U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TOPCLICK INTERNATIONAL, INC.,
a Delaware corporation
(Exact name of registrant as specified in its charter)
DELAWARE 7373 330755473
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation Industrial Classification Identification No.)
or organization) Code Number)
Suite 200, 1636 West 2nd Street, Vancouver, British Columbia, Canada V6J 1H4
(Address of registrant's principal executive offices) (Zip Code)
(604) 737-1127
(Registrant's Telephone Number, Including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: From time to time after this
Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of each class Amount Proposed maximum Proposed maximum
of securities to be offering price aggregate Amount of
to be registered registered per share(1) offering price(1) registration fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 8,333,545 $2.1875 $18,229,629.00 $5,067.84
=========================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(c) of Regulation C using the average of the
bid and ask prices per share of the Registrant's common stock, as reported on
the OTC Bulletin Board for July 6, 1999.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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Preliminary Prospectus
TOPCLICK INTERNATIONAL, INC.,
a Delaware corporation
8,333,545 Shares of $.001 Par Value Common Stock
This prospectus ("Prospectus") relates to 8,333,545 shares (the "Shares") of
common stock, $.001 par value (the "Common Stock"), of TopClick International,
Inc., a Delaware corporation (the "Company"). The Shares are outstanding shares
of Common Stock, or will be outstanding shares of Common Stock acquired upon
exercise of options, warrants or the exchange of certain securities, owned by
the persons named in this Prospectus under the caption "Selling Stockholders."
The Shares were acquired by the Selling Stockholders in various transactions,
all of which were exempt from the registration provisions of the Securities Act
of 1933, as amended (the "1933 Act"), including sales of the Shares in private
placements by the Company, issuance of the Shares as compensation, the exercise
of warrants by certain of the Selling Stockholders and the exchange of certain
shares of common stock of TopClick Corporation, a Delaware corporation, for
certain Shares pursuant to a Stock Exchange Agreement dated February 10, 1999.
The Selling Stockholders may from time to time sell the Shares on the OTC
Bulletin Board, on any other national securities exchange or automated quotation
system on which the Common Stock may be listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The Shares may be sold directly or
through brokers or dealers. See "Plan of Distribution."
The Company will receive no part of the proceeds of any sales made hereunder.
See "Use of Proceeds." All expenses of registration incurred in connection with
this offering are being borne by the Company, but all selling and other expenses
incurred by the Selling Stockholders will be borne by the Selling Stockholders.
See "Selling Stockholders."
The Selling Stockholders and any broker-dealers participating in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the 1933 Act, and any commissions or discounts given to any such
broker-dealer may be regarded as underwriting commissions or discounts under the
1933 Act.
The Shares have not been registered for sale by the Selling Stockholders under
the securities laws of any state as of the date of this Prospectus. Brokers or
dealers effecting transactions in the Shares should confirm the registration
thereof under the securities laws of the States in which transactions occur or
the existence of any exemption from registration.
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".
On June 30, 1999, the closing bid and asked prices of the Common Stock as
reported on the OTC Bulletin Board were $1.9375 and $2.0625, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is July 7, 1999
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Item 3. Summary Information and Risk Factors.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS, WHICH CONTAINS MORE DETAILED INFORMATION WITH RESPECT TO EACH OF THE
MATTERS SUMMARIZED IN THIS PROSPECTUS AS WELL AS OTHER MATTERS NOT COVERED IN
THE SUMMARY. ALL PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE ENTIRE
CONTENTS OF THE PROSPECTUS AND THE EXHIBITS ATTACHED HERETO, INDIVIDUALLY AND
WITH THEIR OWN TAX, LEGAL AND BUSINESS ADVISORS.
The Company: The principal business address of the Company is
Suite 200, 1636 West 2nd Street, Vancouver,
British Columbia, Canada V6J 1H4; telephone number
(604) 737-1127.
Business of the
Company: The Company is a Delaware corporation which 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. 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.
State of
organization of the
Company: The Company was incorporated pursuant to the
provisions of the General Corporation Law of
Delaware on October 3, 1996.
Risk Factors: A purchase of the Common Stock involves various
risks that must be considered carefully by any
potential purchaser. Those risks include, but are
not necessarily limited to, (i) there can be no
assurance that the products and services of the
Company will achieve a significant degree of
market acceptance, and that acceptance, if
achieved, will be sustained for any significant
period or that product and service life cycles
will be sufficient (or substitute products and
services developed) to permit the Company to
recover associated costs; (ii) the Company has a
limited operating history upon which an evaluation
of the Company's prospects can be made; (iii) the
officers and directors of the Company may be
subject to various conflicts of interest; (iv)
substantially all of the Company's products and
services will be offered on the Internet, and,
therefore, the Company's ability to generate
significant revenues will depend upon, among other
things, consumers and advertisers' acceptance of
the Internet as an effective and sustainable
advertising medium and the development of a large
base of users of the Company's services possessing
demographic
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characteristics attractive to advertisers, both of
which are subject to market and other factors
beyond the Company's control; (v) the Company may
be required to raise substantial funds in order to
implement its business plans and objectives; (vi)
the Company is subject to significant competition
from other Internet guides; (vii) the results of
operations of the Company may vary from period to
period as a result of a variety of factors; (viii)
the market for the products and services of the
Company is characterized by continuous development
and introduction of new products and services;
(ix) the Internet is subject to changing
political, economic and regulatory influences that
may affect the business practices and operations
of the Company; (x) the Company is dependent on
its key personnel and management; (xi) the Company
does not anticipate paying dividends on its Common
Stock in the foreseeable future; (xii) there can
be no assurance that the Company's operations will
become profitable; (xiii) the Company may fail to
become compliant with Year 2000 computer
programming issues; and (xiv) the Company's
communications providers, customers, or other
third parties may fail to become compliant with
Year 2000 computer programming issues. See "RISK
FACTORS".
The Shares: The Shares offered hereby are outstanding shares
of Common Stock, or will be outstanding shares of
Common Stock acquired upon exercise of options,
warrants or the exchange of certain shares of
common stock of TopClick Corporation, a Delaware
corporation, for Shares now owned by the persons
named in this Prospectus under the caption
"Selling Stockholders." The Shares were acquired
by the Selling Stockholders in various
transactions, all of which were exempt from the
registration provisions of the 1933 Act.
Estimated use of
proceeds: All of the Shares offered hereby are being offered
by the Selling Stockholders. The Company will not
receive any of the proceeds from the sale of the
Shares. See "Selling Stockholders."
RISK FACTORS
In addition to the other information specified in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business before purchasing any of the Shares offered hereby. A purchase of the
Shares offered hereby is speculative in nature and involves a high degree of
risk. No purchase of the Shares should be made by any person who is not in a
position to lose the entire amount of such investment.
THIS PROSPECTUS SPECIFIES FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SPECIFIED IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN THIS PROSPECTUS. PROSPECTIVE PURCHASERS OF SHARES MUST BE PREPARED FOR THE
POSSIBLE LOSS OF THEIR ENTIRE INVESTMENTS IN THE COMPANY. THE ORDER IN WHICH THE
FOLLOWING RISK FACTORS ARE PRESENTED IS ARBITRARY, AND PROSPECTIVE PURCHASERS OF
SHARES SHOULD NOT CONCLUDE, BECAUSE OF THE ORDER OF PRESENTATION OF THE
FOLLOWING RISK FACTORS, THAT ONE RISK FACTOR IS MORE SIGNIFICANT THAN THE OTHER
RISK FACTORS.
Information specified in this Prospectus contains "forward looking statements"
which can be identified by the use of forward-looking terminology such as
"believes", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or the negative thereof or
other variations thereon or comparable terminology. Such statements are subject
to certain risks, uncertainties and assumptions. No assurances can be given that
the future results anticipated by the forward looking statements will be
achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements,
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including certain risks and uncertainties, that could cause actual results to
vary materially from the future results covered in such forward-looking
statements. Among the key factors that have a direct bearing on the Company's
results of operations are the effects of various governmental regulations, the
fluctuation of the Company's direct costs and the costs and effectiveness of the
Company's operating strategy. Other factors could also cause actual results to
vary materially from the future results covered in such forward-looking
statements.
Limited Operating History. The Company has a very limited operating history upon
which an evaluation of the Company's prospects can be made. The Company's
prospects must be considered speculative, considering the risks, expenses, and
difficulties frequently encountered in the establishment of a new business,
specifically the risks inherent in the development and operation of websites and
services on the Internet. There can be no assurance that unanticipated technical
or other problems will not occur which would result in material delays in future
product and service commercialization or that the efforts of the Company will
result in successful product and service commercialization. There can be no
assurance that the Company will be able to achieve profitable operations.
Competition. Competition to provide Internet Guides to Internet users is intense
and the Company expects the competition to increase. The Company will compete
directly with other companies and businesses that have developed and are in the
process of developing technologies and services which will be competitive with
the technologies and services developed and offered by the Company. There can be
no assurance that other technologies or services which are functionally
equivalent or similar to the technologies and services of the Company have not
been developed or are not in development. The Company expects that there are
companies or businesses which may have developed or are developing such
technologies and services as well as other companies and businesses which have
the expertise which would encourage them to develop and market services directly
competitive with those developed and marketed by the Company. To the extent that
customers exhibit loyalty to the supplier that first supplies them with a
particular service or technology, the competitors of the Company may have an
advantage over the Company with respect to services and technologies first
developed by such competitors. As a result of their size and breadth of their
service offerings, certain of these competitors have been and will be able to
establish managed accounts by which they seek to gain a disproportionate share
of users for their services and technologies. Such managed accounts present
significant competitive barriers to the Company. It is anticipated that the
Company will benefit from its participation in niche markets which, as they
expand, may attract the attention of the competitors of the Company.
There can be no assurance that competitors have not or will not succeed in
developing technologies and services that are more effective than any which have
been or are being developed by the Company or which would render the products of
the Company obsolete and noncompetitive. The Company faces stiff competition
which includes, but is not limited to the following: the Browser companies;
Internet Distribution Companies; existing established content providers;
Internet search and directory sites; broadband communications companies; large
media conglomerates; commercial and non-commercial computer operating systems
companies; software development companies; directory companies (e.g. Yellow
Pages); and Bookmark Managers.
Many of the Company's existing competitors, as well as a number of potential new
competitors, have longer operating histories in the Web market, greater name
recognition, larger customer bases and databases and significantly greater
financial, technical and marketing resources than the Company. Such competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to potential
employees, distribution partners, advertisers and content providers. Further,
there can be no assurance that the Company's competitors will not develop Web
search and retrieval services that are equal or superior to those of the Company
or that achieve greater market acceptance than the Company's offerings in the
area of name recognition, performance, ease of use and functionality. There can
also be no assurance that ISPs, OSPs, Web browsers and other Web content
providers will not be perceived by advertisers as having more desirable Web
sites for placement of advertisements. In addition, a number of the Company's
competitors have established collaborative relationships with ISPs, OSPs and
other Web content providers. Accordingly, there can be no assurance that the
Company will be able to retain a customer base of advertisers or maintain or
increase traffic on its network or that competitors will not experience greater
growth in traffic than the Company as a result of such relationships, which
could have the effect of making their Web sites more attractive. There can also
be no assurance that the Company will be able to compete successfully against
its current or future competitors
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or that competition will not have a material adverse effect on the Company's
business, results of operations and financial condition.
Third-Party Reliance. The Company may become dependent upon various third
parties for one or more significant services required for the business of the
Company, which services will be provided to the Company pursuant to agreements
with such providers. Inasmuch as the capacity for certain services by certain
third parties may be limited, the inability of the Company, for economic or
other reasons, to continue to receive services from existing providers or to
obtain similar services from additional providers could have a material adverse
effect on the Company.
The Company currently owns and also licenses from third parties its
technologies. As it continues to introduce new services that incorporate new
technologies, it may be required to license technology from others. There can be
no assurance that these third-party technology licenses will be available to the
Company on commercially reasonable terms, if at all. The inability of the
Company to obtain any of these technology licenses could result in delays or
reductions in the introduction of new services or could adversely affect the
performance of its services until equivalent technology could be identified,
licensed and integrated.
Business Interruption; Reliance on Computer and Telecommunications
Infrastructure. The Company's success will be dependent in large part on its
continued investment in sophisticated telecommunications and computer systems
and computer software. The Company anticipates making significant investments in
the acquisition, development, and maintenance of such technologies in an effort
to remain competitive and anticipates that such expenditures will be necessary
on an on-going basis. Moreover, computer and telecommunication technologies are
evolving rapidly and are characterized by short product lifecycles, which
requires the Company to anticipate technological developments. There can be no
assurance that the Company will be successful in anticipating, managing or
adopting such technological changes on a timely basis or that the Company will
have the capital resources available to invest in new technologies. In addition,
the Company's business is highly dependent on its computer and
telecommunications equipment and software systems, the temporary or permanent
loss of which, through physical damage or operating malfunction, could have a
material adverse effect on the Company's business. Operating malfunctions in the
software systems of financial institutions, market makers, and other parties
might have an adverse affect on the operations of the Company. The Company's
business is materially dependent on service provided by various local and long
distance telephone companies. A significant increase in the cost of telephone
services that is not recoverable through an increase in the price of the
Company's services, or any significant interruption in telephone services, could
have a material adverse effect on the Company.
Reliance on Growth and Use of the Internet. The substantial growth in the use of
and interest in the Internet and the Web is a recent phenomenon. There can be no
assurance that communication or commerce over the Internet will become more
widespread or that extensive content will continue to be provided over the
Internet. The Internet may not prove to be a viable commercial marketplace for a
number of reasons, including potentially inadequate development of the necessary
infrastructure, such as a reliable network backbone, or timely development and
commercialization of performance improvements, including high speed modems. In
addition, to the extent that the Internet continues to experience significant
growth in the number of users and level of use, there can be no assurance that
the Internet infrastructure will continue to be able to support the demands
placed upon it by such potential growth or that the performance or reliability
of the Web will not be adversely affected by this continued growth. In addition,
the Internet could lose its viability due to delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet activity, or due to increased governmental regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
also could result in slower response times and adversely affect usage of the Web
and the Company's online media properties. If use of the Internet does not
continue to grow, or if the Internet infrastructure does not effectively support
growth that may occur, the Company's business, operating results and financial
condition would be materially and adversely affected.
Uninsured Loss; Acts of God. The Company is required to carry and maintain a
comprehensive general liability insurance policy, an employer's liability
policy, and worker's compensation, as well as liability insurance required
pursuant to the commercial lease for the Company's business premises. The
Company may also carry and maintain other business insurance of the types
customarily carried by similar businesses. However, there are certain types of
extraordinary
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occurrences which may be either uninsurable or not economically insurable. For
example, in the event of a major earthquake, the Company's telecommunications
and computer systems could be rendered inoperable for protracted periods of
time, which would adversely affect the Company's financial condition. In the
event of a major civil disturbance, the Company's operations could be adversely
affected. Should such an uninsured loss occur, the Company could lose
significant revenues and financial opportunities in amounts which would not be
partially or fully compensated by insurance proceeds.
Regulatory and Related Influences. The Internet is subject to changing
political, economic and regulatory influences that will affect the procurement
practices and operation of Internet directory service organizations. Any of
these influences could have a material adverse effect on the Company's business,
financial condition and results of operations. During the past several years,
various Internet directory service industries and telecommunications industries
have been subject to an increase in governmental and international regulation.
Certain proposals to reform the telecommunications and Internet service systems
are periodically under consideration by the appropriate regulators. These
programs may contain proposals to increase government involvement in Internet
directory services and otherwise change the operating environment for the
customers of the Company. The Company cannot predict what impact, if any, such
factors might have on its business, financial condition and results of
operations.
Market Forces. Many Internet directory service providers are consolidating to
create integrated Internet directory service delivery systems with greater
regional market power. As a result, these emerging systems could have greater
bargaining power, which may lead to price erosion of the products of the
Company. The failure of the Company to maintain adequate price levels would have
a material adverse effect on the Company's business, financial condition and
results of operations. Changes in current Internet directory service
reimbursement systems could result in the need for unplanned product
enhancements, in delays or cancellations, or in the revocation of endorsement of
the services of the Company. Other market-driven reforms could have
unpredictable effects on the Company's business, financial condition and results
of operations. The Company's results of operations may vary from period to
period due to a variety of factors, including the level of research and
development of the Company, the introduction of new products or services by the
Company or its competitors, cost increases from third-party service providers,
changes in marketing and sales expenditures, market acceptance of the products
and services of the Company, competitive pricing pressures, and general economic
and industry conditions that affect customer demand.
As with any relatively new business enterprise operating in a specialized and
intensely competitive market, the Company is subject to many business risks
which include, but are not limited to, unforeseen marketing and promotional
expenses, unforeseen negative publicity, competition, and lack of operating
experience. Many of the risks may be unforeseeable or beyond the control of the
Company. There can be no assurance that the Company will successfully implement
its business plan in a timely or effective manner, or that management of the
Company will be able to market its services and sell enough products to generate
sufficient revenues and continue as a going concern. The strategy of the Company
for growth is substantially dependent upon its ability to market its services
successfully. There can be no assurance that the Company will be able to market
its services on acceptable terms, or at all. Failure of the Company to market
its services successfully could have a material adverse effect on the Company's
business, financial condition or results of operations.
Growth of Business. Since its inception, the Company has experienced significant
change and expansion in its business and operations, which have placed
significant demands on the Company's administrative, operational, financial, and
other resources. Future growth, if any, could place a significant strain on the
Company's management, operational, financial, and other resources. The Company's
ability to manage future growth will depend upon a significant expansion of its
accounting and other internal management systems and the implementation and
subsequent improvement of a variety of systems, procedures, and controls.
Moreover, the Company will need to continue to train, motivate, and manage its
employees and attract and retain qualified senior managers and technical
professionals. If the Company's management is unable to manage growth
effectively, there could be a material adverse effect on the Company's business,
financial condition, and operating results.
Future Capital Needs and Uncertainty of Additional Funding. As specified more
completely at Page __ of the Prospectus under the caption "Liquidity and Capital
Resources", on or about January 30, 1999, the Company entered into
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a financing agreement which provided the Company with approximately $2,000,000.
Moreover, the Company believes that it may be able to acquire additional
financing at commercially reasonable rates; however, there can be no assurance
that the Company will be able to obtain additional financing at commercially
reasonable rates, or at all. The Company has expended, and will continue to
expend in the future, substantial funds on the research and development of its
products and services. The failure of the Company to obtain additional financing
would significantly limit or eliminate the Company's ability to fund its
research and development activities, which would have a material adverse effect
on the Company's ability to continue to compete with other Internet directory
service providers.
Based on its current staffing level and product development schedule, the
Company anticipates that its working capital and funds anticipated to be derived
from operations should be adequate to satisfy its capital and operating
requirements through the end of fiscal 1999. This estimate is based upon certain
assumptions; however, there can be no assurance that the Company will have
sufficient working capital to satisfy the Company's capital needs beyond
December 31, 1999. The Company anticipates that it may seek additional funding
through public or private sales of its securities, including equity securities,
or through commercial or private financing arrangements. However, adequate
funds, whether through financial markets or collaborative or other arrangements
with corporate partners or from other sources, may not be available when needed
or on terms acceptable to the Company. In the event that the Company is not able
to obtain additional funding on a timely basis, the Company may be required to
scale back or eliminate certain or all of its development or marketing programs
or to license third parties to commercialize products or technologies that the
Company would otherwise seek to develop, manufacture or market itself, any of
which could have a material adverse effect on the Company's results of
operations in order to satisfy its capital and operating requirements.
Limited Protection of Proprietary Technology. As specified under the captions
"Intellectual Property Strategy" and "Name Identification" elsewhere in this
Prospectus, the Company will attempt to protect its proprietary technology and
domain names. The Company has purchased certain domain names and will attempt to
prevent third parties from utilizing similar domain names. The Company
exclusively owns any and all software that it develops and regards its software
technology as proprietary. The Company may rely on a combination of copyright,
NSI registration, trademark and trade secret laws, as well as through
contractual restrictions on disclosure, copying and distribution (including but
not limited to confidentiality agreements with its employees and
subcontractors), to attempt to protect its intellectual property rights in its
products and services. There is a possibility that such copyright, registration,
trademark and trade secret laws, as well as such confidentiality agreements, may
not be enforceable in certain jurisdictions. It may be possible for unauthorized
third parties to copy the Company's products or to reverse engineer or obtain
and use information that the Company regards as proprietary. There can be no
assurance that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to the Company's
technologies. In addition, because the Internet is, by its nature,
international, the laws of certain countries in which the Company's products and
services are or may be distributed or utilized may not protect the Company's
products and intellectual rights to the same extent as the laws of the United
States. As the number of software products increases and the functionality of
these products further overlaps, the Company believes that software will
increasingly become the subject of claims that such software infringes the
rights of others. To date no third party has filed an infringement claim against
the Company and there have been no explicit threats of litigation asserting that
the Company's products infringe on any third party's intellectual property
rights. However, there can be no assurance that third parties will not assert
infringement claims against the Company in the future or that any such assertion
will not result in costly litigation or require the Company to obtain a license
to intellectual property rights of third parties. If the Company were required
to so obtain any such licenses, there can be no assurance that such licenses
will be available on reasonable terms, or at all.
Rapid Technological Change. The emerging multimedia and Internet markets and the
personal computer industry in general are characterized by rapidly changing
technology, resulting in short product life cycles and rapid price declines. The
Company must continuously update its existing and planned products and services
to keep them current with changing technologies and must develop new products
and services, to take advantage of new technologies that could render the
Company's existing products and services obsolete. The Company's future
prospects are highly dependent on its ability to increase the functionality of
its products and services in a timely manner and to develop new products that
address new technologies and achieve market acceptance. There can be no
assurance that the Company will be successful in these efforts. If the Company
were unable to develop and introduce such products and services in a timely
manner,
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due to resource constraints or technological or other reasons, this inability
could have a material adverse effect on the Company's results of operations. In
particular, the introduction of new products and services are subject to the
inherent risk of development delays. The Company has experienced product
development delays in the past, and such delays may occur in the future. In
addition, due to the uncertainties associated with the Company's emerging
market, there can be no assurance that the Company will be able to forecast
product and service demands accurately or to respond in a timely manner to
changing technologies and customer requirements.
Key Personnel. The future success of the Company will depend in part on the
service of its key personnel and, additionally, its ability to identify, hire
and retain additional qualified personnel. There is intense competition for
qualified personnel in the areas of the activities of the Company, and there can
be no assurance that the Company will be able to continue to attract and retain
such personnel necessary for the development of the business of the Company.
Because of the intense competition, there can be no assurance that the Company
will be successful in adding personnel as needed to satisfy the staffing
requirements of the Company. Failure to attract and retain key personnel could
have a material adverse effect on the Company.
Conflicts of Interest. The persons serving as officers and directors of the
Company may have existing responsibilities and, in the future, may have
additional responsibilities, to provide management and services to other
entities in addition to the Company. As a result, conflicts of interest between
the Company and the other activities of those persons may occur from time to
time, in that those persons shall have conflicts of interest in allocating time,
services, and functions between the other business ventures in which those
persons may be or become involved and, also, the affairs of the Company .
Dependence on Management. The Company is dependent on the efforts and abilities
of its senior management. The loss of various members of that management could
have a material adverse effect on the business and prospects of the Company. The
members of the Board of Directors of the Company believe that all commercially
reasonable efforts have been made to minimize the risks attendant with the
departure by key personnel from the service of the Company. There is no
assurance, however, that upon the departure of key personnel from the service of
the Company that replacement personnel will cause the Company to operate
profitably.
Although the Company intends to pursue a strategy of aggressive marketing and
development of its primary product, Topclick.com, a new Internet information
retrieval guide, and related Internet products and services, implementation of
this strategy will depend in large part on its ability to (i) establish a
significant customer base and maintain favorable relationships with those
customers; (ii) effectively operate its websites and Internet services; (iii)
obtain adequate financing on favorable terms to fund its business strategy; (iv)
maintain appropriate procedures, policies, and systems; (v) hire, train, and
retain skilled employees; and (vi) continue to operate in the face of increasing
competition. The inability of the Company to obtain or maintain any or all of
these factors could impair its ability to successfully implement its business
strategy, which could have a material adverse effect on the results of
operations and financial condition of the Company.
Limitation on Liability of Officers and Directors of the Company. The
Certificate of Incorporation of the Company includes a provision eliminating or
limiting the personal liability of the officers and directors of the Company to
the Company and its shareholders for damages for breach of fiduciary duty as a
director or officer. Accordingly, the officers and directors of the Company may
have no liability to the shareholders of the Company for any mistakes or errors
of judgment or for any act of omission, unless such act or omission involves
intentional misconduct, fraud, or a knowing violation of law or results in
unlawful distributions to the shareholders of the Company. DISCLOSURE OF
POSITION OF COMMISSION REGARDING INDEMNIFICATION FOR SECURITIES ACT LIABILITIES:
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY
PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT IN THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE 1933 ACT AND IS, THEREFORE,
UNENFORCEABLE.
10
<PAGE>
Penny Stock Regulation. The Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, deliver a standardized
risk disclosure document prepared by the Commission, which specifies information
about penny stocks and the nature and significance of risks of the penny stock
market. The broker-dealer also must provide the customer with bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from those rules the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
If the Company's common stock becomes subject to the penny stock rules,
purchasers of Shares may find it more difficult to sell their Shares.
Control by Existing Stockholders; Anti-Takeover Provisions. The Company's
directors, officers and principal (greater than 5%) stockholders, taken as a
group, together with their affiliates, beneficially own, in the aggregate,
approximately 42% of the Company's outstanding Common Stock. Certain principal
stockholders are directors or executive officers of the Company. As a result of
such ownership, these stockholders may be able to exert significant influence,
or even control, matters requiring approval by the stockholders of the Company,
including the election of directors. In addition, certain provisions of Delaware
law and of the Company's Certificate of Incorporation and Bylaws could have the
effect of making it more difficult or more expensive for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
the Company. The Company is not authorized to issue preferred stock.
Securities Market Factors. The Common Stock is quoted on the OTC Bulletin Board.
However, no assurance can be given that an active public market will develop or
be sustained. Factors such as announcements of the introduction of new or
enhanced products by the Company or its competitors and quarter-to-quarter
variations in the Company's results of operations, as well as market conditions
in the technology and emerging growth company sector, may have a significant
impact on the market price of the Company's shares. Further, the stock market
has experienced extreme volatility that has particularly affected the market
prices of equity securities of many high technology companies and that often has
been unrelated or disproportionate to the operating performance of such
companies. These market fluctuations may adversely affect the price of the
Common Stock.
No Foreseeable Dividends. The Company does not anticipate paying dividends on
the Common Stock in the foreseeable future; but, rather, the Company plans to
retain earnings, if any, for the operation and expansion of the business of the
Company.
No Assurances of Revenue or Operating Profits. There can be no assurance that
the Company will be able to develop consistent revenue sources or that is
operations will become profitable.
Federal Income Tax Consequences. The Company has obtained no ruling from the
Internal Revenue Service and no opinion of counsel with respect to the federal
income tax consequences of the purchase or sale of Common Stock by the Selling
Stockholders. Consequently, investors must evaluate for themselves the income
tax implications which attach to their purchase, and any subsequent sale, of the
Shares.
Impact of the Year 2000. The Year 2000 (commonly referred to as "Y2K") issue
results from the fact that many computer programs were written using two, rather
than four, digits to identify the applicable year. As a result, computer
programs with time-sensitive software may recognize a two digit code for any
year in the next century as related to this century. For example, "00", entered
in a date-field for the year 2000, may be interpreted as the year 1900,
resulting in system failures or miscalculations and disruptions of operations,
including, among other things, a temporary inability to process transactions or
engage in other normal business activities.
11
<PAGE>
In order to improve operating performance, the Company has undertaken a number
of significant systems initiatives. All hardware, software and communication
systems owned by or supplied to the Company have been analyzed by reviewing all
relevant product and service manuals, contacting vendors, and on-line research
of relevant vendor websites. The Company telephoned its phone systems provider,
its alarm monitoring company, and its website hosting provider to ensure Y2K
compliance. The Company also conducted on-line vendor reviews of its desktop
Pentium computers and its Windows 95 and Microsoft Office software. For other
software, the Company contacted the providers, reviewed the relevant manuals,
and reviewed vendor websites to ensure Y2K compliance. The Company also
considered and reviewed Y2K compliance of its power-backup systems suppliers.
An ancillary benefit of the Company's systems initiatives specified above is
that the resulting systems are Year 2000 compliant. The Company (i) has
completed an assessment of each of its operations and their Year 2000 readiness,
(ii) has determined that appropriate actions have been and are being taken, and
(iii) believes that it has completed its overall Year 2000 remediation prior to
any anticipated impact on its operations. The Company has determined that the
Year 2000 issue will not pose significant operational problems for its computer
systems. However, although the Company has initiated formal communications with
a number of its significant suppliers to determine the extent to which the
Company's interface systems are vulnerable to those third parties' failure to
remediate their own Year 2000 issues, and will initiate similar communication
with major customers as well as the balance of its major suppliers in 1998,
there is no guarantee that the systems of other companies on which the Company's
systems rely will be timely converted and would not have an adverse effect on
the Company's systems.
In a worst case scenario, the Company's primary service, an information
retrieval guide for Internet users, could be adversely affected by the
non-compliance of banks, communications providers, utilities, common carriers,
the Company's customers, potential customers and other sources known and unknown
to the Company. Widespread breakdowns in the telecommunications industry would
have an adverse affect on the Company's operations. The ultimate impact of the
Y2K issue cannot be reasonably estimated at this time. Many Y2K problems might
not be readily apparent when they first occur, but instead could imperceptibly
degrade technology systems and corrupt information stored in computerized
databases, in some cases before January 1, 2000.
Third-Party Y2K Risks to the Company. The Company believes that the most
significant Y2K risks to the Company's continued operations are the Company's
dependence on (i) electrical power and (ii) phone and data lines. Power failures
or shortages resulting from British Columbia Hydro's failure to become Y2K
compliant would hinder the Company's operations. Moreover, system-wide failures
in the Company's telecommunications provider, BC Tel, resulting from BC Tel's
failure to become Y2K compliant, would likewise hinder the Company's operations.
The Company might also lose data which the Company stores in-house.
Item 4. Use of Proceeds
All of the Shares offered hereby are being offered by the Selling Stockholders.
The Company will not receive any of the proceeds from the sale of the Shares.
See "Selling Stockholders."
Item 5. Determination of Offering Price
Price Range of Common Stock. In or about December 1998, quotation of the
Company's common stock began on the OTC Bulletin Board (trading symbol: TOCK).
Prior to that date, there was no public market for the Company's common stock.
The Company's common stock has closed at a low of 2 5/32 and a high of 8 1/8 for
the 52-week period ending June 23, 1999. On June 23, 1999, the closing bid and
asked prices of the Common Stock as reported on the OTC Bulletin Board were
$2.125 and $2.25, respectively. This market is extremely limited and the prices
for the Company's common stock quoted by brokers is not necessarily a reliable
indication of the value of the Company's common stock.
The offering price of the Shares was calculated pursuant to Rule 457(c) of
Regulation C using the average of the bid and asked price of the Company's
common stock, as reported on the OTC Bulletin Board as of a specified date
within 5 business days prior to the date of the filing of this Registration
Statement, specifically, as of June 23, 1999.
12
<PAGE>
Item 6. Dilution
The Company will not be a reporting company until the effective date of the
Registration Statement on Form 10-SB which the Company filed with the Commission
on April 23, 1999. The Company is not selling any of the Shares being registered
hereby. The Shares are outstanding shares of Common Stock, or will be
outstanding shares of Common Stock acquired upon exercise of options, warrants
or the conversion of certain securities, owned by the persons named in this
Prospectus under the caption "Selling Stockholders." The Selling Stockholders
may from time to time sell the Shares on the OTC Bulletin Board, on any other
national securities exchange or automated quotation system on which the Common
Stock may be listed or traded, in negotiated transactions or otherwise, at
prices then prevailing or related to the then current market price or at
negotiated prices. The Shares may be sold directly or through brokers or
dealers. The purchase prices paid by officers, directors, promoters and
affiliated persons for common equity purchased by them, or which they have
rights to purchase, or which they acquired by means of related party
transactions, are specified in this Prospectus under the captions "Security
Ownership of Certain Beneficial Owners and Management", "Organization Within
Last Five Years", and "Certain Relationships and Related Transactions".
Item 7. Selling Stockholders
The following table sets forth the number of Shares which may be offered for
sale from time to time by the Selling Stockholders. The Shares offered for sale
constitute all of the Shares known to the Company to be beneficially owned by
the Selling Stockholders. None of the Selling Stockholders has held any position
or office with the Company, except as specified in the following table. Other
than the relationships described below, none of the Selling Stockholders had or
have any material relationship with the Company.
Simone Alten 2,871
Steve Beaton 3,445
Ronald Bernhardt 7,786
Martin Bodnar 4,594
Princina Bodnar 4,594
David and Yolanda Booth 2,297
Mike Brown 12,632
Jeffrey Budz 12,379
James T. Carroll 31,580
William Carter 574
John Cilmi 27,446
Vanna Colotti 4,459
Marilyn Cormier 384
Barbara Daidone 4,594
Mark Darling 3,445
John and Lee De Vuyst 11,484
De Vuyst Holdings 11,484
David DiBiase 22,968
Andrea Docherty 230
Benson Group Limited 117,709
Robert Ellingson 5,742
Steven Elman 8,682
David Ezra 22,577
Helen Fadden 4,594
Dennis Paul Fecci 19,465
Christine Fornier 22,968
Kathy Fowler 2,871
Arthur Gee 1,148
Victor Golinsky 4,594
13
<PAGE>
Richard Green 5,742
Ken Grundy 382
Neil Hamilton 28,709
Jim Hornell 1,148
Joan Jacobs 11,484
Marion Jenson 5,742
Dr. Fred Knelman 22,968
Karen Krawchuk 13,781
Ellen Laine 6,890
Yvan Lalonde 57,419
Carol Lalonde 57,419
Michael Lalonde 57,419
John Larsen 227,739
Frederick Ledetsch 4,594
Eunho Lee 4,594
Bruce Lemire-Elmore 15,503
Louise Lemire-Elmore 15,503
Chris Lewis (1) 5,302,071
Lester Licht 30,501
Terry Livingstone(2) 229,675
John Manville 5,742
Douglas Matthews 1,378
Jim McGuigan 5,742
James McLachlan 11,484
Robert McLachlan 16,077
Sandra McLachlan 5,742
Steven Meehan 2,871
MRA Engineering 14,355
Kevin Mularkey 1,148
Janet Neff (5) 4,594
Sabene Odonoghue 4,594
Andrew Opperman 22,968
Alastair Pirie 11,484
Wayne Pye 11,484
Merrill Lynch in Trust for Jalinder Rai 957
Rick and Mary Reynolds 152,160
Rodger Sarfi 1,914
Jeffrey Sawchuk 574
George Schellenberg 4,594
Hardip Singh 389,170
Richard Sommers 16,575
Jim Soukoreff (4) 71,774
Greg Soukoreff (4) 21,744
Susan Soukoreff(4) 71,774
C. Cedric Steele 13,781
Bruce Steinke 1,914
Jojhar Takhar 957
Pardip Thind 957
RBC Dominion Securities Inc. in Trust for Mark Varley 57,419
Louis Vella 11,484
Tony Whitehorn 15,503
Henry and Marge Wiebe 11,484
14
<PAGE>
Dorothy Armstrong 1,148
David and Yolanda Booth 3,785
Yolanda Booth 623
David Booth 1,334
Cary Chernoff 5,742
Iain Cleator 11,484
Catherine and Calvin Cook 5,472
Calvin Cook 270
Richard C. Cook 5,742
Wimborne Holdings 55,122
Laurie Dittrich 574
Ira Doering 11,484
Jeffrey Dubois 3,445
Wendy Dubois 10,335
Michael Durkin 11,484
Bob and Debbie Egglestone 17,226
Lars Engels 22,968
Dan Faminoff 5,156
Laurentian Bank of Canada in Trust for Dan Faminoff 2,500
John Faminoff 5,156
Laurentian Bank of Canada in Trust for John Faminoff 2,500
Scott Findlay 11,484
Mark Finger 22,853
Brad Glazer 1,378
Chris Goddard 5,742
Angeline E. Joss 50,000
Michael Lois Joss 25,000
Sidney S. Joss 77,629
Theresa Ann Joss 25,000
Dr. E. W. Kane Ltd. 11,484
Steve and Vanessa Keeler-Young 4,594
Brent and Jennifer Lee 26,000
Colin Lee 75,431
Grant Lee 44,000
Shirley Lee 60,000
Robert Leier 7,579
Heather MacDougall 1,148
Lynn Malcolm 2,297
Douglas Matthews 5,891
Harry McClelland 2,946
Ross McClelland 2,946
Dan Menard 574
Daphne Menard 574
Jacquie Miller 1,148
Kailey Miller 1,148
Hal Neff(3) 22,968
Lori Neuen 2,946
Shawn and Elizabeth O'Hara 574
Thomas O'Hara 574
David Palm 8,039
Uwe Pause 5,742
Kathryn and Andre Pickersgill 11,484
15
<PAGE>
Paul Branston 22,968
James Ryley 11,484
Peter Sauer 11,484
Ben Scheffer 1,148
Jamie Scheffer 1,148
Carole Small 1,148
Maureen Smith 5,742
Paul Soukoreff(4) 5,742
Esther Soukoreff(4) 5,742
Terrence L. Steinke 3,828
Eric Stephanson 22,968
James Dexter 11,484
Greenline Investor Services in Trust for John Suk 2,871
Nesbitt Burns Inc. in Trust for Candace Sikorski Acct. (John Suk) 2,871
Jennie Tong 37,873
Murray Van Laare 3,445
Hendrika Wall 1,148
Dr. G. W. Wilson 5,742
Bruno and Marianne Zilli 28,709
(1) Mr. Lewis is the President, Chief Executive Officer and Chairman of the
Board of the Company.
(2) Mr. Livingstone is the Chief Operating Officer of the Company.
(3) Mr. Neff was a promoter of the Company's subsidiary, TopClick Corporation,
a Delaware corporation.
(4) Related to Gregory Soukoreff, a promoter of the Company's subsidiary,
TopClick Corporation, a Delaware corporation.
(5) Related to Hal Neff, a promoter of the Company's subsidiary, TopClick
Corporation, a Delaware corporation.
Pursuant to the agreements by which certain of the Selling Stockholders acquired
their Shares, the Company agreed to use its best efforts to file a registration
statement for the resale of such Shares and to use its best efforts to cause
such registration statement to be declared effective. Pursuant to those
agreements, the Company will pay all expenses in connection with the
registration and sale of the Shares, except any selling commissions or discounts
allocable to sales of the Shares, fees and disbursements of counsel and other
representatives of the Selling Stockholders, and any stock transfer taxes
payable by reason of any such sale.
Item 8. Plan of Distribution
The Selling Stockholders may from time to time sell all or a portion of the
Shares in the over-the-counter market, or on any other national securities
exchange on which the Common Stock is or becomes listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The Shares will not be sold in an
underwritten public offering. The Shares may be sold directly or through brokers
or dealers. The methods by which the Shares may be sold include: (a) a block
trade (which may involve crosses) in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) privately
negotiated transactions. In effecting sales, brokers and dealers engaged by
Selling Stockholders may arrange for other brokers or dealers to participate.
Brokers or dealers may receive commissions or discounts from Selling
Stockholders (or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser) in amounts to be negotiated which are not
expected to exceed those customary in the types of transactions involved.
Broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share, and, to the extent such
broker-dealer is unable to do so acting as agent for a Selling Stockholder, to
purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to such Selling Stockholder. Broker-dealers who acquire
shares as principal may thereafter resell such shares from time to time in
transactions (which may involve crosses and block transactions and sales to and
through other
16
<PAGE>
broker-dealers, including transactions of the nature described above) in the
over-the-counter market or otherwise at prices and on terms then prevailing at
the time of sale, at prices then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may pay to or
receive from the purchasers of such shares commissions as described above.
In connection with the distribution of the Shares, the Selling Stockholders may
enter into hedging transactions with broker-dealers. In connection with such
transactions, broker-dealers may engage in short sales of the Shares in the
course of hedging the positions they assume with the Selling Stockholders. The
Selling Stockholders may also sell the Shares short and redeliver the Shares to
close out the short positions. The Selling Stockholders may also enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the Shares. The Selling Stockholders may also loan or
pledge the Shares to a broker-dealer and the broker-dealer may sell the Shares
so loaned or upon a default the broker-dealer may effect sales of the pledged
shares. In addition to the foregoing, the Selling Stockholders may enter into,
from time to time, other types of hedging transactions.
The Selling Stockholders and any broker-dealers participating in the
distributions of the Shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the 1933 Act and any profit on the sale of Shares by
the Selling Stockholders and any commissions or discounts given to any such
broker-dealer may be deemed to be underwriting commissions or discounts under
the 1933 Act.
The Shares may also be sold pursuant to Rule 144 under the 1933 Act beginning
two years after the Shares were issued, provided such date is at least 90 days
after the date of this Prospectus.
The Company has filed the Registration Statement, of which this Prospectus forms
a part, with respect to the sale of the Shares. There can be no assurance that
the Selling Stockholders will sell any or all of the Shares offered hereunder.
Under the Securities Exchange Act of 1934 ("Exchange Act") and the regulations
thereunder, any person engaged in a distribution of the Shares offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the Common Stock of the Company during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rules 10b-6 and 10b-7, which provisions may limit
the timing of purchases and sales of Common Stock by the Selling Stockholders.
The Company will pay all of the expenses incident to the offering and sale of
the Shares, other than commissions, discounts and fees of underwriters, dealers
or agents.
Item 9. Legal Proceedings
There are no legal actions pending against the Company nor are any such legal
actions contemplated, except as follows:
In March, 1999, the Company was informed that Allen Lees, a resident of British
Columbia, was claiming an ownership interest in certain shares of common stock
of Helpful By Design, Inc. ("HBD"). Mr. Lees claim to ownership of such HBD
shares arises from consulting services which Mr. Lees was engaged to perform on
behalf of HBD under its former name, Voxtech Communications, Inc. , beginning in
or about 1993. HBD disputes Mr. Lees' claim of ownership to those HBD shares.
The Company has become involved in this dispute because in September, 1998, HBD
sold certain assets, including 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
17
<PAGE>
Executive Officer, Chris Lewis, have also been named as defendants in this
lawsuit. The Company intends to vigorously defend this action.
Item 10. Directors, Executive Officers, Promoters and Control Persons.
The directors and principal executive officers of the Company are as specified
on the following table:
================================================================================
Name Age Position
- --------------------------------------------------------------------------------
President, Chief Executive Officer, Chairman
Chris Lewis 42 of the 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
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
18
<PAGE>
Networks, Mr. Livingstone was a Senior Project Manager with MacDonald Dettwiler,
where he oversaw projects in Taiwan, Egypt, and north America for DGPS and radar
surveillance systems. From 1993 to 1997, he held various project management and
related positions with various companies in Canada, including Helpful By Design,
Inc. from June 1996 to July 1997, and Nortel (Northern Telecom) from February
1996 to June 1996. Mr. Livingstone was self-employed from 1994 through June
1996, worked with Glenayre Electronics in Vancouver, British Columbia from 1992
to 1993, and with an IBM business partner, GRSI, from 1989 through 1992. He also
worked at Wang Canada from 1986 to 1989, where he managed multiple development
teams and projects in Saudi Arabia and the Philippines in planning, organizing,
controlling and implementing turnkey nationwide systems.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of April 15, 1999 by (i) each person
or entity known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each of the Company's directors and
named executive officers, and (iii) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Name and Address Amount and Nature
Title of Class of Beneficial Owner of Beneficial Owner Percent of Class
- -------------- ------------------- ------------------- ----------------
<S> <C> <C> <C>
$.001 Par Value Chris Lewis Officer and Director 40.27%
Common Stock 1636 W. 2nd St. 5,280,571 common shares
Vancouver, B.C. (also holds 225,000 options)
$.001 Par Value Terry Livingstone Chief Operating Officer; 1.75%
Common Stock 1636 W. 2nd St. 229,675 common shares
Vancouver, B.C. (also holds 25,000 options)
$.001 Par Value All directors and named 42.02%
Common Stock executive officers as a
group
</TABLE>
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. In accordance with Commission rules, shares of the Company's common
stock which may be acquired upon exercise of stock options or warrants which are
currently exercisable or which become exercisable within 60 days of the date of
the table are deemed beneficially owned by the optionees. Subject to community
property laws, where applicable, the persons or entities named in the table
above have sole voting and investment power with respect to all shares of the
Company's common stock indicated as beneficially owned by them.
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c) of Regulation S-B.
Item 12. Description of Securities
The Company is authorized to issue 100,000,000 shares of common stock, $.001 par
value, each share of common stock having equal rights and preferences, including
voting privileges. The Company is not authorized to issue shares of preferred
stock. As of April 2, 1999, 13,112,740 shares of the Company's common stock were
issued and outstanding.
The shares of $.001 par value common stock of the Company constitute equity
interests in the Company entitling each shareholder to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
the Company's common stock are entitled to one vote for each share of record on
all matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of directors of the Company or any other matter, with
the result that the holders of more than 50% of the shares voted for the
election of those directors can elect all of
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the Directors. The holders of the Company's common stock are entitled to receive
dividends when, as and if declared by the Company's Board of Directors from
funds legally available therefor; provided, however, that cash dividends are at
the sole discretion of the Company's Board of Directors. In the event of
liquidation, dissolution or winding up of the Company, the holders of common
stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities of the Company and after
provision has been made for each class of stock, if any, having preference in
relation to the Company's common stock. Holders of the shares of Company's
common stock have no conversion, preemptive or other subscription rights, and
there are no redemption provisions applicable to the Company's common stock.
Dividend Policy. The Company has never declared or paid a cash dividend on its
capital stock and does not expect to pay cash dividends on its Common Stock in
the foreseeable future. The Company currently intends to retain its earnings, if
any, for use in its business. Any dividends declared in the future will be at
the discretion of the Board of Directors and subject to any restrictions that
may be imposed by the Company's lenders.
Item 13. Interest of Named Experts and Counsel.
No "expert", as that term is defined pursuant to Regulation Section 228.509(a)
of Regulation S-B, or the Company's "counsel", as that term is defined pursuant
to Regulation Section 228.509(b) of Regulation S-B, was hired on a contingent
basis, or will receive a direct or indirect interest in the Company, or was a
promoter, underwriter, voting trustee, director, officer, or employee of the
Company, at any time prior to the filing of this Registration Statement.
Item 14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION FOR
LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO PUBLIC
POLICY AND, THEREFORE, UNENFORCEABLE.
Item 15. Organization Within Last Five Years
Transactions with Promoters. The Company did not employ or contract with any
promoters. The Company's subsidiary, TopClick Corporation, a Delaware
corporation incorporated on July 8, 1998 ("TC"), had relationships with the
following promoters: Kili Nimani, Hal Neff, Gernot Doebelin, and Gregory
Soukoreff. Each of these promoters signed an "Investment Associate Agreement"
with TC. Mr. Neff is also a director of TC.
Each promoter is entitled to receive options to purchase shares of TC's $.001
par value common stock in amounts equal to 10% of the number of shares sold by
that promoter. For example, if a particular promoter sells 100,000 shares of
TC's $.001 par value common stock, he is entitled to receive options to purchase
10,000 shares of that stock for a purchase price to be set by the Board of
Directors. Those options shall vest during a 3 year period and expire after an
additional 3 years. As of September 30, 1998, options to purchase 25,000 shares
of TC's common stock had been issued to Kili Nimani at an option price of $0.70
per share.
Item 16. Description of Business.
The Company was originally incorporated to engage in any lawful act or activity
for which corporations may be organized under the General corporation Law of
Delaware. The Company initially was involved in the development of oil and gas
properties. After the consummation of a series of corporate acquisitions
specified 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
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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.
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
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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 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 17. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information retrieval is already a significant market on the Internet, but the
growth of the Internet requires continued advances in Internet guide services.
Because of the expanding volume of information on the Internet, no single
company has been able to monopolize Internet guides and referencing indexes. The
Company believes that the continued rapid expansion of the Internet provides
opportunities for the Company's innovations and will further provide the Company
with
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markets which the major search engines and guides do not control or dominate.
The Company believes that there is a window of opportunity to establish a
package of the best Internet guides into one environment.
The Company's innovations include the packaging of top Internet destinations, a
simplified Internet navigation structure, and a fast, simple one-stop
information search interface to the top Internet information directories, search
engines and meta-search engines by the Company's "central keyword searching"
facility. This feature provides one-stop keyword searching across the top portal
sites including Yahoo!, Lycos, GoTo.com, Go Network, Ask Jeeves, Dogpile,
Northern Light, Looksmart, Infoseek, Snap!, Webcrawler, AOL Netfind, HotBot and
AltaVista.
Plans for Future Operations and Marketing Strategy. As set forth above, in May,
1999 the Company began an e-commerce initiative with LinkShare, which, the
Company believes, will enable the Company to establish various e-commerce
relationships. The Company anticipates that it will market itself to the
Internet community as a clearinghouse and an 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 hopes to ultimately 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 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
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"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.
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.
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Expanding Internet Markets. Nua, one of Europe's leading online consultants and
developers, estimates that there were approximately 100 million Internet users
worldwide in January, 1998. According to a recent report in Computer
Intelligence, the growth rate of Internet users may have increased by as much as
30% in 1998. The Company anticipates that it may benefit from that growth;
however, no guaranty can be provided that such will occur.
North American Internet users represent more than 80% of all users. Until a year
ago, almost 99% of the 13 million servers hooked to the Internet were
distributed throughout North America, Western Europe and Japan. Internet
advertising revenue has grown significantly since 1996, and, in 1998, approached
the total advertising revenue for all domestic national newspaper revenues. Most
analysts predict that this significant growth rate will continue through the
year 2000. Netscape World recently predicted that Internet advertising revenues
will surpass those of all domestic national newspaper revenues by this year. The
Company should benefit from such growth; however, no guaranty can be provided
that the Company will so benefit.
State of Readiness for Y2K. The Company has performed an assessment of the
Company's information technology ("IT") systems as well as its non-IT systems
(such as embedded technology in manufacturing or process control equipment
containing microprocessors or other similar circuitry) relating to the Y2K
problems previously referenced herein. The Company evaluated all hardware and
software for Y2K compliance by using sources from the Internet, by contacting
manufacturers, and by contacting third party suppliers of phone systems and
security systems. Additionally, the Company reviewed product documentation for
Y2K compliance where such was available.
The in-house workstations of Company employees and subcontractors are Pentium
Personal Computers which utilize Windows 95 and Office 97+ software. The Company
believes that all critical applications of that software are Y2K compliant. The
Company has one additional workstation which is also Y2K compliant.
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. Because the Company is not
generating any revenues from the sale or licensing of their service products,
the Company's only external source of liquidity is the sale of its capital
stock.
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
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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.
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.
Item 18. 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 March 31, 1999
- --------------------------------------------------------------------------------
Cash $1,971,293
- --------------------------------------------------------------------------------
Intellectual Property (estimated value) unknown
- --------------------------------------------------------------------------------
Property and Equipment $78,806
- --------------------------------------------------------------------------------
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.
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
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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.
Many parties are actively developing search, indexing and related Web
technologies at the present time. The Company believes that they will take steps
to protect these technologies, including seeking patent protection. As a result,
the Company believes that disputes regarding the ownership of such technologies
are likely to arise in the future.
The Company may, in the future, receive notice of claims of infringement of
other parties' proprietary rights, including claims for infringement resulting
from the downloading of materials by the online or Web services operated or
facilitated by the Company. Although the Company investigates claims and
responds as it deems appropriate, there can be no assurance that infringement or
invalidity claims (or claims for indemnification resulting from infringement
claims) will not be asserted or prosecuted against the Company or that any
assertions or prosecutions will not materially and adversely affect the
Company's business, results of operations and financial condition. Irrespective
of the validity or the successful assertion of such claims, the Company would
incur significant costs and diversion of resources with respect to the defense
thereof which could have a material adverse effect on the Company's business,
results of operations and financial condition. If any claims or actions were
asserted against the Company, the Company might seek to obtain a license under a
third party's intellectual property rights. There can be no assurance, however,
that under such circumstances a license would be available on commercially
reasonable terms, or at all.
Item 19. Certain Relationships and Related Transactions
Related Party Transactions. Pursuant to a Financing Agreement dated January 28,
1999, the Company acquired all of the shares of TopClick Corporation, a Delaware
corporation incorporated on July 8, 1998 (previously defined in this Prospectus
as "TC") which, in turn, had previously acquired certain assets from E.Z.P.C.
Canada Inc., which was incorporated on September 28, 1994, under the Canada
Business Corporations Act with one common share owned by Helpful By Design,
Inc., a Canadian federal jurisdiction corporation ("HBD"). Chris Lewis, the
Chief Executive Officer of the Company, was a significant shareholder of HBD. TC
is now a wholly-owned subsidiary of the Company.
As consideration for the exchange, assignment, transfer, conveyance, setting
over and delivery of the shares of TC, the Company issued 8 shares of its $.001
par value common stock for every 7 shares of TC $.001 par value common stock.
27
<PAGE>
This exchange value was determined by negotiations between the Company, TC, and
Sonora Capital Corporation ("Sonora"), and was approved by a majority of the
shareholders of TC.
On or about July 14, 1998, the name of E.Z.P.C. Canada, Inc., was changed to
TopClick (Canada) Inc. In September, 1998, HBD sold the TopClick website (which
website is described more specifically below) and related assets, including the
one common share of TopClick (Canada) Inc., to TC for the issuance of 7,000,000
shares of $.001 par value common stock of TC to HBD and forgiveness of
indebtedness owed by HBD to TopClick (Canada) Inc. The TopClick website and
related assets were valued by the Board of Directors of HBD ("HBD Board") at
US$700,000 (all amounts are in United States currency unless otherwise
specified.) The HBD Board valued the forgiveness of a debt in the amount of
$480,000 in Canadian Dollars ("CDN$") at $315,789, at an exchange rate of
approximately 1.52 CDN$ to one United States dollar. The HBD Board believes that
total consideration for the sale of the TopClick website and related assets was,
therefore, approximately $1,015,789. As part of this transaction, TC agreed to
convert the shares of preferred stock held by shareholders of TopClick (Canada)
Inc. into shares of common stock of TC.
The September, 1998 transaction between the Company's wholly-owned subsidiary,
TC, and HBD was not the result of arm's-length negotiations. The TopClick
website and related assets were valued by the Board of Directors of HBD ("HBD
Board") at $700,000. The HBD Board valued the forgiveness of a debt in the
amount of CDN$480,000 at $315,789, at an exchange rate of 1.52 Canadian dollars
to one United States dollar. The HBD Board believes that total consideration for
the sale of the TopClick website and related assets was, therefore,
approximately $1,015,789. However, the real cost to HBD of designing, developing
and building the TopClick website, assembling the development personnel, and
developing a business plan and strategy for the TopClick website, during a
period of approximately 18 months, was approximately CDN$1,000,000. Therefore,
the sale resulted in a profit of approximately 50% to HBD. As specified
previously herein, a significant number of shares of HBD were owned by Chris
Lewis, the Chief Executive Officer of the Company.
At March 31, 1999, $36,000 in contract fees were accrued for services rendered
to TopClick Canada Inc. by Chris Lewis, the Chief Executive Officer of the
Company. At December 31, 1997, the Company had a note payable to Mr. Lewis
relating to the purchase of rights which he held in an oil and gas lease
property. The unsecured, non-interest bearing note in the amount of $7,500 was
due and payable January 31, 1998 and was paid in full on or about March 28,
1998.
Item 20. Market for Common Equity and Related Stockholder Matters
The Company participates in the OTC Bulletin Board, an electronic quotation
medium for securities traded outside the Nasdaq Stock Market. The Company's
common stock trades on the OTC Bulletin Board under the trading symbol "TOCK".
The Company's common stock has closed at a low of 2 3/32 and a high of 8 1/8 for
the 52-week period ending 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.
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.
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.
28
<PAGE>
Item 21. Executive Compensation - Remuneration of Directors and Officers.
Any compensation received by officers, directors, and management personnel of
the Company will be determined from time to time by the Board of Directors of
the Company. Officers, directors, and management personnel of the Company will
be reimbursed for any out-of-pocket expenses incurred on behalf of the Company.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to the Company payable to
the Chief Executive Officer of the Company and the other executive officers of
the Company whose total annual salary and bonus is anticipated to exceed $50,000
during the year ending December 31, 1999. The Board of Directors of the Company
may adopt an incentive stock option plan for its executive officers which would
result in additional compensation.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
---------------------------------------
<TABLE>
<CAPTION>
Name Other Annual All Other
and Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
- ---------------------------------- ---- ------------ -------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
Chris Lewis, 1999 $144,000 None None 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.
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
================================================================================
- --------
(1) The officers and directors of the Company received no direct
compensation from the Company during the Company's most recent fiscal year. The
officers and directors of the Company are reimbursed for expenses incurred on
behalf of the Company.
29
<PAGE>
Item 22. 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 23. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.
EXPERTS
The financial statements of the Company at December 31, 1998, and 1997, and for
the years then ended, and for the period from incorporation to December 31,
1998, appearing in this Prospectus and Registration Statement have been audited
by Buckley Dodds, Chartered Accountants, and are included in reliance upon such
reports given upon the authority of Buckley Dodds as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form SB-2 with the Commission
pursuant to the 1933 Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement on Form SB-2 and the exhibits and schedules to the Registration
Statement on Form SB-2. For further information with respect to the Company and
the Common Stock offered hereby, reference is made to the Registration Statement
on Form SB-2 and the exhibits and schedules filed as a part of the Registration
Statement on Form SB-2. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete, and reference is made in each instance to the copy of such contract or
document filed as an exhibit to the Registration Statement on Form SB-2. Each
such statement is qualified in all respects by such reference to such exhibit.
On or about April 23, 1999, the Company filed a Registration Statement on Form
10-SB, which is currently under review by the Commission. Once the Registration
Statement on Form 10-SB becomes effective, the Company will become a reporting
company with the Commission, and will thereafter provide an annual report to its
security holders, which will include audited financial statements. The public
may read and copy any materials filed with the Commission, including the
Company's Registration Statement on Form SB-2 and the Registration Statement on
Form 10-SB, and all exhibits and schedules thereto, at the Commission's Public
Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. Copies of all
or any part thereof may be obtained from such office after payment of fees
prescribed by the Securities and Exchange Commission. The public may also obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission. The address of
that site is http://www.sec.gov. The Company currently maintains its own
Internet address at www.topclick.com.
30
<PAGE>
TABLE OF CONTENTS
Item
Number Caption Page
- ------ ------- ----
3. Summary Information.....................................................4
Risk Factors............................................................5
Limited Operating History..........................................6
Competition........................................................6
Third Party Reliance ..............................................7
Business Interruption..............................................7
Reliance on Growth of the Internet.................................7
Uninsured Losses; Acts of God......................................7
Regulatory and Related Influences..................................8
Market Forces......................................................8
Growth of Business.................................................8
Future Capital Needs and Uncertainty of Additional Funding.........8
Limited Protection of Proprietary Technology.......................9
Rapid Technological Change.........................................9
Key Personnel.....................................................10
Conflicts of Interest.............................................10
Dependence on Management..........................................10
Limitation of Liability of Officers and Directors.................10
Penny Stock Regulation............................................11
Control by Existing Shareholders; Anti-Takeover Provisions........11
Securities Market Factors.........................................11
No Foreseeable Dividends..........................................11
No Assurances of Revenue or Operating Profits.....................11
Federal Income Tax Consequences...................................11
Impact of the Year 2000 (Y2K Issues)..............................11
Third Party Y2K Risks to the Company..............................12
4. Use of Proceeds........................................................12
5. Determination of Offering Price........................................12
6. Dilution...............................................................13
7. Selling Security Holders...............................................13
8. Plan of Distribution...................................................16
9. Legal Proceedings......................................................17
10. Directors, Executive Officers, Promoters and Control Persons...........18
11. Security Ownership of Certain Beneficial Owners and Management.........19
12. Description of Securities..............................................19
13. Interest of Named Experts and Counsel..................................20
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.............................................20
15. Organization Within Last Five Years....................................20
16. Description of Business................................................20
17. Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................22
18. Description of Property................................................26
19. Certain Relationships and Related Transactions.........................27
20. Market for Common Equity and Related Stockholder Matters...............28
21. Executive Compensation.................................................29
22. Financial Statements...................................................30
23. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...............................................30
Experts................................................................30
Additional Information.................................................30
31
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Article Seventh of the Certificate of Incorporation of the Company provides,
among other things, that directors of the Company shall not be personally liable
to the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of such director's
duty of loyalty to the Company or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) liability for unlawful payments of dividends or unlawful stock
purchase or redemption by the corporation; or (iv) for any transaction from
which such director derived any improper personal benefit. Accordingly, the
directors of the Company may have no liability to the shareholders of the
Company for any mistakes or errors of judgment or for any act of omission,
unless such act or omission involves intentional misconduct, fraud, or a knowing
violation of law or results in unlawful distributions to the shareholders of the
Company.
There are no indemnification provisions in the Company's Certificate of
Incorporation regarding officers of the Company. However, the Company
anticipates that it will enter into indemnification agreements with each of its
executive officers pursuant to which the Company will agree to indemnify each
such person for all expenses and liabilities, including criminal monetary
judgments, penalties and fines, incurred by such person in connection with any
criminal or civil action brought or threatened against such person by reason of
such person being or having been an officer or director or employee of the
Company. In order to be entitled to indemnification by the Company, such person
must have acted in good faith and in a manner such person believed to be in the
best interests of the Company and, with respect to criminal actions, such person
must have had no reasonable cause to believe his or her conduct was unlawful.
Item 25. Other Expenses of Issuance and Distribution
The Company will pay all expenses in connection with the registration and sale
of the Shares, except any selling commissions or discounts allocable to sales of
the Shares, fees and disbursements of counsel and other representatives of the
Selling Stockholders, and any stock transfer taxes payable by reason of any such
sale. The estimated expenses of issuance and distribution are set forth below.
Registration Fees Approximately $4,633.41
Transfer Agent Fees Approximately $2,500.00
Costs of Printing and Engraving Approximately $300.00
Legal Fees Approximately $15,000.00
Accounting Fees Approximately $7,500.00
Item 26. Recent Sales of Unregistered Securities
There have been no sales of unregistered securities within the last three (3)
years which would be required to be disclosed pursuant to Item 701 of Regulation
S-B, except for the following:
On or about January 30, 1999, the Company sold 4,912,500 shares of its $.001 par
value common stock for $0.20 per share. The shares were issued in reliance upon
the exemption from the registration requirements of the Securities Act of 1933
set forth in Section 3(b) of that act and Rule 504 of Regulation D promulgated
by the Securities and Exchange Commission. The offering price for the shares was
arbitrarily set by the Company and had no relationship to assets, book value,
revenues or other established criteria of value. The gross proceeds to the
Company were $982,500. The Company used $150,000 of these funds to repay an
outstanding loan of $150,000 from a group of investors represented by Sonora
Capital Corporation, a British Columbia corporation.
On or about March 28, 1999, the Company sold 400,000 shares of its $0.001 par
value common stock for $2.50 per share. The shares were issued in reliance upon
the exemption from the registration requirements of the Securities Act of 1933
set forth in Regulation S promulgated by the Securities and Exchange Commission.
Specifically, the offer was made to
32
<PAGE>
"non U.S. persons outside the United States of America", as that term is defined
under applicable federal and state securities laws. The offering price for the
shares was arbitrarily set by the Company and had no relationship to assets,
book value, revenues or other established criteria of value. The net proceeds to
the Company were $1,000,000.
Item 27. Exhibits.
Copies of the following documents are filed with this Registration
Statement, Form SB-2, as exhibits:
Exhibit No.
3.1* Certificate of Incorporation
(Charter Document)
3.2* Amendment to Certificate of Incorporation
(Charter Document)
3.3* Bylaws
5. Opinion Re: Legality
8. Opinion Re: Tax Matters (not applicable)
10.1* Financing Agreement
(material contract)
10.2* Frontier GlobalCenter, Inc. Agreement
(material contract)
11. Statement Re: Computation of Per Share Earnings
15. Letter on Unaudited Interim Financial Information
21. Subsidiaries of the Registrant
23.1 Consent of Auditors
23.2 Consent of Counsel
24. Power of Attorney is included on the Signature Page of the
Registration Statement
27. Financial Data Schedule
- ----------
* Previously filed.
33
<PAGE>
Item 28. Undertakings.
A. Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the 1933 Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of
Regulation S-B) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any additional or changed material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
SIGNATURES
In accordance with the requirements of the 1933 Act, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, in the City of Vancouver, British
Columbia, on July ___, 1999.
TopClick International, Inc.,
a Delaware corporation
By:
---------------------------
Its: President
34
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and hereby
authorizes Chris Lewis with the full power of substitution, as attorney-in-fact,
to sign in such person's behalf, individually and in each capacity stated below,
and to file any amendments, including post-effective amendments to this
Registration Statement.
In accordance with the requirements of the 1933 Act, this Registration Statement
was signed by the following persons in the capacities and on the dates stated.
TOPCLICK INTERNATIONAL, INC.
____________________________ July___, 1999
President and Director
____________________________ July___, 1999
Chief Operating Officer
35
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
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
<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
<PAGE>
1
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
<PAGE>
3
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
<PAGE>
4
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)
<PAGE>
5
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>
<PAGE>
6
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>
<PAGE>
7
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.
<PAGE>
8
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.
<PAGE>
9
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.
<PAGE>
10
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.
11
<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.
12
<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.
<PAGE>
13
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.
<PAGE>
14
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).
23.1 CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated April 27, 1999 in the Registration Statement on Form
SB-2 and related Prospectus of TopClick International, Inc. for the registration
of 8,333,545 shares of its common stock.
----------------------------
By:
For: Buckley Dodds
