SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1
To
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
TOPCLICK INTERNATIONAL, INC.,
a Delaware corporation
(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, 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)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of Each Exchange on which
to be so registered: each class is to be registered:
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par value $.001
(Title of Class)
Copies to:
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile 949.660.9010
Page 1 of 31
Exhibit Index is specified on Page 17
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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 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.
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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 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 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
keyword-search the guide site and, if a match to their search exists, that are
taken directly to the Subject level of the site. If there is no match, users are
taken to an enhanced search page featuring 9 of the top search engines or
indexes.
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
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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.
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; Jason
Wilkes, Vice President in charge of business development; and Rory Wadham, lead
programmer.
Item 2. 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
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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 encyclopedia of quality Internet
guides. The Company believes that by December, 1999, it will be capable of
developing monthly traffic volumes of 30 million unique searches (that is,
separate and distinct, individual search requests) and 90 million page views and
achieving market acceptance and name recognition as a provider of packaged top
guide information. The Company bases its monthly traffic volume projections, in
part, on the increase of its website traffic by 1200 percent in the first
quarter of 1999, 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. By December, 2000, the Company hopes that it will have
created a top 10 portal site and top 10 site by visitor traffic. 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. The Company plans to advertise in the top Internet and
computer industry publications, such as Internet World, Internet Users, and PC
Magazine, as well as in major mainstream newspapers, magazines, and other media.
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
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businesses, with the intention of placing a link to the TopClick website 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.
The Company may decide to provide free content enhancement and free advertising
on a by-subject approach to the top Internet guides. For example, the Company
may provide the Yahoo Golf website with links and coverage on the Company's Golf
Guide page. The Company anticipates entering into certain strategic partnership
agreements to provide content and links to existing high-value news information
providers, such as ESPN in its "sports" section and PointCast in its "business"
section. The Company further intends to promote its products and services by
developing on-site competitive games and contests.
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 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 Company anticipates increasing its top sites to 25,000
top sites from 5,000 top sites during the next 12 months. The TopClick guide
will be offered free to users, strategic partners (such as existing Internet
guides) and other media partners.
The Company will retain records of and analyze information areas that users
visit most frequently on its website, allowing the Company to develop specific
indexes and guides based on user demand.
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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
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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 (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 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.
Results of Operations. The Company has not yet realized any revenue from
operations. In the 9-month period ended March 31, 1999, the Company expended
$338,547 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 of the Company's
Internet website. During the same period, the Company capitalized $6,881 of
depreciation of its computer equipment as software development costs.
The Company expended $87,675 in the 9-month period ending March 31, 1999 for the
acquisition of property and equipment. The Company experienced a net loss from
its operating activities of $259,748 for the 9-month period ending March 31,
1999.
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At March 31, 1999, the Company had deposited approximately $1,923,144 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 4. 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 42.02%
Common Stock named executive
officers as a group
</TABLE>
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("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.
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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 5. 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
Chris Lewis 42 Board 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
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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 coordination, 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 6. 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 $50,000
during the year ending December 31, 1999. The Board of Directors of the Company
may adopt an incentive stock option plan for its executive officers which would
result in additional compensation.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
---------------------------------------
<TABLE>
<CAPTION>
Name Other Annual All Other
and Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
- ------------------------ ---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Chris Lewis, 1999 $144,000 None None Stock options
President and Chief (as specified below)
Executive Officer
Terry Livingstone 1999 $100,000 None None Stock options
Chief Operating Officer (as specified below)
</TABLE>
Compensation of Directors. As of April 23, 1999, the Company did not have any
non-executive directors (that is, directors who do not also serve as executive
officers of the Company). The
11
<PAGE>
Company anticipates that the Board of Directors of the Company may approve a
stock option and compensation plan for non-executive directors. 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.
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.
The Company has granted stock options to 4 full time employees, including Chris
Lewis and Terry Livingstone. Chris Lewis was granted options to acquire 225,000
shares and Terry Livingstone was granted options to acquire 25,000 shares at
$1.00 per share. Jason Wilkes, manager of product development, was granted
options to acquire 150,000 shares of the Company's $.001 par value common stock
and Rory Wadham, a senior programmer, was granted options to acquire 35,000
shares of the Company's $.001 par value common stock. The options are at a price
of $0.50 per share and vest over three years (except for Mr. Livingstone's
options, which expire after one year). The stock option plan provides that if an
employee's employment with the Company is terminated for cause, that employee
forfeits all options; and further provides that, in the event an employee
voluntarily terminates his or her employment with the Company, any available
options vested on the date of termination must be exercised within 30 days.
Specified below, in tabular form, is the aggregate annual remuneration of the
Company's Chief Executive Officer and the four (4) most highly compensated
executive officers other than the Chief Executive Officer who were serving as
executive officers at the end of the Company's last completed fiscal year.
================================================================================
Name of individual or Capacities in which Aggregate
Identity of Group remuneration was received remuneration
- --------------------------------------------------------------------------------
All Executive Officers(1) None None
================================================================================
Item 7. 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 ("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.
- -------------------
(1) The officers and directors of the Company received no direct
compensation from the Company during the Company's most recent completed fiscal
year. The officers and directors of the Company are reimbursed for expenses
incurred on behalf of the Company.
12
<PAGE>
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 (previously identified herein as "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 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.
As set forth above, the September, 1998 transaction between the Company's
wholly-owned subsidiary, TC, and HBD was not the result of arm's-length
negotiations. Moreover, although the HBD Board believes that total consideration
for the sale of the TopClick website and related assets was approximately
$1,015,789, 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.
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.
13
<PAGE>
Item 8. 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 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.
Item 9. 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 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.
Year Period High Low
-----------------------------------------------------------------
1998 Fourth Quarter $0.2969 $0.25
1999 First Quarter $5.875 $0.2969
Second Quarter $4.7812 $2.0312
(Through June 23, 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.
After consummation of the financing transaction with Sonora and other parties,
as specified at length herein in the section entitled Development of the Company
at Page 2 and Related Party Transactions at Page 13, 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
14
<PAGE>
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.
The Company has granted stock options to 4 full time employees. As specified
above, Chris Lewis was granted options to acquire 225,000 shares and Terry
Livingstone was granted options to acquire 25,000 shares at $1.00 per share.
Jason Wilkes, manager of product development, was granted options to acquire
150,000 shares of the Company's $.001 par value common stock and Rory Wadham, a
senior programmer, was granted options to acquire 35,000 shares of the Company's
$.001 par value common stock. The options are at a price of $0.50 per share and
vest over three years (except for Mr. Livingstone's options, which expire after
one year). The Plan provides that if an employee's employment with the Company
is terminated for cause, that employee forfeits all options; and further
provides that, in the event an employee voluntarily terminates his or her
employment with the Company, any available options vested on the date of
termination must be exercised within 30 days.
Item 10. 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 class of persons to whom the offer
and sale of securities were offered and sold were private investors. 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 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.
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 class of persons to whom the offer and sale of securities were
made was the class of "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 11. 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.
15
<PAGE>
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. Financial Statements
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Registration Statement, Form 10-SB (see Item 15 below).
Item 14. 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.
Item 15. Financial Statements and Exhibits
(a) Index to Financial Statements. Page
Audited Consolidated Financial Statements of the Company:
Independent Auditor's Report F-1
Consolidated Balance Sheets as at March 31, 1999 F-2
Consolidated Statements of Operations For the Nine Month
Period Ended March 31, 1999 and For the Period from
May 15, 1998 (inception) to March 31, 1999 F-3
16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
CONSOLIDATED BALANCE SHEET Page 1
CONSOLIDATED STATEMENTS SHAREHOLDERS' EQUITY 2
CONSOLIDATED STATEMENTS OF OPERATIONS 3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5 - 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7 - 14
(b) Index to Exhibits.
Copies of the following documents are filed with this Amendment No. 1 to the
Registration Statement, Form 10-SB as exhibits:
Index to Exhibits Page
4 Financing Agreement E-1 through E-17
(material contract)*
*Previously filed as Exhibit 10.1 to the Company's Registration Statement on
Form SB-2 filed with the Commission on July 8, 1999.
SIGNATURES
In accordance with the provisions of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this Amendment No. 1 to the Registration
Statement on Form 10-SB to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Vancouver, British Columbia, on July ___, 1999.
TopClick International, Inc.,
a Delaware corporation
By:
Its: President
17
<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 March 31, 1999 and the related consolidated statements of
operations, shareholders' equity and cash flows for the nine month period then
ended and for the period from May 15, 1998 (deemed date of inception) to March
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
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 provided 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 March 31, 1999 and the consolidated results of its operations,
shareholders' equity and cash flows for the nine month period then ended and for
the period from May 15, 1998 (deemed date of inception) to March 31, 1999, in
conformity with generally accepted accounting principles in the United States of
America.
Vancouver, BC /s/ Buckley Dodds
April 27, 1999 Chartered Accountants
F-1
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 1999
ASSETS
March
31, 1999
--------
CURRENT
Cash (Note 6) $ 1,971,293
GST receivable 4,209
1,975,502
PROPERTY, PLANT AND EQUIPMENT (Note 5) 78,806
DEFERRED CHARGES (Note 3) --
SOFTWARE DEVELOPMENT COSTS (Note 7) 220,097
$ 2,274,405
LIABILITIES
CURRENT
Accounts payable $ 93,524
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, 12,932,000 issued and outstanding 12,392
Additional paid - in capital 2,466,729
Cumulative translation adjustment (37,081)
Deficit accumulated during development stage (261,159)
2,180,881
$ 2,274,405
APPROVED BY THE DIRECTORS:
__________________________ Director _________________________ Director
F-2
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1999
AND FOR THE PERIOD FROM MAY 15, 1998 (INCEPTION) TO MARCH 31, 1999
Nine month Period from
period ended May 15, 1998
March 31, (Inception) to
1999 March 31, 1999
EXPENSES
Contract fees $ 95,602 $ 95,602
Accounting and legal 43,257 44,631
Consulting fees 30,165 30,165
Investment referral fees 23,003 23,003
Office expenses 15,346 15,346
Rent 14,943 14,943
Wages and benefits 11,458 11,458
Meals and entertainment 9,931 9,931
Telephone 6,891 6,891
Travel 2,696 2,696
Automobile 2,459 2,459
Depreciation 1,988 1,988
Utilities 1,542 1,542
Insurance 1,302 1,302
Interest and bank charges 168 205
260,751 262,162
LOSS FROM OPERATIONS (260,751) (262,162)
OTHER ITEMS
Interest income 6,003 6,003
Write-off of deferred charges (5,000) (5,000)
1,003 1,003
NET LOSS FOR THE PERIOD $ (259,748) $ (261,159)
LOSS PER SHARE $ (0.02) $ (0.02)
WEIGHTED AVERAGE SHARES 11,398,460 11,455,560
F-3
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1999
AND FOR THE PERIOD FROM MAY 15, 1998 TO MARCH 31, 1999
Nine month Period from
period ended May 15, 1998
March 31, (Inception) to
1999 March 31, 1999
NET LOSS FOR THE PERIOD $(259,748) $(261,159)
OTHER COMPREHENSIVE INCOME/(LOSS), Net of tax:
Foreign currency translation adjustments (37,081) (37,081)
COMPREHENSIVE LOSS FOR THE PERIOD $(296,829) $(298,240)
F-4
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1999
AND FOR THE PERIOD FROM MAY 15, 1998 TO MARCH 31, 1999
<TABLE>
<CAPTION>
Nine month Period from
period ended May 15, 1998
March 31, (Inception) to
1999 March 31, 1999
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss) for the period $ (259,748) $ (261,159)
Item not involving cash:
Depreciation 8,869 8,869
Issuance of shares for contract fees 20,000 20,000
Changes in non-cash working capital
Accounts payable 92,113 93,524
GST receivable (4,209) (4,209)
(142,975) (142,975)
FINANCING ACTIVITIES
Proceeds from Issuance of common stock 2,422,040 2,422,040
2,422,040 2,422,040
INVESTING ACTIVITIES
Acquisition of Property, plant and equipment (87,675) (87,675)
Software development costs (220,097) (220,097)
(307,772) (307,772)
INCREASE IN CASH 1,971,293 1,971,293
CASH, BEGINNING OF PERIOD -- --
CASH, END OF PERIOD $ 1,971,293 $ 1,971,293
</TABLE>
F-5
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1999
AND FOR THE PERIOD FROM MAY 15, 1998 TO MARCH 31, 1999
<TABLE>
<CAPTION>
Supplemental Disclosure of Cash Flow Information
Nine month Period from
period ended May 15, 1998
March 31, (Inception) to
1999 March 31, 1999
<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 $ 148,550
Issuance of common stock (148,550) (148,550)
$ -- $ --
</TABLE>
F-6
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
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 cost 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.
F-7
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are expressed in US 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).
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 Corporation consolidated.
iii] The comparative financial statements as at and for the period ended
March 31 1999 are those of Topclick Corporation consolidated which
includes accounts of Topclick International, Inc.
F-8
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 liabilities 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 cost 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.
Deferred Charges
Deferred charges consist of a joint interest in the rights to an oil
producing property (Note 3). The costs associated with the acquisition of
the right are being amortized based on the depletion of oil reserves over
the expected production life, estimated to be six year.
Software Development Costs
Software development costs represent costs relating to the development of
the Internet website. These costs will be amortized upon commercialization
of the Internet website, which is expected to be three years due to the
nature of business in the industry of software technologies.
F-9
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss per share
Loss per share is provided in accordance with the Statement of Financial
Accounting Standards No.128 (SFAS 128), " 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 denominated foreign functional currency
are translated at the exchange rate at the balance sheet date. Translation
adjustments are recorded as a separate component of the shareholders'
equity. Revenues and expenses denominated in foreign currency are
translated at the weighted average exchange rate for the period.
NOTE 3 DEFERRED CHARGES
March 31, March 31,
1999 1998
Rights - Airport Trust 1 - 10 $ -- $ 7,500
Less: Accumulated depletion -- (1,563)
-----------------------------------------------------------------------
$ -- $ 5,937
----------------------------------------------------------------------
On May 16, 1997, the Company entered into an agreement to purchase the
rights title and interest in an oil and gas lease property through a
related party transaction (Note 4). The acquisition entitles the company to
a .01000 working interest and a .0075 net revenue interest in the property
from the well operator, Marathon Oil Company, for which the Company paid $
7,500.
The nature of the business is changed as described in Note 1, hence, the
net book value of the deferred charges were written off, as it has no
future benefits to the Company.
F-10
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
NOTE 4 RELATED PARTY TRANSACTION
As at March 31, 1999, $ 36,000 of contract fees were accrued for services
rendered to Topclick Canada Inc. by a controlling shareholder of the
Company.
As at December 31, 1997, the Company had a note payable to the President
and stockholder of the Company relating to the purchase of the rights as
described in Note 3. The unsecured, non-interest bearing note was due
January 31, 1998 and was paid on full on March 28, 1998.
NOTE 5 PROPERTY, PLANT AND EQUIPMENT
Accumulated Net Book
Cost Depreciation Value Depreciation
--------------------------------------------------
Computer $ 61,166 $ 6,881 $54,285 $ 6,881
Furniture and
Equipment 26,509 1,988 24,521 1,988
-------------------------------------------------
$ 87,675 $ 8,869 $ 78,806 $ 8,869
--------------------------------------------------
During the nine month period ended March 31, 1999, $ 6,881 of depreciation
of the computer was capitalized as software development costs.
NOTE 6 CASH
At March 31, 1999, approximately $1,923,144 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, managing over $85 billion (Canadian Dollars) in client assets. It
is the leading debt and equity underwriter in Canada, with a highly
sophisticated international team of financial experts: research analysts,
economists and traders. In addition, RBC 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.
F-11
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
NOTE 7 ACQUISITION OF SOFTWARE DEVELOPMENT COSTS
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 for value of $ 148,550. The assets acquired by Topclick
Corporation from Helpful by Design Inc. are valued at predecessor's
costs and are represented by the following:
Software Development Costs (historical costs) $ 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
consist of the following:
Cash $ 37,158
Receivable 16,000
Accounts payable (1,400)
-------------------
Net Assets $ 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 interest.
F-12
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
NOTE 8 SIGNIFICANT EVENTS
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 of 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 9 SHARES ISSUED FOR SERVICES RENDERED
During the nine month period, Topclick Corporation (legal subsidiary)
issued 20,000 common shares with fair value of $ 1.00 per shares to an
individual for services rendered in connection with conducting quality
controls to the internet website of Topclick Canada Inc.(its wholly-owned
subsidiary).
NOTE 10 FINANCIAL INSTRUMENTS
The Company's financial assets and liabilities consist of cash, GST
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 6). 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 borrowing from external parties is not
substantial. Accordingly, its interest rate risk is considered to be
minimal.
F-13
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
NOTE 10 FINANCIAL INSTRUMENTS (Continued)
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 11 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 dates 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 actions to ensure that the Company's
technologies are Year 2000 compliance. 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.
NOTE 12 COMPARATIVE FIGURES
The comparative figures have been reclassified to conform with the
presentation adopted in the current period. As described in Note 2 [iii],
the comparative figures are those of Topclick Corporation (the legal
subsidiary).
F-14
