SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934, for the fiscal year ended June 30, 1999
Commission File No. _____
TOPCLICK INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 330755473
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Suite 200, 1636 West 2nd Street, V6J 1H4
Vancouver, British Columbia, Canada (Zip Code)
(Address of registrant's principal executive offices)
(604) 737-1127
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant (1) has filed all reports required by Section 13 or
15(d) of the Securities Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: No revenues.
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act). As of September 29, 1999, approximately $2,976,888.
The number of shares outstanding of the issuer's only class of Common Stock,
$.001 par value, was 13,407,473 on July 1, 1999.
Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.
Transitional Small Business Disclosure format (check one):
Yes [_] No [X ]
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PART I.
Item 1. 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 more completely under the caption "Development of the Company" at Item
16 of this Prospectus, 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 ("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.
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On or about January 30, 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 the Company's
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission on July 8, 1999. 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 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 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. Through its "top of the web" reference structure the Company sent many
customers to popular destination sites like eBay, PCQuote, Hotmail, MotleyFool,
Chat Planet and E-trade.
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 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.
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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.
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.
Comparison of Results of Operations at June 30, 1999 and June 30, 1998. The
Company's available cash increased from $55,737 at June 30, 1998 to $1,702,291
as a result of the Financing Agreement between TC, the Company, Sonora, HBD, and
other parties, as specified more completely above. As the Company's financial
statements specify, the Company uses Canadian Dollars as the functional
currency, and assets and liabilities denominated in Canadian Dollars are
translated into United States Dollars at the exchange rate of the respective
balance sheet dates. Revenues and expenses denominated in foreign currency are
translated at the weighted average exchange rate for the periods specified.
These foreign currency translation adjustments resulted in a gain of $17,922,
net of taxes, for the year ended June 30, 1999, as compared to no gain or loss
to due foreign currency translation adjustments for the period from May 15, 1998
(date of inception) to June 30, 1998.
At June 30, 1999, approximately $1,667,370 of the Company's total cash was
deposited with RBC Dominion Securities Limited ("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.
The Company had an accumulated deficit of $464,014 as at June 30, 1999, as
compared to an accumulated deficit of $17,994 as at June 30, 1998, with a
corresponding net loss of $462,603 for the year ended June 30, 1999, as compared
to a net loss of $1,411 for the period May 15, 1998 (date of inception) to June
30, 1998. Most of this loss accrued from software development costs, which
increased from zero during the period from May 15, 1998 (inception) to June 30,
1998, to $260,019 for the year ended June 30, 1999. These software development
costs represent costs relating to the development of the Company's Internet
website and related services.
The Company's expenditures for computer equipment increased from zero during the
period May 15, 1998 (date of inception) to $67,166 during the year ended June
30, 1999. The Company's expenditures for furniture and office equipment also
increased from zero during the period May 15, 1998 (date of inception) to
$23,593 during the year ended June 30, 1999. During the year ended June 30,
1999, $10,075 of depreciation of the Company's computer equipment was
capitalized as software development costs.
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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; Jason
Wilkes, Vice President in charge of business development; and Rory Wadham, lead
programmer.
Item 2. Description of Property.
Property held by the Company. As of the date specified in the following table,
the Company held the following property:
================================================================================
Description of 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 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.
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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.
Item 3. Legal Proceedings
Except as specified below, there are no legal actions pending against the
Company nor are any such legal actions contemplated.
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 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
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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.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
PART II.
Item 5. 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".
The Company's common stock has closed at a low of approximately 0.38 and a high
of 8.125 for the 52-week period ending September 30, 1999. 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.
There are 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 6. Plan of Operation
THIS REPORT SPECIFIES FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE COMPANY
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E
OF THE SECURITIES EXCHANGE ACT OF 1934 ("FORWARD-LOOKING STATEMENTS") INCLUDING,
WITHOUT LIMITATION, FORWARD-LOOKING STATEMENTS REGARDING THE COMPANY'S
EXPECTATIONS, BELIEFS, INTENTIONS AND FUTURE STRATEGIES. FORWARD-LOOKING
STATEMENTS ARE STATEMENTS THAT ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE
NOT BASED ON HISTORICAL FACTS. FORWARD- LOOKING STATEMENTS MAY BE IDENTIFIED BY
THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS "COULD", "MAY", "WILL",
"EXPECT", "SHALL", "ESTIMATE", "ANTICIPATE", "PROBABLE", "POSSIBLE", "SHOULD",
"CONTINUE", "INTEND" OR SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE
OF THOSE TERMS. THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THIS REPORT HAVE
BEEN COMPILED BY MANAGEMENT OF THE COMPANY ON THE BASIS OF ASSUMPTIONS MADE BY
MANAGEMENT AND CONSIDERED BY MANAGEMENT TO BE REASONABLE. FUTURE OPERATING
RESULTS OF THE COMPANY, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO
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REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE INFERRED FROM THOSE
FORWARD-LOOKING STATEMENTS.
THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN
THIS REPORT REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY
AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER
CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA AND
OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM AND
AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT
THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM
ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON
THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. IN ADDITION, THOSE
FORWARD-LOOKING STATEMENTS HAVE BEEN COMPILED AS OF THE DATE OF THIS REPORT AND
SHOULD BE EVALUATED WITH CONSIDERATION OF ANY CHANGES OCCURRING AFTER THE DATE
OF THIS REPORT. NO ASSURANCE CAN BE GIVEN THAT ANY OF THE ASSUMPTIONS RELATING
TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THIS REPORT ARE ACCURATE, AND THE
COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.
Overview. The Company's primary source of revenue and only external source of
liquidity is the sale of stock and financing from third party lenders. On or
about January 30, 1999, the Company entered into a Financing Agreement which
provided the Company with $2,000,000. 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. The Company has not yet realized any
revenue from operations.
Company's Plan of Operation for Next 12 Months. 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.
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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 encyclopedia of quality Internet
guides. The Company believes that it will continue to develop increased website
traffic and bases its anticipated increase in monthly traffic volumes, in part,
on the increase of its website traffic by 1200 percent in the first quarter of
1999, and on 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. 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 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. 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.
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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 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.
According to reports in trade magazines such as Computer Intelligence, 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.
10
<PAGE>
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.
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 (CDN$600 is
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.
Employees. During the next 12 months, depending on the success of the Company's
market expansion plan, the Company may be required to hire up to 20 additional
employees; however, the Company is not able to provide a reasonable estimate of
the number of such additional employees which may be required at this time.
11
<PAGE>
Item 7. Financial Statements
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Annual Report on Form 10-KSB.
Item 8. 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.
PART III.
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The directors and principal executive officers of the Company are as specified
on the following table:
<TABLE>
<CAPTION>
==================================================================================================
Name Age Position
- - --------------------------------------------------------------------------------------------------
<S> <C> <C>
President, Chief Executive Officer, Chairman of the
Chris Lewis 42 Board of Directors.
- - --------------------------------------------------------------------------------------------------
Terry Livingstone 53 Chief Operating Officer
- - --------------------------------------------------------------------------------------------------
</TABLE>
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.
12
<PAGE>
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 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 10. Executive Compensation.
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 $50,000
during the year ending December 31, 1999. The Board of Directors of the Company
may adopt an incentive stock option plan for its executive officers which would
result in additional compensation.
13
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
---------------------------------------
Name Other Annual All Other
and Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
- - ---------------------------------- ------ -------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Chris Lewis, 1999 $144,000 None None None
President and Chief Executive
Officer
Terry Livingstone 1999 $100,000 None None None
Chief Operating Officer
</TABLE>
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 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. Neither Mr. Lewis nor Mr. Livingstone has earned, or is entitled to,
any stock options, stock appreciation rights, stock-based compensation or other
forms of non-cash compensation in lieu of a portion of this anticipated annual
compensation.
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 June 30, 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.
$.001 Par Value Terry Livingstone Chief Operating Officer; 1.75%
Common Stock 1636 W. 2nd St. 229,675 common shares
Vancouver, B.C.
$.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.
14
<PAGE>
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.
Item 12. 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.
15
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
3.1 Certificate of Incorporation
(Charter Document)*
3.2 Amendment to Certificate of Incorporation
(Charter Document)*
3.3 Bylaws*
4. Instruments Defining the Rights of Holders (not applicable)
9. Voting Trust Agreement - Not Applicable
10.1 Financing Agreement
(material contract)**
10.2 Frontier GlobalCenter, Inc. Agreement
(material contract)*
11. Statement Re: Computation of Per Share Earnings(Loss)
15. Letter on Unaudited Interim Financial Information
18. Letter on Change in Accounting Principles (Not applicable)
19. Reports Furnished to Security Holders (Not applicable)
21. Subsidiaries of the Registrant
22. Published Report Regarding Matters Submitted to Vote (not applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel*
24. Power of Attorney is included on Signature Page*
27. Financial Data Schedule*
99. Additional Exhibits (not applicable)
16
<PAGE>
*Previously filed as Exhibits to Registration Statement on Form SB-2 filed with
the Commission on July 8, 1999.
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K with the Commission.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vancouver, British Columbia, on October 8, 1999.
TopClick International, Inc.,
a Delaware corporation
By: /s/ Chris Lewis
------------------------
Its: President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Chris Lewis
------------------------
Director
17
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
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 STATEMENTS
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 SHEET 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>
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
September 1, 1999 Chartered Accountants
1.
<PAGE>
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>
2.
See accompanying notes to the consolidated financial statements
<PAGE>
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>
3.
<PAGE>
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
============ ============
4.
<PAGE>
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)
========= =========
5.
<PAGE>
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>
6.
<PAGE>
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>
7.
<PAGE>
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).
8.
<PAGE>
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.
9.
<PAGE>
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 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 $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.
10.
<PAGE>
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.
11.
<PAGE>
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.
12.
<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.
13.
<PAGE>
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.
BUCKLEY DODDS
================================================================================
Chartered Accountants Suite 1140-1185 West Georgia Street
Vancouver, B.C. Canada V6E 4E6
Telephone: (604) 688-7227
Fax: (604) 681-7716
TOPCLICK INTERNATIONAL, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (LOSS)
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30 1998
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.
Basic loss per share is as follows:
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
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
=========== ==========
/s/ Buckley Dodds
----------------------
Buckley Dodds
Chartered Accountants
[LETTERHEAD OF BUCKLEY DODDS]
October 5, 1999
Securities Exchange Commission
Dear Sirs:
We refer to the Annual Report on Form 10-KSB of Topclick International, Inc for
the year ended June 30, 1999.
We consent to the use in the above mentioned Annual Report on Form 10-KSB of our
Auditor's Report dated September 1, 1999, to the directors of Total Image Copier
Products Limited, on the financial statements for the year ended June 30, 1999
and the period from May 15, 1998 to June 30, 1998.
We report that we have read the Form 10-KSB and have no reason to believe that
there are any misrepresentations in the information contained therein that is
derived form the financial statements upon which we have reported or that is
within our knowledge as a result of our audit or review of these financial
statements.
This letter is provided solely for the purpose of assisting the securities
regulatory authority to which it is addressed in discharging their
responsibilities and should not be relied on for any other purpose.
Yours truly,
/s/ Buckley Dodds
Buckley Dodds
Chartered Accountants
