SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 4
To
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
TOPCLICK INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 330755473
-------- ---------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Suite 200, 1636 West 2nd Street, Vancouver, British Columbia, Canada V6J 1H4
- --------------------------------------------------------------------------------
(Address of registrant's principal executive offices) (Zip Code)
(604) 737-1127
--------------
(Registrant's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of Each Exchange on which
to be so registered: each class is to be registered:
-------------------- -------------------------------
None None
---- ----
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par value $.001
-----------------------------
(Title of Class)
Copies to:
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile 949.660.9010
Page 1 of 81
Exhibit Index is specified on Page 20
1
<PAGE>
Item 1. Description of Business.
The Company was originally incorporated to engage in any lawful act or activity
for which corporations may be organized under the General corporation Law of
Delaware. The Company initially was involved in the development of oil and gas
properties. After the consummation of a series of corporate acquisitions
specified herein under the subheading entitled Development of the Company
immediately below, the nature of the Company's business changed from development
of oil and gas properties to the business of facilitating the consumption of
information, products and services via the Internet. To this end, the Company
currently provides Internet users with a one-stop information index to the top
Internet guides, which allows users to view and then quickly select the best
guide for their needs based on their choice of information subject. The
Company's services allow Internet users to locate their subject categories
easily and provides them with the freedom to roam back and forth from guide to
guide. For example, inside the Company's Internet golf environment, the Company
has packaged all of the top Internet guides to golf, such as Yahoo!, Excite and
Lycos.
Development of the Company. TopClick International, Inc., a Delaware corporation
formerly named Galveston Oil & Gas, Inc. ("Company"), was incorporated in the
State of Delaware on October 3, 1996. The Company changed its name to TopClick
International, Inc. on or about February 5, 1999 by filing an amendment to its
Certificate of Incorporation with the Delaware Secretary of State. Pursuant to
an Acquisition Agreement dated January 28, 1999, the Company acquired all of the
shares of TopClick Corporation, a Delaware corporation incorporated on July 8,
1998 (previously defined in this Prospectus as "TC") which, in turn, had
previously acquired certain assets from E.Z.P.C. Canada Inc., which was
incorporated on September 28, 1994, under the Canada Business Corporations Act
with one common share owned by Helpful By Design, Inc., a Canadian federal
jurisdiction corporation ("HBD"). The Acquisition Agreement was part of a
Financing Agreement specified more completely below. TC is now a wholly-owned
subsidiary of the Company.
As consideration for the exchange, assignment, transfer, conveyance, setting
over and delivery of the shares of TC, the Company issued 8 shares of its $.001
par value common stock for every 7 shares of TC $.001 par value common stock.
This exchange value was determined by negotiations between the Company, TC , and
Sonora Capital Corporation, a British Columbia corporation ("Sonora"), and was
approved by a majority of the shareholders of TC.
On or about July 14, 1998, the name of E.Z.P.C. Canada, Inc., was changed to
TopClick (Canada) Inc. In September, 1998, HBD sold the TopClick website (which
website is described more specifically below) and related assets, including the
one common share of TopClick (Canada) Inc., to TC for the issuance of 7,000,000
shares of $.001 par value common stock of TC to HBD and forgiveness of
indebtedness owed by HBD to TopClick (Canada) Inc. The TopClick website and
related assets were valued by the Board of Directors of HBD ("HBD Board") at
US$700,000 (all amounts are in United States currency unless otherwise
specified.) The HBD Board valued the forgiveness of a debt in the amount of
$480,000 in Canadian Dollars ("CDN$") at $315,789, at an exchange rate of
approximately 1.52 CDN$ to one United States dollar. The HBD Board believes that
total consideration for the sale of the TopClick website and related assets was,
therefore, approximately $1,015,789. As part of this transaction, TC agreed to
convert the shares of preferred stock held by shareholders of TopClick (Canada)
Inc. into shares of common stock of TC.
2
<PAGE>
On or about January 28, 1999, TC entered into a Financing Agreement with the
Company, Sonora, HBD, and other parties whereby a group of investors represented
by Sonora provided $2,000,000 to the Company. As part of a series of related
transactions, HBD and the shareholders of TC transferred their shares of TC to
the Company so that TC became a wholly-owned subsidiary of the Company. A copy
of the Financing Agreement is attached as Exhibit 4 to this registration
statement. A copy of the Acquisition Agreement is attached to that Financing
Agreement as Exhibit B thereto.
Business of the Company. As set forth above, the Company owns and operates the
TopClick website, a unique information retrieval guide for Internet users. The
TopClick website contains the first comprehensive Internet "superguide" to the
major Internet guides, designed to help Internet users find the answers to their
searches more quickly and effectively than they can through conventional single
guides or search engines. TopClick makes it easy for Internet users to find
their subjects and move back and forth from guide to guide without having to
visit each guide's homepage and conduct individual searches. The TopClick
website is located at the Internet address www.topclick.com. The TopClick
website's features include "central keyword searching", which provides one-stop
keyword searching across the top portal sites, including Yahoo!, Excite, Lycos,
GoTo.com, Go Network, Ask Jeeves, Dogpile, Northern Light, Looksmart, Infoseek,
Snap!, Webcrawler, AOL Netfind, HotBot and Alta Vista. The TopClick website also
features top Internet brands across thousands of information subjects, organized
into 51 easy-to-use information categories. The website currently houses over
8,000 top sites and anticipates adding additional top sites.
The Company anticipates generating revenues from commission referral fees during
the next 12 months. The Company contemplates that it will direct Internet
traffic to e-commerce vendors; in return, the Company anticipates receiving a
commission referral fee ranging from 8% to 25%. The Company also anticipates
more direct involvement in e-commerce. For example, the Company has recently
opened a virtual bookstore by packaging approximately 300 books on privacy
issues. The Company intends to sell these books over the Internet and receive a
sales commission, similar to the operations of Amazon.com. The Company
anticipates deriving revenues from the virtual bookstore within the next 6
months.
While the Company is considering the possibility of generating revenues from
subscription fees from subscribers for certain proposed Internet services, the
Company does not currently provide any specialized services and does not
currently have any subscribers. The Company is considering providing
personalized information services to paid subscribers but has not yet determined
the scope of such services nor the subscription rates for such services.
The Company derives certain consumer data from customer profiles. During the
past 12 months, the Company contemplated generating revenues through the sale of
this consumer data to third parties. However, as specified above, the Company
recently opened a virtual bookstore relating to privacy issues, and Management
of the Company believes that selling research data (commonly referred to as
"aggregated data") to advertisers or market researches may not comport with the
Company's privacy-related businesses. While it is a common practice for entities
with high traffic volume websites to sell such aggregated data, this proposed
policy is currently under review by Management of the Company. Therefore, the
Company may elect to forego this potential revenue source.
3
<PAGE>
In the same way, websites with high traffic volumes typically generate
advertising fees through the sale of banner and other types of Internet
advertising. The Company has not yet determined whether it will sell such
advertising on its website. Moreover, in the event the Company elects to sell
such advertising, the Company's advertising revenues will depend, in part, on
the volume of traffic at the Company's website.
The Company has built and is continuing to develop a complex database of HTML
links arranged into predefined categories and subjects across the top guides on
the Internet. The TopClick guide currently includes links from Yahoo!, Excite,
Lycos, Infoseek, Looksmart, Webcrawler, AOL, Snap! and Magellan. There are two
principal ways to use the TopClick guide: (1) users can quickly click through
three levels of information: Group, Category, and Subject. Users can then "click
out" to any of the top Internet guides; or (2) alternatively, users can enter a
keyword into the search panel and then click out to their choice of the top 12
search engines on the Internet.
In April, 1999 the Company reported that the usage of its website had increased
significantly during the first period of 1999 and, in March alone, the Company
served close to one million page views. The term "page view" means the accessing
of a website page on the Internet. Often used by advertisers to gauge the
"traffic", or frequency of visitation, on a specific website, the term "page
view" differs from the Internet term "hit" in that a page view counts only the
number of times a page has been accessed, while a "hit" counts the number of
times that all the elements on a specific page, including graphics, have been
accessed.
In May, 1999 the Company began an e-commerce initiative with LinkShare
Corporation ("LinkShare"), whose software enables companies selling goods or
services on the Internet to establish business partnerships through
cross-selling and cross-referral agreements with other sites. In addition to
providing technology, LinkShare tracks and verifies customer referrals and
transactions and manages the related revenue structures. LinkShare currently
services more than 150 retailers and manages a network of tens of thousands of
affiliate sites. LinkShare is privately owned and headquartered in New York
City, with offices in San Francisco and Denver. Additional information can be
obtained at LinkShare's website at http://www.linkshare.com.
The Company believes that its participation in the LinkShare program will enable
it to establish e- commerce relationships with over 150 existing electronic
retailers, and to earn referral revenues through those relationships. In the
first phase of this program, the Company has been approved to integrate
e-commerce offerings from 1-800-Flowers, Borders.com, Cyberian Outpost,
Fashionmall, Florist.com, K-Tel, American Eagle Outfitters, and AudioBook.
The Company has not generated any revenues to date and has a comprehensive loss
for the year ended June 30, 1999 of US$444,681.00.
Transition of Website. In March, 1999 the Company entered into a nonexclusive,
nontransferable Master Service Agreement with Frontier GlobalCenter, Inc.
("Frontier") for Internet connectivity services, which obligated the Company to
pay monthly bandwith charges, to purchase software and hardware (specifically,
servers) to facilitate such services, and to lease monthly rack space to store
those servers, all of which allowed the Company to move its website to allow for
more rapid growth. Frontier specializes in scalable high-speed hosting services,
and hosts many of the world's busiest websites, including Yahoo!, Netscape,
Playboy, Pacific Bell, Quote.com, and USA Today. The
4
<PAGE>
Company has installed a high-speed server and software system together with a
leading statistical analysis and tracking software solution from Marketwave
Corporation of Seattle, Washington ("Marketwave"), all supported by a 12-month
maintenance contract. Marketwave is a leading innovator in real-time Internet
data mining and traffic analysis software, with more than 40,000 licensed
corporate customers including industry names like Intel, Dell, AT&T, Cox
Communications, Volvo and NBC Europe. The new hosting architecture incorporates
a fully redundant system supported by a "high-availability" load-balancing
solution which distributes peak traffic across the servers to improve
performance.
Employees. The Company and its subsidiaries currently have eight employees, all
of which are full-time employees. Management of the Company anticipates using
consultants for business, accounting, engineering, and legal services on an
as-needed basis.
Key Employees. The Company's key employees are Chris Lewis, the President and
Chief Executive Officer; Terry Livingstone, the Chief Operating Officer; Jason
Wilkes, Vice President in charge of business development; and Rory Wadham, lead
programmer.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of
Operations
Information retrieval is already a significant market on the Internet, but the
growth of the Internet requires continued advances in Internet guide services.
Because of the expanding volume of information on the Internet, no single
company has been able to monopolize Internet guides and referencing indexes. The
Company believes that the continued rapid expansion of the Internet provides
opportunities for the Company's innovations and will further provide the Company
with markets which the major search engines and guides do not control or
dominate. The Company believes that there is a window of opportunity to
establish a package of the best Internet guides into one environment.
The Company's innovations include the packaging of top Internet destinations, a
simplified Internet navigation structure, and a fast, simple one-stop
information search interface to the top Internet information directories, search
engines and meta-search engines by the Company's "central keyword searching"
facility. This feature provides one-stop keyword searching across 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 it will continue to develop increased. The
Company bases its belief that it will continue to increase monthly traffic
volumes, in part, on the increase of its website traffic by 1200 percent in the
first quarter of 1999, and the Company's belief that the Internet will continue
to grow at a significant rate, and the Company's plans to establish e-commerce
agreements with strategic partners. During the period April 1, 1999 through and
including June 30, 1999, the Company's website generated 1,117,880 page views
and 477,143 unique searches.
5
<PAGE>
The overall marketing plan for the Company's products and services is based on
two separate promotional phases: (1) the Initial Site Launch Plan and (2) the
Market Development Plan.
Initial Site Launch Plan. The Company anticipates that it will launch multiple
online tactical programs to create awareness of the Company's websites and
services with the goal of inducing potential clients to visit the Company's
websites, where demonstrations of the Company's products and services will be
displayed. The Company believes that by keeping the information current,
subscribers will return to the Company's websites, the ultimate goal being
increased usage over time.
The Company believes that over 80% of all Internet searches originate through
the top 8 guides. The Company intends to submit its website to those top 8
guides and to use an automated software package to submit the TopClick website
to the other 1,000 guides on the Internet. The Company's objective is to build
the Company's websites and brands into well-known Internet properties.
The Company intends to submit Topclick.com to the top 10 site award businesses
on the Internet through the use of electronic press releases. The Company
intends to use the same methods to submit Topclick.com to the Top 10 Cool
Sites/What's New Sites website to gain further recognition with Internet
customers. The Company anticipates that it will send out press releases to the
principal media groups that cover the Internet such as ABC, CNN, and CBS, as
well as to technology news suppliers like PointCast. The Company also
anticipates that it will provide automated announcements to specific interest
groups at Internet chat environments and present its guide to mass community
sites, such as Geocites, as a complimentary service which the Company believes
will enhance the value of its core products. The Company will concentrate on
disseminating information about its products and services to specific
opinion-forming communities, such as teachers and marketing professionals via
e-mail announcements.
Market Development Plan. For new Internet customers, the Company contemplates
that it will establish channel development programs to Internet service
providers, cable companies, telephone companies, satellite companies and web
television businesses, with the intention of placing a link to TopClick in their
software, as a starting point for those new Internet users.
A "link" is a selectable connection from one word, picture, or information
object to another on the Internet. The most common form of link is the
highlighted word or picture that can be selected by the user (with a mouse or in
some other fashion), resulting in the immediate delivery and view of another
file. The highlighted object is often referred to as an "anchor". The anchor
reference and the object referred to constitute a hypertext link. The Company
anticipates that it will seek logo and URL linking arrangements with targeted
sites. The Company intends to develop "tell-a-friend" extensions to the TopClick
site to make it easy for existing users to electronically tell friends about the
Company's services.
Developing Site Traffic. The Company believes that it must develop volume
traffic on its site in order to be successful. Once traffic volume has been
established, the Company believes that it will become a distribution point for
advertisers and will develop opportunities to participate in sponsorship
agreements, electronic commerce agreements and joint marketing ventures. The
Company intends to build its initial equity value measured by traffic (that is,
page views) and then intends to develop multiple revenue streams as a broker of
diverse audience interests. There is no assurance, however, that the Company
will build an equity base which will be considered worth
6
<PAGE>
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 TopClick guide will be offered free to users, strategic
partners (such as existing Internet guides) and other media partners.
Name Identification. The Company has purchased additional domain names and will
attempt to prevent third parties from adopting names similar to TopClick. The
Company has entered into various domain name registration agreements for
Topsearches.com, Mytopclick.com, Topclicking.com, Topclick-Inc.com,
Topclickinc.com, Top-Clicks.net, Topclick.net, Topclicks.net, Topclicks.com,
Top-click.com, Top-clicks.com, Top-click.net, Lookmarks.com with Network
Solutions, Inc. ("NSI"). NSI is responsible for the registration of second-level
Internet domain names in the top level COM, ORG, NET, and EDU domains. NSI
registers these second-level domain names on a first come, first served basis.
By registering a domain name, NSI does not determine the legality of the domain
name registration, or otherwise evaluate whether that registration or use may
infringe upon the rights of a third party. Effective February 25, 1998, NSI
revised its domain name dispute policy which provides, among other things, that
if a registrant files a civil action related to the registration and use of a
domain name, and provides NSI with a copy of the file-stamped complaint, NSI
will maintain the status quo ante of the domain name record pending a final or
temporary decision of that court. In such cases, NSI will deposit control of the
domain name into the registry of the court by supplying the registrant with the
registry certificate for deposit. While the domain name is in the registry of
the court, NSI will not make any changes to the domain name record unless
ordered by the court.
The Company believes that this revision to NSI's domain name dispute policy will
discourage frivolous claims against the domain names held by the Company. Domain
name registrations are effective for two years and may be renewed year-to-year
thereafter.
Expanding Internet Markets. Nua, one of Europe's leading online consultants and
developers, estimates that there were approximately 100 million Internet users
worldwide in January, 1998. According to a recent report in Computer
Intelligence, the growth rate of Internet users may have increased by as much as
30% in 1998. The Company anticipates that it may benefit from that growth;
however, no guaranty can be provided that such will occur.
North American Internet users represent more than 80% of all users. Until a year
ago, almost 99% of the 13 million servers hooked to the Internet were
distributed throughout North America, Western Europe and Japan. Internet
advertising revenue has grown significantly since 1996, and, in 1998, approached
the total advertising revenue for all domestic national newspaper revenues. Most
7
<PAGE>
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 28,
1999, the Company entered into a Financing Agreement with a group of investors
represented by Sonora Capital Corporation, a British Columbia corporation
("Sonora"). Other parties to the Financing Agreement were Peter Hough, Clive
Barwin and James Decker, British Columbia residents; and Helpful By Design,
Inc., a Canadian federal jurisdiction corporation ("HBD"). Chris Lewis, the
Chief Executive
8
<PAGE>
Officer of the Company, was a significant shareholder of HBD, and Mr. Lewis was
also a party to the Financing Agreement. TC is now a wholly-owned subsidiary of
the Company. The group of investors represented by Sonora provided the Company
with $2,000,000. Pursuant to the Financing Agreement, the Company acquired all
of the shares of TopClick Corporation, a Delaware corporation incorporated on
July 8, 1998 ("TC") which, in turn, had previously acquired certain assets from
E.Z.P.C. Canada Inc., which was incorporated on September 28, 1994, under the
Canada Business Corporations Act with one common share owned by HBD.
As consideration for the exchange, assignment, transfer, conveyance, setting
over and delivery of the shares of TC, the Company issued 8 shares of its $.001
par value common stock for every 7 shares of TC $.001 par value common stock.
This exchange value was determined by negotiations between the Company, TC, and
Sonora, and was approved by a majority of the shareholders of TC. A copy of the
Financing Agreement is filed as a material contract as Exhibit 10.1 to this
Amendment No. 3 to the Company's Registration Statement on Form 10-SB.
The Company believes that it may be able to acquire additional financing at
commercially reasonable rates; however, there can be no assurance that the
Company will be able to obtain additional financing at commercially reasonable
rates, or at all. The Company has expended, and will continue to expend in the
future, substantial funds on the research and development of its products and
services. The failure of the Company to obtain additional financing, or to
generate revenues from its Internet products and services, would significantly
limit or eliminate the Company's ability to fund its research and development
activities, which would have a material adverse effect on the Company's ability
to continue to compete with other Internet directory service providers.
Moreover, although the Company has significant cash reserves, it cannot continue
to operate indefinitely without generating revenues. At present, the Company's
primary source of revenue is the sale of its securities.
Results of Operations. The Company has not yet realized any revenue from
operations. In the year ended June 30, 1999, the Company expended $260,019 in
software development costs, which represent costs relating to the development of
the Company's Internet website. The Company anticipates that these costs will be
amortized upon the commercial exploitation of the Company's Internet website.
During the year ended June 30, 1999, the Company capitalized $10,075 of
depreciation of its computer equipment as software development costs.
The Company experienced a net loss from its operating activities of $482,680 for
the year ended June 30, 1999 and a net loss, after interest income and write-off
of deferred charges, of $462,603, resulting in a loss per share of $0.04. This
loss was further offset by foreign currency translation adjustments of $17,922,
resulting in a comprehensive loss of $444,681 at June 30, 1999.
At June 30, 1999, the Company had cash of approximately $1,667,370 deposited
with RBC Dominion Securities Ltd. ("RBC"), earning interest at 3.75% per annum.
RBC is a leading debt and equity underwriter in Canada and a member of the Royal
Bank Financial Group, a global financial services group.
Recent Developments. On June 4, 1999, the Company announced that it had added
twenty high profile Internet retailers to the development of its e-commerce
environment in preparation for the launch of the TopClick Marketplace, a
packaged e-commerce shopping environment that will be
9
<PAGE>
offered on the Company's homepage. Retail brands include Ameritech, Travelocity,
Barnsandnoble.com, Priceline, and Reel.com, which have been made available
through the affiliate network Be Free, Inc. On June 9, 1999, the Company
announced that it had added Dell and Amazon.com to its e-commerce package. The
Company recently joined the Amazon.com Associates Program, a leading selling
program on the Internet, which the Company believes has more than 260,000
members. The Company is continuing discussions with additional Internet
retailers and anticipates continuing to add established Internet retailers to
its packaged e-commerce shopping environment.
Item 3. Description of Property
Property held by the Company. As of the dates specified in the following table,
the Company held the following property:
================================================================================
Property June 30, 1999
-------- -------------
- --------------------------------------------------------------------------------
Cash $1,702,291
================================================================================
Intellectual Property-software development $260,019
- --------------------------------------------------------------------------------
Property and Equipment $78,324
- --------------------------------------------------------------------------------
The Company owns the TopClick website and all proprietary software incidental to
the operation thereof. The Company has purchased additional domain names similar
to TopClick in an attempt to prevent third parties from exploiting the TopClick
brand name. On or about August 3, 1998, TC purchased office furniture and
communications systems to furnish the Company offices located at Suite 200, 1636
West 2nd Avenue, Vancouver, British Columbia, Canada V6J 1H4. TC acquired office
workstations and fixtures with an inventory value on that date of $74,000 for
the actual purchase price of $22,000; a Telecomms System for $14,000; 10
personal computers, a laptop computer, and servers, for $23,700; software and
databases for $29,000; 3 printers and personal computer accessories for $6,500;
and an office security system for $1,700. As of March 31, 1999, the Company,
after deducting accumulated depreciation, assigned a net book value of $54,285
to the Company's computer equipment and $24,521 to the Company's furniture and
other office equipment.
The Company has become the successor-in-interest to TopClick (Canada) Inc.'s
commercial lease for the premises located at #200-1636 W. Second Avenue in
Vancouver, British Columbia. That lease commenced August 1, 1998 and expires
July 31, 2001, and consists of approximately 3,500 square feet designated for
use as Internet software and related business offices. The annual base rental is
CDN$42,000, paid in monthly installments and subject to typical common area
charges and pro rata 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.
10
<PAGE>
Intellectual Property Strategy. The Company will attempt to protect its
proprietary technology and domain names (see the discussion under the heading
entitled "Name Identification" on Page 6 of this registration statement). The
Company exclusively owns any and all software that it develops and retains the
right to license its products to third parties. The Company may rely on a
combination of copyright, NIS registration, trademark and trade secrecy laws,
and confidentiality agreements with its employees and subcontractors, to protect
its intellectual property rights in its products.
The Company faces a challenge unique to the software and computing industry.
While it is possible to protect a product's "look and feel", it is almost
impossible for a company to protect its Internet and software features and
functions. This means that another organization may elect to use the Company's
products as prototypes or guides for their own development. This can drastically
shorten a competitor's product development cycle. The Company intends to remain
among the top innovators and most customer-focused providers of Internet
information retrieval systems. This will require the Company to spend
significant funds for continuing research and development activities. The
Company regards its technology as proprietary and may attempt to protect it with
copyrights, trademarks, trade secret laws, restrictions on disclosure and
transferring title and other methods, and has plans to seek a patent with
respect to certain aspects of its searching and indexing technology. There can
be no assurance that any patents that may issue from these applications will be
sufficiently broad to protect the Company's technology. In addition, there can
be no assurance that any patents that may be issued will not be challenged,
invalidated or circumvented, or that any rights granted thereunder would provide
proprietary protection to the Company. Failure of any patents to provide
protection of the Company's technology may make it easier for the Company's
competitors to offer technology equivalent to or superior to the Company's
technology.
The Company also anticipates entering into confidentiality or license agreements
with its employees and consultants, and generally controls access to and
distribution of its documentation and other proprietary information. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use the Company's services or technology without authorization, or to
develop similar technology independently. In addition, effective copyright,
trademark and trade secret protection may be unavailable or limited in certain
foreign countries, and the global nature of the Web makes it virtually
impossible to control the ultimate destination of the Company's services.
Policing unauthorized use of the Company's technology is difficult. There can be
no assurance that the steps taken by the Company will prevent misappropriation
or infringement of its technology. In addition, litigation may be necessary in
the future to enforce the Company's intellectual property rights, to protect the
Company's trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of resources and could have a material and adverse effect on the
Company's business, results of operations and financial condition.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of June 30, 1999 by (i) each person
or entity known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each of the Company's directors and
named executive officers, and (iii) all directors and executive officers of the
Company as a group.
11
<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and Nature
Title of Class of Beneficial Owner of Beneficial Owner Percent of Class
------------------- ------------------- ----------------
<S> <C> <C> <C>
$.001 Par Value Chris Lewis Officer and Director 40.27%
Common Stock 1636 W. 2nd St. 5,280,571 common shares
Vancouver, B.C.
$.001 Par Value Terry Livingstone Chief Operating Officer; 1.75%
Common Stock 1636 W. 2nd St. 229,675 common shares
Vancouver, B.C.
$.001 Par Value All directors and named 42.02%
Common Stock executive officers as a group
</TABLE>
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("Commission") and generally includes voting
or investment power with respect to securities. In accordance with Commission
rules, shares of the Company's common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of the Company's common stock indicated as
beneficially owned by them.
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c) of Regulation S-B.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and principal executive officers of the Company are as specified
on the following table:
================================================================================
Name Age Position
- --------------------------------------------------------------------------------
President, Chief Executive Officer, Chairman
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
12
<PAGE>
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 coordination, including the areas of computer operations, programming,
systems analysis, design and project implementation. From September 1997 to May
1998 and prior to working for Nortel Networks, Mr. Livingstone was a Senior
Project Manager with MacDonald Dettwiler, where he oversaw projects in Taiwan,
Egypt, and North America for DGPS and radar surveillance systems. From 1993 to
1997, he held various project management and related positions with various
companies in Canada, including Helpful By Design, Inc. from June 1996 to July
1997, and Nortel (Northern Telecom) from February 1996 to June 1996. Mr.
Livingstone was self-employed from 1994 through June 1996, worked with Glenayre
Electronics in Vancouver, British Columbia from 1992 to 1993, and with an IBM
business partner, GRSI, from 1989 through 1992. He also worked at Wang Canada
from 1986 to 1989, where he managed multiple development teams and projects in
Saudi Arabia and the Philippines in planning, organizing, controlling and
implementing turnkey nationwide systems.
13
<PAGE>
Item 6. Executive Compensation - Remuneration of Directors and Officers.
Any compensation received by officers, directors, and management personnel of
the Company will be determined from time to time by the Board of Directors of
the Company. Officers, directors, and management personnel of the Company will
be reimbursed for any out-of-pocket expenses incurred on behalf of the Company.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to the Company payable to
the Chief Executive Officer of the Company and the other executive officers of
the Company whose total annual salary and bonus is anticipated to exceed $50,000
during the year ending December 31, 1999. The Board of Directors of the Company
may adopt an incentive stock option plan for its executive officers which would
result in additional compensation.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------
<TABLE>
<CAPTION>
Name Other Annual All Other
and Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
- ---------------------- ---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Chris Lewis, 1999 $144,000 None None None
President and Chief
Executive Officer
Terry Livingstone 1999 $100,000 None None None
Chief Operating Officer
</TABLE>
Compensation of Directors. As of April 23, 1999, the Company did not have any
non-executive directors (that is, directors who do not also serve as executive
officers of the Company). The Company anticipates that the Board of Directors of
the Company may approve a stock option and compensation plan for non-executive
directors. The Company anticipates that those non-executive directors shall
receive shares of the Company's $.001 par value common stock worth $5,000 each
quarter, and an additional $1,250 per quarter designated as a "meeting
attendance fee". Therefore, the total compensation paid to each non-executive
director shall be equivalent to $25,000 annually.
Beginning in the first quarter of 1999, Chris Lewis, the President and a
director of the Company, has received $12,000 per month as compensation for his
services as a director and executive officer, and Mr. Livingstone has received
approximately $8,350 per month as compensation for his services as an executive
officer. Neither Mr. Lewis nor Mr. Livingstone has earned, or is entitled to,
any stock options, stock appreciation rights, stock-based compensation or other
forms of non-cash compensation in lieu of a portion of this anticipated annual
compensation.
Item 7. Certain Relationships and Related Transactions
Related Party Transactions. Pursuant to a Financing Agreement dated January 28,
1999, the Company acquired all of the shares of TopClick Corporation, a Delaware
corporation incorporated on July 8, 1998 ("TC") which, in turn, had previously
acquired certain assets from E.Z.P.C. Canada Inc., which was
14
<PAGE>
incorporated on September 28, 1994, under the Canada Business Corporations Act
with one common share owned by Helpful By Design, Inc., a Canadian federal
jurisdiction corporation ("HBD"). Chris Lewis, the Chief Executive Officer of
the Company, was a significant shareholder of HBD. TC is now a wholly-owned
subsidiary of the Company.
As consideration for the exchange, assignment, transfer, conveyance, setting
over and delivery of the shares of TC, the Company issued 8 shares of its $.001
par value common stock for every 7 shares of TC $.001 par value common stock.
This exchange value was determined by negotiations between the Company, TC, and
Sonora Capital Corporation (previously identified herein as "Sonora"), and was
approved by a majority of the shareholders of TC.
On or about July 14, 1998, the name of E.Z.P.C. Canada, Inc., was changed to
TopClick (Canada) Inc. In September, 1998, HBD sold the TopClick website and
related assets, including the one common share of TopClick (Canada) Inc., to TC
for the issuance of 7,000,000 shares of $.001 par value common stock of TC to
HBD and forgiveness of indebtedness owed by HBD to TopClick (Canada) Inc. The
TopClick website and related assets were valued by the Board of Directors of HBD
("HBD Board") at US$700,000 (all amounts are in United States currency unless
otherwise specified.) The HBD Board valued the forgiveness of a debt in the
amount of $480,000 in Canadian Dollars ("CDN$") at $315,789, at an exchange rate
of approximately 1.52 CDN$ to one United States dollar. The HBD Board believes
that total consideration for the sale of the TopClick website and related assets
was, therefore, approximately $1,015,789. As part of this transaction, TC agreed
to convert the shares of preferred stock held by shareholders of TopClick
(Canada) Inc. into shares of common stock of TC.
As set forth above, the September, 1998 transaction between the Company's
wholly-owned subsidiary, TC, and HBD was not the result of arm's-length
negotiations. Moreover, although the HBD Board believes that total consideration
for the sale of the TopClick website and related assets was approximately
$1,015,789, the real cost to HBD of designing, developing and building the
TopClick website, assembling the development personnel, and developing a
business plan and strategy for the TopClick website, during a period of
approximately 18 months, was approximately CDN$1,000,000. Therefore, the sale
resulted in a profit of approximately 50% to HBD. As specified previously
herein, a significant number of shares of HBD were owned by Chris Lewis, the
Chief Executive Officer of the Company.
At March 31, 1999, $36,000 in contract fees were accrued for services rendered
to TopClick Canada Inc. by Chris Lewis, the Chief Executive Officer of the
Company.
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,
15
<PAGE>
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 8. Legal Proceedings
There are no legal actions pending against the Company nor are any such legal
actions contemplated, except as follows:
In March, 1999, the Company was informed that Allen Lees, a resident of British
Columbia, was claiming an ownership interest in certain shares of common stock
of Helpful By Design, Inc. ("HBD"). Mr. Lees claim to ownership of such HBD
shares arises from consulting services which Mr. Lees was engaged to perform on
behalf of HBD under its former name, Voxtech Communications, Inc. , beginning in
or about 1993. HBD disputes Mr. Lees' claim of ownership to those HBD shares.
The Company has become involved in this dispute because in September, 1998, HBD
sold certain assets, including a website, to one of the Company's subsidiaries,
TopClick Corporation ("TC"), for, among other consideration, the issuance of
7,000,000 shares of $.001 par value common stock of TC. TC later entered into a
stock exchange agreement with the Company which provided, among other things,
that, as consideration for the exchange, assignment, transfer, conveyance,
setting over and delivery of the shares of TC to the Company, the Company issued
8 shares of its $.001 par value common stock for every 7 shares of TC $.001 par
value common stock.
Mr. Lees has filed a lawsuit in the Supreme Court of British Columbia seeking to
force conversion of approximately 500,000 HBD shares into shares of the
Company's common stock. In addition to HBD, the Company and its Chief Executive
Officer, Chris Lewis, have also been named as defendants in this lawsuit. The
Company intends to vigorously defend this action.
Item 9. Market for Common Equity and Related Stockholder Matters
The Company participates in the OTC Bulletin Board, an electronic quotation
medium for securities traded outside the Nasdaq Stock Market. The Company's
common stock trades on the OTC Bulletin Board under the trading symbol "TOCK".
The following table sets forth the high and low bid prices for shares of the
Company's common stock for the periods noted, as reported by the National Daily
Quotation Services and the NASD Non- NASDAQ Bulletin Board. Quotations reflected
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
Year Period High Low
1998 Fourth Quarter $0.2969 $ 0.25
1999 First Quarter $ 5.375 $0.2969
Second Quarter $ 4.500 $1.8125
Third Quarter $2.0625 $0.4062
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.
16
<PAGE>
After consummation of the financing transaction with Sonora and other parties,
as specified at length herein in the section entitled Development of the Company
and Related Party Transactions, Sonora conducted a six-week investor relations
promotional campaign which raised the Company's visibility to the retail
investment community, resulting in increased sales of the Company's common
stock. There are now approximately 2,000 holders of the Company's common stock.
There have been no cash dividends declared on the Company's common stock since
the Company's inception. Dividends will be declared at the sole discretion of
the Company's Board of Directors.
Item 10. Recent Sales of Unregistered Securities
There have been no sales of unregistered securities within the last three (3)
years which would be required to be disclosed pursuant to Item 701 of Regulation
S-B, except for the following:
On or about January 30, 1999, the Company sold 4,912,500 shares of its $.001 par
value common stock for $0.20 per share. The class of persons to whom the offer
and sale of securities were offered and sold were private investors. The shares
were issued in reliance upon the exemption from the registration requirements of
the Securities Act of 1933 set forth in Section 3(b) of that act and Rule 504 of
Regulation D promulgated by the Securities and Exchange Commission. The offering
price for the shares was arbitrarily set by the Company and had no relationship
to assets, book value, revenues or other established criteria of value. The
gross proceeds to the Company were $982,500. The Company used $150,000 of these
funds to repay an outstanding loan of $150,000 from a group of investors
represented by Sonora.
On or about March 28, 1999, the Company sold 400,000 shares of its $0.001 par
value common stock for $2.50 per share. The shares were issued in reliance upon
the exemption from the registration requirements of the Securities Act of 1933
set forth in Regulation S promulgated by the Securities and Exchange Commission.
Specifically, the class of persons to whom the offer and sale of securities were
made was the class of "non U.S. persons outside the United States of America",
as that term is defined under applicable federal and state securities laws. The
offering price for the shares was arbitrarily set by the Company and had no
relationship to assets, book value, revenues or other established criteria of
value. The net proceeds to the Company were $1,000,000.
Item 11. Description of Securities
The Company is authorized to issue 100,000,000 shares of common stock, $.001 par
value, each share of common stock having equal rights and preferences, including
voting privileges. The Company is not authorized to issue shares of preferred
stock. As of June 30, 1999, 13,407,473 shares of the Company's common stock were
issued and outstanding.
The shares of $.001 par value common stock of the Company constitute equity
interests in the Company entitling each shareholder to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
the Company's common stock are entitled to one vote for each share of record on
all matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of directors of the Company or any other matter, with
the result that the holders of more than 50% of the shares voted for the
election of those directors can elect all of the Directors. The holders of
17
<PAGE>
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 12. 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.
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 13. Financial Statements
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Amendment No. 4 to the Registration Statement on Form 10-SB
(see Item 15 below).
18
<PAGE>
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.
Item 15. Financial Statements and Exhibits
(a) Index to Financial Statements.
Audited Consolidated Financial Statements of the Company
As of June 30, 1999 and 1998:
Report of Independent Auditors F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Shareholders Equity F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Comprehensive Loss F-5
Consolidated Statements of Cash Flows F-6 and F-7
Notes to Consolidated Financial Statements F-8 through F-14
Unaudited Interim Consolidated Financial Statements of the Company
As of September 30, 1999 and 1998:
Auditors Statement F-17
Consolidated Balance Sheets F-18
Consolidated Statements of Shareholders Equity F-19
Consolidated Statements of Operations F-20
Consolidated Statements of Comprehensive Loss F-21
Consolidated Statements of Cash Flows F-22 and F-23
Notes to Consolidated Financial Statements F-24 through F-31
19
<PAGE>
(b) Index to Exhibits.
Copies of the following documents are filed with this Amendment No. 4 to the
Registration Statement, Form 10-SB as exhibits:
Index to Exhibits Page
(a) Exhibits
Exhibit No.
3.1 Certificate of Incorporation
(Charter Document)*
3.2 Amendment to Certificate of Incorporation
(Charter Document)*
3.3 Bylaws*
4. Instruments Defining the Rights of Holders (not applicable)
9. Voting Trust Agreement - Not Applicable
10.1 Financing Agreement
(material contract)**
10.2 Frontier GlobalCenter, Inc. Agreement
(material contract)*
11. Statement Re: Computation of Per Share Earnings(Loss)
15. Letter on Unaudited Interim Financial Information
18. Letter on Change in Accounting Principles (Not applicable)
19. Reports Furnished to Security Holders (Not applicable)
21. Subsidiaries of the Registrant
22. Published Report Regarding Matters Submitted to Vote (not applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel*
20
<PAGE>
24. Power of Attorney is included on Signature Page*
27. Financial Data Schedule*
99. Additional Exhibits (not applicable)
*Previously filed as Exhibits to Registration Statement on Form SB-2 filed with
the Commission on July 8, 1999.
**Previously filed as an Exhibit to Amendment No. 3 to the Registration
Statement on Form 10-SB filed with the Commission on November 17, 1999.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To The Board of Directors and Shareholders
Of Topclick International, Inc.
We have audited the accompanying consolidated balance sheet of Topclick
International, Inc. (Formerly Galveston Oil & Gas, Inc.) (a development stage
company) as at June 30, 1999 and 1998 and the related consolidated statements of
operations, shareholders' equity and cash flows for the year ended June 30, 1999
and for the period from May 15, 1998 (inception) to June 30, 1998. These
consolidated financial statements are the responsibility on the Company's
management. Our responsibility is to express an opinion on theses consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as at June 30, 1999 and 1998 and the consolidated results of its
operations, shareholders' equity and cash flows for the year ended June 30, 1999
and for the period from May 15, 1998 (inception) to June 30, 1998, in conformity
with generally accepted accounting principles in the United States of America.
Vancouver, BC /s/ Buckley Dodds
September 1, 1999 Chartered Accountants
F-1
<PAGE>
1.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil and Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston
TOPCLICK CORPORATION Oil & Gas, Inc.)
Common Common Common Common
Shares Stock Shares Stock
--------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, May 15, 1998 (inception) -- -- 2,450,000 $ 2,450
Net loss for the period -- -- -- --
--------------------------------------------------------
Balance, June 30, 1998 -- -- 2,450,000 2,450
Issued for acquisition of internet
Property 6,972,774 148,550 -- --
Issued for acquisition of Topclick
(Canada) Inc. 514,929 51,758 -- --
Issued for services rendered 20,000 20,000 -- --
Issued for cash 192,297 255,490 -- --
Issued and surrendered in
Acquisition of Topclick
International, Inc. (reverse merger) (7,700,000) (475,798) 8,800,000 8,800
Issued for cash -- -- 2,157,473 2,157
Cumulative translation adjustment -- -- -- --
Net loss for the period -- -- -- --
--------------------------------------------------------
Balance, June 30, 1999 -- $ -- 13,407,473 $ 13,407
--------------------------------------------------------
<CAPTION>
DEFICIT
ACCUMULATED TOTAL
ADDITIONAL CUMULATIVE DURING THE SHAREHOLDERS'
PAID-IN TRANSLATION DEVELOPMENT EQUITY
CAPITAL ADJUSTMENT STAGE (DEFICIT)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, May 15, 1998 (inception) $ 17,456 -- (16,583) 3,323
Net loss for the period -- -- (1,411) (1,411)
-------------------------------------------------------
Balance, June 30, 1998 17,456 -- (17,994) 1,912
Issued for acquisition of internet
Property -- -- -- 148,550
Issued for acquisition of Topclick
(Canada) Inc. -- -- -- 51,758
Issued for services rendered -- -- -- 20,000
Issued for cash -- -- -- 255,490
Issued and surrendered in
Acquisition of Topclick
International, Inc. (reverse merger) 450,415 -- 16,583 --
Issued for cash 1,997,843 -- -- 2,000,000
Cumulative translation adjustment -- 17,922 -- 17,922
Net loss for the period -- -- (462,603) (462,603)
-------------------------------------------------------
Balance, June 30, 1999 $ 2,465,714 $ 17,992 $ (464,014) $ 2,330,029
-------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements
F-2
<PAGE>
2.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
CURRENT
<S> <C> <C>
Cash (Note 4) $ 1,702,291 $ 55,737
Goods and Services Tax Receivable 16,414 --
----------- -----------
1,718,705 55,737
PROPERTY, PLANT AND EQUIPMENT ( Note 3) 78,324 --
SOFTWARE DEVELOPMENT COSTS (Note 5) 260,019 --
----------- -----------
$ 2,057,048 $ 55,737
=========== ===========
LIABILITIES
CURRENT
Accounts payable $ 23,569 $ 2,100
Due to director 450 100
----------- -----------
$ 24,019 $ 2,200
----------- -----------
SHAREHOLDERS' EQUITY
Preferred shares, $.001 par value, 20,000 shares
authorized, none issued and outstanding
Common shares, $.001 par value, 99,980,000 shares
authorized, 13,407,473 and 2,450,000 issued and outstanding 13,407 2,502
Additional paid - in capital 2,465,714 69,029
Cumulative translation adjustment 17,922 --
Deficit accumulated during development stage (464,014) (17,994)
----------- -----------
2,033,029 53,537
----------- -----------
$ 2,057,048 $ 55,737
=========== ===========
</TABLE>
F-3
<PAGE>
3.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
Period from
May 15,1998
Year ended (Inception)
June 30, to June 30,
1999 1998
EXPENSES
Contract fees $ 193,264 $ --
Accounting and legal 79,674 1,379
Consulting fees 33,789 --
Investment referral fees 27,394 --
Wages and benefits 25,643 --
Office expenses 22,174 --
Rent 22,127 --
Meals and entertainment 14,503 --
Internet services 13,210 --
Travel 12,014 --
Software 8,941 --
Telephone 8,524 --
Education 6,039 --
Automobile 4,775 --
Advertising 4,603 --
Depreciation 2,360 --
Utilities 1,759 --
Insurance 1,582 --
Interest and bank charges 305 32
- --------------------------------------------------------------------------------
482,680 1,411
LOSS FROM OPERATIONS (482,680) (1,411)
- --------------------------------------------------------------------------------
OTHER ITEMS
Interest income 24,055 --
Write-off deferred charges (3,978) --
- --------------------------------------------------------------------------------
20,077 --
NET LOSS FOR THE PERIOD $ (462,603) $ (1,411)
- --------------------------------------------------------------------------------
LOSS PER SHARE $ (0.04) $ (0.00)
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES 12,000,682 2,450,000
============ ============
F-4
<PAGE>
4.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
NET LOSS FOR THE PERIOD $(462,603) $ (1,411)
OTHER COMPREHENSVIE INCOME (LOSS) , Net of tax:
Foreign currency translation adjustments 17,922 --
--------- ---------
COMPREHENSIVE LOSS FOR THE PERIOD $(444,681) $ (1,411)
========= =========
F-5
<PAGE>
5.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss) for the period $ (462,603) $ (1,411)
Items not involving cash:
Write-off of deferred charges 3,978 --
Depreciation 2,360 --
Issuance of shares for contract fees 20,000 --
Changes in non-cash working capital --
Accounts payable 21,469 2,100
Goods and Services Tax receivable (16,414) --
Due to director 350 100
- ----------------------------------------------------------------------------------------------------------
(430,860) 789
FINANCING ACTIVITIES
Proceeds from Issuance of common stock 2,269,567 51,625
- ----------------------------------------------------------------------------------------------------------
2,269,567 --
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (90,759) --
Software development costs (101,394) --
- ----------------------------------------------------------------------------------------------------------
(192,153) --
INCREASE IN CASH 1,646,554 52,414
--------- -----------
CASH, BEGINNING OF PERIOD 55,737 3,323
--------- -----------
CASH, END OF PERIOD $ 1,702,291 $ 55,737
- ----------------------------------------------------------------------------------------------------------
</TABLE>
F-6
<PAGE>
6.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
<S> <C> <C>
Interest Paid $ -- $ --
Income taxes paid -- --
- ---------------------------------------------------------------------------------------------------------------
$ -- $ --
- ---------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Non-Cash Investing and Financing Information
Acquisition of assets for issuance of common stock:
Software development costs $ 148,550 $ --
Topclick (Canada) Inc. 51,758 --
Issuance of common stock (200,308) --
- ---------------------------------------------------------------------------------------------------------------
$ -- $ --
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE>
7.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 BUSINESS DESCRIPTION
Topclick International, Inc. (formerly Galveston Oil & Gas, Inc. ) (a
development stage company), "the Company", was incorporated on October
3, 1996 under the laws of the state of Delaware in United States of
America. Pursuant to the agreement described in Note 7, the Company
had a change of control, as such, the nature of the business is
changed from development of oil and gas properties to the business of
operating an Internet Website.
Topclick International, Inc. purchased 100% of Topclick Corporation
pursuant to the stock exchange agreement dated February 10, 1999. This
has been accounted for as a reverse acquisition of the Company by
Topclick Corporation.
Topclick Corporation was incorporated under the laws of Delaware on
July 8, 1998. Effective July 8, 1998, Topclick Corporation acquired
100% of Topclick (Canada) Inc. which is a company under common control
and as such the business combination has been accounted for at
historical costs in a manner similar to that in a pooling of
interests.
Topclick (Canada) Inc. was incorporated under the laws of the Canada
Business Corporation Act and commenced operations (deemed date of
inception) on May 15, 1998.
In addition, Topclick Corporation purchased certain Internet assets
from Helpful by Design Inc. which is also under common control. This
has been accounted for at predecessor historical costs.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are expressed in U.S. Dollars,
have been prepared in accordance with accounting principles generally
accepted in United States and include the following significant
accounting policies:
Consolidation
The consolidated financial statements of the Company include the
accounts of the Company and the consolidated accounts of its
wholly-owned subsidiary Topclick Corporation. The consolidated
financial statements of Topclick Corporation also include accounts of
its wholly-owned subsidiary, Topclick (Canada) Inc. All significant
inter-company transactions have been eliminated.
As described in Note 7, Topclick International, Inc. acquired all of
the outstanding common shares of Topclick Corporation. For accounting
purposes, the acquisition has been treated as the acquisition of
Topclick International, Inc. with Topclick Corporation as the acquiror
(reverse acquisition). The historical financial statements prior to
February 10, 1999 are those of Topclick Corporation consolidated.
Pro-forma information giving effect to the acquisition as if the
acquisition took place May 15, 1998 is not presented as the effects
are immaterial.
i) The consolidated financial statements of the combined entities
are issued under the name of the legal parent (Topclick
International, Inc.) but are considered a continuation of the
financial statements of the legal subsidiary (Topclick
Corporation).
F-8
<PAGE>
8.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
ii) As Topclick Corporation is deemed to be the acquiror for
accounting purposes, its assets and liabilities are included in
the consolidated financial statements at their historical
carrying values in the accounts of Topclick International Inc.
Accounting Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles of United States of
America requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilites and disclosures
in the consolidated financial statements and the accompanying notes.
Actual results could differ from those estimates.
Property, plant and equipment
Property, plant and equipment are recorded at costs and are amortized
in the following manner:
Computers 30% declining balance
Furniture and equipment 20% declining balance
In the year of acquisition, depreciation is calculated at one-half of
the above-noted rates.
Software Development Costs
Software development costs represent costs relating to the development
of the Internet website. These costs will be amortized upon the
commercialization of the Internet website, over three years due to the
nature of business in the of software technology industry.
Loss Per Share
Loss per share is provided in accordance with the Statement of
Financial Accounting Standards No. 128 (SFAS), "Earnings Per Share".
Due to the Company's simple capital structure, only basic loss per
share is presented. Basic loss per share is computed by dividing loss
available to common shareholders by weighted average number of common
shares outstanding for the period.
Foreign currency translation
The Company uses the local currency (Canadian Dollars) as the
functional currency. Assets and liabilities dominated in the foreign
functional currency are translated at the exchange rate of the balance
sheet date. Translation adjustments are recorded as a separate
component of the shareholders' equity. Revenues and expenses
demoninated in foreign currency are translated at the weighted average
exchange for the period.
F-9
<PAGE>
9.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 2 SIGNIFICANT ACCOUTING POLICIES (Continued)
Income Taxes
The Company accounts for income taxes using the liability method.
Under this method deferred income tax liabilities and assets are
computed based on the tax liability or benefit in future years of the
reversal of temporary differences in the recognition of income or
reduction of expenses between financial and tax reporting. Deferred
tax assets and/or liabilities are classified as current and noncurrent
based on the classification of the related asset or liability for
financial reporting purposes, or based on the expected reversal date
for deferred taxes that are not related to an asset or liability.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
NOTE 3 PROPERTY, PLANT AND EQUIPMENT
Accumulated Net Book
Cost Depreciation Value Depreciation
---------------------------------------------------------
Computer $67,166 $10,075 $57,091 $10,075
Furniture and
Equipment 23,593 2,360 21,233 2,360
-------------------------------------------------------
$90,759 $12,435 $78,324 $12,435
-------------------------------------------------------
During the year ended June 30, 1999, $10,075 of depreciation of the
computer was capitialized as software development costs.
NOTE 4 CASH
At June 30, 1999, approximately $1,667,370 of the total cash is
deposited with RBC Dominion Securities Limited (RBC). It carries
interest at 3 3/4 per annum. It is management's intention to utilize
this account as part of its operating bank account. RBC is Canada's
leader in the investment industry. It is the leading debt and equity
underwriter in Canada and is a member of the Royal Bank Financial
Group. The Royal Bank is Canada's premier global financial services
group with leading market share in personal and business banking,
corporate and investment banking, and wealth management.
F-10
<PAGE>
10.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 5 ACQUISITION OF SOFTWARE DEVELOPMENT COSTS (Continued)
a) Effective July 8, 1998 and pursuant to the terms of the
acquisition agreement dated September 15, 1998, Topclick
Corporation (the legal subsidiary) acquired the Internet property
from Helpful By Design Inc., a company under common control of a
controlling shareholder of Topclick Corporation. The
consideration given was 6,972,774 common shares. The software
development costs acquired by Topclick Corporation from Helpful
By Design Inc. are recorded at processor's costs of $148,550.
b) Pursuant to the same agreement as above, Topclick Corporation
acquired 100% of the outstanding shares of Topclick (Canada) Inc.
from Helpful by Design Inc. for the issuance of 514,929 common
shares of Topclick Corporation. The shares issued have been
recorded at the amount of the net assets of Topclick (Canada)
Inc. at the date of acquisition.
The net assets of Topclick (Canada) Inc. at date of acquisition
consists of the following:
Cash $ 37,158
Receivable 16,000
Accounts payable (1,400)
--------
$ 51,758
--------
The above transaction between entities under common control has
been accounted for at historical cost in a manner similar to that
in a pooling of interests.
NOTE 6 REVERSE MERGER
Pursuant to the stock exchange agreement dated February 10, 1999,
the Company issued eight common shares in exchange for every
seven common shares of Topclick Corporation. Therefore, at
February 23, 1999 (closing date), a total of 8,800,000 common
shares were issued by the Company in exchange for 7,700,000
outstanding common shares if Topclick Corporation.
As a result of the above transactions, the Company legally
controls Topclick Corporation. However, in substance, the
shareholders of Topclick Corporation control the Company with an
ownership of approximately 71% of its outstanding common shares.
NOTE 7 SHARES ISSUED FOR SERVICES RENDERED
During the year, Topclick Corporation (legal subsidiary) issued
20,000 common shares to an individual for the fair value of
services rendered in connection with conducting quality controls
to the internet website of Topclick (Canada) Inc. (its
wholly-owned subsidiary). The shares issued been recorded at the
value of the services rendered.
F-11
<PAGE>
11.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 8 FINANCIAL INSTRUMENTS
The Company's financial assets and liabilities consist of cash, Goods
Services Tax receivable, accounts payable, the terms and conditions of
which have been described in the preceding notes.
Credit risk arises from the potential that a debtor will fail to
perform its obligations. The Company is subject to credit risk through
its cash deposits. However, these cash deposits are placed in a
well-capitalized, high quality financial institution (Note 4).
Accordingly, concentrations of credit risk are considered to be
minimal.
Interest rate risk is the risk to the Company's earnings that would
arise from fluctuations in interest rates, and would depend of the
volatility of these rates. The Company's borrowings from external
parties is not substantial. Accordingly, its interest rate risk is
considered to be minimal.
Financial risk is the risk to the Company's earnings that would arise
from fluctuations in interest rates and foreign exchange rates, and
would depend on the volatility of these rates. The Company does not
use derivative instruments to reduce its exposure to interest and
foreign currency risk on its cash deposits held in Canadian funds.
NOTE 9 UNCERTAINTY DUE TO THE YEAR 2000 ISSUE (Unaudited)
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and
financial reporting may range from minor error to significant system
failure which could affect an entity's ability to conduct normal
business operations. Management believes they have taken appropriate
course of action to ensure that the Company's technologies are Year
2000 compliant. However, it is not possible to be certain that all
aspects of the Year 2000 issue effecting the entity, including those
related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.
F-12
<PAGE>
12.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 10 DEFERRED INCOME TAXES
Significant components of the Company's deferred income taxes and
liabilities at June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Deferred income tax asset
Net operating loss $(482,680) $ --
Other 20,077 --
--------- -----
462,603 --
Total deferred income tax asset
valuation allowance 462,603 --
--------- -----
Net deferred income tax liability $ -- $ --
--------- -----
Reconciliation's of the effective tax rate to the Canadian
statutory rate is as follows:
Tax expense at Canadian statutory rate 45.6% 45.6%
Change in valuation allowance (45.6%) (45.6%)
--------- -----
Effective income tax rate - % - %
--------- -----
</TABLE>
The company has Canadian net operating loss carryforwards of
approximately $462,603 that expire in 2006.
The Company operates its business in its Canadian subsidiary Topclick
(Canada) Inc. and as such has losses carried forward for Canadian
income tax purposes.
NOTE 11 CONTINGENCIES
The Company is the subject of a lawsuit by an individual who is
claiming ownership interest in common stock of Helpful By Design Inc.
(HBD). HBD sold certain assets, including a website to Topclick
Corporation. As described in note 6 there was a share exchange between
Topclick Corporation and the Company that resulted in the Company
legally controlling Topclick Corporation.
The individual has filed a lawsuit in the Supreme Court of British
Columbia seeking the force conversion of approximately 500,000 HBD
shares of its .001 par value common stock into shares of the Company's
.001 par value common stock.
It is not possible to estimate the amount of a contingent loss in
respect of this legal action. The impact on earnings per share is not
material.
F-13
<PAGE>
13.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 12 COMMITMENTS
The Company has commitments under certain contracts of employment and
consulting agreements as follows:
2000 $ 88,970
Further, contracts of employment and consulting agreements call for
the granting of stock options to the individuals under contract. The
option agreement have not been formally prepared and signed at June
30, 1999 as management is in the process of creating a formal Stock
Option Plan.
Options for the issuance of 776,000 shares of the company are
committed to be granted upon the creation of the Stock Option Plan at
a price less than $1.00 per share to be determined at the time of the
granting of the options.
NOTE 13 COMPARATIVE FIGURES
The comparative figures have been reclassified to conform with the
presentation adopted in the current period.
F-14
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999 AND 1998, AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(UNITED STATES DOLLARS)
Unaudited
F-15
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999 AND 1998, AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(UNITED STATES DOLLARS)
PAGE
NOTICE TO READER
CONSOLIDATED BALANCE SHEET 1
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY 2
CONSOLIDATED STATEMENT OF OPERATIONS 3
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS 4
CONSOLIDATED STATEMENT OF CASH FLOWS 5-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7-13
F-16
<PAGE>
[Letterhead of BUCKLEY DODDS]
================================================================================
NOTICE TO READER
We have compiled the consolidated balance sheet of Topclick International, Inc.
as at September 30, 1999 and the consolidated statements of operations, deficit
and cash flows for the three months then ended from information provided by
management. We have not audited, reviewed or otherwise attempted to verify the
accuracy or completeness of such information. Readers are cautioned that these
statements may not be appropiate for their puproses.
/s/ Buckley Dodds
Chartered Accountents
Vancouver, B.C.
November 4, 1999
F-17
<PAGE>
1.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
ASSETS
September 30, September 30,
1999 1998
<S> <C> <C>
CURRENT
Cash (Note 4) $ 1,398,427 $ 19,099
Goods and Services Tax Receivable 25,029 4,280
Prepaid rent 4,815 --
----------- -----------
1,428,271 23,379
PROPERTY, PLANT AND EQUIPMENT ( Note 3) 118,469 29,642
SOFTWARE DEVELOPMENT COSTS (Note 5) 303,521 --
----------- -----------
$ 1,850,261 $ 53,021
=========== ===========
LIABILITIES
CURRENT
Accounts payable $ 12,579 $ 4,453
----------- -----------
SHAREHOLDERS' EQUITY
Preferred shares, $.001 par value, 20,000 shares
authorized, none issued and outstanding
Common shares, $.001 par value, 99,980,000 shares
authorized, 13,407,473 and 2,450,000 issued and outstanding 13,407 2,450
Additional paid - in capital 2,465,714 66,198
Cumulative translation adjustment 27,562 --
Deficit accumulated during development stage (669,001) (20,080)
----------- -----------
1,837,682 48,568
----------- -----------
$ 1,850,261 $ 53,021
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-18
<PAGE>
2.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil and Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND FOR THE PERIOD FROM MAY 15, 1998 (INCEPTION) TO SEPTEMBER 30, 1998
(unaudited - See Notice to reader)
<TABLE>
<CAPTION>
TOPCLICK
INTERNATIONAL, INC. DEFICIT TOTAL
(Formerly Galveston ACCUMULATED SHARE-
TOPCLICK CORPORATION Oil & Gas, Inc.) ADDITIONAL CUMULATIVE DURING THE HOLDERS'
Common Common Common Common PAID-IN TRANSLATION DEVELOPMENT EQUITY
Shares Stock Shares Stock CAPITAL ADJUSTMENT STAGE (DEFICIT)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 15, 1998
(inception) -- -- 2,450,000 $ 2,450 $ 17,456 -- (16,583) 3,323
Net loss for the period -- -- -- -- -- -- (3,497) (3,497)
------------------------------------------------------------------------------------------------------
Balance, September 30, 1998 -- -- 2,450,000 2,450 17,456 -- (20,080) (174)
Issued for acquisition of
internet Property 6,972,774 148,550 -- -- -- -- -- 148,550
Issued for acquisition of
Topclick (Canada) Inc. 514,929 51,758 -- -- -- -- -- 51,758
Issued for services rendered 20,000 20,000 -- -- -- -- -- 20,000
Issued for cash 192,297 255,490 -- -- -- -- -- 255,490
Issued and surrendered in
Acquisition of Topclick
International, Inc.
(reverse merger) (7,700,000) (475,798) 8,800,000 8,800 450,415 -- 16,583 --
Issued for cash -- -- 2,157,473 2,157 1,997,843 -- -- 2,000,000
Cumulative translation
adjustment -- -- -- -- -- 27,562 -- 27,562
Net loss to June 30, 1999 -- -- -- -- -- -- (460,517) (460,517)
------------------------------------------------------------------------------------------------------
Balance June 30, 1999 -- -- -- -- -- -- (464,014) (464,014)
Net loss for the period -- -- -- -- -- -- (204,987) (204,987)
------------------------------------------------------------------------------------------------------
Balance, September 30, 1999 -- $ -- 13,407,473 $ 13,407 $2,465,714 $ 27,562 $(669,001) $1,837,682
------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-19
<PAGE>
3.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(Unaudited - See Notice to Reader)
Period from
Three months May 15, 1998
Ended (Inception)
September 30, to September 30,
1999 1998
EXPENSES
Contract fees $ 71,920 $ --
Accounting and legal 26,726 3,519
Travel 21,691 --
Advertising 20,001 --
Wages and benefits 19,687 --
Internet services 10,692 --
Rent 10,152 --
Securities filing fees 6,176 --
Office expenses 5,813 --
Meals and entertainment 3,254 --
Telephone 2,166 --
Consulting fees 2,007 --
Depreciation 1,582 --
Automobile 1,295 --
Insurance 799 --
Interest and bank charges 370 57
Utilities 271 --
Software 252 --
Education 157 --
- -------------------------------------------------------------------------------
205,011 3,576
LOSS FROM OPERATIONS (205,011) (3,576)
- -------------------------------------------------------------------------------
OTHER ITEMS
Interest income 24 79
- -------------------------------------------------------------------------------
24 3,497
NET LOSS FOR THE PERIOD $ (204,987) $ (3,497)
- -------------------------------------------------------------------------------
LOSS PER SHARE $ (0.01) $ (0.00)
- -------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES 13,407,473 2,450,000
============ ============
See accompanying notes to the unaudited consolidated financial statements.
F-20
<PAGE>
4.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
Period from
Three months May 15, 1998
Ended (inception)
September 30, to September 30,
1999 1998
<S> <C> <C>
NET LOSS FOR THE PERIOD $ (204,987) $ (3,497)
OTHER COMPREHENSVIE INCOME (LOSS) , Net of tax:
Foreign currency translation adjustments 27,692 --
- -----------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD $ (177,295) $ (3,497)
============ ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-21
<PAGE>
5.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
Period from
Three months May 15, 1998
ended (Inception)
September 30, to September 30,
1999 1998
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss) for the period $ (204,987) $ (3,497)
Items not involving cash:
Depreciation 1,582 --
Changes in non-cash working capital --
Accounts payable 10,990 4,453
Goods and Services Tax receivable (8,615) --
Due to director (450) 100
Prepaid rent (4,815) --
- ----------------------------------------------------------------------------------------
(206,295) 1,056
FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 44,362
- ----------------------------------------------------------------------------------------
-- 44,362
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (47,183) (29,642)
Software development costs (50,386) --
- ----------------------------------------------------------------------------------------
(97,569) (29,642)
(DECREASE) INCREASE IN CASH (303,864) 15,776
CASH, BEGINNING OF PERIOD 1,702,291 3,323
----------- -----------
CASH, END OF PERIOD $ 1,398,427 $ 19,099
- ----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-22
<PAGE>
6.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(Unaudited - See Notice to Reader)
Period from
Three Months May 15, 1998
ended (Inception) to
June 30, September 30,
1999 1998
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 $ -- --
Topclick (Canada) Inc. -- --
Issuance of common stock -- --
- --------------------------------------------------------------------------------
$ -- $ --
- --------------------------------------------------------------------------------
See accompanying notes to the unaudited consolidated financial statements.
F-23
<PAGE>
7.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
NOTE 1 BUSINESS DESCRIPTION
Topclick International, Inc. (formerly Galveston Oil & Gas, Inc. ) (a
development stage company), "the Company", was incorporated on October
3, 1996 under the laws of the state of Delaware in United States of
America. Pursuant to the agreement described in Note 7, the Company
had a change of control, as such, the nature of the business is
changed from development of oil and gas properties to the business of
operating an Internet Website.
Topclick International, Inc. purchased 100% of Topclick Corporation
pursuant to the stock exchange agreement dated February 10, 1999. This
has been accounted for as a reverse acquisition of the Company by
Topclick Corporation.
Topclick Corporation was incorporated under the laws of Delaware on
July 8, 1998. Effective July 8, 1998, Topclick Corporation acquired
100% of Topclick (Canada) Inc. which is a company under common control
and as such the business combination has been accounted for at
historical costs in a manner similar to that in a pooling of
interests.
Topclick (Canada) Inc. was incorporated under the laws of the Canada
Business Corporation Act and commenced operations (deemed date of
inception) on May 15, 1998.
In addition, Topclick Corporation purchased certain Internet assets
from Helpful by Design Inc. which is also under common control. This
has been accounted for at predecessor historical costs.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are expressed in U.S. Dollars,
have been prepared in accordance with accounting principles generally
accepted in United States and include the following significant
accounting policies:
Consolidation
The consolidated financial statements of the Company include the
accounts of the Company and the consolidated accounts of its
wholly-owned subsidiary Topclick Corporation. The consolidated
financial statements of Topclick Corporation also include accounts of
its wholly-owned subsidiary, Topclick (Canada) Inc. All significant
inter-company transactions have been eliminated.
As described in Note 7, Topclick International, Inc. acquired all of
the outstanding common shares of Topclick Corporation. For accounting
purposes, the acquisition has been treated as the acquisition of
Topclick International, Inc. with Topclick Corporation as the acquiror
(reverse acquisition). The historical financial statements prior to
February 10, 1999 are those of Topclick Corporation consolidated.
Pro-forma information giving effect to the acquisition as if the
acquisition took place May 15, 1998 is not presented as the effects
are immaterial.
i) The consolidated financial statements of the combined entities
are issued under the name of the legal parent (Topclick
International, Inc.) but are considered a continuation of the
financial statements of the legal subsidiary (Topclick
Corporation).
F-24
<PAGE>
8.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to reader)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
ii) As Topclick Corporation is deemed to be the acquiror for
accounting purposes, its assets and liabilities are included in
the consolidated financial statements at their historical
carrying values in the accounts of Topclick International Inc.
Accounting Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles of United States of
America requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilites and disclosures
in the consolidated financial statements and the accompanying notes.
Actual results could differ from those estimates.
Property, plant and equipment
Property, plant and equipment are recorded at costs and are amortized
in the following manner:
Computers 30% declining balance
Furniture and equipment 20% declining balance
In the year of acquisition, depreciation is calculated at one-half of
the above-noted rates.
Software Development Costs
Software development costs represent costs relating to the development
of the Internet website. These costs will be amortized upon the
commercialization of the Internet website, over three years due to the
nature of business in the of software technology industry.
Loss Per Share
Loss per share is provided in accordance with the Statement of
Financial Accounting Standards No. 128 (SFAS), "Earnings Per Share".
Due to the Company's simple capital structure, only basic loss per
share is presented. Basic loss per share is computed by dividing loss
available to common shareholders by weighted average number of common
shares outstanding for the period.
Foreign currency translation
The Company uses the local currency (Canadian Dollars) as the
functional currency. Assets and liabilities dominated in the foreign
functional currency are translated at the exchange rate of the balance
sheet date. Translation adjustments are recorded as a separate
component of the shareholders' equity. Revenues and expenses
demoninated in foreign currency are translated at the weighted average
exchange for the period.
F-25
<PAGE>
9.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice To Reader)
NOTE 2 SIGNIFICANT ACCOUTING POLICIES (Continued)
Income Taxes
The Company accounts for income taxes using the liability method.
Under this method deferred income tax liabilities and assets are
computed based on the tax liability or benefit in future years of the
reversal of temporary differences in the recognition of income or
reduction of expenses between financial and tax reporting. Deferred
tax assets and/or liabilities are classified as current and noncurrent
based on the classification of the related asset or liability for
financial reporting purposes, or based on the expected reversal date
for deferred taxes that are not related to an asset or liability.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
NOTE 3 PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Accumulated Net Book
Cost Depreciation Value Depreciation
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer $ 93,765 $ 15,502 $ 78,263 $ 1,281
Furniture and
Equipment 30,815 3,637 27,178 301
Leasehold 13,362 334 13,028 --
--------------------------------------------------------------------------
$ 137,942 $ 19,473 $ 118,469 $ 1,582
--------------------------------------------------------------------------
</TABLE>
During the three months ended September 30, 1999, $1,281 of
depreciation of the computer was capitialized as software development
costs.
NOTE 4 CASH
At September 30, 1999, approximately $1,398,427 of the total cash is
deposited with RBC Dominion Securities Limited (RBC). It carries
interest at 3 3/4 per annum. It is management's intention to utilize
this account as part of its operating bank account. RBC is Canada's
leader in the investment industry. It is the leading debt and equity
underwriter in Canada and is a member of the Royal Bank Financial
Group. The Royal Bank is Canada's premier global financial services
group with leading market share in personal and business banking,
corporate and investment banking, and wealth management.
F-26
<PAGE>
10.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
NOTE 5 ACQUISITION OF SOFTWARE DEVELOPMENT COSTS (Continued)
a) Effective July 8, 1998 and pursuant to the terms of the
acquisition agreement dated September 15, 1998, Topclick
Corporation (the legal subsidiary) acquired the Internet property
from Helpful By Design Inc., a company under common control of a
controlling shareholder of Topclick Corporation. The
consideration given was 6,972,774 common shares. The software
development costs acquired by Topclick Corporation from Helpful
By Design Inc. are recorded at processor's costs of $148,550.
b) Pursuant to the same agreement as above, Topclick Corporation
acquired 100% of the outstanding shares of Topclick (Canada) Inc.
from Helpful by Design Inc. for the issuance of 514,929 common
shares of Topclick Corporation. The shares issued have been
recorded at the amount of the net assets of Topclick (Canada)
Inc. at the date of acquisition.
The net assets of Topclick (Canada) Inc. at date of acquisition
consists of the following:
Cash $ 37,158
Receivable 16,000
Accounts payable (1,400)
--------------
$ 51,758
==============
The above transaction between entities under common control has been
accounted for at historical cost in a manner similar to that in a
pooling of interests.
NOTE 6 REVERSE MERGER
Pursuant to the stock exchange agreement dated February 10, 1999, the
Company issued eight common shares in exchange for every seven common
shares of Topclick Corporation. Therefore, at February 23, 1999
(closing date), a total of 8,800,000 common shares were issued by the
Company in exchange for 7,700,000 outstanding common shares if
Topclick Corporation.
As a result of the above transactions, the Company legally controls
Topclick Corporation. However, in substance, the shareholders of
Topclick Corporation control the Company with an ownership of
approximately 71% of its outstanding common shares.
F-27
<PAGE>
11.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
NOTE 7 FINANCIAL INSTRUMENTS
The Company's financial assets and liabilities consist of cash, Goods
Services Tax receivable, accounts payable, the terms and conditions of
which have been described in the preceding notes.
Credit risk arises from the potential that a debtor will fail to
perform its obligations. The Company is subject to credit risk through
its cash deposits. However, these cash deposits are placed in a
well-capitalized, high quality financial institution (Note 4).
Accordingly, concentrations of credit risk are considered to be
minimal.
Interest rate risk is the risk to the Company's earnings that would
arise from fluctuations in interest rates, and would depend of the
volatility of these rates. The Company's borrowings from external
parties is not substantial. Accordingly, its interest rate risk is
considered to be minimal.
Financial risk is the risk to the Company's earnings that would arise
from fluctuations in interest rates and foreign exchange rates, and
would depend on the volatility of these rates. The Company does not
use derivative instruments to reduce its exposure to interest and
foreign currency risk on its cash deposits held in Canadian funds.
NOTE 8 UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and
financial reporting may range from minor error to significant system
failure which could affect an entity's ability to conduct normal
business operations. Management believes they have taken appropriate
course of action to ensure that the Company's technologies are Year
2000 compliant. However, it is not possible to be certain that all
aspects of the Year 2000 issue effecting the entity, including those
related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.
F-28
<PAGE>
12.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to reader)
NOTE 9 DEFERRED INCOME TAXES
Significant components of the Company's deferred income taxes and
liabilities at September 30, 1999 and 1998 are as follows:
September 30, September 30,
1999 1998
Deferred income tax asset
Net operating loss $ (687,691) $ --
Other 18,690 --
------------ -------------
Total deferred income tax asset (669,001) --
valuation allowance 669,001 --
------------ -------------
Net deferred income tax liability $ -- $ --
------------ -------------
Reconciliation's of the effective tax rate to the Canadian statutory
rate is as follows:
Tax expense at Canadian
statutory rate 45.6% 45.6%
Change in valuation allowance (45.6%) (45.6%)
------------ -------------
Effective income tax rate --% --%
------------ -------------
The company has Canadian net operating loss carryforwards of
approximately $462,603 that expire in 2006.
The Company operates its business in its Canadian subsidiary Topclick
(Canada) Inc. and as such has losses carried forward for Canadian
income tax purposes.
NOTE 10 CONTINGENCIES
The Company is the subject of a lawsuit by an individual who is
claiming ownership interest in common stock of Helpful By Design Inc.
(HBD). HBD sold certain assets, including a website to Topclick
Corporation. As described in note 6 there was a share exchange between
Topclick Corporation and the Company that resulted in the Company
legally controlling Topclick Corporation.
The individual has filed a lawsuit in the Supreme Court of British
Columbia seeking the force conversion of approximately 500,000 HBD
shares of its .001 par value common stock into shares of the Company's
.001 par value common stock.
It is not possible to estimate the amount of a contingent loss in
respect of this legal action. The impact on earnings per share is not
material.
F-29
<PAGE>
13.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to reader)
NOTE 11 COMMITMENTS
The Company has commitments under certain contracts of employment and
consulting agreements as follows:
2000 $ 88,970
Further, contracts of employment and consulting agreements call for
the granting of stock options to the individuals under contract. The
option agreement have not been formally prepared and signed at
September 30, 1999 as management is in the process of creating a
formal Stock Option Plan.
Options for the issuance of 776,000 shares of the company are
committed to be granted upon the creation of the Stock Option Plan at
a price less than $1.00 per share to be determined at the time of the
granting of the options.
NOTE 12 COMPARATIVE FIGURES
The comparative figures have been reclassified to conform with the
presentation adopted in the current period.
F-30
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999 AND 1998, AND FOR THE YEAR ENDED
JUNE 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO JUNE 30, 1998
(UNITED STATES DOLLARS)
F-31
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1999 AND 1998, AND FOR THE YEAR ENDED
JUNE 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO JUNE 30, 1998
(UNITED STATES DOLLARS)
PAGE
REPORT OF INDEPENDENT AUDITORS
CONSOLIDATED BALANCE SHEET 1
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY 2
CONSOLIDATED STATEMENT OF OPERATIONS 3
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS 4
CONSOLIDATED STATEMENT OF CASH FLOWS 5-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7-13
F-32
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To The Board of Directors and Shareholders
Of Topclick International, Inc.
We have audited the accompanying consolidated balance sheet of Topclick
International, Inc. (Formerly Galveston Oil & Gas, Inc.) (a development stage
company) as at June 30, 1999 and 1998 and the related consolidated statements of
operations, shareholders' equity and cash flows for the year ended June 30, 1999
and for the period from May 15, 1998 (inception) to June 30, 1998. These
consolidated financial statements are the responsibility on the Company's
management. Our responsibility is to express an opinion on theses consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as at June 30, 1999 and 1998 and the consolidated results of its
operations, shareholders' equity and cash flows for the year ended June 30, 1999
and for the period from May 15, 1998 (inception) to June 30, 1998, in conformity
with generally accepted accounting principles in the United States of America.
Vancouver, BC
September 1, 1999 Chartered Accountants
F-33
<PAGE>
1.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil and Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston
TOPCLICK CORPORATION Oil & Gas, Inc.)
Common Common Common Common
Shares Stock Shares Stock
--------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, May 15, 1998 (inception) -- -- 2,450,000 $ 2,450
Net loss for the period -- -- -- --
--------------------------------------------------------
Balance, June 30, 1998 -- -- 2,450,000 2,450
Issued for acquisition of internet
Property 6,972,774 148,550 -- --
Issued for acquisition of Topclick
(Canada) Inc. 514,929 51,758 -- --
Issued for services rendered 20,000 20,000 -- --
Issued for cash 192,297 255,490 -- --
Issued and surrendered in
Acquisition of Topclick
International, Inc. (reverse merger) (7,700,000) (475,798) 8,800,000 8,800
Issued for cash -- -- 2,157,473 2,157
Cumulative translation adjustment -- -- -- --
Net loss for the period -- -- -- --
--------------------------------------------------------
Balance, June 30, 1999 -- $ -- 13,407,473 $ 13,407
--------------------------------------------------------
<CAPTION>
DEFICIT
ACCUMULATED TOTAL
ADDITIONAL CUMULATIVE DURING THE SHAREHOLDERS'
PAID-IN TRANSLATION DEVELOPMENT EQUITY
CAPITAL ADJUSTMENT STAGE (DEFICIT)
-------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, May 15, 1998 (inception) $ 17,456 -- (16,583) 3,323
Net loss for the period -- -- (1,411) (1,411)
-------------------------------------------------------
Balance, June 30, 1998 17,456 -- (17,994) 1,912
Issued for acquisition of internet
Property -- -- -- 148,550
Issued for acquisition of Topclick
(Canada) Inc. -- -- -- 51,758
Issued for services rendered -- -- -- 20,000
Issued for cash -- -- -- 255,490
Issued and surrendered in
Acquisition of Topclick
International, Inc. (reverse merger) 450,415 -- 16,583 --
Issued for cash 1,997,843 -- -- 2,000,000
Cumulative translation adjustment -- 17,922 -- 17,922
Net loss for the period -- -- (462,603) (462,603)
-------------------------------------------------------
Balance, June 30, 1999 $ 2,465,714 $ 17,992 $ (464,014) $ 2,330,029
-------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements
F-34
<PAGE>
2.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
CURRENT
<S> <C> <C>
Cash (Note 4) $ 1,702,291 $ 55,737
Goods and Services Tax Receivable 16,414 --
----------- -----------
1,718,705 55,737
PROPERTY, PLANT AND EQUIPMENT ( Note 3) 78,324 --
SOFTWARE DEVELOPMENT COSTS (Note 5) 260,019 --
----------- -----------
$ 2,057,048 $ 55,737
=========== ===========
LIABILITIES
CURRENT
Accounts payable $ 23,569 $ 2,100
Due to director 450 100
----------- -----------
$ 24,019 $ 2,200
----------- -----------
SHAREHOLDERS' EQUITY
Preferred shares, $.001 par value, 20,000 shares
authorized, none issued and outstanding
Common shares, $.001 par value, 99,980,000 shares
authorized, 13,407,473 and 2,450,000 issued and outstanding 13,407 2,502
Additional paid - in capital 2,465,714 69,029
Cumulative translation adjustment 17,922 --
Deficit accumulated during development stage (464,014) (17,994)
----------- -----------
2,033,029 53,537
----------- -----------
$ 2,057,048 $ 55,737
=========== ===========
</TABLE>
F-35
<PAGE>
3.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
Period from
May 15,1998
Year ended (Inception)
June 30, to June 30,
1999 1998
EXPENSES
Contract fees $ 193,264 $ --
Accounting and legal 79,674 1,379
Consulting fees 33,789 --
Investment referral fees 27,394 --
Wages and benefits 25,643 --
Office expenses 22,174 --
Rent 22,127 --
Meals and entertainment 14,503 --
Internet services 13,210 --
Travel 12,014 --
Software 8,941 --
Telephone 8,524 --
Education 6,039 --
Automobile 4,775 --
Advertising 4,603 --
Depreciation 2,360 --
Utilities 1,759 --
Insurance 1,582 --
Interest and bank charges 305 32
- --------------------------------------------------------------------------------
482,680 1,411
LOSS FROM OPERATIONS (482,680) (1,411)
- --------------------------------------------------------------------------------
OTHER ITEMS
Interest income 24,055 --
Write-off deferred charges (3,978) --
- --------------------------------------------------------------------------------
20,077 --
NET LOSS FOR THE PERIOD $ (462,603) $ (1,411)
- --------------------------------------------------------------------------------
LOSS PER SHARE $ (0.04) $ (0.00)
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES 12,000,682 2,450,000
============ ============
F-36
<PAGE>
4.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
NET LOSS FOR THE PERIOD $(462,603) $ (1,411)
OTHER COMPREHENSVIE INCOME (LOSS) , Net of tax:
Foreign currency translation adjustments 17,922 --
--------- ---------
COMPREHENSIVE LOSS FOR THE PERIOD $(444,681) $ (1,411)
========= =========
F-37
<PAGE>
5.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss) for the period $ (462,603) $ (1,411)
Items not involving cash:
Write-off of deferred charges 3,978 --
Depreciation 2,360 --
Issuance of shares for contract fees 20,000 --
Changes in non-cash working capital --
Accounts payable 21,469 2,100
Goods and Services Tax receivable (16,414) --
Due to director 350 100
- ----------------------------------------------------------------------------------------------------------
(430,860) 789
FINANCING ACTIVITIES
Proceeds from Issuance of common stock 2,269,567 51,625
- ----------------------------------------------------------------------------------------------------------
2,269,567 --
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (90,759) --
Software development costs (101,394) --
- ----------------------------------------------------------------------------------------------------------
(192,153) --
INCREASE IN CASH 1,646,554 52,414
--------- -----------
CASH, BEGINNING OF PERIOD 55,737 3,323
--------- -----------
CASH, END OF PERIOD $ 1,702,291 $ 55,737
- ----------------------------------------------------------------------------------------------------------
</TABLE>
F-38
<PAGE>
6.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
AND FOR THE PERIOD
FROM MAY 15, 1998 (INCEPTION) TO JUNE 30, 1998
<TABLE>
<CAPTION>
Period from
May 15, 1998
Year ended (Inception)
June 30, to June 30,
1999 1998
<S> <C> <C>
Interest Paid $ -- $ --
Income taxes paid -- --
- ---------------------------------------------------------------------------------------------------------------
$ -- $ --
- ---------------------------------------------------------------------------------------------------------------
Supplemental Disclosure of Non-Cash Investing and Financing Information
Acquisition of assets for issuance of common stock:
Software development costs $ 148,550 $ --
Topclick (Canada) Inc. 51,758 --
Issuance of common stock (200,308) --
- ---------------------------------------------------------------------------------------------------------------
$ -- $ --
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
F-39
<PAGE>
7.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 BUSINESS DESCRIPTION
Topclick International, Inc. (formerly Galveston Oil & Gas, Inc. ) (a
development stage company), "the Company", was incorporated on October
3, 1996 under the laws of the state of Delaware in United States of
America. Pursuant to the agreement described in Note 7, the Company
had a change of control, as such, the nature of the business is
changed from development of oil and gas properties to the business of
operating an Internet Website.
Topclick International, Inc. purchased 100% of Topclick Corporation
pursuant to the stock exchange agreement dated February 10, 1999. This
has been accounted for as a reverse acquisition of the Company by
Topclick Corporation.
Topclick Corporation was incorporated under the laws of Delaware on
July 8, 1998. Effective July 8, 1998, Topclick Corporation acquired
100% of Topclick (Canada) Inc. which is a company under common control
and as such the business combination has been accounted for at
historical costs in a manner similar to that in a pooling of
interests.
Topclick (Canada) Inc. was incorporated under the laws of the Canada
Business Corporation Act and commenced operations (deemed date of
inception) on May 15, 1998.
In addition, Topclick Corporation purchased certain Internet assets
from Helpful by Design Inc. which is also under common control. This
has been accounted for at predecessor historical costs.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are expressed in U.S. Dollars,
have been prepared in accordance with accounting principles generally
accepted in United States and include the following significant
accounting policies:
Consolidation
The consolidated financial statements of the Company include the
accounts of the Company and the consolidated accounts of its
wholly-owned subsidiary Topclick Corporation. The consolidated
financial statements of Topclick Corporation also include accounts of
its wholly-owned subsidiary, Topclick (Canada) Inc. All significant
inter-company transactions have been eliminated.
As described in Note 7, Topclick International, Inc. acquired all of
the outstanding common shares of Topclick Corporation. For accounting
purposes, the acquisition has been treated as the acquisition of
Topclick International, Inc. with Topclick Corporation as the acquiror
(reverse acquisition). The historical financial statements prior to
February 10, 1999 are those of Topclick Corporation consolidated.
Pro-forma information giving effect to the acquisition as if the
acquisition took place May 15, 1998 is not presented as the effects
are immaterial.
i) The consolidated financial statements of the combined entities
are issued under the name of the legal parent (Topclick
International, Inc.) but are considered a continuation of the
financial statements of the legal subsidiary (Topclick
Corporation).
F-40
<PAGE>
8.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
ii) As Topclick Corporation is deemed to be the acquiror for
accounting purposes, its assets and liabilities are included in
the consolidated financial statements at their historical
carrying values in the accounts of Topclick International Inc.
Accounting Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles of United States of
America requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilites and disclosures
in the consolidated financial statements and the accompanying notes.
Actual results could differ from those estimates.
Property, plant and equipment
Property, plant and equipment are recorded at costs and are amortized
in the following manner:
Computers 30% declining balance
Furniture and equipment 20% declining balance
In the year of acquisition, depreciation is calculated at one-half of
the above-noted rates.
Software Development Costs
Software development costs represent costs relating to the development
of the Internet website. These costs will be amortized upon the
commercialization of the Internet website, over three years due to the
nature of business in the of software technology industry.
Loss Per Share
Loss per share is provided in accordance with the Statement of
Financial Accounting Standards No. 128 (SFAS), "Earnings Per Share".
Due to the Company's simple capital structure, only basic loss per
share is presented. Basic loss per share is computed by dividing loss
available to common shareholders by weighted average number of common
shares outstanding for the period.
Foreign currency translation
The Company uses the local currency (Canadian Dollars) as the
functional currency. Assets and liabilities dominated in the foreign
functional currency are translated at the exchange rate of the balance
sheet date. Translation adjustments are recorded as a separate
component of the shareholders' equity. Revenues and expenses
demoninated in foreign currency are translated at the weighted average
exchange for the period.
F-41
<PAGE>
9.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 2 SIGNIFICANT ACCOUTING POLICIES (Continued)
Income Taxes
The Company accounts for income taxes using the liability method.
Under this method deferred income tax liabilities and assets are
computed based on the tax liability or benefit in future years of the
reversal of temporary differences in the recognition of income or
reduction of expenses between financial and tax reporting. Deferred
tax assets and/or liabilities are classified as current and noncurrent
based on the classification of the related asset or liability for
financial reporting purposes, or based on the expected reversal date
for deferred taxes that are not related to an asset or liability.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
NOTE 3 PROPERTY, PLANT AND EQUIPMENT
Accumulated Net Book
Cost Depreciation Value Depreciation
---------------------------------------------------------
Computer $67,166 $10,075 $57,091 $10,075
Furniture and
Equipment 23,593 2,360 21,233 2,360
-------------------------------------------------------
$90,759 $12,435 $78,324 $12,435
-------------------------------------------------------
During the year ended June 30, 1999, $10,075 of depreciation of the
computer was capitialized as software development costs.
NOTE 4 CASH
At June 30, 1999, approximately $1,667,370 of the total cash is
deposited with RBC Dominion Securities Limited (RBC). It carries
interest at 3 3/4 per annum. It is management's intention to utilize
this account as part of its operating bank account. RBC is Canada's
leader in the investment industry. It is the leading debt and equity
underwriter in Canada and is a member of the Royal Bank Financial
Group. The Royal Bank is Canada's premier global financial services
group with leading market share in personal and business banking,
corporate and investment banking, and wealth management.
F-42
<PAGE>
10.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 5 ACQUISITION OF SOFTWARE DEVELOPMENT COSTS (Continued)
a) Effective July 8, 1998 and pursuant to the terms of the
acquisition agreement dated September 15, 1998, Topclick
Corporation (the legal subsidiary) acquired the Internet property
from Helpful By Design Inc., a company under common control of a
controlling shareholder of Topclick Corporation. The
consideration given was 6,972,774 common shares. The software
development costs acquired by Topclick Corporation from Helpful
By Design Inc. are recorded at processor's costs of $148,550.
b) Pursuant to the same agreement as above, Topclick Corporation
acquired 100% of the outstanding shares of Topclick (Canada) Inc.
from Helpful by Design Inc. for the issuance of 514,929 common
shares of Topclick Corporation. The shares issued have been
recorded at the amount of the net assets of Topclick (Canada)
Inc. at the date of acquisition.
The net assets of Topclick (Canada) Inc. at date of acquisition
consists of the following:
Cash $ 37,158
Receivable 16,000
Accounts payable (1,400)
--------
$ 51,758
--------
The above transaction between entities under common control has
been accounted for at historical cost in a manner similar to that
in a pooling of interests.
NOTE 6 REVERSE MERGER
Pursuant to the stock exchange agreement dated February 10, 1999,
the Company issued eight common shares in exchange for every
seven common shares of Topclick Corporation. Therefore, at
February 23, 1999 (closing date), a total of 8,800,000 common
shares were issued by the Company in exchange for 7,700,000
outstanding common shares if Topclick Corporation.
As a result of the above transactions, the Company legally
controls Topclick Corporation. However, in substance, the
shareholders of Topclick Corporation control the Company with an
ownership of approximately 71% of its outstanding common shares.
NOTE 7 SHARES ISSUED FOR SERVICES RENDERED
During the year, Topclick Corporation (legal subsidiary) issued
20,000 common shares to an individual for the fair value of
services rendered in connection with conducting quality controls
to the internet website of Topclick (Canada) Inc. (its
wholly-owned subsidiary). The shares issued been recorded at the
value of the services rendered.
F-43
<PAGE>
11.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 8 FINANCIAL INSTRUMENTS
The Company's financial assets and liabilities consist of cash, Goods
Services Tax receivable, accounts payable, the terms and conditions of
which have been described in the preceding notes.
Credit risk arises from the potential that a debtor will fail to
perform its obligations. The Company is subject to credit risk through
its cash deposits. However, these cash deposits are placed in a
well-capitalized, high quality financial institution (Note 4).
Accordingly, concentrations of credit risk are considered to be
minimal.
Interest rate risk is the risk to the Company's earnings that would
arise from fluctuations in interest rates, and would depend of the
volatility of these rates. The Company's borrowings from external
parties is not substantial. Accordingly, its interest rate risk is
considered to be minimal.
Financial risk is the risk to the Company's earnings that would arise
from fluctuations in interest rates and foreign exchange rates, and
would depend on the volatility of these rates. The Company does not
use derivative instruments to reduce its exposure to interest and
foreign currency risk on its cash deposits held in Canadian funds.
NOTE 9 UNCERTAINTY DUE TO THE YEAR 2000 ISSUE (Unaudited)
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and
financial reporting may range from minor error to significant system
failure which could affect an entity's ability to conduct normal
business operations. Management believes they have taken appropriate
course of action to ensure that the Company's technologies are Year
2000 compliant. However, it is not possible to be certain that all
aspects of the Year 2000 issue effecting the entity, including those
related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.
F-44
<PAGE>
12.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 10 DEFERRED INCOME TAXES
Significant components of the Company's deferred income taxes and
liabilities at June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Deferred income tax asset
Net operating loss $(482,680) $ --
Other 20,077 --
--------- -----
462,603 --
Total deferred income tax asset
valuation allowance 462,603 --
--------- -----
Net deferred income tax liability $ -- $ --
--------- -----
Reconciliation's of the effective tax rate to the Canadian
statutory rate is as follows:
Tax expense at Canadian statutory rate 45.6% 45.6%
Change in valuation allowance (45.6%) (45.6%)
--------- -----
Effective income tax rate - % - %
--------- -----
</TABLE>
The company has Canadian net operating loss carryforwards of
approximately $462,603 that expire in 2006.
The Company operates its business in its Canadian subsidiary Topclick
(Canada) Inc. and as such has losses carried forward for Canadian
income tax purposes.
NOTE 11 CONTINGENCIES
The Company is the subject of a lawsuit by an individual who is
claiming ownership interest in common stock of Helpful By Design Inc.
(HBD). HBD sold certain assets, including a website to Topclick
Corporation. As described in note 6 there was a share exchange between
Topclick Corporation and the Company that resulted in the Company
legally controlling Topclick Corporation.
The individual has filed a lawsuit in the Supreme Court of British
Columbia seeking the force conversion of approximately 500,000 HBD
shares of its .001 par value common stock into shares of the Company's
.001 par value common stock.
It is not possible to estimate the amount of a contingent loss in
respect of this legal action. The impact on earnings per share is not
material.
F-45
<PAGE>
13.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 12 COMMITMENTS
The Company has commitments under certain contracts of employment and
consulting agreements as follows:
2000 $ 88,970
Further, contracts of employment and consulting agreements call for
the granting of stock options to the individuals under contract. The
option agreement have not been formally prepared and signed at June
30, 1999 as management is in the process of creating a formal Stock
Option Plan.
Options for the issuance of 776,000 shares of the company are
committed to be granted upon the creation of the Stock Option Plan at
a price less than $1.00 per share to be determined at the time of the
granting of the options.
NOTE 13 COMPARATIVE FIGURES
The comparative figures have been reclassified to conform with the
presentation adopted in the current period.
F-46
<PAGE>
1.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
ASSETS
September 30, September 30,
1999 1998
<S> <C> <C>
CURRENT
Cash (Note 4) $ 1,398,427 $ 19,099
Goods and Services Tax Receivable 25,029 4,280
Prepaid rent 4,815 --
----------- -----------
1,428,271 23,379
PROPERTY, PLANT AND EQUIPMENT ( Note 3) 118,469 29,642
SOFTWARE DEVELOPMENT COSTS (Note 5) 303,521 --
----------- -----------
$ 1,850,261 $ 53,021
=========== ===========
LIABILITIES
CURRENT
Accounts payable $ 12,579 $ 4,453
----------- -----------
SHAREHOLDERS' EQUITY
Preferred shares, $.001 par value, 20,000 shares
authorized, none issued and outstanding
Common shares, $.001 par value, 99,980,000 shares
authorized, 13,407,473 and 2,450,000 issued and outstanding 13,407 2,450
Additional paid - in capital 2,465,714 66,198
Cumulative translation adjustment 27,562 --
Deficit accumulated during development stage (669,001) (20,080)
----------- -----------
1,837,682 48,568
----------- -----------
$ 1,850,261 $ 53,021
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-47
<PAGE>
2.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil and Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND FOR THE PERIOD FROM MAY 15, 1998 (INCEPTION) TO SEPTEMBER 30, 1998
(unaudited - See Notice to reader)
<TABLE>
<CAPTION>
TOPCLICK
INTERNATIONAL, INC. DEFICIT TOTAL
(Formerly Galveston ACCUMULATED SHARE-
TOPCLICK CORPORATION Oil & Gas, Inc.) ADDITIONAL CUMULATIVE DURING THE HOLDERS'
Common Common Common Common PAID-IN TRANSLATION DEVELOPMENT EQUITY
Shares Stock Shares Stock CAPITAL ADJUSTMENT STAGE (DEFICIT)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 15, 1998
(inception) -- -- 2,450,000 $ 2,450 $ 17,456 -- (16,583) 3,323
Net loss for the period -- -- -- -- -- -- (3,497) (3,497)
------------------------------------------------------------------------------------------------------
Balance, September 30, 1998 -- -- 2,450,000 2,450 17,456 -- (20,080) (174)
Issued for acquisition of
internet Property 6,972,774 148,550 -- -- -- -- -- 148,550
Issued for acquisition of
Topclick (Canada) Inc. 514,929 51,758 -- -- -- -- -- 51,758
Issued for services rendered 20,000 20,000 -- -- -- -- -- 20,000
Issued for cash 192,297 255,490 -- -- -- -- -- 255,490
Issued and surrendered in
Acquisition of Topclick
International, Inc.
(reverse merger) (7,700,000) (475,798) 8,800,000 8,800 450,415 -- 16,583 --
Issued for cash -- -- 2,157,473 2,157 1,997,843 -- -- 2,000,000
Cumulative translation
adjustment -- -- -- -- -- 27,562 -- 27,562
Net loss to June 30, 1999 -- -- -- -- -- -- (460,517) (460,517)
------------------------------------------------------------------------------------------------------
Balance June 30, 1999 -- -- -- -- -- -- (464,014) (464,014)
Net loss for the period -- -- -- -- -- -- (204,987) (204,987)
------------------------------------------------------------------------------------------------------
Balance, September 30, 1999 -- $ -- 13,407,473 $ 13,407 $2,465,714 $ 27,562 $(669,001) $1,837,682
------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-48
<PAGE>
3.
TOPCLICK INTERNATIONAL, INC.
(Formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(Unaudited - See Notice to Reader)
Period from
Three months May 15, 1998
Ended (Inception)
September 30, to September 30,
1999 1998
EXPENSES
Contract fees $ 71,920 $ --
Accounting and legal 26,726 3,519
Travel 21,691 --
Advertising 20,001 --
Wages and benefits 19,687 --
Internet services 10,692 --
Rent 10,152 --
Securities filing fees 6,176 --
Office expenses 5,813 --
Meals and entertainment 3,254 --
Telephone 2,166 --
Consulting fees 2,007 --
Depreciation 1,582 --
Automobile 1,295 --
Insurance 799 --
Interest and bank charges 370 57
Utilities 271 --
Software 252 --
Education 157 --
- -------------------------------------------------------------------------------
205,011 3,576
LOSS FROM OPERATIONS (205,011) (3,576)
- -------------------------------------------------------------------------------
OTHER ITEMS
Interest income 24 79
- -------------------------------------------------------------------------------
24 3,497
NET LOSS FOR THE PERIOD $ (204,987) $ (3,497)
- -------------------------------------------------------------------------------
LOSS PER SHARE $ (0.01) $ (0.00)
- -------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES 13,407,473 2,450,000
============ ============
See accompanying notes to the unaudited consolidated financial statements.
F-49
<PAGE>
4.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
Period from
Three months May 15, 1998
Ended (inception)
September 30, to September 30,
1999 1998
<S> <C> <C>
NET LOSS FOR THE PERIOD $ (204,987) $ (3,497)
OTHER COMPREHENSVIE INCOME (LOSS) , Net of tax:
Foreign currency translation adjustments 27,692 --
- -----------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD $ (177,295) $ (3,497)
============ ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-50
<PAGE>
5.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(Unaudited - See Notice to Reader)
<TABLE>
<CAPTION>
Period from
Three months May 15, 1998
ended (Inception)
September 30, to September 30,
1999 1998
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss) for the period $ (204,987) $ (3,497)
Items not involving cash:
Depreciation 1,582 --
Changes in non-cash working capital --
Accounts payable 10,990 4,453
Goods and Services Tax receivable (8,615) --
Due to director (450) 100
Prepaid rent (4,815) --
- ----------------------------------------------------------------------------------------
(206,295) 1,056
FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 44,362
- ----------------------------------------------------------------------------------------
-- 44,362
INVESTING ACTIVITIES
Acquisition of property, plant and equipment (47,183) (29,642)
Software development costs (50,386) --
- ----------------------------------------------------------------------------------------
(97,569) (29,642)
(DECREASE) INCREASE IN CASH (303,864) 15,776
CASH, BEGINNING OF PERIOD 1,702,291 3,323
----------- -----------
CASH, END OF PERIOD $ 1,398,427 $ 19,099
- ----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
F-51
<PAGE>
6.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999AND THE PERIOD FROM MAY 15, 1998
(INCEPTION) TO SEPTEMBER 30, 1998
(Unaudited - See Notice to Reader)
Period from
Three Months May 15, 1998
ended (Inception) to
June 30, September 30,
1999 1998
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 $ -- --
Topclick (Canada) Inc. -- --
Issuance of common stock -- --
- --------------------------------------------------------------------------------
$ -- $ --
- --------------------------------------------------------------------------------
See accompanying notes to the unaudited consolidated financial statements.
F-52
<PAGE>
7.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
NOTE 1 BUSINESS DESCRIPTION
Topclick International, Inc. (formerly Galveston Oil & Gas, Inc. ) (a
development stage company), "the Company", was incorporated on October
3, 1996 under the laws of the state of Delaware in United States of
America. Pursuant to the agreement described in Note 7, the Company
had a change of control, as such, the nature of the business is
changed from development of oil and gas properties to the business of
operating an Internet Website.
Topclick International, Inc. purchased 100% of Topclick Corporation
pursuant to the stock exchange agreement dated February 10, 1999. This
has been accounted for as a reverse acquisition of the Company by
Topclick Corporation.
Topclick Corporation was incorporated under the laws of Delaware on
July 8, 1998. Effective July 8, 1998, Topclick Corporation acquired
100% of Topclick (Canada) Inc. which is a company under common control
and as such the business combination has been accounted for at
historical costs in a manner similar to that in a pooling of
interests.
Topclick (Canada) Inc. was incorporated under the laws of the Canada
Business Corporation Act and commenced operations (deemed date of
inception) on May 15, 1998.
In addition, Topclick Corporation purchased certain Internet assets
from Helpful by Design Inc. which is also under common control. This
has been accounted for at predecessor historical costs.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are expressed in U.S. Dollars,
have been prepared in accordance with accounting principles generally
accepted in United States and include the following significant
accounting policies:
Consolidation
The consolidated financial statements of the Company include the
accounts of the Company and the consolidated accounts of its
wholly-owned subsidiary Topclick Corporation. The consolidated
financial statements of Topclick Corporation also include accounts of
its wholly-owned subsidiary, Topclick (Canada) Inc. All significant
inter-company transactions have been eliminated.
As described in Note 7, Topclick International, Inc. acquired all of
the outstanding common shares of Topclick Corporation. For accounting
purposes, the acquisition has been treated as the acquisition of
Topclick International, Inc. with Topclick Corporation as the acquiror
(reverse acquisition). The historical financial statements prior to
February 10, 1999 are those of Topclick Corporation consolidated.
Pro-forma information giving effect to the acquisition as if the
acquisition took place May 15, 1998 is not presented as the effects
are immaterial.
i) The consolidated financial statements of the combined entities
are issued under the name of the legal parent (Topclick
International, Inc.) but are considered a continuation of the
financial statements of the legal subsidiary (Topclick
Corporation).
F-53
<PAGE>
8.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to reader)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
ii) As Topclick Corporation is deemed to be the acquiror for
accounting purposes, its assets and liabilities are included in
the consolidated financial statements at their historical
carrying values in the accounts of Topclick International Inc.
Accounting Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles of United States of
America requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilites and disclosures
in the consolidated financial statements and the accompanying notes.
Actual results could differ from those estimates.
Property, plant and equipment
Property, plant and equipment are recorded at costs and are amortized
in the following manner:
Computers 30% declining balance
Furniture and equipment 20% declining balance
In the year of acquisition, depreciation is calculated at one-half of
the above-noted rates.
Software Development Costs
Software development costs represent costs relating to the development
of the Internet website. These costs will be amortized upon the
commercialization of the Internet website, over three years due to the
nature of business in the of software technology industry.
Loss Per Share
Loss per share is provided in accordance with the Statement of
Financial Accounting Standards No. 128 (SFAS), "Earnings Per Share".
Due to the Company's simple capital structure, only basic loss per
share is presented. Basic loss per share is computed by dividing loss
available to common shareholders by weighted average number of common
shares outstanding for the period.
Foreign currency translation
The Company uses the local currency (Canadian Dollars) as the
functional currency. Assets and liabilities dominated in the foreign
functional currency are translated at the exchange rate of the balance
sheet date. Translation adjustments are recorded as a separate
component of the shareholders' equity. Revenues and expenses
demoninated in foreign currency are translated at the weighted average
exchange for the period.
F-54
<PAGE>
9.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice To Reader)
NOTE 2 SIGNIFICANT ACCOUTING POLICIES (Continued)
Income Taxes
The Company accounts for income taxes using the liability method.
Under this method deferred income tax liabilities and assets are
computed based on the tax liability or benefit in future years of the
reversal of temporary differences in the recognition of income or
reduction of expenses between financial and tax reporting. Deferred
tax assets and/or liabilities are classified as current and noncurrent
based on the classification of the related asset or liability for
financial reporting purposes, or based on the expected reversal date
for deferred taxes that are not related to an asset or liability.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
NOTE 3 PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Accumulated Net Book
Cost Depreciation Value Depreciation
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer $ 93,765 $ 15,502 $ 78,263 $ 1,281
Furniture and
Equipment 30,815 3,637 27,178 301
Leasehold 13,362 334 13,028 --
--------------------------------------------------------------------------
$ 137,942 $ 19,473 $ 118,469 $ 1,582
--------------------------------------------------------------------------
</TABLE>
During the three months ended September 30, 1999, $1,281 of
depreciation of the computer was capitialized as software development
costs.
NOTE 4 CASH
At September 30, 1999, approximately $1,398,427 of the total cash is
deposited with RBC Dominion Securities Limited (RBC). It carries
interest at 3 3/4 per annum. It is management's intention to utilize
this account as part of its operating bank account. RBC is Canada's
leader in the investment industry. It is the leading debt and equity
underwriter in Canada and is a member of the Royal Bank Financial
Group. The Royal Bank is Canada's premier global financial services
group with leading market share in personal and business banking,
corporate and investment banking, and wealth management.
F-55
<PAGE>
10.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
NOTE 5 ACQUISITION OF SOFTWARE DEVELOPMENT COSTS (Continued)
a) Effective July 8, 1998 and pursuant to the terms of the
acquisition agreement dated September 15, 1998, Topclick
Corporation (the legal subsidiary) acquired the Internet property
from Helpful By Design Inc., a company under common control of a
controlling shareholder of Topclick Corporation. The
consideration given was 6,972,774 common shares. The software
development costs acquired by Topclick Corporation from Helpful
By Design Inc. are recorded at processor's costs of $148,550.
b) Pursuant to the same agreement as above, Topclick Corporation
acquired 100% of the outstanding shares of Topclick (Canada) Inc.
from Helpful by Design Inc. for the issuance of 514,929 common
shares of Topclick Corporation. The shares issued have been
recorded at the amount of the net assets of Topclick (Canada)
Inc. at the date of acquisition.
The net assets of Topclick (Canada) Inc. at date of acquisition
consists of the following:
Cash $ 37,158
Receivable 16,000
Accounts payable (1,400)
--------------
$ 51,758
==============
The above transaction between entities under common control has been
accounted for at historical cost in a manner similar to that in a
pooling of interests.
NOTE 6 REVERSE MERGER
Pursuant to the stock exchange agreement dated February 10, 1999, the
Company issued eight common shares in exchange for every seven common
shares of Topclick Corporation. Therefore, at February 23, 1999
(closing date), a total of 8,800,000 common shares were issued by the
Company in exchange for 7,700,000 outstanding common shares if
Topclick Corporation.
As a result of the above transactions, the Company legally controls
Topclick Corporation. However, in substance, the shareholders of
Topclick Corporation control the Company with an ownership of
approximately 71% of its outstanding common shares.
F-56
<PAGE>
11.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to Reader)
NOTE 7 FINANCIAL INSTRUMENTS
The Company's financial assets and liabilities consist of cash, Goods
Services Tax receivable, accounts payable, the terms and conditions of
which have been described in the preceding notes.
Credit risk arises from the potential that a debtor will fail to
perform its obligations. The Company is subject to credit risk through
its cash deposits. However, these cash deposits are placed in a
well-capitalized, high quality financial institution (Note 4).
Accordingly, concentrations of credit risk are considered to be
minimal.
Interest rate risk is the risk to the Company's earnings that would
arise from fluctuations in interest rates, and would depend of the
volatility of these rates. The Company's borrowings from external
parties is not substantial. Accordingly, its interest rate risk is
considered to be minimal.
Financial risk is the risk to the Company's earnings that would arise
from fluctuations in interest rates and foreign exchange rates, and
would depend on the volatility of these rates. The Company does not
use derivative instruments to reduce its exposure to interest and
foreign currency risk on its cash deposits held in Canadian funds.
NOTE 8 UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and
financial reporting may range from minor error to significant system
failure which could affect an entity's ability to conduct normal
business operations. Management believes they have taken appropriate
course of action to ensure that the Company's technologies are Year
2000 compliant. However, it is not possible to be certain that all
aspects of the Year 2000 issue effecting the entity, including those
related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.
F-57
<PAGE>
12.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to reader)
NOTE 9 DEFERRED INCOME TAXES
Significant components of the Company's deferred income taxes and
liabilities at September 30, 1999 and 1998 are as follows:
September 30, September 30,
1999 1998
Deferred income tax asset
Net operating loss $ (687,691) $ --
Other 18,690 --
------------ -------------
Total deferred income tax asset (669,001) --
valuation allowance 669,001 --
------------ -------------
Net deferred income tax liability $ -- $ --
------------ -------------
Reconciliation's of the effective tax rate to the Canadian statutory
rate is as follows:
Tax expense at Canadian
statutory rate 45.6% 45.6%
Change in valuation allowance (45.6%) (45.6%)
------------ -------------
Effective income tax rate --% --%
------------ -------------
The company has Canadian net operating loss carryforwards of
approximately $462,603 that expire in 2006.
The Company operates its business in its Canadian subsidiary Topclick
(Canada) Inc. and as such has losses carried forward for Canadian
income tax purposes.
NOTE 10 CONTINGENCIES
The Company is the subject of a lawsuit by an individual who is
claiming ownership interest in common stock of Helpful By Design Inc.
(HBD). HBD sold certain assets, including a website to Topclick
Corporation. As described in note 6 there was a share exchange between
Topclick Corporation and the Company that resulted in the Company
legally controlling Topclick Corporation.
The individual has filed a lawsuit in the Supreme Court of British
Columbia seeking the force conversion of approximately 500,000 HBD
shares of its .001 par value common stock into shares of the Company's
.001 par value common stock.
It is not possible to estimate the amount of a contingent loss in
respect of this legal action. The impact on earnings per share is not
material.
F-58
<PAGE>
13.
TOPCLICK INTERNATIONAL, INC.
(formerly Galveston Oil & Gas, Inc.)
( A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(Unaudited - See Notice to reader)
NOTE 11 COMMITMENTS
The Company has commitments under certain contracts of employment and
consulting agreements as follows:
2000 $ 88,970
Further, contracts of employment and consulting agreements call for
the granting of stock options to the individuals under contract. The
option agreement have not been formally prepared and signed at
September 30, 1999 as management is in the process of creating a
formal Stock Option Plan.
Options for the issuance of 776,000 shares of the company are
committed to be granted upon the creation of the Stock Option Plan at
a price less than $1.00 per share to be determined at the time of the
granting of the options.
NOTE 12 COMPARATIVE FIGURES
The comparative figures have been reclassified to conform with the
presentation adopted in the current period.
F-59
<PAGE>
SIGNATURES
In accordance with the provisions of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this Amendment No. 4 to the Registration
Statement on Form 10-SB to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newport Beach, California, on November 22, 1999.
TopClick International, Inc.,
a Delaware corporation
By:
--------------------------
/s/ Chris Lewis
Its: President
