U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
to FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TOPCLICK INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7372 330755473
-------- ---- ---------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation Classification Code Number) Identification
or organization) No.)
Suite 200, 1636 West 2nd Street, Vancouver, British Columbia, Canada V6J 1H4
(Address of registrant's principal executive offices) (Zip Code)
(604) 737-1127
(Registrant's Telephone Number, Including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: From time to time after this
Registration Statement becomes effective.
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of each class Amount Proposed maximum Proposed maximum
of securities to be offering price aggregate Amount of
to be registered registered per share(1) offering price(1) registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 8,954,973 $0.6875 $6,156,543.90 $1,711.52
====================================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(c) of Regulation C using the average of the
bid and ask prices per share of the Registrant's common stock, as reported on
the OTC Bulletin Board for November 29, 1999.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
1
<PAGE>
Preliminary Prospectus
TOPCLICK INTERNATIONAL, INC.,
a Delaware corporation
8,954,973 Shares of $.001 Par Value Common Stock
This prospectus ("Prospectus") relates to 8,954,973 shares (the "Shares") of
common stock, $.001 par value (the "Common Stock"), of TopClick International,
Inc., a Delaware corporation ("we" or the "Company"). The Shares are outstanding
shares of Common Stock, or will be outstanding shares of Common Stock acquired
upon exercise of options, warrants or the exchange of certain securities, owned
by the persons named in this Prospectus under the caption "Selling
Stockholders." The Shares were acquired by the Selling Stockholders in various
transactions, all of which were exempt from the registration provisions of the
Securities Act of 1933, as amended (the "1933 Act"), including sales of the
Shares in private placements by the Company, issuance of the Shares as
compensation, the exercise of warrants by certain of the Selling Stockholders
and the exchange of certain shares of common stock of TopClick Corporation, a
Delaware corporation, for certain Shares pursuant to a Stock Exchange Agreement
dated February 10, 1999.
The Selling Stockholders may from time to time sell the Shares on the OTC
Bulletin Board, on any other national securities exchange or automated quotation
system on which the Common Stock may be listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The Shares may be sold directly or
through brokers or dealers. See "Plan of Distribution."
We will receive no part of the proceeds of any sales made hereunder. See "Use of
Proceeds." All expenses of registration incurred in connection with this
offering are being borne by the Company, but all selling and other expenses
incurred by the Selling Stockholders will be borne by the Selling Stockholders.
See "Selling Stockholders."
The Selling Stockholders and any broker-dealers participating in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the 1933 Act, and any commissions or discounts given to any such
broker-dealer may be regarded as underwriting commissions or discounts under the
1933 Act.
The Shares have not been registered for sale by the Selling Stockholders under
the securities laws of any state as of the date of this Prospectus. Brokers or
dealers effecting transactions in the Shares should confirm the registration
thereof under the securities laws of the States in which transactions occur or
the existence of any exemption from registration.
We participate on the OTC Bulletin Board, an electronic quotation medium for
securities traded outside the Nasdaq Stock Market. Our common stock trades on
the OTC Bulletin Board under the trading symbol "TOCK". On November 29, 1999,
the closing bid and asked prices of our Common Stock as reported on the OTC
Bulletin Board were $0.65625 and $0.71875, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is November 29, 1999
3
<PAGE>
Item 3. Summary Information and Risk Factors.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS, WHICH CONTAINS MORE DETAILED INFORMATION WITH RESPECT TO EACH OF THE
MATTERS SUMMARIZED IN THIS PROSPECTUS AS WELL AS OTHER MATTERS NOT COVERED IN
THE SUMMARY. ALL PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE ENTIRE
CONTENTS OF THE PROSPECTUS AND THE EXHIBITS ATTACHED HERETO, INDIVIDUALLY AND
WITH THEIR OWN TAX, LEGAL AND BUSINESS ADVISORS.
The Company: Our address is Suite 200, 1636 West 2nd
Street, Vancouver, British Columbia,
Canada V6J 1H4; our telephone number is
(604) 737-1127.
Business of the We are a Delaware corporation which was
Company: originally incorporated to engage in any
lawful act or activity for which
corporations may be organized under the
General corporation Law of Delaware. We
were initially was involved in the
development of oil and gas properties.
After a series of corporate acquisitions
specified more completely under the
caption "Development of the Company" at
Item 16 of this Prospectus, the nature
of our business changed from development
of oil and gas properties to the
business of facilitating the consumption
of information, products and services
via the Internet. We currently provide
Internet users with a one-stop
information index to the top Internet
guides. We are trying to develop
increased traffic on our website in
order to be successful. Once traffic
volume has been established, we believe
that our website will become a
distribution point for advertisers and
we will develop opportunities to
participate in sponsorship agreements,
electronic commerce agreements and joint
marketing ventures. We plan to build our
initial equity value measured by traffic
(that is, page views) and then develop
multiple revenue streams as a broker of
diverse audience interests. There is no
assurance, however, that we will build
an equity base which will be considered
worth acquiring. Initially, we will
offer our products and services free to
our customers, strategic partners and
media partners.
State of The Company was incorporated pursuant to
organization of the the provisions of the General
Company: Corporation Law of Delaware on October
3, 1996.
Risk Factors: A purchase of the Common Stock involves
various risks that must be considered
carefully by any potential purchaser.
Those risks include, but are not
necessarily limited to, (i) there can be
no assurance that the products and
services of the Company will achieve a
significant degree of market acceptance,
and that acceptance, if achieved, will
be sustained for any significant period
or that product and service life cycles
will be sufficient (or substitute
products and services developed) to
permit the Company to recover associated
costs; (ii) we have a limited operating
history upon which an evaluation of our
business prospects can be made; (iii)
the officers and directors of the
Company may be subject to various
conflicts of interest; (iv)
substantially all of our products and
services will be offered on the
Internet, and, therefore, our ability to
generate significant revenues will
depend upon, among other things,
consumers and advertisers' acceptance of
the Internet as an effective and
sustainable advertising medium and the
development of a large base of users of
the Company's services possessing
demographic characteristics attractive
to advertisers, both of which are
subject to market and other factors
beyond our control; (v) we may be
required to raise
4
<PAGE>
substantial funds in order to implement
our business plans and objectives; (vi)
we are subject to significant
competition from other Internet guides;
(vii) the results of operations of the
Company may vary from period to period
as a result of a variety of factors;
(viii) the market for our products and
services is characterized by continuous
development and introduction of new
products and services; (ix) the Internet
is subject to changing political,
economic and regulatory influences that
may affect the business practices and
operations of the Company; (x) we are
dependent on our key personnel and
management; (xi) we do not anticipate
paying dividends on our Common Stock in
the foreseeable future; (xii) there can
be no assurance that the Company's
operations will become profitable;
(xiii) the Company may fail to become
compliant with Year 2000 computer
programming issues; and (xiv) our
communications providers, customers, or
other third parties may fail to become
compliant with Year 2000 computer
programming issues. See "RISK FACTORS".
The Shares: The Shares offered hereby are
outstanding shares of Common Stock, or
will be outstanding shares of Common
Stock acquired upon exercise of options,
warrants or the exchange of certain
shares of common stock of TopClick
Corporation, a Delaware corporation, for
Shares now owned by the persons named in
this Prospectus under the caption
"Selling Stockholders." The Shares were
acquired by the Selling Stockholders in
various transactions, all of which were
exempt from the registration provisions
of the 1933 Act.
Estimated use of All of the Shares offered hereby are
proceeds: being offered by the Selling
Stockholders. The Company will not
receive any of the proceeds from the
sale of the Shares. See "Selling
Stockholders."
RISK FACTORS
In addition to the other information specified in this Prospectus, the following
risk factors should be considered carefully in evaluating our business before
purchasing any Company Shares. A purchase of the Shares is speculative in nature
and involves a high degree of risk. No purchase of the Shares should be made by
any person who is not in a position to lose the entire amount of such
investment.
THIS PROSPECTUS SPECIFIES FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SPECIFIED IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN THIS PROSPECTUS. PROSPECTIVE PURCHASERS OF SHARES MUST BE PREPARED FOR THE
POSSIBLE LOSS OF THEIR ENTIRE INVESTMENTS IN THE COMPANY. THE ORDER IN WHICH THE
FOLLOWING RISK FACTORS ARE PRESENTED IS ARBITRARY, AND PROSPECTIVE PURCHASERS OF
SHARES SHOULD NOT CONCLUDE, BECAUSE OF THE ORDER OF PRESENTATION OF THE
FOLLOWING RISK FACTORS, THAT ONE RISK FACTOR IS MORE SIGNIFICANT THAN THE OTHER
RISK FACTORS.
Information specified in this Prospectus contains "forward looking statements"
which can be identified by the use of forward-looking terminology such as
"believes", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or the negative thereof or
other variations thereon or comparable terminology. Such statements are subject
to certain risks, uncertainties and assumptions. No assurances can be given that
the future results anticipated by the forward looking statements will be
achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Among the key factors that have a direct bearing on the Company's
5
<PAGE>
results of operations are the effects of various governmental regulations, the
fluctuation of the Company's direct costs and the costs and effectiveness of the
Company's operating strategy. Other factors could also cause actual results to
vary materially from the future results covered in such forward-looking
statements.
We Have a Limited Operating History. We have a very limited operating history
upon which an evaluation of our business prospects can be made. Anyone who is
considering a purchase of Shares must consider that our business prospects are
speculative, considering the risks, expenses, and difficulties frequently
encountered in the establishment of a new business, specifically the risks
inherent in the development and operation of websites and services on the
Internet. There can be no assurance that unanticipated technical or other
problems will not occur which would result in material delays in future product
and service commercialization or that our efforts will result in successful
product and service commercialization. There can be no assurance that we will be
able to achieve profitable operations.
Our Industry is Intensely Competitive. Competition to provide Internet Guides to
Internet users is intense and we expect the competition to increase. We will
compete directly with other companies and businesses that have developed and are
in the process of developing technologies and services which will be competitive
with the technologies and services which we offer. There can be no assurance
that other technologies or services which are functionally equivalent or similar
to our technologies and services have not been developed or are not in
development. We expect that there are companies or businesses which may have
developed or are developing such technologies and services as well as other
companies and businesses which have the expertise which would encourage them to
develop and market services directly competitive with ours. To the extent that
customers exhibit loyalty to the supplier that first supplies them with a
particular service or technology, our competitors may have an advantage over us
with respect to services and technologies first developed by such competitors.
As a result of their size and breadth of their service offerings, certain of
these competitors have been and will be able to establish managed accounts by
which they seek to gain a disproportionate share of users for their services and
technologies. Such managed accounts present significant competitive barriers to
the Company. It is anticipated that we will benefit from our participation in
niche markets which, as they expand, may attract the attention of our
competitors.
There can be no assurance that competitors have not or will not succeed in
developing technologies and services that are more effective than any which have
been or are being developed by us or which would render our products obsolete
and noncompetitive. We face stiff competition which includes, but is not limited
to the following: the Browser companies; Internet Distribution Companies;
existing established content providers; Internet search and directory sites;
broadband communications companies; large media conglomerates; commercial and
non-commercial computer operating systems companies; software development
companies; directory companies (e.g. Yellow Pages); and Bookmark Managers.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories in the Web market, greater name
recognition, larger customer bases and databases and significantly greater
financial, technical and marketing resources. Such competitors may be able to
undertake more extensive marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to potential employees, distribution
partners, advertisers and content providers. Further, there can be no assurance
that our competitors will not develop Web search and retrieval services that are
equal or superior to ours or that achieve greater market acceptance than our
offerings in the area of name recognition, performance, ease of use and
functionality. There can also be no assurance that ISPs, OSPs, Web browsers and
other Web content providers will not be perceived by advertisers as having more
desirable Web sites for placement of advertisements. In addition, a number of
our competitors have established collaborative relationships with ISPs, OSPs and
other Web content providers. Accordingly, there can be no assurance that we will
be able to retain a customer base of advertisers or maintain or increase traffic
on its network or that competitors will not experience greater growth in traffic
than the Company as a result of such relationships, which could have the effect
of making their Web sites more attractive. There can also be no assurance that
we will be able to compete successfully against our current or future
competitors or that competition will not have a material adverse effect on our
business, results of operations and financial condition.
We May Become Dependent on Third Parties. We may become dependent upon various
third parties for one or more significant services required for our business.
Inasmuch as the capacity for certain services by certain third parties may be
6
<PAGE>
limited, our inability, for economic or other reasons, to continue to receive
services from existing providers or to obtain similar services from additional
providers could have a material adverse effect on the Company.
As we continue to introduce new services that incorporate new technologies, we
may be required to license technology from third parties. There can be no
assurance that these third-party technology licenses will be available to the
Company on commercially reasonable terms, if at all. The inability of the
Company to obtain any of these technology licenses could result in delays or
reductions in the introduction of new services or could adversely affect the
performance of its services until equivalent technology could be identified,
licensed and integrated.
We Will Rely on Use of Computer and Telecommunications Infrastructure. Our
success will be dependent in large part on its continued investment in
sophisticated telecommunications and computer systems and computer software. We
anticipate making significant investments in the acquisition, development, and
maintenance of such technologies in an effort to remain competitive and we
believe that such expenditures will be necessary on an on-going basis. Moreover,
computer and telecommunication technologies are evolving rapidly and are
characterized by short product lifecycles, which requires us to anticipate
technological developments. There can be no assurance that we will be successful
in anticipating, managing or adopting such technological changes on a timely
basis or that we will have the capital resources available to invest in new
technologies. In addition, our business is highly dependent on its computer and
telecommunications equipment and software systems, the temporary or permanent
loss of which, through physical damage or operating malfunction, could have a
material adverse effect on our business. Operating malfunctions in the software
systems of financial institutions, market makers, and other parties might have
an adverse affect on our operations. The Company's business is materially
dependent on service provided by various local and long distance telephone
companies. A significant increase in the cost of telephone services that is not
recoverable through an increase in the price of the Company's services, or any
significant interruption in telephone services, could have a material adverse
effect on the Company.
We Will Rely on Use of the Internet. The substantial growth in the use of and
interest in the Internet and the Web is a recent phenomenon. There can be no
assurance that communication or commerce over the Internet will become more
widespread or that extensive content will continue to be provided over the
Internet. The Internet may not prove to be a viable commercial marketplace for a
number of reasons, including potentially inadequate development of the necessary
infrastructure, such as a reliable network backbone, or timely development and
commercialization of performance improvements, including high speed modems. In
addition, to the extent that the Internet continues to experience significant
growth in the number of users and level of use, there can be no assurance that
the Internet infrastructure will continue to be able to support the demands
placed upon it by such potential growth or that the performance or reliability
of the Web will not be adversely affected by this continued growth. In addition,
the Internet could lose its viability due to delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet activity, or due to increased governmental regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
also could result in slower response times and adversely affect usage of the Web
and the Company's online media properties. If use of the Internet does not
continue to grow, or if the Internet infrastructure does not effectively support
growth that may occur, the Company's business, operating results and financial
condition would be materially and adversely affected.
Uninsured Loss; Acts of God. We are required to carry and maintain a
comprehensive general liability insurance policy, an employer's liability
policy, and worker's compensation, as well as liability insurance required
pursuant to the commercial lease for the Company's business premises. We may
also carry and maintain other business insurance of the types customarily
carried by similar businesses. However, there are certain types of extraordinary
occurrences which may be either uninsurable or not economically insurable. For
example, in the event of a major earthquake, the Company's telecommunications
and computer systems could be rendered inoperable for protracted periods of
time, which would adversely affect our financial condition. In the event of a
major civil disturbance, our operations could be adversely affected. Should such
an uninsured loss occur, we could lose significant revenues and financial
opportunities in amounts which would not be partially or fully compensated by
insurance proceeds.
We are Subject to Regulatory and Related Influences. The Internet is subject to
changing political, economic and regulatory influences that will affect the
procurement practices and operation of Internet directory service organizations.
7
<PAGE>
Any of these influences could have a material adverse effect on our business,
financial condition and results of operations. During the past several years,
various Internet directory service industries and telecommunications industries
have been subject to an increase in governmental and international regulation.
Certain proposals to reform the telecommunications and Internet service systems
are periodically under consideration by the appropriate regulators. These
programs may contain proposals to increase government involvement in Internet
directory services and otherwise change the operating environment for our
customers. We cannot predict what impact, if any, such factors might have on its
business, financial condition and results of operations.
We are Subject to Market Forces Beyond Our Control. Many Internet directory
service providers are consolidating to create integrated Internet directory
service delivery systems with greater regional market power. As a result, these
emerging systems could have greater bargaining power, which may lead to price
erosion of our products. Our failure to maintain adequate price levels would
have a material adverse effect on our business, financial condition and results
of operations. Changes in current Internet directory service reimbursement
systems could result in the need for unplanned product enhancements, in delays
or cancellations, or in the revocation of endorsement of the services of the
Company. Other market - driven reforms could have unpredictable effects on our
business, financial condition and results of operations. The Company's results
of operations may vary from period to period due to a variety of factors,
including our level of research and development, our introduction of new
products or services, cost increases from third-party service providers, changes
in marketing and sales expenditures, market acceptance of the products and
services of the Company, competitive pricing pressures, and general economic and
industry conditions that affect customer demand.
As with any relatively new business enterprise operating in a specialized and
intensely competitive market, the Company is subject to many business risks
which include, but are not limited to, unforeseen marketing and promotional
expenses, unforeseen negative publicity, competition, and lack of operating
experience. Many of the risks may be unforeseeable or beyond the control of the
Company. There can be no assurance that we will successfully implement its
business plan in a timely or effective manner, or that management of the Company
will be able to market its services and sell enough products to generate
sufficient revenues and continue as a going concern. The strategy of the Company
for growth is substantially dependent upon its ability to market its services
successfully. There can be no assurance that the Company will be able to market
its services on acceptable terms, or at all. Failure to market our services
successfully could have a material adverse effect on the Company's business,
financial condition or results of operations.
Growth of Business. Since its inception, the Company has experienced significant
change and expansion in its business and operations, which have placed
significant demands on the Company's administrative, operational, financial, and
other resources. Future growth, if any, could place a significant strain on the
Company's management, operational, financial, and other resources. The Company's
ability to manage future growth will depend upon a significant expansion of its
accounting and other internal management systems and the implementation and
subsequent improvement of a variety of systems, procedures, and controls.
Moreover, the Company will need to continue to train, motivate, and manage its
employees and attract and retain qualified senior managers and technical
professionals. If the Company's management is unable to manage growth
effectively, there could be a material adverse effect on the Company's business,
financial condition, and operating results.
Future Capital Needs and Uncertainty of Additional Funding. As specified more
completely at Page __ of the Prospectus under the caption "Liquidity and Capital
Resources", on or about January 30, 1999, the Company entered into a financing
agreement which provided the Company with approximately $2,000,000. Moreover,
the Company believes that it may be able to acquire additional financing at
commercially reasonable rates; however, there can be no assurance that the
Company will be able to obtain additional financing at commercially reasonable
rates, or at all. The Company has expended, and will continue to expend in the
future, substantial funds on the research and development of its products and
services. The failure of the Company to obtain additional financing would
significantly limit or eliminate the Company's ability to fund its research and
development activities, which would have a material adverse effect on the
Company's ability to continue to compete with other Internet directory service
providers.
8
<PAGE>
Based on its current staffing level and product development schedule, the
Company anticipates that its working capital and funds anticipated to be derived
from operations should be adequate to satisfy its capital and operating
requirements through the end of fiscal 1999. This estimate is based upon certain
assumptions; however, there can be no assurance that the Company will have
sufficient working capital to satisfy the Company's capital needs beyond
December 31, 1999. The Company anticipates that it may seek additional funding
through public or private sales of its securities, including equity securities,
or through commercial or private financing arrangements. However, adequate
funds, whether through financial markets or collaborative or other arrangements
with corporate partners or from other sources, may not be available when needed
or on terms acceptable to the Company. In the event that the Company is not able
to obtain additional funding on a timely basis, the Company may be required to
scale back or eliminate certain or all of its development or marketing programs
or to license third parties to commercialize products or technologies that the
Company would otherwise seek to develop, manufacture or market itself, any of
which could have a material adverse effect on the Company's results of
operations in order to satisfy its capital and operating requirements.
Limited Protection of Proprietary Technology. As specified under the captions
"Intellectual Property Strategy" and "Name Identification" elsewhere in this
Prospectus, the we will attempt to protect our proprietary technology and domain
names. We have purchased certain domain names and will attempt to prevent third
parties from utilizing similar domain names. We exclusively own all software
that we develop and we regard our software technology as proprietary. We may
rely on a combination of copyright, NSI registration, trademark and trade secret
laws, as well as through contractual restrictions on disclosure, copying and
distribution (including but not limited to confidentiality agreements with its
employees and subcontractors), to protect our intellectual property rights in
its products and services. There is a possibility that such copyright,
registration, trademark and trade secret laws, as well as such confidentiality
agreements, may not be enforceable in certain jurisdictions. It may be possible
for unauthorized third parties to copy our products or to reverse engineer or
obtain and use information that the Company regards as proprietary. There can be
no assurance that our competitors will not independently develop technologies
that are substantially equivalent or superior to the Company's technologies. In
addition, because the Internet is, by its nature, international, the laws of
certain countries in which the Company's products and services are or may be
distributed or utilized may not protect the Company's products and intellectual
rights to the same extent as the laws of the United States. As the number of
software products increases and the functionality of these products further
overlaps, we believe that software will increasingly become the subject of
claims that such software infringes the rights of others. To date no third party
has filed an infringement claim against the Company and there have been no
explicit threats of litigation asserting that our products infringe on any third
party's intellectual property rights. However, there can be no assurance that
third parties will not assert infringement claims against the Company in the
future or that any such assertion will not result in costly litigation or
require the Company to obtain a license to intellectual property rights of third
parties. If the Company were required to so obtain any such licenses, there can
be no assurance that such licenses will be available on reasonable terms, or at
all.
Rapid Technological Change. The emerging multimedia and Internet markets and the
personal computer industry in general are characterized by rapidly changing
technology, resulting in short product life cycles and rapid price declines. We
must continuously update our existing and planned products and services to keep
them current with changing technologies and must develop new products and
services, to take advantage of new technologies that could render our existing
products and services obsolete. The Company's future prospects are highly
dependent on its ability to increase the functionality of its products and
services in a timely manner and to develop new products that address new
technologies and achieve market acceptance. There can be no assurance that the
Company will be successful in these efforts. If the Company were unable to
develop and introduce such products and services in a timely manner, due to
resource constraints or technological or other reasons, this inability could
have a material adverse effect on the Company's results of operations. In
particular, the introduction of new products and services are subject to the
inherent risk of development delays. The Company has experienced product
development delays in the past, and such delays may occur in the future. In
addition, due to the uncertainties associated with the Company's emerging
market, there can be no assurance that the Company will be able to forecast
product and service demands accurately or to respond in a timely manner to
changing technologies and customer requirements.
9
<PAGE>
Key Personnel. The future success of the Company will depend in part on the
service of its key personnel and, additionally, its ability to identify, hire
and retain additional qualified personnel. There is intense competition for
qualified personnel in the areas of the activities of the Company, and there can
be no assurance that the Company will be able to continue to attract and retain
such personnel necessary for the development of the business of the Company.
Because of the intense competition, there can be no assurance that the Company
will be successful in adding personnel as needed to satisfy the staffing
requirements of the Company. Failure to attract and retain key personnel could
have a material adverse effect on the Company.
Conflicts of Interest. The persons serving as officers and directors of the
Company may have existing responsibilities and, in the future, may have
additional responsibilities, to provide management and services to other
entities in addition to the Company. As a result, conflicts of interest between
the Company and the other activities of those persons may occur from time to
time, in that those persons shall have conflicts of interest in allocating time,
services, and functions between the other business ventures in which those
persons may be or become involved and, also, the affairs of the Company .
Dependence on Management. The Company is dependent on the efforts and abilities
of its senior management. The loss of various members of that management could
have a material adverse effect on the business and prospects of the Company. The
members of the Board of Directors of the Company believe that all commercially
reasonable efforts have been made to minimize the risks attendant with the
departure by key personnel from the service of the Company. There is no
assurance, however, that upon the departure of key personnel from the service of
the Company that replacement personnel will cause the Company to operate
profitably.
Although the Company intends to pursue a strategy of aggressive marketing and
development of its primary product, Topclick.com, a new Internet information
retrieval guide, and related Internet products and services, implementation of
this strategy will depend in large part on its ability to (i) establish a
significant customer base and maintain favorable relationships with those
customers; (ii) effectively operate its websites and Internet services; (iii)
obtain adequate financing on favorable terms to fund its business strategy; (iv)
maintain appropriate procedures, policies, and systems; (v) hire, train, and
retain skilled employees; and (vi) continue to operate in the face of increasing
competition. The inability of the Company to obtain or maintain any or all of
these factors could impair its ability to successfully implement its business
strategy, which could have a material adverse effect on the results of
operations and financial condition of the Company.
Limitation on Liability of Officers and Directors of the Company. The
Certificate of Incorporation of the Company includes a provision eliminating or
limiting the personal liability of the officers and directors of the Company to
the Company and its shareholders for damages for breach of fiduciary duty as a
director or officer. Accordingly, the officers and directors of the Company may
have no liability to the shareholders of the Company for any mistakes or errors
of judgment or for any act of omission, unless such act or omission involves
intentional misconduct, fraud, or a knowing violation of law or results in
unlawful distributions to the shareholders of the Company. DISCLOSURE OF
POSITION OF COMMISSION REGARDING INDEMNIFICATION FOR SECURITIES ACT LIABILITIES:
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY
PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT IN THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE 1933 ACT AND IS, THEREFORE,
UNENFORCEABLE.
Penny Stock Regulation. The Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, deliver a standardized
risk disclosure document prepared by the Commission, which specifies information
about penny stocks and the nature and significance of risks of the penny stock
market. The broker-dealer also must provide the customer with bid and
10
<PAGE>
offer quotations for the penny stock, the compensation of the broker-dealer and
its salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from those rules the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
If the Company's common stock becomes subject to the penny stock rules,
purchasers of Shares may find it more difficult to sell their Shares.
Control by Existing Stockholders; Anti-Takeover Provisions. The Company's
directors, officers and principal (greater than 5%) stockholders, taken as a
group, together with their affiliates, beneficially own, in the aggregate,
approximately 42% of the Company's outstanding Common Stock. Certain principal
stockholders are directors or executive officers of the Company. As a result of
such ownership, these stockholders may be able to exert significant influence,
or even control, matters requiring approval by the stockholders of the Company,
including the election of directors. In addition, certain provisions of Delaware
law and of the Company's Certificate of Incorporation and Bylaws could have the
effect of making it more difficult or more expensive for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
the Company. The Company is not authorized to issue preferred stock.
Securities Market Factors. Our Common Stock is quoted on the OTC Bulletin Board.
However, no assurance can be given that an active public market will develop or
be sustained. Factors such as announcements of the introduction of new or
enhanced products by the Company or its competitors and quarter-to-quarter
variations in the Company's results of operations, as well as market conditions
in the technology and emerging growth company sector, may have a significant
impact on the market price of the Company's shares. Further, the stock market
has experienced extreme volatility that has particularly affected the market
prices of equity securities of many high technology companies and that often has
been unrelated or disproportionate to the operating performance of such
companies. These market fluctuations may adversely affect the price of the
Common Stock.
No Foreseeable Dividends. The Company does not anticipate paying dividends on
the Common Stock in the foreseeable future; but, rather, the Company plans to
retain earnings, if any, for the operation and expansion of the business of the
Company.
No Assurances of Revenue or Operating Profits. There can be no assurance that
the Company will be able to develop consistent revenue sources or that is
operations will become profitable.
Federal Income Tax Consequences. The Company has obtained no ruling from the
Internal Revenue Service and no opinion of counsel with respect to the federal
income tax consequences of the purchase or sale of Common Stock by the Selling
Stockholders. Consequently, investors must evaluate for themselves the income
tax implications which attach to their purchase, and any subsequent sale, of the
Shares.
Impact of the Year 2000. The Year 2000 (commonly referred to as "Y2K") issue
results from the fact that many computer programs were written using two, rather
than four, digits to identify the applicable year. As a result, computer
programs with time-sensitive software may recognize a two digit code for any
year in the next century as related to this century. For example, "00", entered
in a date-field for the year 2000, may be interpreted as the year 1900,
resulting in system failures or miscalculations and disruptions of operations,
including, among other things, a temporary inability to process transactions or
engage in other normal business activities.
In order to improve operating performance, the Company has undertaken a number
of significant systems initiatives. All hardware, software and communication
systems owned by or supplied to the Company have been analyzed by reviewing all
relevant product and service manuals, contacting vendors, and on-line research
of relevant vendor websites. The Company telephoned its phone systems provider,
its alarm monitoring company, and its website hosting provider to ensure Y2K
compliance. The Company also conducted on-line vendor reviews of its desktop
Pentium computers and its Windows 95 and Microsoft Office software. For other
software, the Company contacted the providers, reviewed the relevant manuals,
11
<PAGE>
and reviewed vendor websites to ensure Y2K compliance. The Company also
considered and reviewed Y2K compliance of its power-backup systems suppliers.
An ancillary benefit of the Company's systems initiatives specified above is
that the resulting systems are Year 2000 compliant. The Company (i) has
completed an assessment of each of its operations and their Year 2000 readiness,
(ii) has determined that appropriate actions have been and are being taken, and
(iii) believes that it has completed its overall Year 2000 remediation prior to
any anticipated impact on its operations. The Company has determined that the
Year 2000 issue will not pose significant operational problems for its computer
systems. However, although the Company has initiated formal communications with
a number of its significant suppliers to determine the extent to which the
Company's interface systems are vulnerable to those third parties' failure to
remediate their own Year 2000 issues, and will initiate similar communication
with major customers as well as the balance of its major suppliers in 1998,
there is no guarantee that the systems of other companies on which the Company's
systems rely will be timely converted and would not have an adverse effect on
the Company's systems.
In a worst case scenario, the Company's primary service, an information
retrieval guide for Internet users, could be adversely affected by the
non-compliance of banks, communications providers, utilities, common carriers,
the Company's customers, potential customers and other sources known and unknown
to the Company. Widespread breakdowns in the telecommunications industry would
have an adverse affect on the Company's operations. The ultimate impact of the
Y2K issue cannot be reasonably estimated at this time. Many Y2K problems might
not be readily apparent when they first occur, but instead could imperceptibly
degrade technology systems and corrupt information stored in computerized
databases, in some cases before January 1, 2000.
Third-Party Y2K Risks to the Company. The Company believes that the most
significant Y2K risks to the Company's continued operations are the Company's
dependence on (i) electrical power and (ii) phone and data lines. Power failures
or shortages resulting from British Columbia Hydro's failure to become Y2K
compliant would hinder the Company's operations. Moreover, system-wide failures
in the Company's telecommunications provider, BC Tel, resulting from BC Tel's
failure to become Y2K compliant, would likewise hinder the Company's operations.
The Company might also lose data which the Company stores in-house.
Item 4. Use of Proceeds
All of the Shares offered hereby are being offered by the Selling Stockholders.
The Company will not receive any of the proceeds from the sale of the Shares.
See "Selling Stockholders."
Item 5. Determination of Offering Price
Price Range of Common Stock. In or about December 1998, quotation of our common
stock began on the OTC Bulletin Board (trading symbol: TOCK). Prior to that
date, there was no public market for the Company's common stock. The Company's
common stock has closed at a low of $0.21875 and a high of $8.125 for the
52-week period ending November 29, 1999. On November 29, 1999, the closing bid
and asked prices of the Common Stock as reported on the OTC Bulletin Board were
$0.65625 and $0.71875, respectively. This market is extremely limited and the
prices for the Company's common stock quoted by brokers is not necessarily a
reliable indication of the value of the Company's common stock.
The offering price of the Shares was calculated pursuant to Rule 457(c) of
Regulation C using the average of the bid and asked price of the Company's
common stock, as reported on the OTC Bulletin Board as of a specified date
within 5 business days prior to the date of the filing of this Registration
Statement, specifically, as of November 29, 1999.
Item 6. Dilution
The Company became a reporting company on or about June 22, 1999, the effective
date of the Registration Statement on Form 10-SB which the Company filed with
the Commission on April 23, 1999. The Company is not selling any of the Shares
12
<PAGE>
being registered hereby. The Shares are outstanding shares of Common Stock, or
will be outstanding shares of Common Stock acquired upon exercise of options,
warrants or the conversion of certain securities, owned by the persons named in
this Prospectus under the caption "Selling Stockholders." The Selling
Stockholders may from time to time sell the Shares on the OTC Bulletin Board, on
any other national securities exchange or automated quotation system on which
the Common Stock may be listed or traded, in negotiated transactions or
otherwise, at prices then prevailing or related to the then current market price
or at negotiated prices. The Shares may be sold directly or through brokers or
dealers. The purchase prices paid by officers, directors, promoters and
affiliated persons for common equity purchased by them, or which they have
rights to purchase, or which they acquired by means of related party
transactions, are specified in this Prospectus under the captions "Security
Ownership of Certain Beneficial Owners and Management", "Organization Within
Last Five Years", and "Certain Relationships and Related Transactions".
Item 7. Selling Stockholders
The following table sets forth the number of Shares which may be offered for
sale from time to time by the Selling Stockholders. The Shares offered for sale
constitute all of the Shares known to the Company to be beneficially owned by
the Selling Stockholders. None of the Selling Stockholders has held any position
or office with the Company, except as specified in the following table. Other
than the relationships described below, none of the Selling Stockholders had or
have any material relationship with the Company.
Simone Alten 2,871
Steve Beaton 3,445
Ronald Bernhardt 7,786
Martin Bodnar 4,594
Princina Bodnar 4,594
David and Yolanda Booth 2,297
Mike Brown 12,632
Mike Brown(7) 10,000
Jeffrey Budz 12,379
James T. Carroll 31,580
William Carter 574
John Cilmi 27,446
Vanna Colotti 4,459
Marilyn Cormier 384
Barbara Daidone 4,594
Mark Darling 3,445
John and Lee De Vuyst 11,484
De Vuyst Holdings 11,484
David DiBiase 22,968
Andrea Docherty 230
Benson Group Limited 117,709
Robert Ellingson 5,742
Steven Elman 8,682
David Ezra 22,577
Helen Fadden 4,594
Dennis Paul Fecci 19,465
Christine Fornier 22,968
Kathy Fowler 2,871
Arthur Gee 1,148
Victor Golinsky 4,594
Richard Green 5,742
Ken Grundy 382
13
<PAGE>
Neil Hamilton 28,709
Jim Hornell 1,148
Joan Jacobs 11,484
Marion Jenson 5,742
Dr. Fred Knelman 22,968
Karen Krawchuk 13,781
Ellen Laine 6,890
Yvan Lalonde 57,419
Carol Lalonde 57,419
Michael Lalonde 57,419
John Larsen 227,739
Frederick Ledetsch 4,594
Eunho Lee 4,594
Bruce Lemire-Elmore 15,503
Louise Lemire-Elmore 15,503
Chris Lewis (1) 5,302,071
Lester Licht 30,501
Terry Livingstone(2) 229,675
John Manville 5,742
Douglas Matthews 1,378
Jim McGuigan 5,742
James McLachlan 11,484
Robert McLachlan 16,077
Sandra McLachlan 5,742
Steven Meehan 2,871
MRA Engineering 14,355
Kevin Mularkey 1,148
Janet Neff (5) 4,594
Sabene Odonoghue 4,594
Andrew Opperman 22,968
Alastair Pirie 11,484
Wayne Pye 11,484
Merrill Lynch in Trust for Jalinder Rai 957
Rick and Mary Reynolds 152,160
Rodger Sarfi 1,914
Jeffrey Sawchuk 574
George Schellenberg 4,594
Hardip Singh 389,170
Richard Sommers 16,575
Jim Soukoreff (4) 71,774
Greg Soukoreff (4) 21,744
Susan Soukoreff(4) 71,774
C. Cedric Steele 13,781
Bruce Steinke 1,914
Jojhar Takhar 957
Pardip Thind 957
RBC Dominion Securities Inc. in Trust for Mark Varley 57,419
Louis Vella 11,484
Tony Whitehorn 15,503
Henry and Marge Wiebe 11,484
Dorothy Armstrong 1,148
14
<PAGE>
David and Yolanda Booth 3,785
Yolanda Booth 623
David Booth 1,334
Cary Chernoff 5,742
Iain Cleator 11,484
Catherine and Calvin Cook 5,472
Calvin Cook 270
Richard C. Cook 5,742
Wimborne Holdings 55,122
Laurie Dittrich 574
Ira Doering 11,484
Jeffrey Dubois 3,445
Wendy Dubois 10,335
Michael Durkin 11,484
Bob and Debbie Egglestone 17,226
Lars Engels 22,968
Dan Faminoff 5,156
Laurentian Bank of Canada in Trust for Dan Faminoff 2,500
John Faminoff 5,156
Laurentian Bank of Canada in Trust for John Faminoff 2,500
Scott Findlay 11,484
Mark Finger 22,853
Brad Glazer 1,378
Chris Goddard 5,742
Angeline E. Joss 50,000
Michael Lois Joss 25,000
Sidney S. Joss 77,629
Theresa Ann Joss 25,000
Dr. E. W. Kane Ltd. 11,484
Steve and Vanessa Keeler-Young 4,594
Brent and Jennifer Lee 26,000
Colin Lee 75,431
Grant Lee 44,000
Shirley Lee 60,000
Robert Leier 7,579
Heather MacDougall 1,148
Lynn Malcolm 2,297
Douglas Matthews 5,891
Harry McClelland 2,946
Ross McClelland 2,946
Dan Menard 574
Daphne Menard 574
Jacquie Miller 1,148
Kailey Miller 1,148
Hal Neff(3) 22,968
Hal Neff(7 ) 10,000
Lori Neuen 2,946
Shawn and Elizabeth O'Hara 574
Thomas O'Hara 574
David Palm 8,039
Uwe Pause 5,742
15
<PAGE>
Kathryn and Andre Pickersgill 11,484
Paul Branston 22,968
James Ryley 11,484
Peter Sauer 11,484
Ben Scheffer 1,148
Jamie Scheffer 1,148
Carole Small 1,148
Maureen Smith 5,742
Paul Soukoreff(4) 5,742
Esther Soukoreff(4) 5,742
Terrence L. Steinke 3,828
Eric Stephanson 22,968
James Dexter 11,484
Greenline Investor Services in Trust for John Suk 2,871
Nesbitt Burns Inc. in Trust for Candace Sikorski Acct. (John Suk) 2,871
Jennie Tong 37,873
Murray Van Laare 3,445
Hendrika Wall 1,148
Dr. G. W. Wilson 5,742
Bruno and Marianne Zilli 28,709
Allen Lees (6) (held in Trust by Law Offices of Fraser Milner) 571,428
Bruce McKay(7) 10,000
Grant Lee(7) 10,000
Gilmore Skeels(7) 10,000
(1) Mr. Lewis is the President, Chief Executive Officer and Chairman of the
Board of the Company.
(2) Mr. Livingstone is the Chief Operating Officer of the Company.
(3) Mr. Neff was a promoter of the Company's subsidiary, TopClick Corporation,
a Delaware corporation.
(4) Related to Gregory Soukoreff, a promoter of the Company's subsidiary,
TopClick Corporation, a Delaware corporation.
(5) Related to Hal Neff, a promoter of the Company's subsidiary, TopClick
Corporation, a Delaware corporation.
(6) Held in trust pending outcome of litigation. See portion of this Prospectus
entitled "Legal Proceedings" at Page 18.
(7) Shares issued when persons were directors of the Company's subsidiary,
TopClick Corporation, a Delaware corporation.
Pursuant to the agreements by which certain of the Selling Stockholders acquired
their Shares, the Company agreed to use its best efforts to file a registration
statement for the resale of such Shares and to use its best efforts to cause
such registration statement to be declared effective. Pursuant to those
agreements, the Company will pay all expenses in connection with the
registration and sale of the Shares, except any selling commissions or discounts
allocable to sales of the Shares, fees and disbursements of counsel and other
representatives of the Selling Stockholders, and any stock transfer taxes
payable by reason of any such sale.
Item 8. Plan of Distribution
The Selling Stockholders may from time to time sell all or a portion of the
Shares in the over-the-counter market, or on any other national securities
exchange on which the Common Stock is or becomes listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The Shares will not be sold in an
underwritten public offering. The Shares may be sold directly or through brokers
or dealers. The methods by which the Shares may be sold include: (a) a block
trade (which may involve crosses) in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) privately
negotiated transactions. In effecting sales, brokers and dealers engaged by
Selling Stockholders may arrange for
16
<PAGE>
other brokers or dealers to participate. Brokers or dealers may receive
commissions or discounts from Selling Stockholders (or, if any such
broker-dealer acts as agent for the purchaser of such shares, from such
purchaser) in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the Selling Stockholders to sell a specified number of such 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
such Selling Stockholder. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market or otherwise at prices and on terms then prevailing at
the time of sale, at prices then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may pay to or
receive from the purchasers of such shares commissions as described above.
In connection with the distribution of the Shares, the Selling Stockholders may
enter into hedging transactions with broker-dealers. In connection with such
transactions, broker-dealers may engage in short sales of the Shares in the
course of hedging the positions they assume with the Selling Stockholders. The
Selling Stockholders (except for officers and directors of the Company) may also
sell the Shares short and redeliver the Shares to close out the short positions.
The Selling Stockholders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the Shares.
The Selling Stockholders may also loan or pledge the Shares to a broker-dealer
and the broker-dealer may sell the Shares so loaned or upon a default the
broker-dealer may effect sales of the pledged shares. In addition to the
foregoing, the Selling Stockholders may enter into, from time to time, other
types of hedging transactions.
The Selling Stockholders and any broker-dealers participating in the
distributions of the Shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the 1933 Act and any profit on the sale of Shares by
the Selling Stockholders and any commissions or discounts given to any such
broker-dealer may be deemed to be underwriting commissions or discounts under
the 1933 Act.
The Shares may also be sold pursuant to Rule 144 under the 1933 Act beginning
two years after the Shares were issued, provided such date is at least 90 days
after the date of this Prospectus.
The Company has filed the Registration Statement, of which this Prospectus forms
a part, with respect to the sale of the Shares. There can be no assurance that
the Selling Stockholders will sell any or all of the Shares offered hereunder.
Under the Securities Exchange Act of 1934 ("Exchange Act") and the regulations
thereunder, any person engaged in a distribution of the Shares offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the Common Stock of the Company during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rules 10b-6 and 10b-7, which provisions may limit
the timing of purchases and sales of Common Stock by the Selling Stockholders.
The Company will pay all of the expenses incident to the offering and sale of
the Shares, other than commissions, discounts and fees of underwriters, dealers
or agents.
Item 9. Legal Proceedings
There are no legal actions pending against the Company nor are any such legal
actions contemplated, except as follows:
In March, 1999, the Company was informed that Allen Lees, a resident of British
Columbia, was claiming an ownership interest in certain shares of common stock
of Helpful By Design, Inc. ("HBD"). Mr. Lees claim to ownership of such HBD
shares arises from consulting services which Mr. Lees was engaged to perform on
behalf of HBD under its former name, Voxtech Communications, Inc. , beginning in
or about 1993. HBD disputes Mr. Lees' claim of ownership to those HBD shares.
The Company has become involved in this dispute because in September, 1998, HBD
sold certain assets, including
17
<PAGE>
a website, to one of the Company's subsidiaries, TopClick Corporation ("TC"),
for, among other consideration, the issuance of 7,000,000 shares of $.001 par
value common stock of TC. TC later entered into a stock exchange agreement with
the Company which provided, among other things, that, as consideration for the
exchange, assignment, transfer, conveyance, setting over and delivery of the
shares of TC to the Company, the Company issued 8 shares of its $.001 par value
common stock for every 7 shares of TC $.001 par value common stock.
Mr. Lees has filed a lawsuit in the Supreme Court of British Columbia seeking to
force conversion of approximately 500,000 HBD shares into shares of the
Company's common stock. In addition to HBD, the Company and its Chief Executive
Officer, Chris Lewis, have also been named as defendants in this lawsuit. The
Company intends to vigorously defend this action. The Company has issued the
disputed shares to Mr. Lees, which shares are currently held in trust by the Law
Offices of Fraser Milner located in Vancouver, British Columbia, Canada, pending
the outcome of this litigation.
Item 10. Directors, Executive Officers, Promoters and Control Persons.
The directors and principal executive officers of the Company are as specified
on the following table:
================================================================================
Name Age Position
- --------------------------------------------------------------------------------
President, Chief Executive
Officer, Chairman of the Board
Chris Lewis 42 of Directors.
- --------------------------------------------------------------------------------
Terry Livingstone 53 Chief Operating Officer
- --------------------------------------------------------------------------------
Biographical Information on Company's Officers and Directors:
President, Chairman of the Board and Chief Executive Officer. Chris Lewis is the
Company's President and Chief Executive Officer, as well as Chairman of the
Board of Directors. Mr. Lewis developed the TopClick Guide concept and has
responsibility for the strategic planning relating to the products and services
currently under development by the Company. Mr. Lewis has significant experience
in business planning and marketing and has participated in the development and
commercial exploitation of 19 products, including the world's first alphanumeric
paging service. His marketing and communications experience includes small
regional direct mail advertising campaigns to full national television
advertising campaigns supported by print advertising, outdoor poster activities,
product design and packaging, 1-800 telephone response facilities and full media
launch presentations.
During the past 25 years Mr. Lewis has held sales and marketing management
positions in a number of industries, including men's fashion clothing, mobile
communications, telecommunications, computer software and Internet applications,
and the Do-It-Yourself handyman industry. In 1987 he was selected as one of
eight managers (in a company employing 185,000 people) to attend the Accelerated
Business Degree in Business Planning, International Marketing and Marketing
Communications (a sub-MBA program) from the Chartered Institute of Marketing. In
1989, working with Paul Fifield, a European marketing strategist (now a member
of the Company's advisory board), Mr. Lewis developed a new approach to market
segmentation called "Context Marketing" which British Telecom tested in a
customer research program and then implemented as a principal methodology in its
marketing approach.
In 1992 Mr. Lewis emigrated from London, England to join his family in Western
Canada, leaving a position he had held for 6 years at British Telecom as a
strategic marketing manager for personal communications. At British Telecom he
served as the company representative on a multi-company and university
Pan-European Study of Global Social Change to identify the changing customer
attitudes, values and expectations that drive consumer purchase behavior. He
also worked on several corporate business initiatives as a Marketing Futurist
including personal communications, broadband networks, and other specialized
projects. From 1993 to 1998, Mr. Lewis was President of Helpful By Design, Inc.,
a Vancouver, British Columbia-based software and Internet design and development
firm. From June 1998 to date, Mr. Lewis was President and
18
<PAGE>
Chief Executive Officer of TopClick Corporation, an Internet design and
development firm also located in Vancouver, British Columbia.
Chief Operating Officer. Terry Livingstone was recently appointed Chief
Operating Officer of the Company. Prior to this appointment, from June 1998 to
April 1999, Mr. Livingstone was the Western United States and Canada Project
Manager for Nortel Networks, and was responsible for managing complex
telecommunications and multiple Internet-related projects with up to 50 staff
under his co-ordination, including the areas of computer operations,
programming, systems analysis, design and project implementation. From September
1997 to May 1998 and prior to working for Nortel Networks, Mr. Livingstone was a
Senior Project Manager with MacDonald Dettwiler, where he oversaw projects in
Taiwan, Egypt, and north America for DGPS and radar surveillance systems. From
1993 to 1997, he held various project management and related positions with
various companies in Canada, including Helpful By Design, Inc. from June 1996 to
July 1997, and Nortel (Northern Telecom) from February 1996 to June 1996. Mr.
Livingstone was self-employed from 1994 through June 1996, worked with Glenayre
Electronics in Vancouver, British Columbia from 1992 to 1993, and with an IBM
business partner, GRSI, from 1989 through 1992. He also worked at Wang Canada
from 1986 to 1989, where he managed multiple development teams and projects in
Saudi Arabia and the Philippines in planning, organizing, controlling and
implementing turnkey nationwide systems.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of April 15, 1999 by (i) each person
or entity known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each of the Company's directors and
named executive officers, and (iii) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Name and Address Amount and Nature
Title of Class of Beneficial Owner of Beneficial Owner Percent of Class
- -------------- ------------------- ------------------- ----------------
<S> <C> <C> <C>
$.001 Par Value Chris Lewis Officer and Director 40.27%
Common Stock 1636 W. 2nd St. 5,280,571 common shares
Vancouver, B.C. (also holds 225,000 options)
$.001 Par Value Terry Livingstone Chief Operating Officer; 1.75%
Common Stock 1636 W. 2nd St. 229,675 common shares
Vancouver, B.C. (also holds 25,000 options)
$.001 Par Value All directors and named 42.02%
Common Stock executive officers as a
group
</TABLE>
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. In accordance with Commission rules, shares of the Company's common
stock which may be acquired upon exercise of stock options or warrants which are
currently exercisable or which become exercisable within 60 days of the date of
the table are deemed beneficially owned by the optionees. Subject to community
property laws, where applicable, the persons or entities named in the table
above have sole voting and investment power with respect to all shares of the
Company's common stock indicated as beneficially owned by them.
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c) of Regulation S-B.
19
<PAGE>
Item 12. Description of Securities
The Company is authorized to issue 100,000,000 shares of common stock, $.001 par
value, each share of common stock having equal rights and preferences, including
voting privileges. The Company is not authorized to issue shares of preferred
stock. As of April 2, 1999, 13,112,740 shares of the Company's common stock were
issued and outstanding. The shares of $.001 par value common stock of the
Company constitute equity interests in the Company entitling each shareholder to
a pro rata share of cash distributions made to shareholders, including dividend
payments. The holders of the Company's common stock are entitled to one vote for
each share of record on all matters to be voted on by shareholders. There is no
cumulative voting with respect to the election of directors of the Company or
any other matter, with the result that the holders of more than 50% of the
shares voted for the election of those directors can elect all of the Directors.
The holders of the Company's common stock are entitled to receive dividends
when, as and if declared by the Company's Board of Directors from funds legally
available therefor; provided, however, that cash dividends are at the sole
discretion of the Company's Board of Directors. In the event of liquidation,
dissolution or winding up of the Company, the holders of common stock are
entitled to share ratably in all assets remaining available for distribution to
them after payment of liabilities of the Company and after provision has been
made for each class of stock, if any, having preference in relation to the
Company's common stock. Holders of the shares of Company's common stock have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to the Company's common stock.
Dividend Policy. The Company has never declared or paid a cash dividend on its
capital stock and does not expect to pay cash dividends on its Common Stock in
the foreseeable future. The Company currently intends to retain its earnings, if
any, for use in its business. Any dividends declared in the future will be at
the discretion of the Board of Directors and subject to any restrictions that
may be imposed by the Company's lenders.
Item 13. Interest of Named Experts and Counsel.
No "expert", as that term is defined pursuant to Regulation Section 228.509(a)
of Regulation S-B, or the Company's "counsel", as that term is defined pursuant
to Regulation Section 228.509(b) of Regulation S-B, was hired on a contingent
basis, or will receive a direct or indirect interest in the Company, or was a
promoter, underwriter, voting trustee, director, officer, or employee of the
Company, at any time prior to the filing of this Registration Statement.
Item 14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION FOR
LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO PUBLIC
POLICY AND, THEREFORE, UNENFORCEABLE.
Item 15. Organization Within Last Five Years
Transactions with Promoters. The Company did not employ or contract with any
promoters. The Company's subsidiary, TopClick Corporation, a Delaware
corporation incorporated on July 8, 1998 ("TC"), had relationships with the
following promoters: Kili Nimani, Hal Neff, Gernot Doebelin, and Gregory
Soukoreff. Each of these promoters signed an "Investment Associate Agreement"
with TC. Mr. Neff is also a director of TC.
Each promoter is entitled to receive options to purchase shares of TC's $.001
par value common stock in amounts equal to 10% of the number of shares sold by
that promoter. For example, if a particular promoter sells 100,000 shares of
TC's $.001 par value common stock, he is entitled to receive options to purchase
10,000 shares of that stock for a purchase price to be set by the Board of
Directors. Those options shall vest during a 3 year period and expire after an
additional 3 years. As of September 30, 1998, options to purchase 25,000 shares
of TC's common stock had been issued to Kili Nimani at an option price of $0.70
per share.
20
<PAGE>
Item 16. Description of Business.
The Company was originally incorporated to engage in any lawful act or activity
for which corporations may be organized under the General corporation Law of
Delaware. The Company initially was involved in the development of oil and gas
properties. After the consummation of a series of corporate acquisitions
specified herein under the subheading entitled Development of the Company
immediately below, the nature of the Company's business changed from development
of oil and gas properties to the business of facilitating the consumption of
information, products and services via the Internet. To this end, the Company
currently provides Internet users with a one-stop information index to the top
Internet guides, which allows users to view and then quickly select the best
guide for their needs based on their choice of information subject. The
Company's services allow Internet users to locate their subject categories
easily and provides them with the freedom to roam back and forth from guide to
guide. For example, inside the Company's Internet golf environment, the Company
has packaged all of the top Internet guides to golf, such as Yahoo!, Excite and
Lycos.
Development of the Company. TopClick International, Inc., a Delaware corporation
formerly named Galveston Oil & Gas, Inc. ("Company"), was incorporated in the
State of Delaware on October 3, 1996. The Company changed its name to TopClick
International, Inc. on or about February 5, 1999 by filing an amendment to its
Certificate of Incorporation with the Delaware Secretary of State. Pursuant to
an Acquisition Agreement dated January 28, 1999, the Company acquired all of the
shares of TopClick Corporation, a Delaware corporation incorporated on July 8,
1998 (previously defined in this Prospectus as "TC") which, in turn, had
previously acquired certain assets from E.Z.P.C. Canada Inc., which was
incorporated on September 28, 1994, under the Canada Business Corporations Act
with one common share owned by Helpful By Design, Inc., a Canadian federal
jurisdiction corporation ("HBD"). The Acquisition Agreement was part of a
Financing Agreement specified more completely below. TC is now a wholly-owned
subsidiary of the Company.
As consideration for the exchange, assignment, transfer, conveyance, setting
over and delivery of the shares of TC, the Company issued 8 shares of its $.001
par value common stock for every 7 shares of TC $.001 par value common stock.
This exchange value was determined by negotiations between the Company, TC , and
Sonora Capital Corporation, a British Columbia corporation ("Sonora"), and was
approved by a majority of the shareholders of TC.
On or about July 14, 1998, the name of E.Z.P.C. Canada, Inc., was changed to
TopClick (Canada) Inc. In September, 1998, HBD sold the TopClick website (which
website is described more specifically below) and related assets, including the
one common share of TopClick (Canada) Inc., to TC for the issuance of 7,000,000
shares of $.001 par value common stock of TC to HBD and forgiveness of
indebtedness owed by HBD to TopClick (Canada) Inc. The TopClick website and
related assets were valued by the Board of Directors of HBD ("HBD Board") at
US$700,000 (all amounts are in United States currency unless otherwise
specified.) The HBD Board valued the forgiveness of a debt in the amount of
$480,000 in Canadian Dollars ("CDN$") at $315,789, at an exchange rate of
approximately 1.52 CDN$ to one United States dollar. The HBD Board believes that
total consideration for the sale of the TopClick website and related assets was,
therefore, approximately $1,015,789. As part of this transaction, TC agreed to
convert the shares of preferred stock held by shareholders of TopClick (Canada)
Inc. into shares of common stock of TC.
On or about January 28, 1999, TC entered into a Financing Agreement with the
Company, Sonora, HBD, and other parties whereby a group of investors represented
by Sonora provided $2,000,000 to the Company. As part of a series of related
transactions, HBD and the shareholders of TC transferred their shares of TC to
the Company so that TC became a wholly- owned subsidiary of the Company. A copy
of the Financing Agreement is attached as Exhibit 4 to this registration
statement. A copy of the Acquisition Agreement is attached to that Financing
Agreement as Exhibit B thereto.
Business of the Company. As set forth above, the Company owns and operates the
TopClick website, a unique information retrieval guide for Internet users. The
TopClick website contains the first comprehensive Internet "superguide" to the
major Internet guides, designed to help Internet users find the answers to their
searches more quickly and effectively than they can through conventional single
guides or search engines. TopClick makes it easy for Internet users to find
their subjects and move back and forth from guide to guide without having to
visit each guide's homepage and conduct individual searches. The TopClick
website is located at the Internet address www.topclick.com. The TopClick
website's features include "central
21
<PAGE>
keyword searching", which provides one-stop keyword searching across the top
portal sites, including Yahoo!, Excite, Lycos, GoTo.com, Go Network, Ask Jeeves,
Dogpile, Northern Light, Looksmart, Infoseek, Snap!, Webcrawler, AOL Netfind,
HotBot and Alta Vista. The TopClick website also features top Internet brands
across thousands of information subjects, organized into 51 easy-to-use
information categories. The website currently houses over 8,000 top sites and
anticipates adding additional top sites.
The Company anticipates generating revenues from commission referral fees during
the next 12 months. The Company contemplates that it will direct Internet
traffic to e-commerce vendors; provided, however, that there can be no guarantee
or assurance that the Company will be able to enter into contracts with online
vendors or that, if the Company enters into such contracts, the terms and
conditions of such contracts will be economically advantageous to the Company.
In the event the Company enters into such contracts with online vendors, the
Company anticipates receiving a commission referral fee ranging from 8% to 25%.
The Company also anticipates more direct involvement in e-commerce. For example,
the Company has recently opened a virtual bookstore by packaging approximately
300 books on privacy issues. The Company intends to sell these books over the
Internet and receive a sales commission. The Company anticipates deriving
revenues from the virtual bookstore within the next 6 months.
While the Company is considering the possibility of generating revenues from
subscription fees from subscribers for certain proposed Internet services, the
Company does not currently provide any specialized services and does not
currently have any subscribers. The Company is considering providing
personalized information services to paid subscribers but has not yet determined
the scope of such services nor the subscription rates for such services.
The Company derives certain consumer data from customer profiles. During the
past 12 months, the Company contemplated generating revenues through the sale of
this consumer data to third parties. However, as specified above, the Company
recently opened a virtual bookstore relating to privacy issues, and Management
of the Company believes that selling research data (commonly referred to as
"aggregated data") to advertisers or market researches may not comport with the
Company's privacy-related businesses. While it is a common practice for entities
with high traffic volume websites to sell such aggregated data, this proposed
policy is currently under review by Management of the Company. Therefore, the
Company may elect to forego this potential revenue source.
In the same way, websites with high traffic volumes typically generate
advertising fees through the sale of banner and other types of Internet
advertising. The Company has not yet determined whether it will sell such
advertising on its website. Moreover, in the event the Company elects to sell
such advertising, the Company's advertising revenues will depend, in part, on
the volume of traffic at the Company's website.
The Company has built and is continuing to develop a complex database of HTML
links arranged into predefined categories and subjects across the top guides on
the Internet. The TopClick guide currently includes links from Yahoo!, Excite,
Lycos, Infoseek, Looksmart, Webcrawler, AOL, Snap! and Magellan. There are two
principal ways to use the TopClick guide: (1) users can quickly click through
three levels of information: Group, Category, and Subject. Users can then "click
out" to any of the top Internet guides; or (2) alternatively, users can enter a
keyword into the search panel and then click out to their choice of the top 12
search engines on the Internet.
In April, 1999 the Company reported that the usage of its website had increased
significantly during the first period of 1999 and, in March alone, the Company
served close to one million page views. The term "page view" means the accessing
of a website page on the Internet. Often used by advertisers to gauge the
"traffic", or frequency of visitation, on a specific website, the term "page
view" differs from the Internet term "hit" in that a page view counts only the
number of times a page has been accessed, while a "hit" counts the number of
times that all the elements on a specific page, including graphics, have been
accessed.
In May, 1999 the Company began an e-commerce initiative with LinkShare
Corporation ("LinkShare"), whose software enables companies selling goods or
services on the Internet to establish business partnerships through
cross-selling and cross- referral agreements with other sites. In addition to
providing technology, LinkShare tracks and verifies customer referrals
22
<PAGE>
and transactions and manages the related revenue structures. LinkShare currently
services more than 150 retailers and manages a network of tens of thousands of
affiliate sites. LinkShare is privately owned and headquartered in New York
City, with offices in San Francisco and Denver. Additional information can be
obtained at LinkShare's website at http://www.linkshare.com.
The Company believes that its participation in the LinkShare program will enable
it to establish e-commerce relationships with over 150 existing electronic
retailers, and to earn referral revenues through those relationships. In the
first phase of this program, the Company has been approved to integrate
e-commerce offerings from 1-800-Flowers, Borders.com, Cyberian Outpost,
Fashionmall, Florist.com, K-Tel, American Eagle Outfitters, and AudioBook.
The Company has not generated any revenues to date and has a comprehensive loss
for the year ended June 30, 1999 of US$444,681.00.
Transition of Website. In March, 1999 the Company entered into a nonexclusive,
nontransferable Master Service Agreement with Frontier GlobalCenter, Inc.
("Frontier") for Internet connectivity services, which obligated the Company to
pay monthly bandwith charges, to purchase software and hardware (specifically,
servers) to facilitate such services, and to lease monthly rack space to store
those servers, all of which allowed the Company to move its website to allow for
more rapid growth. Frontier specializes in scalable high-speed hosting services,
and hosts many of the world's busiest websites, including Yahoo!, Netscape,
Playboy, Pacific Bell, Quote.com, and USA Today. The Company has installed a
high-speed server and software system together with a leading statistical
analysis and tracking software solution from Marketwave Corporation of Seattle,
Washington ("Marketwave"), all supported by a 12-month maintenance contract.
Marketwave is a leading innovator in real-time Internet data mining and traffic
analysis software, with more than 40,000 licensed corporate customers including
industry names like Intel, Dell, AT&T, Cox Communications, Volvo and NBC Europe.
The new hosting architecture incorporates a fully redundant system supported by
a "high-availability" load-balancing solution which distributes peak traffic
across the servers to improve performance.
Employees. The Company and its subsidiaries currently have eight employees, all
of which are full-time employees. Management of the Company anticipates using
consultants for business, accounting, engineering, and legal services on an
as-needed basis.
Key Employees. The Company's key employees are Chris Lewis, the President and
Chief Executive Officer; Terry Livingstone, the Chief Operating Officer; and
Rory Wadham, lead programmer.
Item 17. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information retrieval is already a significant market on the Internet, but the
growth of the Internet requires continued advances in Internet guide services.
Because of the expanding volume of information on the Internet, no single
company has been able to monopolize Internet guides and referencing indexes. The
Company believes that the continued rapid expansion of the Internet provides
opportunities for the Company's innovations and will further provide the Company
with markets which the major search engines and guides do not control or
dominate. The Company believes that there is a window of opportunity to
establish a package of the best Internet guides into one environment.
The Company's innovations include the packaging of top Internet destinations, a
simplified Internet navigation structure, and a fast, simple one-stop
information search interface to the top Internet information directories, search
engines and meta-search engines by the Company's "central keyword searching"
facility. This feature provides one-stop keyword searching across the top portal
sites including Yahoo!, Lycos, GoTo.com, Go Network, Ask Jeeves, Dogpile,
Northern Light, Looksmart, Infoseek, Snap!, Webcrawler, AOL Netfind, HotBot and
AltaVista.
Plans for Future Operations and Marketing Strategy. As set forth above, in May,
1999 the Company began an e- commerce initiative with LinkShare, which, the
Company believes, will enable the Company to establish various e-commerce
relationships. The Company anticipates that it will market itself to the
Internet community as a clearinghouse and an
23
<PAGE>
encyclopedia of quality Internet guides. The Company believes that it will
continue to develop increased. The Company bases its belief that it will
continue to increase monthly traffic volumes, in part, on the increase of its
website traffic by 1200 percent in the first quarter of 1999, and the Company's
belief that the Internet will continue to grow at a significant rate, and the
Company's plans to establish e-commerce agreements with strategic partners.
During the period April 1, 1999 through and including June 30, 1999, the
Company's website generated 1,117,880 page views and 477,143 unique searches.
The overall marketing plan for the Company's products and services is based on
two separate promotional phases: (1) the Initial Site Launch Plan and (2) the
Market Development Plan.
Initial Site Launch Plan. The Company anticipates that it will launch multiple
online tactical programs to create awareness of the Company's websites and
services with the goal of inducing potential clients to visit the Company's
websites, where demonstrations of the Company's products and services will be
displayed. The Company believes that by keeping the information current,
subscribers will return to the Company's websites, the ultimate goal being
increased usage over time.
The Company believes that over 80% of all Internet searches originate through
the top 8 guides. The Company intends to submit its website to those top 8
guides and to use an automated software package to submit the TopClick website
to the other 1,000 guides on the Internet. The Company's objective is to build
the Company's websites and brands into well-known Internet properties.
The Company intends to submit Topclick.com to the top 10 site award businesses
on the Internet through the use of electronic press releases. The Company
intends to use the same methods to submit Topclick.com to the Top 10 Cool
Sites/What's New Sites website to gain further recognition with Internet
customers. The Company anticipates that it will send out press releases to the
principal media groups that cover the Internet such as ABC, CNN, and CBS, as
well as to technology news suppliers like PointCast. The Company also
anticipates that it will provide automated announcements to specific interest
groups at Internet chat environments and present its guide to mass community
sites, such as Geocites, as a complimentary service which the Company believes
will enhance the value of its core products. The Company will concentrate on
disseminating information about its products and services to specific
opinion-forming communities, such as teachers and marketing professionals via
e-mail announcements.
Market Development Plan. For new Internet customers, the Company contemplates
that it will establish channel development programs to Internet service
providers, cable companies, telephone companies, satellite companies and web
television businesses, with the intention of placing a link to TopClick in their
software, as a starting point for those new Internet users.
A "link" is a selectable connection from one word, picture, or information
object to another on the Internet. The most common form of link is the
highlighted word or picture that can be selected by the user (with a mouse or in
some other fashion), resulting in the immediate delivery and view of another
file. The highlighted object is often referred to as an "anchor". The anchor
reference and the object referred to constitute a hypertext link. The Company
anticipates that it will seek logo and URL linking arrangements with targeted
sites. The Company intends to develop "tell-a-friend" extensions to the TopClick
site to make it easy for existing users to electronically tell friends about the
Company's services.
Developing Site Traffic. The Company believes that it must develop volume
traffic on its site in order to be successful. Once traffic volume has been
established, the Company believes that it will become a distribution point for
advertisers and will develop opportunities to participate in sponsorship
agreements, electronic commerce agreements and joint marketing ventures. The
Company intends to build its initial equity value measured by traffic (that is,
page views) and then intends to develop multiple revenue streams as a broker of
diverse audience interests. There is no assurance, however, that the Company
will build an equity base which will be considered worth acquiring. Initially,
the Company will offer its products and services free to its customers,
strategic partners and media partners.
In keeping with this strategy, the Company will concentrate its marketing
efforts on increasing site traffic. Promotional space and other content on the
site will be provided free to content partners, to increase traffic. The Company
intends to form
24
<PAGE>
strategic relationships with the existing top Internet guides, including
providing free content links to areas of their sites that those guides want to
promote (for example, by providing free content links to the Yahoo Golf Guide).
Through the use of free space inside the TopClick guide, the Company intends to
develop a database of advertising contacts, media contacts, and Internet guide
contacts. At the same time, the Company will attempt to increase volume to the
Company's site using an integrated marketing communications program to existing
and new Internet users. The Company further intends to develop piggy-back
marketing programs and cross-promotional opportunities with other online media.
The TopClick guide will be offered free to users, strategic partners (such as
existing Internet guides) and other media partners.
Name Identification. The Company has purchased additional domain names and will
attempt to prevent third parties from adopting names similar to TopClick. The
Company has entered into various domain name registration agreements for
Topsearches.com, Mytopclick.com, Topclicking.com, Topclick-Inc.com,
Topclickinc.com, Top-Clicks.net, Topclick.net, Topclicks.net, Topclicks.com,
Top-click.com, Top-clicks.com, Top-click.net, Lookmarks.com with Network
Solutions, Inc. ("NSI"). NSI is responsible for the registration of second-level
Internet domain names in the top level COM, ORG, NET, and EDU domains. NSI
registers these second-level domain names on a first come, first served basis.
By registering a domain name, NSI does not determine the legality of the domain
name registration, or otherwise evaluate whether that registration or use may
infringe upon the rights of a third party. Effective February 25, 1998, NSI
revised its domain name dispute policy which provides, among other things, that
if a registrant files a civil action related to the registration and use of a
domain name, and provides NSI with a copy of the file-stamped complaint, NSI
will maintain the status quo ante of the domain name record pending a final or
temporary decision of that court. In such cases, NSI will deposit control of the
domain name into the registry of the court by supplying the registrant with the
registry certificate for deposit. While the domain name is in the registry of
the court, NSI will not make any changes to the domain name record unless
ordered by the court.
The Company believes that this revision to NSI's domain name dispute policy will
discourage frivolous claims against the domain names held by the Company. Domain
name registrations are effective for two years and may be renewed year-to-year
thereafter.
Expanding Internet Markets. Nua, one of Europe's leading online consultants and
developers, estimates that there were approximately 100 million Internet users
worldwide in January, 1998. According to a recent report in Computer
Intelligence, the growth rate of Internet users may have increased by as much as
30% in 1998. The Company anticipates that it may benefit from that growth;
however, no guaranty can be provided that such will occur.
North American Internet users represent more than 80% of all users. Until a year
ago, almost 99% of the 13 million servers hooked to the Internet were
distributed throughout North America, Western Europe and Japan. Internet
advertising revenue has grown significantly since 1996, and, in 1998, approached
the total advertising revenue for all domestic national newspaper revenues. Most
analysts predict that this significant growth rate will continue through the
year 2000. Netscape World recently predicted that Internet advertising revenues
will surpass those of all domestic national newspaper revenues by this year. The
Company should benefit from such growth; however, no guaranty can be provided
that the Company will so benefit.
State of Readiness for Y2K. The Company has performed an assessment of the
Company's information technology ("IT") systems as well as its non-IT systems
(such as embedded technology in manufacturing or process control equipment
containing microprocessors or other similar circuitry) relating to the Y2K
problems previously referenced herein. The Company evaluated all hardware and
software for Y2K compliance by using sources from the Internet, by contacting
manufacturers, and by contacting third party suppliers of phone systems and
security systems. Additionally, the Company reviewed product documentation for
Y2K compliance where such was available.
The in-house workstations of Company employees and subcontractors are Pentium
Personal Computers which utilize Windows 95 and Office 97+ software. The Company
believes that all critical applications of that software are Y2K compliant. The
Company has one additional workstation which is also Y2K compliant.
25
<PAGE>
Built on a UNIX platform, the server hardware and software for the webserver
environments used to host and serve the TopClick website are also Y2K compliant.
After conducting testing and evaluation, the Company believes that its phone
system, its Network Hub, its power backup systems and its security system are
all Y2K compliant. The Company's facsimile machine, however, is not Y2K
compliant.
Cost to Address the Company's Y2K Issues. The only significant equipment
replacement cost the Company anticipates is approximately CDN$600 (at May 24,
1999, the exchange rate was US$1.00 to CDN$1.53, so as of that date CDN$600 was
approximately US$392.16) to replace the Company's facsimile machine. The Company
does not anticipate any additional upgrade, replacement, or equipment servicing
charges to become Y2K compliant. The Company will monitor external service
providers through the Year 2000 at a cost of approximately CDN$125.00
(approximately US$81.70). Therefore, based on current estimates, the costs of
addressing this issue are not expected to have a material adverse effect on the
Company's financial position, results of operations or cash flows. The potential
impact of the Y2K issue on significant customers, vendors and suppliers of the
Company cannot be reasonably estimated at this time.
The Company's Contingency Plans. To prevent electrical failures from adversely
affecting the Company's operations, the Company performs regularly scheduled
data backups and connects its computer system to backup power systems. Through
the Year 2000, the Company will continue to communicate with its electrical and
telecommunications providers to remain informed about (i) the status of such
suppliers' Y2K compliance, and (ii) the potential impact that the failure of
these suppliers to become Y2K compliant will have on the Company.
Liquidity and Capital Resources. As set forth above, on or about January 28,
1999, the Company entered into a Financing Agreement with a group of investors
represented by Sonora Capital Corporation, a British Columbia corporation
("Sonora"). Other parties to the Financing Agreement were Peter Hough, Clive
Barwin and James Decker, British Columbia residents; and Helpful By Design,
Inc., a Canadian federal jurisdiction corporation ("HBD"). Chris Lewis, the
Chief Executive Officer of the Company, was a significant shareholder of HBD,
and Mr. Lewis was also a party to the Financing Agreement. TC is now a
wholly-owned subsidiary of the Company. The group of investors represented by
Sonora provided the Company with $2,000,000. Pursuant to the Financing
Agreement, the Company acquired all of the shares of TopClick Corporation, a
Delaware corporation incorporated on July 8, 1998 ("TC") which, in turn, had
previously acquired certain assets from E.Z.P.C. Canada Inc., which was
incorporated on September 28, 1994, under the Canada Business Corporations Act
with one common share owned by HBD.
As consideration for the exchange, assignment, transfer, conveyance, setting
over and delivery of the shares of TC, the Company issued 8 shares of its $.001
par value common stock for every 7 shares of TC $.001 par value common stock.
This exchange value was determined by negotiations between the Company, TC, and
Sonora, and was approved by a majority of the shareholders of TC. A copy of the
Financing Agreement is filed as a material contract as Exhibit 10.1 to this
Amendment No. 3 to the Company's Registration Statement on Form 10-SB.
The Company believes that it may be able to acquire additional financing at
commercially reasonable rates; however, there can be no assurance that the
Company will be able to obtain additional financing at commercially reasonable
rates, or at all. The Company has expended, and will continue to expend in the
future, substantial funds on the research and development of its products and
services. The failure of the Company to obtain additional financing, or to
generate revenues from its Internet products and services, would significantly
limit or eliminate the Company's ability to fund its research and development
activities, which would have a material adverse effect on the Company's ability
to continue to compete with other Internet directory service providers.
Moreover, although the Company has significant cash reserves, it cannot continue
to operate indefinitely without generating revenues. At present, the Company's
primary source of revenue is the sale of its securities.
Results of Operations. The Company has not yet realized any revenue from
operations. In the year ended June 30, 1999, the Company expended $260,019 in
software development costs, which represent costs relating to the development of
the Company's Internet website. The Company anticipates that these costs will be
amortized upon the commercial exploitation
26
<PAGE>
of the Company's Internet website. During the year ended June 30, 1999, the
Company capitalized $10,075 of depreciation of its computer equipment as
software development costs.
The Company experienced a net loss from its operating activities of $482,680 for
the year ended June 30, 1999 and a net loss, after interest income and write-off
of deferred charges, of $462,603, resulting in a loss per share of $0.04. This
loss was further offset by foreign currency translation adjustments of $17,922,
resulting in a comprehensive loss of $444,681 at June 30, 1999.
At June 30, 1999, the Company had cash of approximately $1,667,370 deposited
with RBC Dominion Securities Ltd. ("RBC"), earning interest at 3.75% per annum.
RBC is a leading debt and equity underwriter in Canada and a member of the Royal
Bank Financial Group, a global financial services group.
Recent Developments. On June 4, 1999, the Company announced that it had added
twenty high profile Internet retailers to the development of its e-commerce
environment in preparation for the launch of the TopClick Marketplace, a
packaged e-commerce shopping environment that will be offered on the Company's
homepage. Retail brands include Ameritech, Travelocity, Barnsandnoble.com,
Priceline, and Reel.com, which have been made available through the affiliate
network Be Free, Inc. On June 9, 1999, the Company announced that it had added
Dell and Amazon.com to its e-commerce package. The Company recently joined the
Amazon.com Associates Program, a leading selling program on the Internet, which
the Company believes has more than 260,000 members. The Company is continuing
discussions with additional Internet retailers and anticipates continuing to add
established Internet retailers to its packaged e-commerce shopping environment.
Item 18. Description of Property
Property held by the Company. As of the dates specified in the following table,
the Company held the following property:
================================================================================
Property June 30, 1999
-------- -------------
- --------------------------------------------------------------------------------
Cash $1,702,291
================================================================================
Intellectual Property-software development $260,019
- --------------------------------------------------------------------------------
Property and Equipment $78,324
- --------------------------------------------------------------------------------
The Company owns the TopClick website and all proprietary software incidental to
the operation thereof. The Company has purchased additional domain names similar
to TopClick in an attempt to prevent third parties from exploiting the TopClick
brand name. On or about August 3, 1998, TC purchased office furniture and
communications systems to furnish the Company offices located at Suite 200, 1636
West 2nd Avenue, Vancouver, British Columbia, Canada V6J 1H4. TC acquired office
workstations and fixtures with an inventory value on that date of $74,000 for
the actual purchase price of $22,000; a Telecomms System for $14,000; 10
personal computers, a laptop computer, and servers, for $23,700; software and
databases for $29,000; 3 printers and personal computer accessories for $6,500;
and an office security system for $1,700. As of March 31, 1999, the Company,
after deducting accumulated depreciation, assigned a net book value of $54,285
to the Company's computer equipment and $24,521 to the Company's furniture and
other office equipment.
The Company has become the successor-in-interest to TopClick (Canada) Inc.'s
commercial lease for the premises located at #200-1636 W. Second Avenue in
Vancouver, British Columbia. That lease commenced August 1, 1998 and expires
July 31, 2001, and consists of approximately 3,500 square feet designated for
use as Internet software and related business offices. The annual base rental is
CDN$42,000, paid in monthly installments and subject to typical common area
charges and pro rata
27
<PAGE>
tax charges. The Company shall have the right to renew the lease for a further 3
year period if the Company is not in default under the lease at the date of
expiration.
Intellectual Property Strategy. The Company will attempt to protect its
proprietary technology and domain names (see the discussion under the heading
entitled "Name Identification" on Page 6 of this registration statement). The
Company exclusively owns any and all software that it develops and retains the
right to license its products to third parties. The Company may rely on a
combination of copyright, NIS registration, trademark and trade secrecy laws,
and confidentiality agreements with its employees and subcontractors, to protect
its intellectual property rights in its products.
The Company faces a challenge unique to the software and computing industry.
While it is possible to protect a product's "look and feel", it is almost
impossible for a company to protect its Internet and software features and
functions. This means that another organization may elect to use the Company's
products as prototypes or guides for their own development. This can drastically
shorten a competitor's product development cycle. The Company intends to remain
among the top innovators and most customer-focused providers of Internet
information retrieval systems. This will require the Company to spend
significant funds for continuing research and development activities. The
Company regards its technology as proprietary and may attempt to protect it with
copyrights, trademarks, trade secret laws, restrictions on disclosure and
transferring title and other methods, and has plans to seek a patent with
respect to certain aspects of its searching and indexing technology. There can
be no assurance that any patents that may issue from these applications will be
sufficiently broad to protect the Company's technology. In addition, there can
be no assurance that any patents that may be issued will not be challenged,
invalidated or circumvented, or that any rights granted thereunder would provide
proprietary protection to the Company. Failure of any patents to provide
protection of the Company's technology may make it easier for the Company's
competitors to offer technology equivalent to or superior to the Company's
technology.
The Company also anticipates entering into confidentiality or license agreements
with its employees and consultants, and generally controls access to and
distribution of its documentation and other proprietary information. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use the Company's services or technology without authorization, or to
develop similar technology independently. In addition, effective copyright,
trademark and trade secret protection may be unavailable or limited in certain
foreign countries, and the global nature of the Web makes it virtually
impossible to control the ultimate destination of the Company's services.
Policing unauthorized use of the Company's technology is difficult. There can be
no assurance that the steps taken by the Company will prevent misappropriation
or infringement of its technology. In addition, litigation may be necessary in
the future to enforce the Company's intellectual property rights, to protect the
Company's trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of resources and could have a material and adverse effect on the
Company's business, results of operations and financial condition.
The Company may, in the future, receive notice of claims of infringement of
other parties' proprietary rights, including claims for infringement resulting
from the downloading of materials by the online or Web services operated or
facilitated by the Company. Although the Company investigates claims and
responds as it deems appropriate, there can be no assurance that infringement or
invalidity claims (or claims for indemnification resulting from infringement
claims) will not be asserted or prosecuted against the Company or that any
assertions or prosecutions will not materially and adversely affect the
Company's business, results of operations and financial condition. Irrespective
of the validity or the successful assertion of such claims, the Company would
incur significant costs and diversion of resources with respect to the defense
thereof which could have a material adverse effect on the Company's business,
results of operations and financial condition. If any claims or actions were
asserted against the Company, the Company might seek to obtain a license under a
third party's intellectual property rights. There can be no assurance, however,
that under such circumstances a license would be available on commercially
reasonable terms, or at all.
28
<PAGE>
Item 19. Certain Relationships and Related Transactions
Related Party Transactions. Pursuant to a Financing Agreement dated January 28,
1999, the Company acquired all of the shares of TopClick Corporation, a Delaware
corporation incorporated on July 8, 1998 (previously defined in this Prospectus
as "TC") which, in turn, had previously acquired certain assets from E.Z.P.C.
Canada Inc., which was incorporated on September 28, 1994, under the Canada
Business Corporations Act with one common share owned by Helpful By Design,
Inc., a Canadian federal jurisdiction corporation ("HBD"). Chris Lewis, the
Chief Executive Officer of the Company, was a significant shareholder of HBD. TC
is now a wholly-owned subsidiary of the Company.
As consideration for the exchange, assignment, transfer, conveyance, setting
over and delivery of the shares of TC, the Company issued 8 shares of its $.001
par value common stock for every 7 shares of TC $.001 par value common stock.
This exchange value was determined by negotiations between the Company, TC, and
Sonora Capital Corporation ("Sonora"), and was approved by a majority of the
shareholders of TC.
On or about July 14, 1998, the name of E.Z.P.C. Canada, Inc., was changed to
TopClick (Canada) Inc. In September, 1998, HBD sold the TopClick website (which
website is described more specifically below) and related assets, including the
one common share of TopClick (Canada) Inc., to TC for the issuance of 7,000,000
shares of $.001 par value common stock of TC to HBD and forgiveness of
indebtedness owed by HBD to TopClick (Canada) Inc. The TopClick website and
related assets were valued by the Board of Directors of HBD ("HBD Board") at
US$700,000 (all amounts are in United States currency unless otherwise
specified.) The HBD Board valued the forgiveness of a debt in the amount of
$480,000 in Canadian Dollars ("CDN$") at $315,789, at an exchange rate of
approximately 1.52 CDN$ to one United States dollar. The HBD Board believes that
total consideration for the sale of the TopClick website and related assets was,
therefore, approximately $1,015,789. As part of this transaction, TC agreed to
convert the shares of preferred stock held by shareholders of TopClick (Canada)
Inc. into shares of common stock of TC.
The September, 1998 transaction between the Company's wholly-owned subsidiary,
TC, and HBD was not the result of arm's-length negotiations. The TopClick
website and related assets were valued by the Board of Directors of HBD ("HBD
Board") at $700,000. The HBD Board valued the forgiveness of a debt in the
amount of CDN$480,000 at $315,789, at an exchange rate of 1.52 Canadian dollars
to one United States dollar. The HBD Board believes that total consideration for
the sale of the TopClick website and related assets was, therefore,
approximately $1,015,789. However, the real cost to HBD of designing, developing
and building the TopClick website, assembling the development personnel, and
developing a business plan and strategy for the TopClick website, during a
period of approximately 18 months, was approximately CDN$1,000,000. Therefore,
the sale resulted in a profit of approximately 50% to HBD. As specified
previously herein, a significant number of shares of HBD were owned by Chris
Lewis, the Chief Executive Officer of the Company.
At March 31, 1999, $36,000 in contract fees were accrued for services rendered
to TopClick Canada Inc. by Chris Lewis, the Chief Executive Officer of the
Company. At December 31, 1997, the Company had a note payable to Mr. Lewis
relating to the purchase of rights which he held in an oil and gas lease
property. The unsecured, non-interest bearing note in the amount of $7,500 was
due and payable January 31, 1998 and was paid in full on or about March 28,
1998.
Item 20. Market for Common Equity and Related Stockholder Matters
The Company participates in the OTC Bulletin Board, an electronic quotation
medium for securities traded outside the Nasdaq Stock Market. The Company's
common stock trades on the OTC Bulletin Board under the trading symbol "TOCK".
This market is extremely limited and the prices for the Company's common stock
quoted by brokers is not necessarily a reliable indication of the value of the
Company's common stock.
The following table sets forth the high and low bid prices for shares of the
Company's common stock for the periods noted, as reported by the National Daily
Quotation Services and the NASD Non-NASDAQ Bulletin Board. Quotations reflected
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
29
<PAGE>
Year Period High Low
1998 Fourth Quarter $0.2969 $0.25
1999 First Quarter $5.375 $0.2969
Second Quarter $4.500 $1.8125
Third Quarter $2.0625 $0.4062
After consummation of the financing transaction with Sonora and other parties,
as specified at length herein in the section entitled Development of the Company
and Related Party Transactions, Sonora conducted a six-week investor relations
promotional campaign which raised the Company's visibility to the retail
investment community, resulting in increased sales of the Company's common
stock. There are now approximately 2,000 holders of the Company's common stock.
There have been no cash dividends declared on the Company's common stock since
the Company's inception. Dividends will be declared at the sole discretion of
the Company's Board of Directors.
Item 21. Executive Compensation - Remuneration of Directors and Officers.
Any compensation received by officers, directors, and management personnel of
the Company will be determined from time to time by the Board of Directors of
the Company. Officers, directors, and management personnel of the Company will
be reimbursed for any out-of-pocket expenses incurred on behalf of the Company.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to the Company payable to
the Chief Executive Officer of the Company and the other executive officers of
the Company whose total annual salary and bonus is anticipated to exceed $50,000
during the year ending December 31, 1999. The Board of Directors of the Company
may adopt an incentive stock option plan for its executive officers which would
result in additional compensation.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
---------------------------------------
Name Other Annual All Other
and Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
- ----------------------------- ----- ------------ -------- ----------------- -------------------
<S> <C> <C> <S> <C> <C>
Chris Lewis, 1999 $144,000 None None Stock options*
President and Chief Executive
Officer
Terry Livingstone 1999 $100,000 None None Stock options*
Chief Operating Officer
</TABLE>
*Chris Lewis has been granted options to acquire 225,000 shares and Terry
Livingstone has been granted options to acquire 25,000 shares at $1.00 per
share.
Compensation of Directors. The Company anticipates that the Board of Directors
of the Company will approve a stock option and compensation plan for
non-executive directors (that is, directors who do not also serve as executive
officers of the Company). The Company anticipates that those non-executive
directors shall receive shares of the Company's $.001 par value common stock
worth $5,000 each quarter, and an additional $1,250 per quarter designated as a
"meeting attendance
30
<PAGE>
fee". Therefore, the total compensation paid to each non-executive director
shall be equivalent to $25,000 annually. The Company does not presently have any
non-executive directors.
Beginning in the first quarter of 1999, Chris Lewis, the President and a
director of the Company, has received $12,000 per month as compensation for his
services as a director and executive officer, and Mr. Livingstone has received
approximately $8,350 per month as compensation for his services as an executive
officer.
Item 22. Financial Statements
31
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL SHEETS
AS OF JUNE 30, 1999 AND 1998, AND FOR THE YEAR ENDED
JUNE 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO JUNE 30, 1998
(UNITED STATES DOLLARS)
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL SHEETS
AS OF JUNE 30, 1999 AND 1998, AND FOR THE YEAR ENDED
JUNE 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO JUNE 30, 1998
(UNITED STATES DOLLARS)
PAGE
REPORT OF INDEPENDENT AUDITORS
CONSOLIDATED BALANCE SHEETS 1
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 2
CONSOLIDATED STATEMENTS OF OPERATIONS 3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-13
<PAGE>
[LETTERHEAD OF BUCKLEY DODDS]
================================================================================
Chartered Accountants
REPORT OF INDEPENDENT AUDITORS
To The Board of Directors and Shareholders
Of Topclick International, Inc.
We have audited the accompanying consolidated balance sheet of Topclick
International, Inc. (Formerly Galveston Oil & Gas, Inc.) (a development stage
company) as at June 30, 1999 and 1998 and the related consolidated statements of
operations, shareholders' equity and cash flows for the year ended June 30, 1999
and for the period from May 15, 1998 (inception) to June 30, 1998. These
consolidated financial statements are the responsibility on the Company's
management. Our responsibility is to express an opinion on theses consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as at June 30, 1999 and 1998 and the consolidated results of its
operations, shareholders' equity and cash flows for the year ended June 30, 1999
and for the period from May 15, 1998 (inception) to June 30, 1998, in conformity
with generally accepted accounting principles in the United States of America.
Vancouver, BC /s/ Buckley Dodds
September 1, 1999 Chartered Accountants
<PAGE>
1
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
CURRENT
<S> <C> <C>
Cash (Note 4) $ 1,702,291 $ 55,737
Goods and Services Tax Receivable 16,414 --
----------- -----------
1,718,705 55,737
PROPERTY, PLANT AND EQUIPMENT ( Note 3) 78,324 --
SOFTWARE DEVELOPMENT COSTS (Note 5) 260,019 --
----------- -----------
$ 2,057,048 $ 55,737
=========== ===========
LIABILITIES
CURRENT
Accounts payable $ 23,569 $ 2,100
Due to director 450 100
----------- -----------
$ 24,019 $ 2,200
----------- -----------
SHAREHOLDERS' EQUITY
Preferred shares, $.001 par value, 20,000 shares
authorized, none issued and outstanding
Common shares, $.001 par value, 99,980,000 shares
authorized, 13,407,473 and 2,450,000 issued and outstanding 13,407 2,502
Additional paid - in capital 2,465,714 69,029
Cumulative translation adjustment 17,922 --
Deficit accumulated during development stage (464,014) (17,994)
----------- -----------
2,033,029 53,537
----------- -----------
$ 2,057,048 $ 55,737
=========== ===========
</TABLE>
<PAGE>
2
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil and Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston
TOPCLICK CORPORATION Oil & Gas, Inc.)
Common Common Common Common
Shares Stock Shares Stock
--------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, May 15, 1998 (inception) -- -- 2,450,000 $ 2,450
Net loss for the period -- -- -- --
--------------------------------------------------------
Balance, June 30, 1998 -- -- 2,450,000 2,450
Issued for acquisition of internet
Property 6,972,774 148,550 -- --
Issued for acquisition of Topclick
(Canada) Inc. 514,929 51,758 -- --
Issued for services rendered 20,000 20,000 -- --
Issued for cash 192,297 255,490 -- --
Issued and surrendered in
Acquisition of Topclick
International, Inc. (reverse merger) (7,700,000) (475,798) 8,800,000 8,800
Issued for cash -- -- 2,157,473 2,157
Cumulative translation adjustment -- -- -- --
Net loss for the period -- -- -- --
--------------------------------------------------------
Balance, June 30, 1999 -- $ -- 13,407,473 $ 13,407
--------------------------------------------------------
<CAPTION>
DEFICIT
ACCUMULATED TOTAL
ADDITIONAL CUMULATIVE DURING THE SHAREHOLDERS'
PAID-IN TRANSLATION DEVELOPMENT EQUITY
CAPITAL ADJUSTMENT STAGE (DEFICIT)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, May 15, 1998 (inception) $ 17,456 -- (16,583) 3,323
Net loss for the period -- -- (1,411) (1,411)
-------------------------------------------------------
Balance, June 30, 1998 17,456 -- (17,994) 1,912
Issued for acquisition of internet
Property -- -- -- 148,550
Issued for acquisition of Topclick
(Canada) Inc. -- -- -- 51,758
Issued for services rendered -- -- -- 20,000
Issued for cash -- -- -- 255,490
Issued and surrendered in
Acquisition of Topclick
International, Inc. (reverse merger) 450,415 -- 16,583 --
Issued for cash 1,997,843 -- -- 2,000,000
Cumulative translation adjustment -- 17,922 -- 17,922
Net loss for the period -- -- (462,603) (462,603)
-------------------------------------------------------
Balance, June 30, 1999 $ 2,465,714 $ 17,992 $ (464,014) $ 2,330,029
-------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements
<PAGE>
3
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
Period from
May 15,1998
Year ended (Inception)
June 30, to June 30,
1999 1998
EXPENSES
Contract fees $ 193,264 $ --
Accounting and legal 79,674 1,379
Consulting fees 33,789 --
Investment referral fees 27,394 --
Wages and benefits 25,643 --
Office expenses 22,174 --
Rent 22,127 --
Meals and entertainment 14,503 --
Internet services 13,210 --
Travel 12,014 --
Software 8,941 --
Telephone 8,524 --
Education 6,039 --
Automobile 4,775 --
Advertising 4,603 --
Depreciation 2,360 --
Utilities 1,759 --
Insurance 1,582 --
Interest and bank charges 305 32
- --------------------------------------------------------------------------------
482,680 1,411
LOSS FROM OPERATIONS (482,680) (1,411)
- --------------------------------------------------------------------------------
OTHER ITEMS
Interest income 24,055 --
Write-off deferred charges (3,978) --
- --------------------------------------------------------------------------------
20,077 --
NET LOSS FOR THE PERIOD $ (462,603) $ (1,411)
- --------------------------------------------------------------------------------
LOSS PER SHARE $ (0.04) $ (0.00)
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES 12,000,682 2,450,000
============ ============
<PAGE>
4
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
NET LOSS FOR THE PERIOD $(462,603) $ (1,411)
OTHER COMPREHENSVIE INCOME (LOSS) , Net of tax:
Foreign currency translation adjustments 17,922 --
- --------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD $(444,681) $ (1,411)
========= =========
<PAGE>
5
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss) for the period $ (462,603) $ (1,411)
Items not involving cash:
Write-off of deferred charges 3,978 --
Depreciation 2,360 --
Issuance of shares for contract fees 20,000 --
Changes in non-cash working capital --
Accounts payable 21,469 2,100
Goods and Services Tax receivable (16,414) --
Due to director 350 100
- ----------------------------------------------------------------------------------------------------------
(430,860) 789
FINANCING ACTIVITIES
Proceeds from Issuance of common stock 2,269,567 51,625
- ----------------------------------------------------------------------------------------------------------
2,269,567 --
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (90,759) --
Software development costs (101,394) --
- ----------------------------------------------------------------------------------------------------------
(192,153) --
INCREASE IN CASH 1,646,554 52,414
--------- -----------
CASH, BEGINNING OF PERIOD 55,737 3,323
--------- -----------
CASH, END OF PERIOD $ 1,702,291 $ 55,737
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
6
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
<S> <C> <C>
Interest Paid $ -- $ --
Income taxes paid -- --
- ---------------------------------------------------------------------------------------------------------------
$ -- $ --
- ---------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Non-Cash Investing and Financing Information
Acquisition of assets for issuance of common stock:
Software development costs $ 148,550 $ --
Topclick (Canada) Inc. 51,758 --
Issuance of common stock (200,308) --
- ---------------------------------------------------------------------------------------------------------------
$ -- $ --
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
7
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 BUSINESS DESCRIPTION
Topclick International, Inc. (formerly Galveston Oil & Gas, Inc. ) (a
development stage company), "the Company", was incorporated on October
3, 1996 under the laws of the state of Delaware in United States of
America. Pursuant to the agreement described in Note 7, the Company
had a change of control, as such, the nature of the business is
changed from development of oil and gas properties to the business of
operating an Internet Website.
Topclick International, Inc. purchased 100% of Topclick Corporation
pursuant to the stock exchange agreement dated February 10, 1999. This
has been accounted for as a reverse acquisition of the Company by
Topclick Corporation.
Topclick Corporation was incorporated under the laws of Delaware on
July 8, 1998. Effective July 8, 1998, Topclick Corporation acquired
100% of Topclick (Canada) Inc. which is a company under common control
and as such the business combination has been accounted for at
historical costs in a manner similar to that in a pooling of
interests.
Topclick (Canada) Inc. was incorporated under the laws of the Canada
Business Corporation Act and commenced operations (deemed date of
inception) on May 15, 1998.
In addition, Topclick Corporation purchased certain Internet assets
from Helpful by Design Inc. which is also under common control. This
has been accounted for at predecessor historical costs.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are expressed in U.S. Dollars,
have been prepared in accordance with accounting principles generally
accepted in United States and include the following significant
accounting policies:
Consolidation
The consolidated financial statements of the Company include the
accounts of the Company and the consolidated accounts of its
wholly-owned subsidiary Topclick Corporation. The consolidated
financial statements of Topclick Corporation also include accounts of
its wholly-owned subsidiary, Topclick (Canada) Inc. All significant
inter-company transactions have been eliminated.
As described in Note 7, Topclick International, Inc. acquired all of
the outstanding common shares of Topclick Corporation. For accounting
purposes, the acquisition has been treated as the acquisition of
Topclick International, Inc. with Topclick Corporation as the acquiror
(reverse acquisition). The historical financial statements prior to
February 10, 1999 are those of Topclick Corporation consolidated.
Pro-forma information giving effect to the acquisition as if the
acquisition took place May 15, 1998 is not presented as the effects
are immaterial.
i) The consolidated financial statements of the combined entities
are issued under the name of the legal parent (Topclick
International, Inc.) but are considered a continuation of the
financial statements of the legal subsidiary (Topclick
Corporation).
<PAGE>
8
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
ii) As Topclick Corporation is deemed to be the acquiror for
accounting purposes, its assets and liabilities are included in
the consolidated financial statements at their historical
carrying values in the accounts of Topclick International Inc.
Accounting Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles of United States of
America requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilites and disclosures
in the consolidated financial statements and the accompanying notes.
Actual results could differ from those estimates.
Property, plant and equipment
Property, plant and equipment are recorded at costs and are amortized
in the following manner:
Computers 30% declining balance
Furniture and equipment 20% declining balance
In the year of acquisition, depreciation is calculated at one-half of
the above-noted rates.
Software Development Costs
Software development costs represent costs relating to the development
of the Internet website. These costs will be amortized upon the
commercialization of the Internet website, over three years due to the
nature of business in the of software technology industry.
Loss Per Share
Loss per share is provided in accordance with the Statement of
Financial Accounting Standards No. 128 (SFAS), "Earnings Per Share".
Due to the Company's simple capital structure, only basic loss per
share is presented. Basic loss per share is computed by dividing loss
available to common shareholders by weighted average number of common
shares outstanding for the period.
Foreign currency translation
The Company uses the local currency (Canadian Dollars) as the
functional currency. Assets and liabilities dominated in the foreign
functional currency are translated at the exchange rate of the balance
sheet date. Translation adjustments are recorded as a separate
component of the shareholders' equity. Revenues and expenses
demoninated in foreign currency are translated at the weighted average
exchange for the period.
<PAGE>
9
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company accounts for income taxes using the liability method.
Under this method deferred income tax liabilities and assets are
computed based on the tax liability or benefit in future years of the
reversal of temporary differences in the recognition of income or
reduction of expenses between financial and tax reporting. Deferred
tax assets and/or liabilities are classified as current and noncurrent
based on the classification of the related asset or liability for
financial reporting purposes, or based on the expected reversal date
for deferred taxes that are not related to an asset or liability.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
NOTE 3 PROPERTY, PLANT AND EQUIPMENT
Accumulated Net Book
Cost Depreciation Value Depreciation
---------------------------------------------------------
Computer $67,166 $10,075 $57,091 $10,075
Furniture and
Equipment 23,593 2,360 21,233 2,360
-------------------------------------------------------
$90,759 $12,435 $78,324 $12,435
-------------------------------------------------------
During the year ended June 30, 1999, $10,075 of depreciation of the
computer was capitialized as software development costs.
NOTE 4 CASH
At June 30, 1999, approximately $1,667,370 of the total cash is
deposited with RBC Dominion Securities Limited (RBC). It carries
interest at 3 3/4 per annum. It is management's intention to utilize
this account as part of its operating bank account. RBC is Canada's
leader in the investment industry. It is the leading debt and equity
underwriter in Canada and is a member of the Royal Bank Financial
Group. The Royal Bank is Canada's premier global financial services
group with leading market share in personal and business banking,
corporate and investment banking, and wealth management.
<PAGE>
10
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 5 ACQUISITION OF SOFTWARE DEVELOPMENT COSTS (Continued)
a) Effective July 8, 1998 and pursuant to the terms of the
acquisition agreement dated September 15, 1998, Topclick
Corporation (the legal subsidiary) acquired the Internet property
from Helpful By Design Inc., a company under common control of a
controlling shareholder of Topclick Corporation. The
consideration given was 6,972,774 common shares. The software
development costs acquired by Topclick Corporation from Helpful
By Design Inc. are recorded at processor's costs of $148,550.
b) Pursuant to the same agreement as above, Topclick Corporation
acquired 100% of the outstanding shares of Topclick (Canada) Inc.
from Helpful by Design Inc. for the issuance of 514,929 common
shares of Topclick Corporation. The shares issued have been
recorded at the amount of the net assets of Topclick (Canada)
Inc. at the date of acquisition.
The net assets of Topclick (Canada) Inc. at date of acquisition
consists of the following:
Cash $ 37,158
Receivable 16,000
Accounts payable (1,400)
--------
$ 51,758
--------
The above transaction between entities under common control has
been accounted for at historical cost in a manner similar to that
in a pooling of interests.
NOTE 6 REVERSE MERGER
Pursuant to the stock exchange agreement dated February 10, 1999,
the Company issued eight common shares in exchange for every
seven common shares of Topclick Corporation. Therefore, at
February 23, 1999 (closing date), a total of 8,800,000 common
shares were issued by the Company in exchange for 7,700,000
outstanding common shares if Topclick Corporation.
As a result of the above transactions, the Company legally
controls Topclick Corporation. However, in substance, the
shareholders of Topclick Corporation control the Company with an
ownership of approximately 71% of its outstanding common shares.
NOTE 7 SHARES ISSUED FOR SERVICES RENDERED
During the year, Topclick Corporation (legal subsidiary) issued
20,000 common shares to an individual for the fair value of
services rendered in connection with conducting quality controls
to the internet website of Topclick (Canada) Inc. (its
wholly-owned subsidiary). The shares issued been recorded at the
value of the services rendered.
<PAGE>
11
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 8 FINANCIAL INSTRUMENTS
The Company's financial assets and liabilities consist of cash, Goods
Services Tax receivable, accounts payable, the terms and conditions of
which have been described in the preceding notes.
Credit risk arises from the potential that a debtor will fail to
perform its obligations. The Company is subject to credit risk through
its cash deposits. However, these cash deposits are placed in a
well-capitalized, high quality financial institution (Note 4).
Accordingly, concentrations of credit risk are considered to be
minimal.
Interest rate risk is the risk to the Company's earnings that would
arise from fluctuations in interest rates, and would depend of the
volatility of these rates. The Company's borrowings from external
parties is not substantial. Accordingly, its interest rate risk is
considered to be minimal.
Financial risk is the risk to the Company's earnings that would arise
from fluctuations in interest rates and foreign exchange rates, and
would depend on the volatility of these rates. The Company does not
use derivative instruments to reduce its exposure to interest and
foreign currency risk on its cash deposits held in Canadian funds.
NOTE 9 UNCERTAINTY DUE TO THE YEAR 2000 ISSUE (Unaudited)
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and
financial reporting may range from minor error to significant system
failure which could affect an entity's ability to conduct normal
business operations. Management believes they have taken appropriate
course of action to ensure that the Company's technologies are Year
2000 compliant. However, it is not possible to be certain that all
aspects of the Year 2000 issue effecting the entity, including those
related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.
<PAGE>
12
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 10 DEFERRED INCOME TAXES
Significant components of the Company's deferred income taxes and
liabilities at June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Deferred income tax asset
Net operating loss $(482,680) $ --
Other 20,077 --
--------- -----
462,603 --
Total deferred income tax asset
valuation allowance 462,603 --
--------- -----
Net deferred income tax liability $ -- $ --
--------- -----
Reconciliation's of the effective tax rate to the Canadian
statutory rate is as follows:
Tax expense at Canadian statutory rate 45.6% 45.6%
Change in valuation allowance (45.6%) (45.6%)
--------- -----
Effective income tax rate - % - %
--------- -----
</TABLE>
The company has Canadian net operating loss carryforwards of
approximately $462,603 that expire in 2006.
The Company operates its business in its Canadian subsidiary Topclick
(Canada) Inc. and as such has losses carried forward for Canadian
income tax purposes.
NOTE 11 CONTINGENCIES
The Company is the subject of a lawsuit by an individual who is
claiming ownership interest in common stock of Helpful By Design Inc.
(HBD). HBD sold certain assets, including a website to Topclick
Corporation. As described in note 6 there was a share exchange between
Topclick Corporation and the Company that resulted in the Company
legally controlling Topclick Corporation.
The individual has filed a lawsuit in the Supreme Court of British
Columbia seeking the force conversion of approximately 500,000 HBD
shares of its .001 par value common stock into shares of the Company's
.001 par value common stock.
It is not possible to estimate the amount of a contingent loss in
respect of this legal action. The impact on earnings per share is not
material.
<PAGE>
13
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 12 COMMITMENTS
The Company has commitments under certain contracts of employment and
consulting agreements as follows:
2000 $ 88,970
Further, contracts of employment and consulting agreements call for
the granting of stock options to the individuals under contract. The
option agreement have not been formally prepared and signed at June
30, 1999 as management is in the process of creating a formal Stock
Option Plan.
Options for the issuance of 776,000 shares of the company are
committed to be granted upon the creation of the Stock Option Plan at
a price less than $1.00 per share to be determined at the time of the
granting of the options.
NOTE 13 COMPARATIVE FIGURES
The comparative figures have been reclassified to conform with the
presentation adopted in the current period.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999 AND 1998, AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1999
(UNITED STATES DOLLARS)
Unaudited
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999 AND 1998, AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1999
(UNITED STATES DOLLARS)
Unaudited
NOTICE TO READER
CONSOLIDATED BALANCE SHEET PAGE 1
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY 2
CONSOLIDATED STATEMENT OF OPERATIONS 3
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS 4
CONSOLIDATED STATEMENT OF CASH FLOWS 5-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7-13
<PAGE>
NOTICE TO READER
We have compiled the consolidated balance sheet of Topclick International, Inc.
as at September 30, 1999 and 1998 and the consolidated statements of operations,
deficit and cash flows for the three months then ended, as well as the period
from May 15, 1998 (Inception) to September 30, 1999, from information provided
by management. We have not audited, reviewed or otherwise attempted to verify
the accuracy or completeness of such information. Readers are cautioned that
these statements may not be appropriate for their purposes.
These consolidated financial statements reflect all adjustments which management
considers necessary in order to make the financial statements not misleading.
Vancouver, BC. "BUCKLEY DODDS"
November 4, 1999 Chartered Accountants
1.
TOPCLICK INTERNATIONAL, INC.
<PAGE>
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
ASSETS
September 30, September 30,
1999 1998
CURRENT
<S> <C> <C>
Cash (Note 4) $ 1,398,427 $ 19,099
Goods and Services Tax Receivable 25,029 4,280
Prepaid rent 4,815 --
----------- -----------
1,428,271 23,379
PROPERTY, PLANT AND EQUIPMENT ( Note 3) 118,469 29,642
SOFTWARE DEVELOPMENT COSTS (Note 5) 303,521 --
----------- -----------
$ 1,850,261 $ 53,021
=========== ===========
LIABILITIES
CURRENT
Accounts payable $ 12,579 $ 4,453
----------- -----------
SHAREHOLDERS' EQUITY
Preferred shares, $.001 par value, 20,000 shares
authorized, none issued and outstanding
Common shares, $.001 par value, 99,980,000 shares
authorized, 13,407,473 and 2,450,000 issued and outstanding 13,407 2,450
Additional paid - in capital 2,465,714 66,198
Cumulative translation adjustment 27,562 --
Deficit accumulated during development stage (669,001) (20,080)
----------- -----------
1,837,682 48,568
----------- -----------
$ 1,850,261 $ 53,021
=========== ===========
</TABLE>
3.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 AND THE PERIOD FROM MAY 15, 1998 (INCEPTION)
TO SEPTEMBER 30, 1999
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
Period from
Three months Three months May 15, 1998
Ended ended (Inception)
September 30, September 30, to September 30,
1999 1998 1999
<S> <C> <C> <C>
EXPENSES
Contract fees $ 71,920 $ -- $ 265,184
Accounting and legal 26,726 3,519 107,779
Travel 21,691 -- 33,705
Advertising 20,001 -- 24,604
Wages and benefits 19,687 -- 45,330
Internet services 10,692 -- 23,902
Rent 10,152 -- 32,279
Securities filing fees 6,176 -- 6,176
Office expenses 5,813 -- 27,987
Meals and entertainment 3,254 -- 17,757
Telephone 2,166 -- 10,690
Consulting fees 2,007 -- 35,796
Depreciation 1,582 -- 3,942
Automobile 1,295 -- 6,070
Insurance 799 --
2,381
Interest and bank charges 370 57 707
Utilities 271 -- 2,030
Software 252 -- 9,193
Education 157 -- 6,196
------------
Investment referral fees -- -- 27,394
- ------------------------------------------------------------------------------------------------
205,011 3,576 689,103
LOSS FROM OPERATIONS (205,011) (3,576) (689,103)
- ------------------------------------------------------------------------------------------------
OTHER ITEMS
Interest income 24 79 24,080
Write-off deferred changes -- -- (3,978)
- ------------------------------------------------------------------------------------------------
24 3,497 20,102
NET LOSS FOR THE PERIOD $ (204,987) $ (3,497) (669,001)
- ------------------------------------------------------------------------------------------------
LOSS PER SHARE $ (0.01) $ (0.00)
------------
WEIGHTED AVERAGE SHARES 13,407,473 2,450,000
============ ============
</TABLE>
4.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 AND THE PERIOD FROM MAY 15, 1998 (INCEPTION)
TO SEPTEMBER 30, 1999
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
Period from
Three months Three months May 15, 1998
Ended ended (Inception)
September 30, September 30, to September 30,
1999 1998 1999
<S> <C> <C> <C>
NET LOSS FOR THE PERIOD $(204,987) $ (3,497) $(669,001)
OTHER COMPREHENSVIE INCOME (LOSS) , Net of tax:
Foreign currency translation adjustments 27,692 -- 27,692
- --------------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD $(177,295) $ (3,497) $(641,309)
========= ========= =========
</TABLE>
5.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 AND THE PERIOD FROM MAY 15, 1998 (INCEPTION)
TO SEPTEMBER 30, 1999
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
Period from
Three months Three months May 15, 1998
Ended ended (Inception)
September 30, September 30, to September 30,
1999 1998 1999
<S> <C> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss) for the period $ (204,987) $ (3,497) $ (669,001)
Items not involving cash:
Depreciation 1,582 -- 3,942
Write-off of deferred charges -- -- 3,978
Issuance of shares for contract fees -- -- 20,000
Changes in non-cash working capital --
Accounts payable 10,990 4,453 12,579
Goods and Services Tax receivable (8,615) -- (25,029)
Due to director (450) 100 --
Paid rent (4,815) -- (4,815)
- --------------------------------------------------------------------------------------------------------------------
(206,295) 1,056 (658,346)
FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 44,362 2,343,172
- --------------------------------------------------------------------------------------------------------------------
-- 44,362 2,343,172
INVESTING ACTIVITIES
Acquisition of property, plant
and equipment (47,183) (29,642) (137,942)
Software development costs (50,386) -- (151,780)
- --------------------------------------------------------------------------------------------------------------------
(97,569) (29,642) (289,722)
(DECREASE) INCREASE IN CASH (303,864) 15,776 1,395,104
CASH, BEGINNING OF PERIOD 1,702,291 3,323 3,323
----------- ----------- -----------
CASH, END OF PERIOD $ 1,398,427 $ 19,099 $ 1,398,427
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
6.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 AND THE PERIOD FROM MAY 15, 1998 (INCEPTION)
TO SEPTEMBER 30, 1999
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
Period from
Three months Three months May 15, 1998
Ended ended (Inception)
September 30, September 30, to September 30,
1999 1998 1999
<S> <C> <C> <C>
Interest Paid $ -- $ -- $ --
Income taxes paid -- -- --
$ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Non--Cash Investing and Financing Information
Acquisition of assets for issuance of common stock:
Software development costs $ -- $ -- $ 148,550
Topclick (Canada) Inc. -- -- 51,758
Issuance of common stock -- -- (200,308)
- --------------------------------------------------------------------------------------------------------------
$ -- $ -- $ --
</TABLE>
7.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
NOTE 1 BUSINESS DESCRIPTION
Topclick International, Inc. (formerly Galveston Oil & Gas, Inc. ) (a
development stage company), "the Company", was incorporated on October
3, 1996 under the laws of the state of Delaware in United States of
America. Pursuant to the agreement described in Note 7, the Company
had a change of control, as such, the nature of the business is
changed from development of oil and gas properties to the business of
operating an Internet Website.
Topclick International, Inc. purchased 100% of Topclick Corporation
pursuant to the stock exchange agreement dated February 10, 1999. This
has been accounted for as a reverse acquisition of the Company by
Topclick Corporation.
Topclick Corporation was incorporated under the laws of Delaware on
July 8, 1998. Effective July 8, 1998, Topclick Corporation acquired
100% of Topclick (Canada) Inc. which is a company under common control
and as such the business combination has been accounted for at
historical costs in a manner similar to that in a pooling of
interests.
Topclick (Canada) Inc. was incorporated under the laws of the Canada
Business Corporation Act and commenced operations (deemed date of
inception) on May 15, 1998.
In addition, Topclick Corporation purchased certain Internet assets
from Helpful by Design Inc. which is also under common control. This
has been accounted for at predecessor historical costs.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are expressed in U.S. Dollars,
have been prepared in accordance with accounting principles generally
accepted in United States and include the following significant
accounting policies:
Consolidation
The consolidated financial statements of the Company include the
accounts of the Company and the consolidated accounts of its
wholly-owned subsidiary Topclick Corporation. The consolidated
financial statements of Topclick Corporation also include accounts of
its wholly-owned subsidiary, Topclick (Canada) Inc. All significant
inter-company transactions have been eliminated.
As described in Note 7, Topclick International, Inc. acquired all of
the outstanding common shares of Topclick Corporation. For accounting
purposes, the acquisition has been treated as the acquisition of
Topclick International, Inc. with Topclick Corporation as the acquiror
(reverse acquisition). The historical financial statements prior to
February 10, 1999 are those of Topclick Corporation consolidated.
Pro-forma information giving effect to the acquisition as if the
acquisition took place May 15, 1998 is not presented as the effects
are immaterial.
i) The consolidated financial statements of the combined entities
are issued under the name of the legal parent (Topclick
International, Inc.) but are considered a continuation of the
financial statements of the legal subsidiary (Topclick
Corporation).
8.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to reader)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
ii) As Topclick Corporation is deemed to be the acquiror for
accounting purposes, its assets and liabilities are included in
the consolidated financial statements at their historical
carrying values in the accounts of Topclick International Inc.
Accounting Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles of United States of
America requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilites and disclosures
in the consolidated financial statements and the accompanying notes.
Actual results could differ from those estimates.
Property, plant and equipment Property, plant and equipment are
recorded at costs and are amortized in the following manner:
Computers 30% declining balance
Furniture and equipment 20% declining balance
In the year of acquisition, depreciation is calculated at one-half of
the above-noted rates.
Software Development
Costs Software development costs represent costs relating to the
development of the Internet website. These costs will be amortized
upon the commercialization of the Internet website, over three years
due to the nature of business in the of software technology industry.
Loss Per Share
Loss per share is provided in accordance with the Statement of
Financial Accounting Standards No. 128 (SFAS), "Earnings Per Share".
Due to the Company's simple capital structure, only basic loss per
share is presented. Basic loss per share is computed by dividing loss
available to common shareholders by weighted average number of common
shares outstanding for the period.
Foreign currency translation
The Company uses the local currency (Canadian Dollars) as the
functional currency. Assets and liabilities dominated in the foreign
functional currency are translated at the exchange rate of the balance
sheet date. Translation adjustments are recorded as a separate
component of the shareholders' equity. Revenues and expenses
demoninated in foreign currency are translated at the weighted average
exchange for the period.
9.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice To Reader)
NOTE 2 SIGNIFICANT ACCOUTING POLICIES (Continued)
Income Taxes
The Company accounts for income taxes using the liability method.
Under this method deferred income tax liabilities and assets are
computed based on the tax liability or benefit in future years of the
reversal of temporary differences in the recognition of income or
reduction of expenses between financial and tax reporting. Deferred
tax assets and/or liabilities are classified as current and noncurrent
based on the classification of the related asset or liability for
financial reporting purposes, or based on the expected reversal date
for deferred taxes that are not related to an asset or liability.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
NOTE 3 PROPERTY, PLANT AND EQUIPMENT
Accumulated Net Book
Cost Depreciation Value Depreciation
---- ------------ ----- ------------
Computer $ 93,765 $ 15,502 $ 78,263 $ 1,281
Furniture and
Equipment 30,815 3,637 27,178 301
Leasehold 13,362 334 13,028 --
-------- -------- ----------------------
$137,942 $ 19,473 $118,469 $ 1,582
-------- -------- -------- --------
During the three months ended September 30, 1999, $1,281 of
depreciation of the computer was capitialized as software development
costs.
NOTE 4 CASH
At September 30, 1999, approximately $1,398,427 of the total cash is
deposited with RBC Dominion Securities Limited (RBC). It carries
interest at 3 3/4 per annum. It is management's intention to utilize
this account as part of its operating bank account. RBC is Canada's
leader in the investment industry. It is the leading debt and equity
underwriter in Canada and is a member of the Royal Bank Financial
Group. The Royal Bank is Canada's premier global financial services
group with leading market share in personal and business banking,
corporate and investment banking, and wealth management.
10.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
NOTE 5 ACQUISITION OF SOFTWARE DEVELOPMENT COSTS (Continued)
a) Effective July 8, 1998 and pursuant to the terms of the
acquisition agreement dated September 15, 1998, Topclick
Corporation (the legal subsidiary) acquired the Internet property
from Helpful By Design Inc., a company under common control of a
controlling shareholder of Topclick Corporation. The
consideration given was 6,972,774 common shares. The software
development costs acquired by Topclick Corporation from Helpful
By Design Inc. are recorded at processor's costs of $148,550.
b) Pursuant to the same agreement as above, Topclick Corporation
acquired 100% of the outstanding shares of Topclick (Canada) Inc.
from Helpful by Design Inc. for the issuance of 514,929 common
shares of Topclick Corporation. The shares issued have been
recorded at the amount of the net assets of Topclick (Canada)
Inc. at the date of acquisition.
The net assets of Topclick (Canada) Inc. at date of acquisition
consists of the following:
Cash $ 37,158
Receivable 16,000
Accounts payable (1,400)
--------
$ 51,758
--------
The above transaction between entities under common control has
been accounted for at historical cost in a manner similar to that
in a pooling of interests.
NOTE 6 REVERSE MERGER
Pursuant to the stock exchange agreement dated February 10, 1999, the
Company issued eight common sharesin exchange for every seven common
shares of Topclick Corporation. Therefore, at February 23, 1999
(closing date), a total of 8,800,000 common shares were issued by the
Company in exchange for 7,700,000 outstanding common shares if
Topclick Corporation.
As a result of the above transactions, the Company legally controls
Topclick Corporation. However, in substance, the shareholders of
Topclick Corporation control the Company with an ownership of
approximately 71% of its outstanding common shares.
11.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
NOTE 7 FINANCIAL INSTRUMENTS
The Company's financial assets and liabilities consist of cash, Goods
Services Tax receivable, accounts payable, the terms and conditions of
which have been described in the preceding notes.
Credit risk arises from the potential that a debtor will fail to
perform its obligations. The Company is subject to credit risk through
its cash deposits. However, these cash deposits are placed in a
well-capitalized, high quality financial institution (Note 4).
Accordingly, concentrations of credit risk are considered to be
minimal.
Interest rate risk is the risk to the Company's earnings that would
arise from fluctuations in interest rates, and would depend of the
volatility of these rates. The Company's borrowings from external
parties is not substantial. Accordingly, its interest rate risk is
considered to be minimal.
Financial risk is the risk to the Company's earnings that would arise
from fluctuations in interest rates and foreign exchange rates, and
would depend on the volatility of these rates. The Company does not
use derivative instruments to reduce its exposure to interest and
foreign currency risk on its cash deposits held in Canadian funds.
NOTE 8 UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and
financial reporting may range from minor error to significant system
failure which could affect an entity's ability to conduct normal
business operations. Management believes they have taken appropriate
course of action to ensure that the Company's technologies are Year
2000 compliant. However, it is not possible to be certain that all
aspects of the Year 2000 issue effecting the entity, including those
related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.
12.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to reader)
NOTE 9 DEFERRED INCOME TAXES
Significant components of the Company's deferred income taxes and liabilities at
September 30, 1999 and 1998 are as follows:
September 30, September 30,
1999 1998
Deferred income tax asset
Net operating loss $(687,691) $ --
Other 18,690 --
--------- ---------
Total deferred income tax asset (669,001) --
valuation allowance 669,001 --
--------- ---------
Net deferred income tax liability $ -- $ --
--------- ---------
Reconciliation's of the effective tax rate to the Canadian
statutory rate is as follows:
Tax expense at Canadian statutory rate 45.6% 45.6%
Change in valuation allowance (45.6%) (45.6%)
--------- ---------
Effective income tax rate -- % -- %
--------- ---------
The company has Canadian net operating loss carryforwards of
approximately $462,603 that expire in 2006.
The Company operates its business in its Canadian subsidiary Topclick
(Canada) Inc. and as such has losses carried forward for Canadian
income tax purposes.
NOTE 10 CONTINGENCIES
The Company is the subject of a lawsuit by an individual who is
claiming ownership interest in common stock of Helpful By Design Inc.
(HBD). HBD sold certain assets, including a website to Topclick
Corporation. As described in note 6 there was a share exchange between
Topclick Corporation and the Company that resulted in the Company
legally controlling Topclick Corporation.
The individual has filed a lawsuit in the Supreme Court of British
Columbia seeking the force conversion of approximately 500,000 HBD
shares of its .001 par value common stock into shares of the Company's
.001 par value common stock.
It is not possible to estimate the amount of a contingent loss in
respect of this legal action. The impact on earnings per share is not
material.
13.
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to reader)
NOTE 11 COMMITMENTS
The Company has commitments under certain contracts of employment and
consulting agreements as follows:
2000 $ 88,970
Further, contracts of employment and consulting agreements call for
the granting of stock options to the individuals under contract. The
option agreement have not been formally prepared and signed at
September 30, 1999 as management is in the process of creating a
formal Stock Option Plan.
Options for the issuance of 776,000 shares of the company are
committed to be granted upon the creation of the Stock Option Plan at
a price less than $1.00 per share to be determined at the time of the
granting of the options.
NOTE 12 COMPARATIVE FIGURES
The comparative figures have been reclassified to conform with the
presentation adopted in the current period.
<PAGE>
Item 23. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby has
been passed upon for the Company by Stepp & Beauchamp LLP, located in Newport
Beach, California.
EXPERTS
The financial statements of the Company at December 31, 1998, and 1997, and for
the years then ended, and for the period from incorporation to December 31,
1998, and for the interim period through September 30, 1999, appearing in this
Prospectus and Registration Statement have been audited by Buckley Dodds,
Chartered Accountants, and are included in reliance upon such reports given upon
the authority of Buckley Dodds as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form SB-2 with the Commission
pursuant to the 1933 Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement on Form SB-2 and the exhibits and schedules to the Registration
Statement on Form SB-2. For further information with respect to the Company and
the Common Stock offered hereby, reference is made to the Registration Statement
on Form SB-2 and the exhibits and schedules filed as a part of the Registration
Statement on Form SB-2. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete, and reference is made in each instance to the copy of such contract or
document filed as an exhibit to the Registration Statement on Form SB-2. Each
such statement is qualified in all respects by such reference to such exhibit.
On or about April 23, 1999, the Company filed a Registration Statement on Form
10-SB, which is currently under review by the Commission. Once or about June 22,
1999, the Company became a reporting company with the Commission, and will
hereafter provide an annual report to its security holders, which will include
audited financial statements. The public may read and copy any materials filed
with the Commission, including the Company's Registration Statement on Form SB-2
and the Registration Statement on Form 10-SB, and all exhibits and schedules
thereto, at the Commission's Public Reference Room at 450 Fifth Street N.W.,
Washington, D.C. 20549. Copies of all or any part thereof may be obtained from
such office after payment of fees prescribed by the Securities and Exchange
Commission. The public may also obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Commission. The address of that site is
http://www.sec.gov. The Company currently maintains its own Internet address at
www.topclick.com.
32
<PAGE>
TABLE OF CONTENTS
Item Number Caption Page
- ----------- ------- ----
3. Summary Information..................................................4
Risk Factors.........................................................5
Limited Operating History...................................6
Competition.................................................6
Third Party Reliance .......................................7
Business Interruption ..................................7
Reliance on Growth of the Internet..........................7
Uninsured Losses; Acts of God...............................7
Regulatory and Related Influences...........................8
Market Forces...............................................8
Growth of Business..........................................8
Future Capital Needs and Uncertainty of
Additional Funding..........................................8
Limited Protection of Proprietary Technology................9
Rapid Technological Change..................................9
Key Personnel..............................................10
Conflicts of Interest......................................10
Dependence on Management...................................10
Limitation of Liability of Officers and Directors..........10
Penny Stock Regulation.....................................11
Control by Existing Shareholders; Anti-Takeover
Provisions.................................................11
Securities Market Factors..................................11
No Foreseeable Dividends...................................11
No Assurances of Revenue or Operating Profits..............11
Federal Income Tax Consequences............................11
Impact of the Year 2000 (Y2K Issues).......................11
Third Party Y2K Risks to the Company.......................12
4. Use of Proceeds.....................................................12
5. Determination of Offering Price.....................................12
6. Dilution............................................................13
7. Selling Security Holders............................................13
8. Plan of Distribution................................................16
9. Legal Proceedings...................................................18
10. Directors, Executive Officers, Promoters and Control Persons........18
11. Security Ownership of Certain Beneficial Owners and Management......19
12. Description of Securities...........................................19
13. Interest of Named Experts and Counsel...............................20
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities..........................................20
15. Organization Within Last Five Years.................................20
16. Description of Business.............................................20
17. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................22
18. Description of Property.............................................26
19. Certain Relationships and Related Transactions ...............27
20. Market for Common Equity and Related Stockholder Matters............28
21. Executive Compensation..............................................29
22. Financial Statements................................................30
23. Changes in and Disagreements with Accountants on Accounting
33
<PAGE>
and Financial Disclosure............................................30
Legal Matters.......................................................30
Experts.............................................................30
Additional Information..............................................30
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Article Seventh of the Certificate of Incorporation of the Company provides,
among other things, that directors of the Company shall not be personally liable
to the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of such director's
duty of loyalty to the Company or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) liability for unlawful payments of dividends or unlawful stock
purchase or redemption by the corporation; or (iv) for any transaction from
which such director derived any improper personal benefit. Accordingly, the
directors of the Company may have no liability to the shareholders of the
Company for any mistakes or errors of judgment or for any act of omission,
unless such act or omission involves intentional misconduct, fraud, or a knowing
violation of law or results in unlawful distributions to the shareholders of the
Company.
There are no indemnification provisions in the Company's Certificate of
Incorporation regarding officers of the Company. However, the Company
anticipates that it will enter into indemnification agreements with each of its
executive officers pursuant to which the Company will agree to indemnify each
such person for all expenses and liabilities, including criminal monetary
judgments, penalties and fines, incurred by such person in connection with any
criminal or civil action brought or threatened against such person by reason of
such person being or having been an officer or director or employee of the
Company. In order to be entitled to indemnification by the Company, such person
must have acted in good faith and in a manner such person believed to be in the
best interests of the Company and, with respect to criminal actions, such person
must have had no reasonable cause to believe his or her conduct was unlawful.
Item 25. Other Expenses of Issuance and Distribution
The Company will pay all expenses in connection with the registration and sale
of the Shares, except any selling commissions or discounts allocable to sales of
the Shares, fees and disbursements of counsel and other representatives of the
Selling Stockholders, and any stock transfer taxes payable by reason of any such
sale. The estimated expenses of issuance and distribution are set forth below.
Registration Fees Approximately $4,633.41
Transfer Agent Fees Approximately $2,500.00
Costs of Printing and Engraving Approximately $300.00
Legal Fees Approximately $15,000.00
Accounting Fees Approximately $7,500.00
Item 26. Recent Sales of Unregistered Securities
There have been no sales of unregistered securities within the last three (3)
years which would be required to be disclosed pursuant to Item 701 of Regulation
S-B, except for the following:
On or about January 30, 1999, the Company sold 4,912,500 shares of its $.001 par
value common stock for $0.20 per share. The shares were issued in reliance upon
the exemption from the registration requirements of the Securities Act of 1933
set forth in Section 3(b) of that act and Rule 504 of Regulation D promulgated
by the Securities and Exchange Commission. The offering price for the shares was
arbitrarily set by the Company and had no relationship to assets, book value,
revenues
34
<PAGE>
or other established criteria of value. The gross proceeds to the Company were
$982,500. The Company used $150,000 of these funds to repay an outstanding loan
of $150,000 from a group of investors represented by Sonora Capital Corporation,
a British Columbia corporation.
On or about March 28, 1999, the Company sold 400,000 shares of its $0.001 par
value common stock for $2.50 per share. The shares were issued in reliance upon
the exemption from the registration requirements of the Securities Act of 1933
set forth in Regulation S promulgated by the Securities and Exchange Commission.
Specifically, the offer was made to "non U.S. persons outside the United States
of America", as that term is defined under applicable federal and state
securities laws. The offering price for the shares was arbitrarily set by the
Company and had no relationship to assets, book value, revenues or other
established criteria of value. The net proceeds to the Company were $1,000,000.
Item 27. Exhibits.
Copies of the following documents are filed with this Amendment No. 2 to
Registration Statement on Form SB-2, as exhibits:
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation*
(Charter Document)
3.2 Amendment to Certificate of Incorporation*
(Charter Document)
3.3 Bylaws*
5. Opinion Re: Legality*
8. Opinion Re: Tax Matters (not applicable)*
10.1 Financing Agreement*
(material contract)
10.2 Frontier GlobalCenter, Inc. Agreement*
(material contract)
11. Statement Re: Computation of Per Share Earnings*
15. Letter on Unaudited Interim Financial Information*
21. Subsidiaries of the Registrant*
23.1 Consent of Auditors*
23.2 Consent of Counsel*
24. Power of Attorney*
27. Financial Data Schedule*
*Previously filed as exhibits to Registration Statement on Form SB-2.
35
<PAGE>
Item 28. Undertakings.
A. Insofar as indemnification for liabilities arising under the 1933 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 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the 1933
Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) (Section 230.424(b) of Regulation S-B) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any additional or changed material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933 Act, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and authorized this
Amendment No. 2 to the Registration Statement on Form SB-2 to be signed on its
behalf by the undersigned, in the City of Vancouver, British Columbia, on
December 13, 1999.
TopClick International, Inc.,
a Delaware corporation
By: /s/ Chris Lewis
-------------------
Its: President
36
<PAGE>
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
By: /s/ Terry Livingstone
-------------------------
Terry Livingstone
Its: Chief Operating Officer
Date: December 13, 1999
By: /s/ Chris Lewis
-------------------------
Chris Lewis
Its: Director
Date: December 13, 1999
