site. Research Sales also
intends to develop a Portrait of the UK Web site that will in turn provide
additional content for our TownPages information service.
Prior to commencement of our acquisition program in July 1999,
substantially all of our revenues were derived from Web design and other related
services provided by Avatar to subsidiaries of affiliates of Kevin R. Leech, our
director and principal shareholder, including Ci4net.com Inc., a publicly traded
company with investments in 40 Internet-related companies as at July 31, 2000,
33 of which were majority owned subsidiaries. Mr. Leech is a significant
shareholder of Ci4net.com, beneficially owning approximately 40% of its
outstanding shares at July 31, 2000. Through September 30, 2000, we have entered
into certain transactions with Ci4Net and other affiliates of Mr. Leech. In
addition, we and our subsidiaries had provided approximately (pound)6.1 million
($8.7 million) of services to subsidiaries and
<PAGE>
investments of Ci4Net, which customers represented 54% of our consolidated
revenue during fiscal 1999 and 21% of our consolidated revenue for the six
months ended June 30, 2000. We recently entered into an agreement settling all
open accounts and obligations between our company and Ci4Net and its
subsidiaries. See "Related Party Transactions."
OUR STRATEGY
The mission of TownPagesNet.com plc is to add value to our client's
businesses. We aim to build on our reputation for providing innovative, high
quality solutions and services within the new media, interactive kiosks, polling
and advertising related markets to both consumers and businesses.
OUR BUSINESSES
AVATAR INTERACTIVE LIMITED (FORMERLY, TOWN PAGES UK LIMITED)
For the nine months ended September 30, 2000, we incurred a consolidated
net loss of approximately (pound)2.1 million ($3.1 million). Of our consolidated
operating loss of approximately (pound)5.6 million ($7.9 million) during such
nine month period, approximately 43% of such operating loss was attributable to
our former Town Pages UK Limited subsidiary. Since June 2000, we have taken
significant steps to eliminate unprofitable initiatives, including reassessing
our original kiosk roll-out strategy and ending work we provided to an affiliate
Ci4Net.com Inc. under certain web channel design contracts. In addition, we
appointed new directors for our Avatar Interactive subsidiary, reduced the
workforce of this subsidiary by approximately 20%, relocated our principal
office and made other overhead reductions. In November 2000, we changed the name
of Town Pages UK Limited to Avatar Interactive Limited. Avatar currently focuses
on three main business activities:
E-BUSINESS SOLUTIONS: We believe that the business-to-business (B2B)
market in the UK represents an extremely large commercial opportunity. A recent
survey by Durlacher Research Limited into the impact of e-commerce on small and
medium enterprises in the UK has revealed that investment in this sector is set
to rise to (pound)3.8 billion ($5.6 billion) over the next twelve months. In
order to exploit this market's potential, Avatar Interactive has partnered with
InterShop, a leading German-based e-commerce software supplier, to enable us to
offer full service capabilities utilizing the data center for hosting both
e-solutions and kiosk applications.
KIOSK SOLUTIONS: Avatar plans to utilize its experience in the design and
building of kiosk applications based on the development of its own Wide Area
Kiosk Network, which remains the largest in the UK with 203 touch screen kiosks
installed and operational as at October 31, 2000. We will exploit this knowledge
by developing applications for third parties.
KIOSK NETWORK: We believe that our kiosks represent an opportunity for
advertisers to use an interactive medium to reach a large audience. It is our
intention to maximize the revenue potential of this medium and at the same time
increase usage of the kiosks by developing a `free to browse' kiosk model.
Trials are planned to take place in a major city in the UK in December 2000.
This model will allow users to view any information they desire through the
kiosk in addition to the TownPages Information Service. If successful, Avatar
will be the first company to offer free unrestricted access to the Internet via
a kiosk in the UK, thereby presenting an excellent media opportunity.
Avatar has recently entered into consulting service arrangements with The
National Trust, The Met Office, Spinlock and Bass Breweries. The most
significant of these is the recent award of consultancy work for The National
Trust. The Trust is a national body that controls over 612,000 acres of
countryside
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in the UK plus more than 200 buildings and gardens of outstanding interest and
importance. Avatar Interactive was selected from among 18 agencies to complete
this work.
The realignment of business objectives and our decision to significantly
reduce the planned establishment of thousands of touch screen kiosks throughout
the United Kingdom rendered inappropriate our original agreement with NCR, our
former exclusive kiosk supplier. The original contract provided for NCR to
supply Town Pages with 3,500 Ci20 Internet enabled touch screen kiosks. The
agreement required Town Pages to purchase a pre defined number of these specific
kiosks at specified time intervals in line with our original business plan.
Failure to meet the terms of that agreement could have resulted in a penalty to
our company totaling approximately (pound)700,000 ($996,000). Avatar intends to
continue to use NCR as a kiosk supplier and is now able to offer kiosks from
NCR's entire product range. This is consistent with the new business direction
offering bespoke kiosk solutions.
MORBRIA LIMITED
In September 1999, we completed the acquisition of Morbria Limited and its
subsidiaries, which provide Website design, advertising, marketing and
communications services. The objective of Morbria is to create a true "Multi
Media Group" encompassing each media area of potential within the advertising,
marketing and communications arena. Our Morbria group currently consists of The
Graphic Palette Company (Manchester) Limited, a reprographics business, Centrix
Communications Limited, a design, print marketing and advertising business and
24/7 Colour Limited, a sheetfed print company.
The aim of Graphic Palette is to continue to grow the new media division,
which is the mainstay of its business. It is our intention to expand the client
list of Graphic Palette (currently including HSBC, Ericsson, Samsung and
Brother) while extending the life of "digital reprographics" business exploiting
the benefits of existing equipment and acquired industry experience.
Centrix offers design, print and production services, marketing
consultancy, and advertising related services across TV, radio, outdoor and
national and local press
We also intend to develop our UK client base across more business sectors
and utilize extensive media contacts and relationships to develop new media.
In August 2000 Morbria acquired 75.01% of the equity of 24/7 Colour
Limited. Our acquisition strategy is to combine 24/7 Colour with Graphic
Palette's reprographics business. Despite the recent advances of technology, we
believe there will always be a market for conventional print, and that growth in
this segment will be in personalization and direct mail. The long-term aim for
24/7 Colour is to create Manchester's first top quality "one-stop print house",
which will be able to handle client's requirements from concept and design right
through to personalization and direct mailing. We intend that, in the future,
clients will be able to have an entire job completed in-house, including all
mailings.
For the nine months ended September 30, 2000, the Morbria Limited group of
companies contributed (pound)2,352,120 ($3,347,067) to net revenues (including
(pound)133,025 ($189,295) contributed by 24/7 Colour Limited in the one month
since purchase), compared to net revenues of (pound)67,156 ($95,563) for the
nine months ended September 30, 1999.
3
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RESEARCH SALES, INC.,
In November 1999, we acquired Research Sales, Inc., a United States online
polling and marketing company, which does business as Rasmussen Research.
Rasmussen intends to further enhance its status as one of the most accurate and
innovative polling companies in the U.S. through the exploitation of an
automated polling system which provides accurate, cost-effective, objective
data. Rasmussen intends to grow by entering into relationships with strategic
partners who stand to benefit from Rasmussen content, while customizing content
packages to meet the needs of a diverse business base and implementing
alternative payment mechanisms.
Research Sales, Inc. is an early stage company and only contributed
revenues of(pound)10,013 ($14,248) in the nine months ended September 30, 2000.
WWW.CO.UK LIMITED GROUP OF COMPANIES
In July 1999, we completed the acquisition of the WWW.CO.UK Limited group
of companies. The WWW.CO.UK Limited companies provide cinema-related services
from Web site design through indoor cinema advertising. The WWW.CO.UK Limited
group of companies is expanding its revenue streams by selling e-commerce and
other new media facilities to its customer base of approximately 7,500
advertisers. At the same time we are utilizing the prospective advertising space
across WWW's publications creating the potential for increased sales and a
larger UK customer base.
For the nine months ended September 30, 2000, the WWW.CO.UK Limited group
of companies contributed (pound)1,846,113 ($2,627,019) to net revenues, compared
to net revenues of (pound)292,820 ($416,683) for the nine months ended September
30, 1999.
BUYERSGUIDE PLC
In October 1999, we acquired Buyers Guide Limited, an Internet-based
business-to-government company. On July 24, 2000, Buyers Guide (renamed
BuyersGuide plc) was admitted to trade on the Alternative Investment Market
("AIM") of the London Stock Exchange following the public offering of
approximately (pound)5 million ($7.1 million) at an offering price of
(pound)0.29 ($0.41) per share. We currently own approximately 75.09% of the
outstanding capital stock of BuyersGuide plc.
The immediate strategic objectives for BuyersGuide include:
o Finalizing the development of intelligent exchange software
necessary to operate Buyers Marketplace.
o To further increase usage of the BuyersGuide Web site and
revenue for our business clientele through direct marketing
strategies both on and off-line.
o Implement software which facilitates the process of tendering
for contracts allowing BuyersGuide to charge commission on all
processed transactions.
o Update the BuyersGuide Web site to incorporate e-commerce
facilities. Secure a percentage of all e-commerce transactions
as a result.
o Expand client base, increase brand awareness and strengthen
relationships with UK government bodies.
For the nine months ended September 30, 2000, Buyers Guide contributed
(pound)936,405 ($1,332,504) to net revenues.
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UKPROPERTYCHANNEL.COM LIMITED
We currently own 10% of the equity of UKPropertyChannel.com Limited, which
provides a portal for estate agents (realtors) in the UK and Ireland.
UKPropertyChannel has mostly exclusive three year notice contracts with over
2,000 realtors to provide them with e-commerce solutions. Under these
agreements, UKPropertyChannel has the rights to include all properties on the
UKPropertyChannel national property Website. The national Website currently has
approximately 1,400 of these branches live and a database of approximately
55,000 properties. Revenues will be obtained from the contractual rights to sell
banner advertising within the sites. We are currently negotiating arrangements
to increase our equity interest in UKPropertyChannel. See "Related Party
Transactions."
RELATED PARTY TRANSACTIONS
Prior to our initial public offering in May 1999, we financed our
operations primarily through a discretionary secured operating line of credit
from Glen Investments Limited. Glen Investments Limited, is a company
wholly-owned by Kevin R. Leech, a director of our company and through his other
affiliates Raven Ventures Limited, Glen UK Holdings Ltd., Milner Laboratories
Limited, is the beneficial owner of approximately 49% of our outstanding
ordinary shares. See "Selling Stockholders." Upon completion of the offering, we
converted (pound)850,000 ($1,209,550) we owed to Glen Investments into 850,000
of our Series A preferred shares, which have priority over our ordinary shares
with respect to dividend and liquidation rights and are convertible into
ordinary shares at 120% of the initial public offering price per ADS, commencing
on May 5, 2000. The (pound)1.6 million ($2.3 million) balance of the
indebtedness owed to Glen Investments affiliate was repaid from the net proceeds
of our initial public offering.
As at September 30, 2000, we had received a working capital loan of
(pound)1,900,000 ($2,703,700) from Kevin R. Leech. The loan bears interest at 2%
above the UK base rate, which was 6% per annum as at November 30, 2000, and is
repayable on the earlier of January 5, 2002 or our receipt of the net proceeds
from the realization of any of our investments.
Both prior to and subsequent to completion of our initial public offering,
our company has sold significant services to and purchased certain goods and
services from certain subsidiaries of Glen Investments as well as Ci4net.com
Inc., a United States publicly traded company in which Kevin R. Leech is a
significant stockholder, beneficially owning approximately 40% of its
outstanding shares. At July 31, 2000, Ci4net.com Inc. owned equity interests in
40 predominately European based Internet-related companies, 33 of which were
majority owned subsidiaries.
Planet Edge Ltd., a subsidiary of Ci4net.com, is a provider of Web site
development services for Avatar Interactive Limited. In fiscal year ended 1999,
Avatar purchased goods and services from Planet Edge totaling (pound)738,680, or
16% of our total cost of revenues for such year. Planet Edge also provides
secure e-commerce transaction and Web site hosting facilities to Morbria which
Morbria's subsidiary, Graphic Palette, resells to its clients. As at September
30, 2000 an aggregate of approximately (pound)360,000 ($512,000) was owed by our
company and its subsidiaries to Planet Edge.
Through June 30, 2000, our Avatar subsidiary provided approximately
(pound)5.4 million ($7.7 million) of large Web channel design and related
services to subsidiaries of Ci4Net.com Inc., and our Avatar subsidiary and the
Graphic Palette and Centrix Communications operations of our Morbria Group
subsidiaries provided approximately an additional (pound)800,000 ($1.1 million)
of services to Ci4Net and its subsidiaries. Through December 1, 2000,
approximately (pound)3.7 million ($5.3 million) had been paid or settled by
Ci4Net and its subsidiaries.
On December 12, 2000, we entered into agreements with Kevin R. Leech and
with Ci4net.com to settle all outstanding obligations among our two companies
and their operating subsidiaries. Under the terms of the agreements, we agreed
to sell to Ci4net.com, for (pound)1.3 million ($1.84 million), or (pound)0.29
($0.41) per share, 4,482,759 shares of our BuyersGuide plc subsidiary,
representing 5.14% of its outstanding shares, and further agreed to cancel our
accounts payable of approximately (pound)360,000 ($512,000) owed by us to the
Planet Edge Limited subsidiary of Ci4net. We also settled approximately
(pound)623,000 ($886,000) of amounts owed by Ci4net subsidiaries to our Graphic
Palette and Centrix Communications subsidiary and received from Ci4net an
assignment of a (pound)524,000 ($745,000) obligation owed to Ci4net by
UKPropertyChannel Limited.
5
<PAGE>
In a related transaction, Kevin R. Leech agreed to issue to us 1,098,280
shares of the common stock of Ci4net.com, Inc. valued at approximately
(pound)1.5 million ($2.1 million) at $2.00 per share, representing the closing
price of the Ci4net.com common stock as traded on the OTC Bulletin Board on
December 12, 2000. These shares are presently unregistered and are agreed to be
registered with the SEC in the name of TownPagesNet.com plc in due course, free
from any encumberances.
We exchanged our BuyersGuide plc shares (valued at (pound)1.3 million) for
shares of Ci4net (valued at (pound)1.5 million) and have allocated the
difference in value together with cash and other assets received and obligations
previously owed to Ci4net.com or its subsidiaries which have been settled,
toward the payment of the balances due to us for services we had rendered to
Ci4net.com and its subsidiaries.
Prior to our September 1999 acquisition of that company, our Morbria
Limited subsidiary was controlled by Glen UK Holdings Limited a company
wholly-owned by Kevin R. Leech. Glen UK Holdings Limited received 772,174 of our
ordinary shares in connection with our acquisition of the Morbria group of
companies. Ci4net.com received an aggregate of 97,268 of our ordinary shares in
connection with our October 1999 acquisition of BuyersGuide.com.
Through November 2000 we have advanced the sum of (pound)800,000 ($1.1
million) to UKPropertyChannel.com Limited for working capital and Ci4net.com
Inc. advanced the sum of (pound)524,000 ($745,652) to UKPropertyChannel. We are
currently negotiating to acquire control of UKPropertyChannel through a merger
of that company with our WWWCO.UK Limited group of companies, as a result of
which it is contemplated that we will own approximately 70% of the shares of the
combined entities and members of operating management will own the balance of
the shares.
In connection with the closing of the BuyersGuide plc offering on the
Alternative Investment Market of the London Stock Exchange in July 2000,
Ci4net.com had agreed to purchase approximately 13.0 million BuyersGuide shares
for approximately (pound)3.8 million ($5.41 million), at the public offering
price of (pound)0.29 ($0.41) per share. Under the terms of our December 2000
agreement, we agreed to modify our agreement with Ci4net, by reducing the number
of BuyersGuide shares to be purchased by Ci4net to approximately 4.5 million
shares (approximately 5.14% of BuyersGuide's outstanding shares) in
consideration of the cash payment of (pound)1.3 million ($1.9 million) or
(pound)0.29 ($0.41) per share, which payment we received.
We intend to raise additional working capital over the next three months
through the realization of a portion of our shareholdings in other subsidiary
companies. There is no assurance, however, that we will be able to complete such
sales in the near future. In November 2000, we received a proposal from Hong
Kong Shanghai Banking Corporation for a (pound)2.5 million ($3.56 million) line
of credit. Although we expect such line of credit to be in place prior to
December 31, 2000, we have not, as yet finalized such financing.
In December 2000, Kevin R. Leech entered into a share option agreement
with John Bowden and Lucy Bowden, two of the former stockholders of BuyersGuide
and selling stockholders in this offering. Under the terms of the agreement, Mr.
Leech granted to Mr. and Ms. Bowden options, exercisable at any time during the
30 day period commencing February 16, 2001 and ending March 16, 2001, to "put"
to Mr. Leech up to 725,254 of his ordinary shares in our company for a purchase
price of $1.20 per share, or $870,304.80 if all option shares are purchased by
Mr. Leech. Mr. Leech is obligated to purchase and pay for such shares,
irrespective of whether or not the registration statement of which this
prospectus is a part is declared effective by the SEC or whether Mr. or Ms.
Bowden elect to sell shares pursuant to this prospectus. See
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"Selling Stockholders." Mr. Leech agreed to enter into such agreement with Mr.
and Ms. Bowden to assist our company in complying with certain contractual
obligations to John and Lucy Bowden under our October 1999 agreement acquiring
BuyersGuide.
Our board of directors believes that all transactions with Kevin R. Leech,
Ci4net.com Inc. and other corporate affiliates of Mr. Leech have been entered
into on an arms' length basis and on terms to us which were no less favorable
than we could have obtained from unaffiliated third parties. It is our
intention, subsequent to completion of our settlement arrangements with
Ci4net.com Inc. to avoid, to the extent practicable, any further related party
transactions, and if circumstances so require, only enter into such transactions
which are either accompanied by a fairness opinion from an independent
investment banker or otherwise unanimously approved by the independent members
of our board of directors.
OUR CORPORATE HISTORY
We were incorporated in England and Wales on July 31, 1998 under the name
Town Pages Holdings plc. We acquired all of the share capital of Town Pages UK
Limited on December 15, 1998. Our name was changed to TownPagesNet.com plc in
April 1999. Town Pages UK Limited was incorporated in England and Wales on
November 5, 1995. In May 1999, we completed our initial public offering. We
subsequently completed four acquisitions of additional companies. All references
to operations and financial condition for all fiscal periods prior to December
15, 1998 are to the operations and financial condition of Town Pages UK Limited.
USE OF PROCEEDS
We will not receive any proceeds from the sale of ordinary shares by the
selling stockholders.
RISK FACTORS
An investment in the securities we are offering involves a high degree of
risk. Prospective investors should carefully review the section entitled "Risk
Factors" as well as other information provided in this prospectus.
THE OFFERING
Ordinary shares offered by Selling ............. 7,833,009 ordinary shares
Stockholders
Ordinary shares outstanding before the ......... 2,200,000 ordinary shares
offering
Ordinary shares outstanding after the .......... 10,033,009 ordinary shares
offering
American Stock Exchange Symbol ................. "TPN"
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
We make certain forward-looking statements in this Form F-3 and in
documents incorporated by reference in this Form F-3 within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, relating to our financial
condition, profitability, liquidity, resources, business outlook, proposed
acquisitions, market forces, corporate strategies, contractual commitments,
capital requirements and other matters. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements. To comply
with the terms of the safe harbor, we note that a variety of factors could cause
our actual results and experience to differ substantially from the anticipated
results or other expectations expressed in our forward-looking
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statements. When words and expressions such as: "believes," "expects,"
"anticipates," "estimates," " plans," "intends," "objectives," "goals," "aims,"
"projects," "forecasts," "possible," "seeks," "may," "could," "should," "might,"
"likely," "enable" or similar words or expressions are used in this Form F-3, as
well as statements containing phrases such as "in our view," "there can be no
assurance," "although no assurance can be given" or "there is no way to
anticipate with certainty," forward-looking statements are being made in all of
these instances. These forward-looking statements speak as of the date of this
Form F-3.
Various risks and uncertainties may affect the operation, performance,
development and results of our business and could cause future outcomes to
differ materially from those set forth in our forward-looking statements,
including the following factors: our change in business strategy; our growth
strategies; anticipated trends in the industry; our ability to enter into
additional Web site design contracts; our relationships with our customers;
general market and economic conditions; our ability to finance our future
business requirements; the ability to successfully integrate acquired companies
and businesses; management retention and development; changes in Federal and
state laws and regulations; as well as the risks, uncertainties and other
factors described from time to time in our SEC filings and reports.
We undertake no obligation to publicly update or revise any
forward-looking statements as a result of future developments, events and
conditions outside of our control. New risk factors emerge from time to time and
it not possible for us to predict all such risk factors, nor can we assess the
impact of all such risk factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ
significantly from those forecast in any forward-looking statements. Given these
risks and uncertainties, investors should not overly rely or attach undue weight
to our forward-looking statements as an indication of our actual future results.
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RISK FACTORS
You should carefully consider the following risks before you decide to
invest in our company. If any of the following risks actually occur, our
business, financial condition or results of operations may suffer. As a result,
the trading price of our ADRs could decline, and you may lose all or part of
your investment.
WE HAVE A SHORT OPERATING HISTORY
We commenced our business in November 1995 but conducted no meaningful
operations until 1996 and only conducted experimental prototype operations from
that date until the Spring of 1998. Accordingly, we have a limited operating
history upon which you can evaluate our business and prospects. Our historical
data is of limited value in projecting future operating results. You must
consider our business in light of the risks, expenses and problems frequently
encountered by companies with a limited operating history.
OUR REVISED BUSINESS STRATEGY FOR AVATAR INTERACTIVE LIMITED MAY NOT BE
SUCCESSFUL
Our board of directors recently approved a revised business strategy for
Avatar Interactive Limited. We have revised our approach to the roll-out of
kiosks in terms of both the manner in which we assess the number of kiosks to be
installed in any given area and in the targeting of suitable locations. The
operations of Avatar Interactive Limited following implementation of the revised
business strategy may not reflect our limited historical operations. Further, we
intend to engage in additional lines of business through our recently acquired
subsidiaries. There can be no assurance that the revised business strategy of
Avatar Interactive Limited would be successful or improve our operational
results. Furthermore, other conditions may exist such as increased competition,
reduction in demand for Internet-related services or an economic downturn, which
may offset any improved operational results that are attributed to the revised
business strategy.
MOST OF OUR HISTORICAL REVENUE WAS DERIVED FROM RELATED PARTIES
The success of our business in the Web design and advertising services
markets depends on our ability to attract and retain customers. In fiscal 1999,
7 out of 10 of our largest customers were related parties, being subsidiaries of
Ci4net.com Inc. or other affiliates of Kevin R. Leech. Such customers
represented 54% of our revenue during fiscal 1999 and 21% of our revenue through
June 30, 2000. A termination or reduction of the services that we provide our
related customers could have an adverse effect on our business. In addition, the
failure to maintain any of our large existing customers or attract new
non-related customers could have an adverse effect on our business. Further, the
inability of any major customer to make timely payments could also have an
adverse effect on our financial performance.
WE HAVE INCURRED NET LOSSES SINCE COMMENCING BUSINESS AND EXPECT FUTURE
LOSSES
We have not shown a profit in our annual operations to date. We have
incurred accumulated net losses since inception through September 30, 2000 of
approximately (pound)5.6 million ($7.9 million). We had an accumulated
stockholders' equity of approximately (pound)17.0 million ($24.2 million) at
September 30, 2000. Since we intend to continue to heavily invest in personnel,
brand promotion, infrastructure and expansion into additional markets, we expect
significant additional net losses to continue on an annual and quarterly basis
for the foreseeable future. Our sales may not continue to grow, we may never
achieve profitability and, if we do achieve profitability, we may not be able to
maintain profitability.
Our future performance will depend, in part, on the amount and rates of
growth in our net revenue from e-commerce and advertising. We expect operating
expenses to increase significantly, especially in
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the areas of sales and marketing and brand promotion and as we integrate the
companies we acquired in 1999. To the extent that these expenses are not
accompanied by an increase in net revenue, our business, results of operations
and financial condition could be materially adversely affected. We will need to
increase our net revenue to achieve profitability. We believe that
period-to-period comparisons of our operating results are not meaningful and
that you should not rely upon the results for any period as an indication of
future performance. Our business, results of operations and financial condition
will be materially and adversely affected if:
o net revenue does not grow at anticipated rates;
o increases in operating expenses are not offset by commensurate increases
in net revenue; or
o we are unable to adjust operating expense levels in light of net
revenue.
OUR RECENT ACQUISITIONS MAY AFFECT OUR BUSINESS PROSPECTS
To date, we have entered into various business and technology
acquisitions, license arrangements and strategic alliances in order to provide
community-specific content, generate additional traffic, increase our number of
personnel and establish additional sources of net revenue. Acquisitions carry
numerous risks and uncertainties, including:
o difficulties in integrating operations, personnel, technologies,
products and the information systems of the acquired companies;
o diversion of management's attention from other business concerns;
o risks of entering geographic and business markets in which we have
little or no prior experience; and
o potential loss of key employees of acquired entities.
We cannot guarantee that we will be able to successfully integrate any
businesses, products, technologies or personnel that we have acquired or may
acquire in the future. If we are not able to effectively integrate our
operations and personnel in a timely and efficient manner, then the benefits of
the acquisitions may not be realized. A failure to successfully integrate
acquired entities or assets could have a material adverse effect on our
business, results of operations and financial condition. In addition, we cannot
guarantee that we will be successful in identifying and closing transactions
with potential acquisition candidates. If the benefits of the acquisitions do
not exceed the cost associated with the acquisitions, including the dilution to
our stockholders resulting from the issuance of our ordinary shares in
connection with the transactions, then our financial results, including earnings
per share which is calculated after the amortization of goodwill, could be
adversely affected.
The successful combination of each of WWW.CO.UK Limited, Morbria Limited,
BuyersGuide plc and Research Sales, Inc. with our company will require
substantial effort. The diversion of the attention of management and
difficulties encountered in the transition process could have an adverse impact
on our ability to realize the full benefits of the acquisitions. The successful
combination of the companies will also require coordination of our sales and
marketing efforts. In addition, the process of combining the organizations could
cause the interruption of, or loss of momentum in, our activities.
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OUR FUTURE REVENUES ARE UNPREDICTABLE AND OUR FINANCIAL RESULTS MAY
FLUCTUATE
Our historical financial data is not reliable as a basis upon which to
predict our future revenues or operating expenses for a number of reasons,
including our limited operating history, the emerging nature of our Internet
industry category, and our growth strategy. Our financial results may fluctuate
significantly because of several factors, many of which are beyond our control.
These factors include:
o specific economic conditions relating to the Internet,
o usage of the Internet,
o demand for advertising on our Web site and demand for Internet-based
advertising in general,
o changes in advertising rates as a result of competition or other
factors,
o seasonal trends in advertising,
o the advertising budgets of our existing and potential customers,
o demand for enhanced listing services on our Web site,
o changes in our distribution relationships with Internet service
providers or other third parties,
o demand for our services,
o incurrence of costs relating to acquisitions of businesses or
technologies,
o incurrence of other charges in connection with the services offered by
us and our competitors,
o introduction of enhanced services by us or our competitors,
o market acceptance of new services,
o delays in the introduction of services or enhancements provided by us or
our competitors,
o changes in our pricing policies or those of our competitors,
o capacity constraints, dependencies on
Internet/telecommunications/computer infra-structure, and related
technical difficulties, downtimes, or "Internet brownouts," and
o general economic conditions.
The relatively new industry in which we are engaged has not been tested in
a recessionary economic environment where budget constraints and contraction in
income available for discretionary purchases could reduce the use of our
services.
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WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE
As a result of our operating losses and lack of cash flow from operations
our working capital surplus of (pound)4,673,975 ($6,651,066) at December 31,
1999 was reduced to a working capital surplus of (pound)3,876,885 ($5,516,807)
at September 30, 2000. However, approximately (pound)1,547,022 ($2,201,412) of
such working capital surplus represented the excess of accounts receivable over
accounts payable owed to us by subsidiaries of Ci4net.com, which are being
comprised and settled through offsets and the issuance of shares of stock of
Ci4net. See "Related Party Transactions." We will depend upon revenues from
operations, borrowings under a credit facility which we may seek to establish,
and realization of our investments, to meet our capital expenditure requirements
and fund continued losses. There is no assurance that we will achieve projected
revenues, that bank borrowings will be available to us on commercially
attractive terms or at all, or that the costs actually incurred to expand our
operations will not exceed our budget. Also, if we elect to expand our
operations outside the United Kingdom or to add services or other capabilities
not presently contemplated, either alone or with a strategic partner, the net
proceeds from our prior offering, revenues from operations and any available
bank borrowings may be insufficient to meet our capital requirements for that
expansion. If additional funds were to be required for any of those reasons, we
would be unable to complete our expansion as planned and our business and
financial condition would be seriously adversely affected if we were unable to
raise additional funds on acceptable terms, in timely fashion, or at all. There
is no assurance that any additional financing will be available on commercially
attractive terms, in timely fashion, in sufficient amounts, or at all.
If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of TownPagesNet.com plc held by
existing shareholders, including holders of our ADSs, will be reduced and those
stockholders may experience significant dilution. In addition, new securities
may contain certain rights, preferences or privileges that are senior to those
of our ordinary shares and ADSs.
OUR BUSINESS IS INCREASINGLY COMPETITIVE
The markets for local interactive content and services are highly
fragmented and intensely competitive. There are relatively low barriers to entry
so we expect competition to intensify. We compete on the Internet with Internet
service providers, online service providers, search engines and other site
aggregation companies, services that sponsor communities of personal Web sites,
and various Web site operators and content providers, as well as with Web site
design, Web site consultancy and other similar companies. We also compete with
more traditional advertising media, such as print, radio, and television media,
for a share of advertisers' total advertising budgets.
UNITED KINGDOM COMPETITORS COULD DUPLICATE OUR INFORMATION AND KIOSK
STRATEGY AND REDUCE ITS EFFECTIVENESS
United Kingdom-based companies, such as British Telecommunications plc
(multimedia payphones), KDM International plc (County Web), Freepages plc
(Scoot), Thomson Directories Ltd. (ThomWeb), Yellow Pages, a division of British
Telecommunications plc (Yell), Time Out Group Ltd. (TimeOut.com) and CitySpace
all provide services in the United Kingdom that offer some of the features of
Town Pages. A competing kiosk program could dilute our sales and the marketing
effectiveness of the kiosks. Other non United Kingdom-based companies could
enter the market and duplicate our strategy as well.
The competition in the Web site solution and Internet services consultancy
market in the UK is intense. Razorfish, Agency.com, Tagish and many others all
provide business-to-business services in the United Kingdom which offer some of
the features of our products and services.
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MANY ACTUAL AND POTENTIAL COMPETITORS HAVE STRONG BRAND NAMES OR
GREATER RESOURCES THAN US
Many of our current and potential competitors have substantially greater
human and financial resources, experience, and brand name recognition than us.
These companies may have significant competitive advantages through other lines
of business and existing business relationships.
Some UK-based companies, such as British Telecommunications, have
substantially greater resources than we do. Some UK-based business-to-consumer
and business-to-business services, such as ThomWeb, Yell, TimeOut.com,
Agency.com and Razorfish have strong brand name recognition with which to
compete against us.
World-wide, there are services presently focused on countries other than
the United Kingdom whose high brand recognition and financial and other
resources far in excess of our own could make them serious competitive threats
in the future. Digital City, operated by Digital City, Inc., a company
wholly-owned by America Online, Inc. and Tribune Company, Zip 2, operated by
Zip2 Corporation, CitySearch, operated by Ticketmaster Online-CitySearch, and
Around Town operated by WebTV Networks, Inc., which is owned by Microsoft
Corporation, all fall into that category. There are also international networks
of business-to-business website solution and Internet services consultancies.
Agency.com features among these competitors.
Services including GeoCities, TheGlobe.com, and Xoom sponsor
communities of personal Web sites which also seek to create topically or
geographically segregated online audiences for advertisers. GeoCities,
recently opened an office in London, England. Search engine and other site
aggregation companies such as Excite, Inc., which operates City.Net, Lycos,
Inc., which operates Lycos City Guide, and Yahoo! Inc., which operates Yahoo!
Local, primarily aggregate links to sites providing local content, but are
also potential competitors.
WE MUST EXPAND QUICKLY OR COMPETITORS MAY COPY OR BLOCK OUR STRATEGY
We believe that we must rapidly establish the TownPages information
service as the premier branded locally-focused information provider on the
Internet in the United Kingdom in order to attract the maximum amount of traffic
to our Web site and increase our customer base. We further believe that we must
rapidly expand on our existing Web site solution and Internet services
consultancy client base in order to gain additional market share. If we fail to
do so, competitors may copy our business strategy or take other steps to prevent
us from obtaining a leading market share in those markets and adversely affect
our business.
WE HAVE NOT OPERATED OUR TOWNPAGES INFORMATION SERVICE ON A BROAD SCALE
AND WE DO NOT HAVE EXPERIENCE IN MANAGING RAPID GROWTH
There is no assurance that we will successfully manage the planned launch
of our TownPages information service in additional markets in a cost-effective
or timely manner while maintaining high levels of service and reliability
necessary to establish and maintain a reputation for quality.
OUR PLANNED EXPANSION WILL STRAIN OUR RESOURCES
The pursuit of our business strategy will place a significant strain on
our managerial, operational and financial resources. We will need to improve our
financial and management controls, reporting systems and procedures. We will
also have to expand, train and manage our work force for marketing, sales and
technical support, product development, Web site design, and network and
equipment repair and maintenance, and manage multiple relationships with various
customers, strategic partners and other third parties. We will need to
continually expand and upgrade our technology infrastructure and systems and
ensure continued high levels of service, speedy operation, and reliability. In
addition, we will have to
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improve our methods for measuring the performance and commercial success of our
different products to better respond to advertiser demands for information on
product effectiveness and to better determine which products and services can be
developed most profitably.
To achieve our objectives, we may have to acquire technologies or products
or enter into strategic alliances and acquisitions, although we have no plans or
agreements to do so at the present time. For those initiatives to succeed, we
must make our existing technology, business, and systems work effectively with
those of our strategic partners and any acquired properties without undue
expense, distraction of management from other priorities or other disruptions to
our existing business.
OUR BRAND AND REPUTATION WILL BE DAMAGED IF WE FAIL TO SUCCESSFULLY
MANAGE OUR PLANNED EXPANSION
If our service, or any new feature, is not received favorably, whether due
to any shortcoming in our product or operations or factors beyond our control,
our reputation and the TownPages brand will be damaged. Our business, financial
condition, and results of operations will be materially adversely affected if we
fail to manage growth challenges successfully.
WE MUST TAKE THE RISK OF INTRODUCING NEW SERVICES IN ORDER TO COMPETE
We plan to introduce new and expanded services, including e-commerce
services, on our TownPages information service in order to generate additional
revenues, attract more consumers and respond to competition. There can be no
assurance that we will be able to offer any new services in a cost-effective or
timely manner or that any efforts will be successful. Furthermore, any new
service we launch that is not favorably received by consumers could damage our
reputation or our brand name. Expansion of our services in this manner will also
require significant additional expenses and development and may strain our
management, financial and operational resources. Our inability to generate
revenues from expanded services sufficient to offset their cost could have a
material adverse effect on our business, financial condition and results of
operations.
ESTABLISHING AND MAINTAINING OUR BRAND RECOGNITION AND REPUTATION ARE
ESSENTIAL TO OUR SUCCESS
We believe that our success will depend to a large degree on our ability
to successfully establish and maintain our brand recognition and reputation. In
order to maintain a good reputation and strong brand name, we will need to
invest heavily in our marketing and maintain high standards for actual and
perceived quality, usefulness, reliability, security and ease of use of our
services. Even if we continue to provide good service to our customers, factors
outside of our control, including actions by organizations that are mistaken for
us, could affect our brand and the perceived quality of our services, thereby
damaging our business.
WE RELY UPON THIRD PARTIES FOR EQUIPMENT AND FOR KIOSK MANUFACTURE,
ASSEMBLY, INSTALLATION, MAINTENANCE AND REPAIR
Although our computer and network hardware and our kiosks are assembled
from standard components which may be outsourced from a number of manufacturers
and distributors, we have no equipment manufacturing capacity and will be
dependent upon the timely delivery of quality equipment by those manufacturers
and distributors. Furthermore, our kiosk assembly and installation capacity, and
our equipment and kiosk maintenance and repair capacity, is quite limited. We
will be dependent upon third party services for the timely, cost-effective, and
proper installation, maintenance, and repair of our touch-screen kiosks and for
the maintenance and repair of our equipment and network infrastructure.
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Failure by any of these third parties to perform as we require could materially
adversely affect our business, operations, and financial condition.
KEVIN R. LEECH CONTROLS US
Corporations controlled by Kevin R. Leech, one of our directors,
beneficially own approximately 49% of our outstanding ordinary shares.
Accordingly, Mr. Leech may be in a position to control us and has the ability to
elect and/or remove all of the members of our board of directors and to approve
significant corporate transactions, including key acquisitions and subsequent
financing transactions. He also has the ability to delay or prevent a change in
our control and to discourage a potential acquiror of us or our shares.
WE HAVE ENTERED INTO A NUMBER OF RELATED PARTY TRANSACTIONS WITH
CI4NET.COM INC AND OTHER COMPANIES AFFILIATED WITH KEVIN R. LEECH, WHO
ARE AMONG THE SELLING STOCKHOLDERS IN THIS OFFERING
Prior to commencement of our acquisition program in July 1999,
substantially all of our revenues were derived from Web design and other
services provided to subsidiaries of Ci4net.com Inc., a publicly traded company
with investments in 40 Internet-related companies as at July 31, 2000, 33 of
which were majority owned subsidiaries. Our director and principal stockholder
Kevin R. Leech is a significant shareholder of Ci4net.com, owning approximately
40% of its outstanding shares at July 31, 2000. Through our fiscal year ended
December 31, 1999 and for the nine month period through September 30, 2000, we
had provided approximately (pound)6.2 million ($8.8 million) of services and
purchased approximately (pound)359,000 ($511,000) of goods and services from
subsidiaries of Ci4net.com Inc. and other subsidiaries of Glen Investments
Limited, a company wholly-owned by Kevin R. Leech.
Mr. Leech and his affiliates have helped support our business operations
through a variety of loans and advances to our company, both prior to and
subsequent to our initial public offering in May 1999. As at September 30, 2000,
we owed approximately (pound)1.9 million ($2.7 million) to Mr. Leech. Our
obligation to Mr. Leech bears interest at the annual rate of 2% above the UK
base lending rate, which was 6% per annum as at November 30, 2000, and is
repayable on the earlier of January 5, 2002 or the receipt by us of the net
proceeds from the realization of any of our investments.
Glen UK Holdings Limited, an affiliate of Kevin R. Leech, was a
shareholder of Morbria Limited at the time of our acquisition of such company in
September 1999, and received our ordinary shares a part of such acquisition. In
addition, Ci4net.com has purchased at the initial public offering price shares
of our BuyersGuide.com subsidiary offered to the public on the AIM market of the
London Stock Exchange in July 2000.
For a description of these and other related party transactions as well as
the terms of a proposed agreement to settle all outstanding accounts and
obligations with Ci4net.com, reference is made to "PROSPECTUS SUMMARY - Related
Party Transactions."
KEVIN R. LEECH, A DIRECTOR AND OUR PRINCIPAL STOCKHOLDER, AND HIS
CORPORATE AFFILIATES, AND MR. LEECH AND ROBERT BRADSHAW, A DIRECTOR AND OUR
CHIEF EXECUTIVE OFFICER, MAY HAVE CONFLICTS OF INTEREST
Mr. Leech is a director and principal stockholder of other technology
businesses, and companies that invest in technology companies, and is a
significant stockholder and Chairman of Ci4net.com, Inc., one of the selling
stockholders in this offering. Ci4net owns majority interests in several
European Internet companies for whom we have provided Web site development
services. Several customers of Morbria, one of our subsidiaries, are owned by
Glen Investments Limited. While we do not believe that those companies represent
a competitive threat to us now or in the foreseeable future, it is possible that
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they may be competitors at some future date, or that conflicts of interest may
arise from those relationships. Mr. Bradshaw is the Chief Executive Officer of
Heritage Great Britain plc, a company controlled by Kevin Leech. Heritage Great
Britain is the owner and operator of landmark attractions in the British Isles.
WE MAY NOT BE ABLE TO SUCCESSFULLY PROTECT OUR PROPRIETARY RIGHTS
Our success and ability to compete is dependent in part on the protection
of our original content for the Internet and on the goodwill associated with our
trademarks, trade names and trade secrets. A substantial amount of uncertainty
exists concerning the application of copyright laws to the Internet, and there
can be no assurance that existing laws will provide adequate protection for our
original content. In addition, because copyright laws do not prohibit
independent development of similar content, there can be no assurance that
copyright laws will provide us with any competitive advantage.
We will rely on trade secret and copyright laws to protect the proprietary
technologies, primarily in the form of software, that we may develop in the
future to manage and improve our Web site and advertising services, but there
can be no assurance that those laws will provide sufficient protection to us,
that others will not develop technologies that are similar or superior to ours,
or that third parties will not copy or otherwise obtain and use our technologies
without authorization.
Policing unauthorized use of our proprietary technology and other
intellectual property rights could entail significant expense and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford us little or no
effective protection of our intellectual property.
In addition, we rely on certain technology licensed from third parties,
and may be required to license additional technology in the future. There can be
no assurance that these third-party technology licenses will be available or
will continue to be available to us on acceptable commercial terms or at all. If
we are unable to enter into and maintain any of these technology licenses, it
could damage our business.
OTHER COMPANIES MAY CLAIM WE ARE INFRINGING UPON THEIR PROPRIETARY
TECHNOLOGY
Given the nature of our business, we can not give assurance that third
parties will not bring claims of copyright or trademark infringement against us
or claim that our use of certain technologies violates a patent. Further, there
can be no assurance that third parties will not claim that we have
misappropriated their creative ideas or formats or otherwise infringed on their
proprietary rights in connection with our Internet content. We are not aware of
any claims. Any claims of infringement, with or without merit, could be time
consuming to defend, result in costly litigation, divert management attention,
require us to enter into costly royalty or licensing arrangements or prevent us
from using important technologies or methods, any of which could damage our
business and financial condition.
WE NEED TO CONTINUALLY OBTAIN OR DEVELOP AND DISPLAY USEFUL CONTENT IN
AN ATTRACTIVE FASHION TO ATTRACT USERS AND ADVERTISERS
Our success depends in part upon our ability to deliver interactive,
locally-focused content in order to attract consumers with demographic
characteristics valuable to our customers. Rapidly changing technology, emerging
industry standards and consumer requirements that are subject to rapid change
and frequent new service introductions characterize the markets for our
services. These characteristics are exacerbated by the emerging nature of the
local interactive content and service market and the expectation that many
companies may introduce new Internet products and services addressing this
market in the near future. There can be no assurance that we will be successful
in obtaining or developing and providing new content and services or enhancing
our existing local information services on a timely basis, or that our
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content and services will effectively address requirements of consumers or our
customers or achieve market acceptance.
WE MAY BE HELD LIABLE FOR ONLINE CONTENT PROVIDED BY THIRD PARTIES
We may face potential liability for defamation, negligence, copyright,
patent or trademark infringement and other claims based on the nature and
content of the materials that appear on TownPages. Claims of this type have been
brought, and sometimes successfully pressed, against online services. Although
we carry general liability insurance, our insurance may not cover all claims or
may not be adequate to indemnify us for any liability that may be imposed. Any
imposition of liability, particularly liability that is not covered by insurance
or is in excess of our insurance coverage, could have a material adverse effect
on our reputation, business, financial condition and results of operations.
USERS MAY CONFUSE OTHER COMPANIES' DOMAIN NAMES WITH OUR OWN
TownPages UK Limited has registered with the InterNIC registration
service, the Internet domain names: www.townpagesnet.com, www.townpages.co.uk,
www.townpages.org, www.townpagesplc.com, www.townpagesus.com,
www.townpagesuk.com, and www.townpageseu.com. However, there are other
substantially similar domain names which are registered by companies which may
compete with us and our subsidiaries. In addition, new domains may be added in
the future, allowing combinations and similar domain names that may be
confusingly similar to our own. There can be no assurance that potential users
and advertisers will not confuse our domain names with other similar domain
names. If that confusion occurs,
o we may lose business to a competitor, and
o have to adjust our advertising rates and service fees accordingly, or
o some users of our services may have negative experiences with other
companies on their Web sites that those users erroneously associate with
us.
OUR BUSINESS DEPENDS ON ACCEPTANCE OF THE INTERNET AS AN EFFECTIVE
ADVERTISING MEDIUM AND COMMUNICATIONS AND INFORMATION SEARCH TOOL
The Internet is still a relatively new medium for advertising,
communications, and information search and retrieval. Advertisers may not agree
with our view that Internet advertising can be an effective means for satisfying
their needs. We may be unable to persuade a large enough number of consumers and
advertisers that our service satisfies their needs and does so better than
traditional methods for advertising, communications, or information search and
retrieval, or other Internet providers. Use of the Internet by consumers and
advertisers would be hindered if the reliability, speed, security, and ease in
use of the Internet and increased access to the Internet, through personal
computers or otherwise, does not continue to improve. Also, as consumers and
potential customers develop an awareness of how best to use the Internet, they
may find that our Web site and services do not satisfy their demands. If that
happens, we may be unable to adapt our services to meet those demands.
Furthermore, potential customers may not agree on standards for determining how
to measure the effectiveness of Internet advertising, or whether it is more
effective than traditional advertising methods.
OUR BUSINESS COULD BE HARMED BY ACTUAL OR THREATENED PENETRATION OF OUR
NETWORK SECURITY
Although we are not aware of any attempts by programmers or "hackers" to
penetrate our network security, there can be no assurance that those actions
will not occur in the future. A party who is able to penetrate our network
security could misappropriate proprietary information or cause interruptions in
the
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operation of TownPages, which could have a material adverse effect on our
business, financial condition and results of operations. We may be required to
expend significant capital and resources to protect against the threat of
security breaches or to alleviate problems caused by security breaches. Concerns
over the security of Internet transactions and the privacy of users may also
inhibit the growth of the Internet, particularly as a means of conducting
commercial transactions. Security breaches or the inadvertent transmission of
computer viruses could expose us to a risk of loss or litigation and possible
liability. We do not have "errors and omissions" or other insurance coverage
specifically against losses which might be incurred due to computer viruses or
product defects. Our business, results of operations, and financial condition
could be materially adversely effected if contractual provisions attempting to
limit our liability in these areas are not successful or enforceable, or if
other parties do not accept these contractual provisions as part of our
agreements.
OUR BUSINESS DEPENDS SPECIFICALLY ON THE INTERNET INFRASTRUCTURE
Many of the Internet service providers, online service providers and other
Web site operators on whom we depend have experienced significant service
slowdowns, malfunctions, outages and capacity limitations. We also depend upon
the reliability, speed, data capacity, ease of use, accessibility and security
of the Internet as well as its continued development and acceptance for
commercial use generally. A satisfactory Internet experience may also depend on
the proper functioning and the continued development of equipment such as high
speed modems and personal computers. New protocols or standards have been
developed to handle new systems and increased level of activity at higher speeds
in compliance with governmental regulations. Not all software and equipment
protocols and standards are compatible. Users may experience difficulties due to
computer-related, telecommunications, or other equipment, software, or system
failures or shortcomings unrelated to our services. If users experience these
difficulties, our reputation could be harmed. Moreover, failure of Internet
service providers or online service providers to provide access to the Internet
to our customers and users would prevent them from accessing our Web site, which
could result in reducing the marketability of our services and an eventual loss
of customers.
WE MUST CONSTANTLY ADAPT TO RAPID TECHNOLOGICAL CHANGE
Our industry is characterized by rapidly changing technology, evolving
industry standards, frequent new service and product introductions and
enhancements, and changing customer demands. Our success will depend, in part,
on our ability to adapt rapidly to these developments. We must maintain adequate
financial and technical resources to adapt to these changes or our systems and
technologies could become incompatible or inefficient due to rapidly evolving
software, computer hardware, and telecommunications standards.
OUR BUSINESS WOULD BE HARMED IF SERVICE WAS INTERRUPTED DUE TO
HARDWARE, SOFTWARE, TELECOMMUNICATIONS OR OTHER BREAKDOWNS
Our operations may be interrupted if the computer, computer-related,
telecommunications, or other equipment and software owned by us or by service
providers upon whom we depend are damaged or prevented from operating. If we
experience a temporary or permanent business interruption, whether due to a
casualty or an operating malfunction, as a result of a move or otherwise, our
business, operations, and financial condition could be adversely affected. We do
not have any business interruption insurance, and our property insurance may not
cover that type of loss.
WE ARE DEPENDANT ON OUR KEY MANAGEMENT
We depend upon our senior management team, led by Robert Bradshaw and
Richard Walker, to successfully implement our business strategy. If Mr. Bradshaw
or Mr. Walker or other members of the
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senior management team become unable or unwilling to continue in their present
positions, our business and financial conditions could be damaged. We do not
currently maintain key man life insurance on any of our officers.
WE MAY NOT BE ABLE TO ATTRACT AND RETAIN NEEDED TECHNICAL PERSONNEL
Currently, a large portion of our business involves Web site design,
development and maintenance and network and kiosk operations, maintenance and
repair. Our success depends in large part upon our ability to attract, train,
motivate and retain qualified technical personnel. We may be unable to do so,
particularly in view of the strong competition for individuals with Internet and
related technical experience.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION
There are currently few laws and regulations directly applicable to access
to or commerce on the Internet. However, due to the increasing popularity and
use of the Internet, it is possible that a number of laws and regulations may be
adopted, or existing laws or regulations may be applied differently, with
respect to the Internet, covering issues such as user privacy, pricing and
quality of services. These laws and regulations could hinder growth in use of
the Internet generally and decrease the acceptance of the Internet as a
communications and commercial medium, and could thereby cause our business to
suffer. In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by agencies such as the Federal
Communications Commission in the United States in the same manner as other
telecommunications services. The costs of communicating on the Internet could
increase substantially as a result of this type of regulation in the United
States, the United Kingdom, or elsewhere, potentially slowing the growth in use
of the Internet.
The placement and operation of our external kiosks are also subject to
various local zoning and similar laws and regulations which could delay,
preclude, or increase the cost of kiosk installation and operation.
THE PRICE OF OUR SECURITIES MAY BE HIGHLY VOLATILE
The stock markets generally, and the Internet sector in particular, have
experienced and are likely to continue to experience, significant price and
volume fluctuations. This could result in sharp decreases in the price of our
securities no matter how well or poorly we perform. The trading price of our
securities could also fluctuate significantly in response to fluctuations in
quarterly operating results, failures to meet analysts' expectations,
developments in the Internet industry and our business, and other factors.
WE DO NOT PLAN TO PAY CASH DIVIDENDS
We are prohibited from paying cash dividends on our ordinary shares in any
year in which we do not first declare and pay a 9% dividend on our Series A
preferred shares. In any case, we do not currently intend to pay any cash
dividends. In addition, if we intended to pay dividends, under English corporate
law dividends are only payable out of distributable reserves, which are
essentially equivalent to retained earnings. We currently have no distributable
reserves and we cannot determine at this time if or when we will generate any.
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<PAGE>
ALL OF OUR OUTSTANDING ORDINARY SHARES WILL BE ELIGIBLE FOR IMMEDIATE
FUTURE SALE
The market price of our ordinary shares could drop as a result of sales of
substantial amounts of our ordinary shares in the public market or the
perception that such sales may occur. These factors could also make it more
difficult for us to raise funds through future offerings of stock.
The 2,200,000 ordinary shares in the form of ADSs sold in our initial
public offering are freely tradable without restriction except for any shares
purchased by our "affiliates" as defined in Rule 144 under the Securities Act.
Prior to the registration statement of which this prospectus is a part,
our remaining 7,833,009 outstanding ordinary shares were "restricted securities"
as defined in Rule 144. As such, those shares could only be resold if there is
an effective registration statement under the Securities Act covering those
shares or an exemption from registration under Rule 144 or otherwise is
available. The registration statement of which this prospectus is a part has
registered for sale under the Securities Act of 1933, as amended, all 7,833,009
of our remaining outstanding shares. We also intend to register all ordinary
shares reserved for issuance under our stock option plan. Ordinary shares
covered by such registration will be eligible for resale in the public market,
subject to Rule 144 limitations applicable to "affiliates." Shares held by
companies controlled by Kevin R. Leech and shares owned directly or indirectly
by members of our board of directors or executive management will be deemed
shares held by our "affiliates."
Our stock options and warrants are likely to be exercised, if at all, at a
time when we otherwise could obtain a price for the sale of our ordinary shares
that is higher than the exercise price per share of the options or warrants. Any
such exercise or the possibility of such exercise may impede our efforts to
obtain additional financing through the sale of additional securities or make
such financing more costly.
PREEMPTIVE RIGHTS MAY NOT BE AVAILABLE TO OUR ORDINARY STOCKHOLDERS
Under English corporate law, whenever we issue new shares for cash,
subject to limited exceptions, we must grant to all of our stockholders,
including holders of our ordinary shares, preemptive rights to purchase a
sufficient number of shares to maintain their existing ownership percentage.
These statutory preemptive rights will not apply to our authorized but currently
unissued shares for the period commencing December 15, 1998 and ending on
December 31, 2003, but will apply thereafter. In any event, we may not be able
to offer preemptive rights to US holders of ordinary shares unless an effective
registration statement exists under the Securities Act covering those rights and
the underlying shares. We intend to evaluate at the time of any rights offering
the costs and potential liabilities and benefits to us of enabling US holders of
ordinary shares to exercise preemptive rights, and then make a decision whether
to file such a registration statement. If holders of ordinary shares are unable
to exercise preemptive rights because no registration statement is filed or
effective, Bankers Trust will attempt to sell the holders' preemptive rights if
a viable secondary market exists and a profit can be realized after expenses.
Bankers Trust would then distribute the net proceeds of the sale, net of Bankers
Trust's fees and expenses, to the holders of the ordinary shares. The equity
interests of the holders of ordinary shares would be diluted proportionately if
they are unable to exercise preemptive rights.
YOU MAY BE SUBJECT TO BOTH UNITED STATES AND UNITED KINGDOM TAXES
We strongly urge you to consult with your tax advisors concerning the
consequences of investing in our ordinary shares. Our ordinary shares
represented by ADSs are traded in the United States, but we are organized under
the laws of England and Wales. A US holder of our ADSs will be treated as the
owner of the underlying ordinary shares for purposes of US and UK tax laws.
Therefore, US federal, state
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and local tax laws and UK tax laws will apply to ownership of our ADSs and the
underlying ordinary shares. Tax laws of other jurisdictions may also apply.
MARKET PRICE OF OUR ORDINARY SHARES MAY BE SUBJECT TO FOREIGN EXCHANGE
FLUCTUATIONS
Fluctuations in the exchange rate between the British pound sterling and
the US dollar are likely to affect the market price of the ordinary shares. For
example, even though our financial statements are reported in British pounds
sterling, if the value of the British pound sterling falls against the US
dollar, our earnings per share in US dollars would be reduced. This may
adversely affect the price at which our ordinary shares trade on US securities
markets.
UNITED STATES CIVIL LIABILITIES MAY NOT BE ENFORCEABLE AGAINST US
All of our directors and executive officers and certain of the experts
named in this prospectus are not residents of the United States and virtually
all of the assets of these persons and virtually all of our assets are located
outside the United States. As a result, it may not be possible for you to serve
summons and complaints within the United States upon these persons. Similarly,
it may not be possible to enforce in US courts, against these persons or against
us, judgments of the US courts based upon civil liability provisions of the US
federal or state securities laws. In addition, it may be difficult for you in
original suits or in suits for the enforcement of judgments of US courts to
enforce certain civil liabilities based upon US federal or state securities laws
in England against us or our directors or executive officers, or our experts.
UNDER UK LAW A VOTE OF 75% OF THE STOCKHOLDERS IS REQUIRED TO APPROVE
CERTAIN SIGNIFICANT CORPORATE TRANSACTIONS
Under English law we are required to obtain the vote or consent of holders
of 75% of our outstanding ordinary shares to complete certain significant
transactions, including amendments to our memorandum and articles of
association. This may make it more difficult for us to complete a merger or sale
of our company which is deemed beneficial by our board of directors.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling stockholders. Expenses expected to be incurred by us in connection with
this offering are estimated at approximately $110,000.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our securities. We
currently intend to retain future earnings, if any, to finance the development
and expansion of our business and, therefore, we do not anticipate paying any
cash dividends on our securities in the foreseeable future. Therefore, we do not
anticipate paying any cash dividends on our ordinary shares or ADSs in the
foreseeable future. Also, the terms of our Series A preferred shares prohibit
the payment of cash dividends on our ordinary shares in any year until we also
declare and pay a 9% dividend on our Series A preferred shares.
DETERMINATION OF OFFERING PRICE
Our ordinary shares are not directly publicly traded in the United States
or any foreign market. Our ADSs are traded on the American Stock Exchange. Each
ADS represents one ordinary share. Price quotations for our ADSs were reported
on the AMEX under the symbol "TPN." As of September 30, 2000, we had 10,033,009
ordinary shares issued and outstanding of which 2,200,000 are represented by
ADSs evidenced by ADRs issued by Bankers Trust Company, as depositary. As of
September 30, 2000, all 2,200,000 of our ADSs were held of record by one
registered holder, our depositary, a United States company. This represents
approximately 22% of our outstanding ordinary shares.
The following table sets forth the high and low closing sale prices for
our ADSs (rounded to the nearest cent), on the AMEX, from the beginning of
trading on May 5, 1999 to September 30, 2000. Such prices do not reflect retail
markup, markdown or commissions and may not necessarily represent actual
transactions.
High Low
------- -------
FISCAL 1999
Second Quarter (from May 1999)....................... $10.125 $6.625
Third Quarter........................................ 9.375 6.250
Fourth Quarter....................................... 7.875 4.250
FISCAL 2000
First Quarter........................................ 9.375 4.875
Second Quarter....................................... 6.000 1.625
Third Quarter........................................ 3.250 1.000
On December 12, 2000, the closing price of our ADRs on the American Stock
Exchange was $0.63 per share.
Registrar, Transfer Agent and Depositary
Lloyd's Registrars acts as our registrar and transfer agent. Bankers Trust
Company acts as our depositary with respect to our American Depositary Receipts.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth:
o the names of the selling stockholders,
o the aggregate number of ordinary shares beneficially owned by the
selling stockholders as of September 30, 2000,
o the aggregate number of ordinary shares which may be offered for sale
for the account of the selling stockholders from time to time pursuant
to this prospectus, and
o the amount and percentage of ordinary shares which would be beneficially
owned by the selling stockholders pursuant to this prospectus, if they
are all offered and sold, and assuming the selling stockholders do not
acquire any additional ordinary shares or ADSs.
Because the selling stockholders may offer all, some or none of the shares
they hold, and because there are currently no agreements, arrangements or
understandings with respect to the sale of the shares, no definitive estimate as
to the number of shares that will be held by the selling stockholders after such
offering can be provided, and the following table was prepared on the assumption
that all shares sold under this prospectus will be sold to parties unaffiliated
with the selling stockholders.
Pursuant to Rule 416 of the Securities Act, the selling stockholders may
also offer ordinary shares issued as a result of stock splits, stock dividends
and anti-dilution provisions. Unless otherwise indicated, the selling
stockholders referred to herein have not held any position, office or had any
other material relationship with us or any predecessor in the past three years.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP ORDINARY SHARES TO BE BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED FOR THE SELLING AFTER OFFERING(2)
----------------- STOCKHOLDERS' ACCOUNT --------------
---------------------
NAME SHARES PERCENTAGE(1) SHARES PERCENTAGE SHARES PERCENTAGE
---- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
John Bowden(3) 406,523 4.05% 406,523 4.05% 0 0%
Lucy Bowden(3) 406,522 4.05% 406,522 4.05% 0 0%
ci4net.com Inc.(3) 97,268 0.97% 97,268 0.97% 0 0%
Robert Paul Dillon(4) 85,798 0.86% 85,798 0.86% 0 0%
Glen UK Holdings Ltd.(4) 772,174 7.70% 772,174 7.70% 0 0%
Paul Custy (4) 11,359 0.11% 11,359 0.11% 0 0%
Kevin R. Leech(5) 4,952,174 49.36% 4,952,174 49.36% 0 0%
HCC Holdings Ltd.(6) 488,281 4.87% 488,281 4.87% 0 0%
Todd A. Barnett(7) 8,063 0.08% 8,063 0.08% 0 0%
John C. Blasko(7) 8,063 0.08% 8,063 0.08% 0 0%
Peter Grimm(7) 2,688 0.03% 2,688 0.03% 0 0%
Christopher and Charlotte 2,688 0.03% 2,688 0.03% 0 0%
Van Hollebeke(7)
Louie and Lynn Van 75,253 0.75% 75,253 0.75% 0 0%
Hollebeke(7)
Ronald Van Hollebeke(7) 2,688 0.03% 2,688 0.03% 0 0%
Charles and Theresa 2,688 0.03% 2,688 0.03% 0 0%
Holt(7)
InfoMate Systems Inc.(7) 51,064 0.51% 51,064 0.51% 0 0%
Patrick J. Marker(7) 2,688 0.03% 2,688 0.03% 0 0%
</TABLE>
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<TABLE>
<CAPTION>
(TABLE CONTINUED)
BENEFICIAL OWNERSHIP ORDINARY SHARES TO BE BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED FOR THE SELLING AFTER OFFERING(2)
----------------- STOCKHOLDERS' ACCOUNT --------------
---------------------
NAME SHARES PERCENTAGE(1) SHARES PERCENTAGE SHARES PERCENTAGE
---- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas Moran(7) 10,213 0.10% 10,213 0.10% 0 0%
James and Luana Potter(7) 2,688 0.03% 2,688 0.03% 0 0%
Scott W. Rasmussen(7) 275,206 2.74% 275,206 2.74% 0 0%
William F. Rasmussen(7) 75,253 0.75% 75,253 0.75% 0 0%
Elton G. Welke(7) 5,375 0.05% 5,375 0.05% 0 0%
Arthur Wheeler(7) 2,688 0.03% 2,688 0.03% 0 0%
Thomas Wilson(7) 10,213 0.10% 10,213 0.10% 0 0%
Robert L. Brisotti, Jr(8) 13,783 0.14% 13,783 0.14% 0 0%
Security Capital Trading, 13,782 0.14% 13,782 0.14% 0 0%
Inc.(8)
Nigel Samuel Brooks(9) 3,500 0.03% 3,500 0.03% 0 0%
BT CTAG Nominees 134,000 1.34% 134,000 1.34% 0 0%
Limited(9)
Barry Bernard John 20,500 0.20% 20,500 0.20% 0 0%
Charles(9)
Eileen Charles(9) 7,000 0.06% 7,000 0.06% 0 0%
CMInvestment Nominees 279,000 2.78% 279,000 2.78% 0 0%
Limited(9)
Howard Emerson Flight(9) 7,000 0.06% 7,000 0.06% 0 0%
Peter James Lee(9) 14,000 0.12% 14,000 0.12% 0 0%
Edward James Lifford(9) 14,000 0.12% 14,000 0.12% 0 0%
Nigel Talbot-Ponsonby(9) 14,000 0.12% 14,000 0.12% 0 0%
Peter Gerald Walker(9) 7,000 0.06% 7,000 0.06% 0 0%
Raven Ventures Limited(10) 3,500,000 34.88% 3,500,000 34.88% 0 0%
Milner Laboratories 1,000,000 9.97% 1,000,000 9.97% 0 0%
Limited(10)
</TABLE>
---------------------------
(1) Percentage based on 10,033,009 ordinary shares outstanding as of
September 30, 2000.
(2) Assumes the selling stockholder disposes of all ordinary shares
covered by this prospectus and does not acquire any additional
ordinary shares or ADSs.
(3) Represents shares issued in October 1999 in connection with our
acquisition of BuyersGuide plc . Includes 362,627 ordinary shares
owned by John Bowden which he has the right (but not the obligation)
to sell to Kevin R. Leech at $1.20 per share during the 30 day
period ending March 16, 2001. Kevin Leech, a director and our
principal stockholder, is a significant stockholder and Chairman of
ci4net.com, Inc., owning approximately 40% of its outstanding common
stock. See "Related Party Transactions."
(4) Represents shares issued in September 1999 in connection with our
acquisition of Morbria Limited. Glen UK Holdings Ltd. is an
investment company wholly-owned by Kevin Leech, our director and
principal stockholder.
(5) Represents the shares owned beneficially in our company by Kevin R.
Leech, a director, through his ownership of 100% of the share
capital of each of Glen UK Holdings Ltd. and Raven Ventures Limited
and 68% of the share capital of Milner Laboratories Limited. Does
not include 97,268 of our shares owned by Ci4net.com Inc. in which
Mr. Leech disclaims any beneficial interest.
(6) Represents shares issued in July 1999 and July 2000 in connection
with our acquisition of the WWW.CO.UK Limited group of companies.
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<PAGE>
(7) Represents shares issued in November 1999 in connection with our
acquisition of Research Sales, Inc.
(8) Represents shares issued to Robert Brisotti, Jr. and Security
Capital Trading, Inc. as a finder's fee in connection with the
Research Sales, Inc. acquisition. Security Capital Trading, Inc. was
one of the representatives of the underwriters in our initial public
offering completed in May 1999. Robert Brisotti was at the time of
our initial public offering, associated with Security Capital.
(9) Represents shares owned of record by certain original founding
shareholders of Town Pages (UK) Limited, and shares issued to former
and current members of our board of directors. Barry B.J. Charles
and Nigel Talbot-Ponsonby are former members of our board of
director and Viscount Edward James Wingfield Lifford is currently a
member of our board of directors. CM Investment Nominees Limited is
a UK brokerage firm holding shares for the benefit of Andrew Neville
Lyndon-Skeggs, our former President and a former member of our board
of directors, and BT CTAG Nominees Limited is a UK brokerage firm
holding shares for the benefit of Lewis Jones and Jerry Ranger, two
founding shareholders of our company.
(10) Raven Ventures Limited is a Guernsey (Channel Island) corporation,
wholly-owned by Kevin R. Leech. Milner Laboratories Limited is a
United Kingdom corporation, 68% owned by Kevin R. Leech.
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<PAGE>
PLAN OF DISTRIBUTION
We have registered under the Securities Act, 7,833,009 ordinary shares
represented by ADSs for sale by the selling stockholders. The ordinary shares
registered hereby have been registered pursuant to our obligations contained in
written agreements with the selling stockholders.
All or a portion of the shares offered hereby may be sold, from time to
time, by the selling stockholders in or more transactions on the AMEX, in the
over-the-counter market, in transactions independent of the AMEX or the
over-the-counter market, in separately negotiated transactions, or otherwise.
Such sales may be made either at fixed prices which may be changed, at market
prices prevailing at the time of sale, at prices related to prevailing market
prices or at negotiated prices. The shares may be sold by the selling
stockholders by one or more of the following methods, without limitation: (i)
block trades in which a broker or 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; (ii) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(iii) an exchange distribution in accordance with the rules of such exchange;
(iv) ordinary brokerage transactions and transactions in which a broker may
solicit purchasers; (v) privately negotiated transactions; (vi) short sales; and
(vii) a combination of any such methods of sale. In effecting sales, brokers and
dealers engaged by the selling stockholders may arrange for other brokers or
dealers to participate. Brokers or dealers may receive compensation in the form
of discounts, concessions or commissions from the selling stockholders (or, if
any such broker-dealer acts as agent for the purchaser of the shares, from such
purchaser) in amounts to be negotiated which may be less than, or in excess of,
those customary in the types of transactions involved. Broker-dealers may agree
with the selling stockholders to sell a specified number of the shares at a
stipulated price per Share, and, to the extent such broker-dealer is unable to
do so acting as agent for a selling stockholder, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the selling stockholder. Broker-dealers who acquire the shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve block transactions and sales to and through other broker-dealers,
including transactions of the nature described above) on the AMEX, in the
over-the-counter market, in transactions independent of the AMEX or the
over-the-counter market, in separately negotiated transactions, or otherwise, at
fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices. In
connection with resales, broker-dealers may pay to or receive from the
purchasers of the shares compensation as described above.
In addition, the selling stockholders may be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Regulation M, which provisions may limit the
timing of purchases and sales of any of the ordinary shares by the selling
stockholders. The foregoing may limit the marketability of the ordinary shares.
In order to comply with the securities laws of certain states, if
applicable, the ordinary shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
ordinary shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available.
The ordinary shares offered hereby may, upon compliance with applicable
state securities laws, be sold from time to time to purchasers directly by the
selling stockholders or by pledgees, donees, transferees or other successors in
interest, or in negotiated transactions and on AMEX through brokers or dealers,
or otherwise. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders for whom
such broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). In addition, any securities covered by this prospectus
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<PAGE>
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this prospectus.
Alternatively, subject to the selling restrictions described above
(including volume restrictions and use of designated brokers), the selling
stockholders may from time to time offer the ordinary shares offered hereby
through underwriters, dealers or agents, who may receive compensation in the
form of underwriting discounts, concessions or commissions from the selling
stockholders and/or the purchasers of ordinary shares for whom they may act as
agents. To our knowledge, no underwriting arrangements have been entered into by
the selling stockholders with respect to the shares as of the date hereof.
The selling stockholders and any underwriters, dealers or agents that
participate in the distribution of ordinary shares offered hereby may be deemed
to be "underwriters" within the meaning of the Securities Act, and any profit on
the sale of such ordinary shares by them and any discounts, commissions or
concessions received by any such underwriters, dealers or agents might be deemed
to be underwriting discounts and commissions under the Securities Act.
At the time a particular offer of ordinary shares is made, to the extent
required, a supplement to this prospectus, if required, will be filed with the
Commission which will set forth the aggregate amount of ordinary shares being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, and discounts, commissions and other items
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
The ordinary shares offered hereby may be sold from time to time in one or
more transactions at market prices prevailing at the time of sale, at a fixed
offering price, which may be changed, at varying prices determined at the time
of sale or at negotiated prices. The selling stockholders will pay the
commissions and discounts of underwriters, dealers or agents, if any, incurred
in connection with the sale of the ordinary shares.
We will not receive any proceeds from the sale of the ordinary shares
being offered by the selling stockholders. There can be no assurance that any of
the ordinary shares will be sold by the selling stockholders.
We have agreed to pay all of the expenses, estimated to be approximately
$110,000, in connection with this registration statement, other than
underwriting and brokerage commissions, discounts, fees and counsel fees and
disbursements attributed solely to the selling stockholders.
LEGAL MATTERS
The validity of the ordinary shares offered hereby has been passed upon by
Richard Saleh, Esq., Manchester, United Kingdom.
EXPERTS
The consolidated financial statements of TownPages Net.com plc appearing
in the TownPagesNet.com plc Annual Report (Form 20-F) for the year ended
December 31, 1999, have been audited by Ernst & Young, independent auditors, as
set forth in their report thereon incorporated by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
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<PAGE>
The consolidated financial statements of Research Sales, Inc. for the
period from December 31, 1998 (date of inception) to October 31, 1999 appearing
in the Registration Statement have been audited by Ernst & Young, independent
auditors, 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 accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which we have filed with the Securities and
Exchange Commission, are incorporated by reference in this prospectus:
1) Our Annual Report on Form 20-F for the year ended December 31, 1999.
2) All other reports filed by us pursuant to Sections 13 or 15 of the
Exchange Act since December 31, 1999 consisting of: our Reports on
Form 6-K dated January 27, 2000, March 28, 2000, April 14, 2000, May
18, 2000, June 23, 2000, December 14, 2000 and December 14, 2000.
3) The description of our capital stock contained in our Registration
Statement on Form 8-A, filed on April 23, 1999.
In addition, all documents which we file with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, after the date of this prospectus and before termination of
the offering, including all annual reports on Form 20-F, and all filings on Form
6-K, will be deemed to be incorporated by reference in this prospectus and to be
a part of this prospectus from the date those documents are filed.
Any statement contained in a document which is incorporated, or deemed to
be incorporated, by reference into this prospectus, shall be considered modified
or superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
also is, or is deemed to be, incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
You may request a copy of any document incorporated by reference in
this prospectus at no cost, by writing or telephoning us at the following
address: Welton House, Mill Lane, Alton, Hampshire, England, GU34 1HD, United
Kingdom, Telephone: 011-44-1420-540-900.
28
<PAGE>
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
TownPagesNet.com plc is registered and exists under the laws of England
and Wales. Our directors and officers and certain of our experts named in this
prospectus are not residents of the United States, and a substantial portion of
their assets and our assets are located outside of the United States. As a
result, it may be difficult or not possible for investors to effect service of
process within the United States upon these persons or to enforce outside the
United States judgments obtained against these persons in US courts, or to
enforce in US courts judgments obtained against these persons in courts in
jurisdictions outside the United States, in each case, in any action, including
actions predicated upon the civil liability provisions of the Federal or state
securities laws of the United States. We have been advised by Richard Saleh,
Esq., our UK counsel, that there is doubt as to the enforceability against
persons in England actions for enforcement of judgments of US courts of civil
liabilities predicated solely upon the US federal securities laws. Also,
investors may find it difficult to enforce liabilities based upon the civil
liability provisions of the US federal securities laws against us, our officers,
directors and foreign-resident experts named in this prospectus in an original
action in a United Kingdom court.
29
<PAGE>
UNAUDITED CONDENSED PROFORMA
CONSOLIDATED FINANCIAL INFORMATION
On November 1, 1999, TownPagesNet.com plc consummated the merger of its
newly-formed, wholly-owned subsidiary, Rasmussen Acquisition Corp., a
Washington corporation, with and into Research Sales, Inc. (d/b/a/ Rasmussen
Research, Inc.), a Washington Subchapter-S.
In connection with the merger, in exchange for all of the capital stock of
Research Sales, Town Pages issued 551,302 ordinary shares, valued at
approximately $3.3 million based on the $6.00 per share closing price of the
Company's ADS's on the American Stock Exchange on October 29, 1999.
Research Sales is an Internet-based polling and market research firm.
The acquisition has been accounted for as a purchase. The allocation of
the purchase price has not been finally determined and, accordingly, the pro
forma adjustments reflected below may be adjusted when additional information is
obtained during the one-year period subsequent to the date of the acquisition.
However, any reallocation of the purchase price based on final valuations of the
assets and liabilities acquired should not differ significantly from the
original estimates and should not have a material impact on the consolidated pro
forma information.
The following information, which is unaudited, gives pro forma effect to
the acquisition of Research Sales and has been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP"). The pro
forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position of
TownPages as they may be in the future or as they might have been had the
acquisitions been consummated on the respective dates assumed.
The reporting currency of Research Sales is US dollars. However, as the
reporting currency of TownPages is pounds sterling, the financial statements of
Research Sales that are included elsewhere in this document, have been
translated into pounds sterling, in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation".
The unaudited condensed pro forma consolidated financial information should be
read in conjunction with the historical financial statements of TownPages
included in its Annual Report on Form 20-F for the year ended December 31, 1999
filed with the Securities and Exchange Commission, and historical financial
statements of Research Sales included elsewhere in the report.
30
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
OF TOWNPAGESNET.COM PLC
Year ended December 31, 1999
The following unaudited condensed pro forma consolidated statement of
operations for the year ended December 31, 1999, gives pro forma effect to the
acquisition of Research Sales, after giving effect to the adjustments described
in the notes to the unaudited condensed pro forma financial information, as if
the acquisition had occurred on January 1, 1999. The historical financial
information for TownPages is derived from its historical consolidated statement
of operations for the year ended December 31, 1999 included in its Annual Report
on Form 20-F for the year ended December 31, 1999. The historical financial
information for Research Sales is derived from its audited condensed statement
of operations for the ten months ended October 31, 1999 included elsewhere is
this document.
<TABLE>
<CAPTION>
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS OF
TOWNPAGESNET.COM PLC
YEAR ENDED DECEMBER 31, 1999
HISTORICAL PRO FORMA
---------------------------- ------------------------------
ADJUSTMENTS
TownPages Research Sales Note 1 Consolidated
---------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues (POUND) (POUND) (POUND) (POUND)
Advertising revenues 1,312,561 -- -- 1,312,561
Contract revenues and other 2,050,043 8,824 -- 2,058,867
Contract revenues from related parties 3,885,242 -- -- 3,885,242
---------- ---------- ---------- ----------
TOTAL REVENUES 7,247,846 8,824 -- 7,256,670
COST OF REVENUES
Maintenance and hosting costs 1,388,408 -- -- 1,388,408
Cost of contract revenues and other 2,057,296 66,126 -- 2,123,422
Advertising and commission costs 1,203,613 -- 1,203,613
---------- ---------- ----------
4,649,317 66,126 -- 4,715,443
GROSS PROFIT / (LOSS) 2,598,529 (57,302) -- 2,541,227
OPERATING EXPENSES:
Sales and marketing 1,028,005 6,863 -- 1,034,868
Research & development 77,371 6,192 -- 83,563
General and administrative 2,565,396 271,848 -- 2,837,244
Depreciation 257,905 29,559 -- 287,464
Amortisation 830,701 164,942 333,341 (a) 1,328,984
---------- ---------- ---------- ----------
Total operating expenses 4,759,378 479,404 333,341 5,572,123
LOSS FROM OPERATIONS (2,160,849) (536,706) (333,341) (3,030,896)
Interest expense (76,048) (6,142) 3,100 (b) (79,090)
Interest income 190,043 -- (3,100)(b) 186,943
Other income 4,195 (3,403) -- 792
Foreign exchange gain 163,653 -- -- 163,653
Minority Interests (69,959) -- -- (69,959)
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES (1,948,965) (546,251) (333,341) (2,828,557)
Provision for income taxes 108,669 -- -- 108,669
---------- ---------- ---------- ----------
NET LOSS (2,057,634) (546,251) (333,341) (2,937,226)
========== ========== ========== ==========
Basic and diluted net loss per share (pound)(0.29) (pound)(0.39)
----------
Shares used in computing basic and
diluted net loss per share 7,111,075 459,167 (c) 7,570,242
---------- ---------- ----------
</TABLE>
See note to Unaudited Condensed Pro Forma Consolidated Financial Information
31
<PAGE>
NOTES TO THE UNAUDITED CONDENSED PROFORMA CONSOLIDATED FINANCIAL INFORMATION
OF TOWNPAGESNET.COM PLC
NOTE 1 - PRO FORMA ADJUSTMENTS
The unaudited condensed pro forma consolidated statement of operations give
effect to the following pro forma adjustments:
(a) Amortization of Goodwill
Goodwill arising on the acquisition of Research Sales of (pound)2,000,047 over
five years, less (pound)66,668 included in the historical results of operations
of TownPages for year ended December 31, 1999.
(b) Elimination of intercompany interest income and expense
Interest income and interest expense on outstanding notes payable from Research
Sales to TownPages of (pound)3,100.
(c) Shares used in computing basic and diluted net loss per share
Weighted average shares outstanding for the period. Issue of 551,302 ordinary
shares less 92,135 included in historical computation of weighted average shares
outstanding for the year ended December 31, 1999.
32
<PAGE>
INDEX TO
FINANCIAL STATEMENTS OF RESEARCH SALES, INC.
Page
Report of Independent Auditors...............................................F-2
Statement of Operations for the period from December 31, 1998 (date of
inception) to October 31,
1999...................................................................F-3
Statement of Stockholders' Equity for the period from December 31, 1998 (date of
inception) to October 31,
1999 ............................................................... F-4
Statement of Cash Flows for the period from December 31, 1998 (date of
inception) to October 31,
1999...................................................................F-5
Notes to Financial
Statements.......................................................F-6
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Research Sales, Inc.
We have audited the accompanying statements of operations, stockholders'
equity and cash flows of Research Sales, Inc. for the period from December 31,
1998 (date of inception) to October 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 audit.
We conducted our audit 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 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, results of operations and cash flows of Research
Sales, Inc for the period from December 31, 1998 (date of inception) to October
31, 1999, in conformity with accounting principles generally accepted in the
United States.
ERNST & YOUNG
Reading, England
February 11, 2000
F-2
<PAGE>
RESEARCH SALES, INC
STATEMENT OF OPERATIONS
FROM
DECEMBER 31, 1998
(DATE OF INCEPTION)
TO
OCTOBER 31, 1999
------------------
Revenues
Contract revenues $ 14,250
------------------
Total revenues 14,250
Cost of revenues
Cost of contract revenues 106,793
------------------
106,793
------------------
Gross loss (92,543)
Operating expenses
Sales and marketing 11,086
Research and development 10,000
General and administrative 439,034
Depreciation 47,737
Amortization 266,382
------------------
Total operating expenses 774,239
Operating loss (866,782)
Interest expense (9,920)
Other expense, net (5,496)
Net loss for the period $(882,198)
==================
See accompanying notes
F-3
<PAGE>
<TABLE>
<CAPTION>
RESEARCH SALES, INC
STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK ACCUMULATED
-------------------- -----------
SHARES AMOUNT DEFICIT TOTAL
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1998 (date of - $ - $ - $ -
inception)
Issuance of shares 1,000,000 1,367,327 - 1,367,327
Net loss for the period - - (882,198) (882,198)
Balance at October 31, 1999 1,000,000 $ 1,367,327 $ (882,198) $ 485,129
See accompanying notes
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
RESEARCH SALES, INC
STATEMENT OF CASH FLOWS
FROM
DECEMBER 31, 1998
(DATE OF INCEPTION)
TO
OCTOBER 31, 1999
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $(882,198)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 47,737
Amortization of goodwill 266,382
Changes in operating assets and liabilities:
Accrued expenses 55,133
Accounts payable 28,886
---------------------
Net cash used in operating activities (484,060)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and fixtures (22,406)
Acquisition of subsidiary (162,000)
---------------------
Net cash used in investing activities (184,406)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 764,080
Repayment of notes payable (335,100)
Net proceeds from issuance of common stock 291,007
---------------------
Net cash provided by financing activities 719,987
---------------------
Net increase in cash and cash equivalents 51,521
Cash and cash equivalents at the beginning of the period -
---------------------
Cash and cash equivalents at the end of the period $51,521
=====================
SCHEDULE OF NON-CASH ACTIVITIES
Acquisition of intangible assets of Rasmussen Research, Inc.
for notes payable $877,500
=====================
Repayment of notes payable through issuance of common stock $734,500
=====================
Common stock issued for acquisition of subsidiary $341,280
=====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $5,542
=====================
See accompanying notes
</TABLE>
F-5
<PAGE>
RESEARCH SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Research Sales, Inc. (the "Company") was incorporated as a subchapter S
corporation in the state of Washington on December 31, 1998. The Company
conducts independent public opinion research using a proprietary automated
telephone survey system. Results of this research are distributed on-line and
through traditional media outlets as part of a comprehensive strategy to
generate content for the Internet. The Company's Portrait of America web site is
a leading source for public opinion polling data on the Internet. The Company
recently relocated its headquarters to Matthews, North Carolina. The Company's
assets and operations are located wholly within the United States.
USE OF ESTIMATES
The financial statements are prepared under U.S. generally accepted
accounting principles.
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers investments in highly liquid instruments purchased with an
original maturity of 90 days or less to be cash equivalents. Such amounts are
stated at cost, which approximates market value. As at October 31, 1999 the
Company had no cash equivalents.
CONCENTRATIONS OF CREDIT AND OTHER RISKS
Potential concentrations of credit risk to the Company consist principally of
trade receivables. The Company sells its products to customers based in the
United States in diversified industries and performs on-going credit evaluations
of its customers' financial condition and generally requires no collateral.
Allowances for potential credit losses are maintained; however, no credit losses
have occurred and no provision has been made or utilized throughout the period.
The Company only deposits cash surpluses with high credit quality banks and
institutions.
F-6
<PAGE>
RESEARCH SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FURNITURE AND EQUIPMENT AND WEB SITE
Furniture and equipment and the web site are stated at cost. Depreciation and
amortization of furniture and equipment and the web site are provided so as to
write down the cost of the equipment and fixtures to their estimated residual
value over their expected useful lives, as follows:
Web site 3 years straight line
Furniture and equipment 5 years straight line
REVENUE RECOGNITION
Revenues are recognised at the time the polling service is completed and cash is
deemed collectible.
RESEARCH AND DEVELOPMENT
Research and development expenses are charged to operations as incurred.
ADVERTISING
Costs related to advertising are expensed as incurred. No advertising expenses
were incurred in the period from December 31, 1998 to October 31, 1999.
GOODWILL AND INTANGIBLE ASSETS
The Company amortizes its goodwill and intangible assets on a straight line
basis over their estimated economic useful lives.
The Company operates in a highly specialized and technological industry with
relatively low entry market barriers. Due to the fast moving nature of the
industry, the company does not believe that the goodwill and intangible assets
will have a useful economic life of more than five and three years,
respectively. The carrying amount of the goodwill and intangible assets are
reviewed on a regular basis for indicators of impairment. Indicators of
impairment include levels of revenue associated with the polling system being
below forecast or changes in market conditions or market strategies. Should
indicators exist, such impairment will be reviewed through the examination of
discounted cash flows.
F-7
<PAGE>
RESEARCH SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB) has issued Statement of
Financial Accounting Standards No.133, which has not yet been adopted by the
Company. SFAS No.133, "Accounting for Derivative Instruments and Hedging
Activities" is effective for fiscal years beginning after June 15, 2000. This
standard requires all derivatives to be recognized as either assets or
liabilities on the balance sheet at their fair values. It also prescribes the
accounting to be followed for the changes in the fair values of derivatives
depending upon their intended use and resulting designation. It supercedes or
amends the existing standards that deal with hedge accounting and derivatives.
The Company does not expect the effect that adopting this standard will have a
material impact on the U.S. GAAP amounts reported in its financial statements.
In December 1999, the staff of the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition" which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. Adoption of SAB No. 101 has been
delayed until the fourth quarter of 2000 by the SEC. SAB No. 101 outlines the
basic criteria that must be met in order to recognise revenue and provides
guidance for disclosures related to revenue recognition policies. Although we
have not fully assessed the impact of adopting SAB No. 101 on our financial
position and results of operations in 2001 and thereafter, we do not expect the
effect, if any to be material.
2. ACQUISITION OF ASSETS OF RASMUSSEN RESEARCH
In April 1999, the Company acquired all of the outstanding share capital of
Rasmussen Research, Inc. ("RRI"), a public opinion polling firm located in North
Carolina, USA, for aggregate consideration of $503,820, which was paid as
$162,000 in cash and $341,820, or 162,000 shares, in the Company's common stock.
The value of the shares was determined to be $2.11 per share per the Company's
Board of Directors and is consistent with the per share price for shares
acquired by other investors.
The acquired assets had fair values at the date of acquisition as follows:
Internet website $232,500
Miscellaneous furniture and equipment 45,000
----------
Total identified assets 277,500
Total consideration paid 503,820
----------
Goodwill to be recorded $226,320
==========
The goodwill is amortized on a straight-line basis over its estimated useful
life of 5 years.
F-8
<PAGE>
RESEARCH SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INCOME TAXES
The financial statements do not include a provision for income taxes because the
Corporation is a Subchapter-S Corporation for U.S. tax purposes and as such does
not incur federal or state income taxes. Instead, its earnings and losses are
included in the individual shareholders' personal income tax returns and are
taxed based on their personal tax status.
4. LOANS PAYABLE AND RELATED PARTIES
In January 1999, the Company acquired certain intellectual property and
marketing rights from RRI. The assets included the rights to market polling
services to the RRI's customers and the rights to an automated polling system,
which is comprised of proprietary processes surrounding performing public
opinion polls. In exchange for these intangible assets, the Company issued a
note payable in the amount of $877,500 to Scott Rasmussen, the sole shareholder
of RRI and a relative of a director of the Company. Throughout fiscal 1999, the
Company made payments on the note of $143,000. In October 1999, the remaining
balance of the loan of $734,500 was forgiven in exchange for the issuance of
350,000 shares of the Company's common stock to Scott Rasmussen.
The intangible assets are being amortized on a straight-line basis over their
estimated useful life of 3 years.
As of October 31, 1999 the company has a total of $571,980 in notes payable to
related parties.
In September and October 1999, TownPagesNet.com plc, who became the sole
shareholder of the company in November 1999, provided working capital advances
totalling $424,980. As of October 31, 1999, the entire $424,980 remained
outstanding. The loan from TownPages is evidenced by a note bearing interest at
the Bank of America prime rate, 8.25% as of October 31,1999, and is payable
within 12 months of date of issue. Therefore, $100,000 is repayable by September
17, 2000 and $324,980 is repayable by October 20, 2000.
F-9
<PAGE>
RESEARCH SALES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LOANS PAYABLE AND RELATED PARTIES (CONTINUED)
In the period from December 31, 1998 to October 31, 1999, three shareholders
provided working capital loans to the company. The transactions, balances and
nature of the relationship with each related party are summarized as follows.
October
Advances Payments 31, 1999
-------- -------- --------
William R. Rasmussen, payable on
demand, bearing interest at 8%,
shareholder and director. $ 249,250 $ (162,250) $ 87,000
Lynn Van Hollebeke, payable on demand,
bearing interest at 8%, shareholder
and a relative of a director. $ 29,850 $ (29,850) $ -
Infomate Systems, Inc., payable on
demand, bearing interest at 8%,
shareholder. $ 60,000 $ - $ 60,000
-------------------------------------
$ 339,100 $ (192,100) $ 147,000
=====================================
5. SUBSEQUENT EVENTS
On November 1, 1999 TownPagesNet.com plc acquired 100% of the outstanding common
shares of Research Sales, Inc. in exchange for 551,302 ordinary shares of
TownPagesNet.com plc.
F-10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth all costs and expenses payable by
TownPagesNet.com plc, the registrant, in connection with the sale and
distribution of the securities being registered, other than underwriting
discounts and commissions. All amounts shown are estimates except the Securities
and Exchange Commission registration fee and the AMEX additional listing fee.
Securities and Exchange Commission registration fee............... $1,557
AMEX additional listing fee....................................... 17,500
Accounting fees and expenses...................................... 35,000
Legal fees and expenses........................................... 50,000
Miscellaneous expenses............................................ 5,943
--------
Total $110,000
Item 15. Indemnification of Directors and Officers
Except as hereinafter set forth, there is no provision of the Memorandum
and Articles of Association or any contract, arrangement or statute under which
any of our directors or officers is insured for or indemnified in any manner
against any liability that he may incur in his capacity as such.
Our Articles of Association provide that, subject to the provisions of the
UK Companies Act 1985, every director, secretary or other officer (which
expression excludes an auditor) of ours shall be indemnified by us out of our
own funds against and/or exempted by us from all costs, charges, losses,
expenses and liabilities incurred by him in the actual or purported execution
and/or discharge of his duties and/or the exercise or purported exercise of his
powers and/or otherwise in relation to or in connection with his duties, powers
of office, including (without prejudice to the generality of the foregoing) any
liability incurred by him in defending any proceedings, civil or criminal, which
relate to anything done or omitted or alleged to have been done or omitted by
him as an officer or employee of ours and in which judgment is given in his
favour (or the proceedings are otherwise disposed of without any finding or
admission of any material breach of duty on his part) or in which he is
acquitted or in connection with any application under any statute for relief
from liability in respect of any such act or omission in which relief is granted
to him by a court, unless incurred through their own willful neglect or default.
In addition, the Board of Directors shall have power to purchase and maintain
insurance for or for the benefit of any person who is or was at any time a
director, officer or employee of any "Relevant Company" (as defined below) or
who is or was at any time a trustee of any pension fund or employees' share
scheme in which employees of any Relevant Company are interested, including
(without prejudice to the generality of the foregoing) insurance against any
liability incurred by such persons in respect of any act or omission in the
actual or purported execution and/or discharge of their duties and/or in the
exercise or purported exercise of his or her powers and/or otherwise in relation
to his or her duties, power or offices in relation to any Relevant Company, or
any such pension fund or employees' share scheme. For these purposes, "Relevant
Company" shall mean us, any holding company of ours or any other body, whether
or not incorporated, in which we or such holding company or any of our
predecessors or of such holding company has or had any interest whether direct
or indirect or which is in any way allied to or associated with us, or any
subsidiary undertaking of ours or of such other body.
II-1
<PAGE>
Section 310 of the Companies Act 1985 of Great Britain provides:
(1) This section applies to any provision, whether contained in a company's
articles or in any contract with us or otherwise, for exempting any
officer of ours or any person (whether an officer or not) employed by us
as auditor from, or indemnifying him against, any liability which by
virtue of any rule of law would otherwise attach to him in respect of any
negligence, default, breach of duty or breach of trust of which he may be
guilty in relation to us.
(2) Except as provided by the following sub-section, any such provision is
void.
(3) This section does not prevent a company:
(a) from purchasing and maintaining for any such officer or auditor
insurance against any such liability; or
(b) from indemnifying any such officer or auditor against any
liability incurred by him:
(i) in defending any proceedings (whether civil or criminal) in
which judgment is given in his favor or he is acquitted; or
(ii) in connection with any application under section 144(3) or (4)
(acquisition of shares by innocent nominee) or section 727
(general power to grant relief in case of honest and
reasonable conduct) in which relief is granted to him by the
court.
Our directors and officers are insured against certain liabilities which
they may incur in their capacity as such under a liability insurance policy
carried by us.
Section 727 of the Companies Act of 1985 of Great Britain provides:
(1) If in any proceedings for negligence, default, breach of duty or
breach of trust against an officer of a company or a person employed
by a company as auditor (whether he is or is not an officer of the
company) it appears to the court hearing the case that that officer
or person is or may be liable in respect of the negligence, default,
reach of duty or breach of trust, but that he has acted honestly and
reasonably, and that having regard to all the circumstances of the
case (including those connected with his appointment) he ought
fairly to be excused for the negligence, default, breach of duty or
breach of trust, that court may relieve him, either wholly or
partly, from his liability on such terms as it thinks fit.
(2) If any such officer or person as above mentioned has reason to
apprehend that any claim will or might be made against him in
respect of any negligence, default, breach of duty or breach of
trust, he may apply to the court for relief; and the court on the
application has the same power to relieve him as under this section
it would have had if it had been a court before which proceedings
against that person for negligence, default, breach of duty or
breach of trust had been brought.
(3) Where a case to which subsection (1) applies is being tried by a
judge with a jury, the judge, after hearing the evidence, ay, if he
is satisfied that the defendant or defender ought in pursuance of
that subsection to be relieved either in whole or in part from the
liability sought to be enforced against him, withdraw the case in
whole or part from the
II-2
<PAGE>
jury and forthwith direct judgment to be entered for the defendant
or defender on such terms as to costs of otherwise as the judge may
think proper.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
EXHIBIT
NO. DESCRIPTION
------- -----------
4.1* Form of American Depositary Receipts.
4.2* Specimen of Ordinary Share Certificate.
5.1** Form of opinion of Richard Saleh, Esq. as to matters involving
United Kingdom laws.
23.1** Consent of Richard Saleh, Esq. (included in the opinion filed as
Exhibit 5.1).
23.2** Consent of Ernst & Young.
23.3** Consent of Ernst & Young.
24.1** Power of Attorney (set forth on signature page of the Registration
Statement).
27.1** Financial Data Schedule
--------------------
* Previously filed as an Exhibit to our Registration Statement on Form
F-1 (Reg. No. 333-72075) and incorporated herein by reference.
** Filed herewith.
(b) Financial Statement Schedules.
None.
Item 17. Undertakings.
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement 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.
2. The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(6)(1) or
(4) or 497 (h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-3
<PAGE>
(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus 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. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to 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 for 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 the city of Alton, England, the United Kingdom, on the 14th day
of December, 2000.
TOWNPAGESNET.COM PLC
By: /s/ RICHARD I. WALKER
______________________________
Name: Richard I. Walker
Title: Chief Financial Officer and
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert Bradshaw or Richard I. Walker as
his attorney-in-fact, 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 any and all new registration statements
filed pursuant to Rule 462 under the Securities Act of 1933 in connection with
or related to the offering contemplated by this Registration Statement, as
amended, 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 said attorney-in-fact or his substitute
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
/S/ ROBERT BRADSHAW
------------------------------ Chief Executive December 12, 2000
Robert Bradshaw Officer and Director
(Principal Executive
Officer)
/S/ VISCOUNT EDWARD JAMES
-------------------------- Chairman of the Board December 12, 2000
WINGFIELD LIFFORD and Director
-----------------
Viscount Edward James Wingfield
Lifford
/S/ RICHARD I. WALKER
--------------------------------- Chief Financial December 12, 2000
Richard I. Walker Officer and Director
(Principal Financial
Officer and Principal
Accounting Officer)
/S/ KEVIN R. LEECH
--------------------------------- Director December 12, 2000
Kevin R. Leech
/S/ SIMON WARD
--------------------------------- Director December 12, 2000
Simon Ward
CI4NET.COM, INC.
BY: /S/ KEVIN R. LEECH
--------------------------------- Authorized United December 12, 2000
Kevin R. Leech, States
[Title] Representative
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
4.1* Form of American Depositary Receipts.
4.2* Specimen of Ordinary Share Certificate.
5.1** Form of opinion of Richard Saleh, Esq. as to matters involving
United Kingdom laws.
23.1** Consent of Richard Saleh, Esq. (included in the opinion filed as
Exhibit 5.1).
23.2** Consent of Ernst & Young.
23.3** Consent of Ernst & Young.
24.1** Power of Attorney (set forth on signature page of the Registration
Statement).
27.1** Financial Data Schedule
-------------------
* Previously filed as an Exhibit to our Registration Statement on Form
F-1 (Reg. No. 333-72075) and incorporated herein by reference.
** Filed herewith.
