<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended June 30, 2000
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number: 000-30382
TOPCLICK INTERNATIONAL, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 330755473
---------------------------- -----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1636 West 2nd Avenue, Suite 200
Vancouver, British Columbia, Canada V6J 1H4
--------------------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's Telephone No., including area code: (604) 737-1127
-----------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
The issuer's had no revenues in its most recent fiscal year.
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was sold as of October 19, 2000, was approximately $333,000 based on a price
per share of $0.0625.
The number of shares outstanding of the issuer's only class of Common Stock,
$.001 par value was 15,128,215 as of September 30,2000.
Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to
Rule 424 of the Securities Act of 1933 incorporated herein by reference.
Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X]
<PAGE>
<PAGE>
PART I.
Item 1. Description of Business
------ -----------------------
The Company was originally incorporated to engage in any lawful act or
activity for which corporations may be organized under the General corporation
Law of Delaware and initially was involved in the development of oil and gas
properties. After the consummation of a series of corporate acquisitions
specified more completely under the caption "Development of the Company", 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 developed a
website that was a one-stop information index to the top Internet guides.
This website was subsequently developed into a privacy-oriented search engine
and privacy resource center where Internet users can find research Internet
privacy issues, software products and books.
At the date of this report, the Company's liabilities exceed it current assets
and the Company will have to cease operations unless it is successful in
raising funds in the very near term.
DEVELOPMENT OF THE COMPANY. TopClick International, Inc., a Delaware
corporation formerly named Galveston Oil & Gas, Inc. ("Company"), was
incorporated in the State of Delaware on October 3, 1996. The Company changed
its name to TopClick International, Inc. on or about February 5, 1999 by
filing an amendment to its Certificate of Incorporation with the Delaware
Secretary of State. Pursuant to an Acquisition Agreement dated January 28,
1999, the Company acquired all of the shares of TopClick Corporation, a
Delaware corporation incorporated on July 8, 1998 (previously defined in this
Prospectus as "TC") which, in turn, had previously acquired certain assets
from E.Z.P.C. Canada Inc., which was incorporated on September 28, 1994,
under the Canada Business Corporations Act with one common share owned by
Helpful By Design, Inc., a Canadian federal jurisdiction corporation ("HBD").
The Acquisition Agreement was part of a Financing Agreement specified more
completely below. TC is now a wholly-owned subsidiary of the Company.
As consideration for the exchange, assignment, transfer, conveyance, setting
over and delivery of the shares of TC, the Company issued 8 shares of its
$.001 par value common stock for every 7 shares of TC $.001 par value common
stock. This exchange value was determined by negotiations between the
Company, TC , and Sonora Capital Corporation ("Sonora"), and was approved by a
majority of the shareholders of TC.
On or about July 14, 1998, the name of E.Z.P.C. Canada, Inc., was changed to
TopClick (Canada) Inc. In September, 1998, HBD sold the TopClick website
(which website is described more specifically below) and related assets,
including the one common share of TopClick (Canada) Inc., to TC for the
issuance of 7,000,000 shares of $.001 par value common stock of TC to HBD and
forgiveness of indebtedness owed by HBD to TopClick (Canada) Inc. The
TopClick website and related assets were valued by the Board of Directors of
HBD ("HBD Board") at US$700,000 (all amounts are in United States currency
unless otherwise specified.) The HBD Board valued the forgiveness of a debt
in the amount of $480,000 in Canadian Dollars ("C$") at $315,789, at an
exchange rate of approximately 1.52 C$ to one United States dollar. The HBD
Board believes that total consideration for the sale of the TopClick website
and related assets was, therefore, approximately $1,015,789. As part of this
transaction, TC agreed to convert the shares of preferred stock held by
shareholders of TopClick (Canada) Inc. into shares of common stock of TC.
On or about January 30, 1999, TC entered into a Financing Agreement with the
Company, Sonora, HBD, and other parties whereby a group of investors
represented by Sonora provided $2,000,000 to the Company. As part of a series
of related transactions, HBD and the shareholders of TC transferred their
shares of TC to the Company so that TC became a wholly-owned subsidiary of the
Company.
BUSINESS OF THE COMPANY. As set forth above, the Company owns and operates
the TopClick website, a privacy-based information site with thousands of links
to privacy issues, news, books and organizations. The TopClick website is
located at the Internet address www.topclick.com. The current version of the
website was launched in February 2000 and the number of visitors has grown
every month since. In June 2000, there were 50,000 unique visitors to
TopClick's website.
The company is constantly updating and improving this site. The company
believes that it can generate a number of revenue streams from a privacy site.
For example, the Company intends to sell books over the Internet and receive
sales commissions. The Company expects to derive revenues from the virtual
bookstore within the next nine months.
One of the key attractions of the site is its Internet searching ability which
is based on the Google search engine. TopClick's competitors, which are not
privacy-oriented, include Yahoo!, Excite, Lycos, GoTo.com, Go Network, Ask
Jeeves, Dogpile, Northern Light, Looksmart, Infoseek, Snap!, Webcrawler, AOL
Netfind, HotBot and Alta Vista. In addition to searching the Internet, the
website includes the following resources:
* An on-line bookstore that includes approximately 300 titles on
privacy issues.
* Privacy Market Place provides links to other websites with
information about privacy software such as banner advertising
blocking software and software for managing "cookies".
* Links to privacy advocacy groups.
The Company's website is hosted by GlobalCenter, Inc. ("GlobalCenter") under
an agreement that is ongoing but can be cancelled with no notice. The Company
has purchased servers and related software that is located at Frontier's site
and pays monthly bandwidth charges and rack space lease charges to host the
servers. As part of the server software, the Company has installed a
statistical analysis and tracking software solution from Marketwave
Corporation. The hosting architecture incorporates a fully redundant system
supported by a "high-availability" load-balancing solution that distributes
peak traffic across the servers to improve performance.
The company has also written and installed its own proprietary Protocol
Optimization Software Code, which significantly enhances the speed of the
search results to its customers via the Google protocol.
The Value Proposition of the Topclick private search engine is that it
delivers fast, accurate search results under the banner of Personal Privacy.
Specifically, the site hosts no banner advertisements from advertising
networks like DoubleClick which set cookies against visitors' hard drives and
then build personal profiles of those customers' interests.
The site also has no personal identifier technologies that can identify or
profile visitors, and guarantees its customers that their information will
never be sold or distributed to a third party. The Company has developed its
own proprietary back-end sponsorship delivery software to allow it to deliver
highly flexible sponsorship messages on its search results page, including the
ability to create up to 10 hypertext links within the sponsor message, thus
providing more click-through flexibility than traditional banner
advertisements.
EMPLOYEES. The Company and its subsidiaries currently have two full-time
employees and two contractors that devote substantially all of their efforts
to the Company. Management of the Company anticipates using consultants for
business, accounting, engineering, and legal services on an as-needed basis.
The Company's key employee is Chris Lewis who is the President and Chief
Executive Officer.
Item 2. Description of Property.
------ -----------------------
TopClick's corporate headquarters are maintained in San Diego, California,
with an Operations office in Vancouver, BC. The Vancouver lease agreement is
for approximately 3,500 square feet of office space and expires in 2001. The
San Diego lease is for 210 square feet and expires in November 2000.
The Company owns a variety of computers and other computer equipment for its
operational needs. The Company believes that its facilities and equipment are
suitable and adequate for the business of the Company as presently conducted.
INTELLECTUAL PROPERTY STRATEGY. The Company exclusively owns any and all
software that it develops and retains the right to license its products to
third parties. The Company relies 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.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use the Company's services or technology without
authorization, or to develop similar technology independently. In addition,
effective copyright, trademark and trade secret protection may be unavailable
or limited in certain foreign countries, and the global nature of the Web
makes it virtually impossible to control the ultimate destination of the
Company's services. Policing unauthorized use of the Company's technology is
difficult. There can be no assurance that the steps taken by the Company will
prevent misappropriation or infringement of its technology. In addition,
litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of resources and
could have a material and adverse effect on the Company's business, results of
operations and financial condition.
Item 3. Legal Proceedings
------- -----------------
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
------ ---------------------------------------------------
Not Applicable
<PAGE>
<PAGE>
PART II.
Item 5. Market for Common Equity and Related Stockholder Matters
------ --------------------------------------------------------
The Company participates in the OTC Bulletin Board, an electronic quotation
medium for securities traded outside the NASDAQ Stock Market. The Company's
common stock trades on the OTC Bulletin Board under the trading symbol "TOCK".
The high and low trading prices recorded by the Company's stock have been:
<TABLE>
<CAPTION>
Fiscal Year Ended
June 30, 2000 June 30, 1999
------------- -------------
High Low High Low
---- ---- ---- ----
<S> <C> <C> <C> <C>
Quarter 1 3.22 0.38 - -
Quarter 2 1.53 0.31 - -
Quarter 3 2.38 0.31 5.88 2.98
Quarter 4 0.88 0.25 4.50 1.81
</TABLE>
This market for the Company's common stock is extremely limited and the prices
for the Company's common stock quoted by brokers is not necessarily a reliable
indication of the value of the Company's common stock.
There are approximately 4,600 holders of the Company's common stock. There
have been no cash dividends declared on the Company's common stock since the
Company's inception. Dividends will be declared at the sole discretion of the
Company's Board of Directors.
Item 6. Plan of Operation
------ -----------------
This report specifies forward-looking statements of management of the Company
within the meaning of Section 27a of the Securities Act of 1933 and Section
21e of the Securities Exchange Act of 1934 ("forward-looking statements")
including, without limitation, forward-looking statements regarding the
company's expectations, beliefs, intentions and future strategies. Forward-
looking statements are statements that estimate the happening of future events
and are not based on historical facts. Forward- looking statements may be
identified by the use of forward-looking terminology, such as "could", "may",
"will", "expect", "shall", "estimate", "anticipate", "probable", "possible",
"should", "continue", "intend" or similar terms, variations of those terms or
the negative of those terms. The forward-looking statements specified in this
report have been compiled by management of the Company on the basis of
assumptions made by management and considered by management to be reasonable.
Future operating results of the Company, however, are impossible to predict
and no representation, guaranty, or warranty is to be inferred from those
forward-looking statements. The assumptions used for purposes of the forward-
looking statements specified in this report represent estimates of future
events and are subject to uncertainty as to possible changes in economic,
legislative, industry, and other circumstances. As a result, the
identification and interpretation of data and other information and their use
in developing and selecting assumptions from and among reasonable alternatives
require the exercise of judgment. To the extent that the assumed events do
not occur, the outcome may vary substantially from anticipated or projected
results, and, accordingly, no opinion is expressed on the achievability of
those forward-looking statements. In addition, those forward-looking
statements have been compiled as of the date of this report and should be
evaluated with consideration of any changes occurring after the date of this
report. No assurance can be given that any of the assumptions relating to the
forward-looking statements specified in this report are accurate and the
company assumes no obligation to update any such forward-looking statements.
Company's Plan of Operation for Next 12 Months
----------------------------------------------
The Company has developed and launched a substantial privacy-based information
site (www.topclick.com) with thousands of links to privacy issues, news, books
and organizations.
The Company has developed it's own back-end technology infrastructure to
deliver sponsor placement messages on a rotating basis to potential site
sponsors and has attracted several sponsors to place sponsor messages onto the
site on a trial basis. The company believes that it can generate significant
revenues from the sale of sponsorship to its highly targeted audience of
privacy-concerned customers and has developed a flexible rate card to attract
sponsors at different sponsorship and pricing levels.
The Company takes a very different approach to sponsorship to traditional
banner advertisement strategies. The www.topclick.com Home Page has
straightforward text placement links, whereas the Search Results page of the
site has the capability to deliver a completely sponsor-branded results page,
offering the sponsor a high impact message placement.
The Company can also deliver promotional messages through this system to
represent other businesses with which it has developed revenue-sharing
relationships. For example, in September 2000 the Company announced a
partnership with www.chooseyourmail.com, a permission email service that will
pay the company 40% of all revenues generated from subscribers that sign up
for the service via the Company's web site.
The Company has retained the services of certain key individuals through
management services agreements for day-to-day management and marketing of the
web site. TopClick intends to compensate these individuals through a
combination of cash and stock and to qualify that stock for trading at the
earliest opportunity. The Company is currently being funded by creditors and
does not have cash on hand to discharge all liabilities in the ordinary
course.
On September 25, 2000 the company announced the appointment of iCapital
Corporation Investment Bank to advise the company on business strategy and
sources of funding. The company plans to seek merger acquisition candidates as
part of a development plan to diversify its holdings, create earnings, and
maximize shareholder value.
Subject to securing funding, the company plans to scale down its Canadian
operations and to increase its US presence.
This operating plan is subject to a number of material risks.
INADEQUATE WORKING CAPITAL - At the date of this report, the Company's current
liabilities exceed its current assets. The Company is relying on services
provided by creditors and is not able to pay all its liabilities in the
ordinary course. Unless the Company can raise additional funds in the very
near term, it will have to cease operations.
COMMITMENT OF KEY EMPLOYEES AND CONTRACTORS - There can be no assurance that
the revised arrangement will ensure the continued commitment of key
individuals. If these individuals were to cease working for the Company it is
possible that the Company would be unable to complete development of products
services currently being developed. If any of the contractors were to cease
working for the Company, there could be a materially adverse impact on the
operations of the Company.
ABILITY TO GENERATE REVENUES - The Company currently generates very small
revenues and there can be no assurance that the Company will be able to
generate sufficient revenues over the coming six months or at all. Failure to
generate sufficient revenues to cover operating expenses could have a
materially adverse effect on the operations of the Company.
Developing Site Traffic
-----------------------
In August 2000 www.topclick.com delivered almost 750,000 page impressions to
60,000 unique visitors, a 16% growth on the previous month's performance.
Amongst its services, www.topclick.com offers what we believe is the
Internets' only privacy-based search engine.
The company offers an affiliate partnership program whereby other web sites
can place the www.topclick.com search engine onto their site as a free service
to their customers; by August 31,2000 the company had successfully signed 236
web sites onto this program.
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, Allownet and Allowmail 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.
THE COMPANY'S CONTINGENCY PLANS. To prevent electrical failures from
adversely affecting the Company's operations, the Company performs regularly
scheduled data backups and connects its computer system to backup power
systems. Through the Year 2000, the Company will continue to communicate with
its electrical and telecommunications providers to remain informed about (I)
the status of such suppliers' Y2K compliance, and (ii) the potential impact
that the failure of these suppliers to become Y2K compliant will have on the
Company.
EMPLOYEES. During the next 12 months, depending on the success of the
Company's market expansion plan, the Company may be required to hire up to 20
additional employees; however, the Company is not able to provide a reasonable
estimate of the number of such additional employees which may be required at
this time.
Management's Discussion and Analysis
------------------------------------
Sources of Cash
---------------
The Company's primary source of cash has been from the issuance of the
Company's equity securities. In January 1999, the Company entered into a
Financing Agreement which provided the Company with gross proceeds of
$2,000,000. The Company is attempting to obtain additional financing at
commercially reasonable rates but has not closed a financing since February
1999. There can be no assurance that any required additional financing will be
available on favourable terms, or at all. If additional funds are raised by
the issuance of equity securities, stockholders may experience dilution of
their ownership interest and these securities may have rights senior to those
of the holders of the common stock. If additional funds are raised by the
issuance of debt, the Company may be subject to certain limitations on
operations, including limitations on the payment of dividends. If adequate
funds are not available or are not available on acceptable terms, this could
have a materially adverse effect on the Company's business, financial
condition and results of operations.
In April 2000, the directors of the Company realized that there was
insufficient cash to fund operations at the prevailing expenditure rate.
Accordingly, the directors implemented a plan, the "April Reorganization"
plan, further to which the majority of the Company's employees were terminated
and expenditures were curtailed. As a result of the April Reorganization plan,
monthly cash expenditures have been reduced from approximately $150,000 per
month to approximately $55,000 per month. At the year ending June 30, 2000,
the Company had cash reserves of $165,000, which was sufficient to fund
operations until September 30, 2000. The Company's operations are currently
being funded by creditors.
The failure of the Company to obtain additional financing will significantly
limit or eliminate the Company's ability to fund its research and development
activities, which will have a materially adverse effect on the Company's
ability to continue its operations.
Operating Results
-----------------
For the year ending June 30, 2000, total expenses were $1,821,000, an increase
from $483,000 for the year ending June 30, 1999. The increase in overall
expenses is due to the increase in the number of employees and contractors and
the general scale of operations with the most notable increases including
contract fees, stock based compensation, wages and benefits, internet
services, and office and miscellaneous.
Contractor fees increased from $193,000 in the year ending June 30, 1999 to
$405,000 in the year ending June 30, 2000 as a result of an increase in the
need for personnel with skill sets not currently employed by the company. The
increase in wages and benefits from $26,000 to $335,000 was the result of the
Company moving more of its personnel from contractor to full-time employee
status, although after the April Reorganization, the salary costs dropped
significantly as the Company again relied more on contractors. The increase in
stock based compensation resulted from the fair value of options granted to
non-employees of $113,000. There was no stock plan in effect in the prior
year. The cost of Internet services increased from $13,000 to $85,000 as a
result of increased website activity and fees paid to Google for searching
services. Office expenses increased from $39,000 to $110,000 as a result of
the increased scale of operations including the Company's annual general
meeting that took place in the third quarter. Rent and travel increased after
the Company's San Diego sales office was opened in October 1999.
The Company's loss from operations increased by $1,821,000 during the period
resulting in total accumulated losses since inception (May 15, 1998) of
$2,287,000. A loss of $1,821,000 for the year ending June 30, 2000 compares
to the loss of $463,000 for the year ending June 30, 1999. The increase in the
net loss was largely due to the increase in the operating loss, but in
addition, the Company wrote off capitalized development costs of $260,000 as
there was considerable uncertainty regarding the Company's ability to profit
from these development costs.
The Company's ability to generate significant revenue is uncertain. Losses
from operations and negative cash flow are expected to continue for the
foreseeable future, at least through fiscal 2001. Operating losses will
diminish in the first few months of fiscal 2001 over historic levels following
the reduction in the scale of operations following the April Reorganization.
Future expense trends will depend on the ability of the Company to obtain
additional financing. Although the expectation is to begin generating revenues
within six months, these revenues are projected to be substantially less than
expenses for fiscal 2001. If the Company does not obtain further financing,
revenue does not increase and if spending levels are not adjusted accordingly,
the Company will not achieve profitability, which would have a materially
adverse effect on business, financial condition and results of operations.
Even if profitability is achieved, it may not be sustained or increased on a
quarterly or annual basis in the future.
Working capital requirements depend on numerous factors. At June 30, 2000, the
Company had approximately $165,000 in cash. Management of the Company intends
to utilize these funds to finance operations. At the date of this report, cash
on hand will be required to discharge liabilities.
The Company uses the local currency, which is the Canadian dollar, as its
functional currency. Assets and liabilities denominated 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. Interest income and expenses denominated in foreign
currency are translated at the weighted average exchange rate for the period.
At June 30, 2000, most of the Company's financial instruments were denominated
in United States dollars.
Item 7. Financial Statements
------ --------------------
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Annual Report on Form 10-KSB.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
------ ----------------------------------------------------------------
On May 19, 2000, the Company dismissed Buckley Dodds & Associates as its
accountants and appointed PricewaterhouseCoopers, LLP as accountants. On
September 18, 2000, the Company dismissed PricewaterhouseCoopers, LLP as
accountants and appointed Davidson & Company. Neither Buckley Dodds &
Associates nor PricewaterhouseCoopers, LLP rendered an opinion with an adverse
opinion or disclaimer of opinion or any report modified as to uncertainty,
audit scope or accounting principles. There were no disagreements with the
former accounts on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure. The decision to change
accounts was approved by the board of directors.
<PAGE>
<PAGE>
PART III.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
------ -------------------------------------------------------------
The directors and principal executive officer of the Company are as specified
on the following table:
<TABLE>
<CAPTION>
Name Age Position
---- --- ---------
<S> <C> <C>
Chris Lewis 44 President, Chief Executive Officer, Chairman of the
Board of Directors
Grant Lee 34 Director
</TABLE>
There are no family relationships between the officer and directors.
Biographical Information on Company's Officer and Directors:
CHRIS LEWIS, PRESIDENT, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER -
Chris Lewis is the Company's President and Chief Executive Officer, as well as
Chairman of the Board of Directors. Mr. Lewis developed the TopClick Guide
concept and has responsibility for the strategic planning relating to the
products and services currently under development by the Company. Mr. Lewis
has significant experience in business planning and marketing and has
participated in the development and commercial exploitation of 19 products,
including the world's first alphanumeric paging service. His marketing and
communications experience includes small regional direct mail advertising
campaigns to full national television advertising campaigns supported by
print advertising, outdoor poster activities, product design and packaging, 1-
800 telephone response facilities and full media launch presentations.
During the past 25 years Mr. Lewis has held sales and marketing management
positions in a number of industries, including men's fashion clothing, mobile
communications, telecommunications, computer software and Internet
applications, and the Do-It-Yourself handyman industry.
In 1987 he was selected as one of eight managers (in a company employing
185,000 people) to attend the Accelerated Business Degree in Business
Planning, International Marketing and Marketing Communications (a sub-MBA
program) from the Chartered Institute of Marketing. In 1989, working with
Paul Fifield, a European marketing strategist (now a member of the Company's
advisory board), Mr. Lewis developed a new approach to market segmentation
called "Context Marketing" which British Telecom tested in a customer research
program and then implemented as a principal methodology in its marketing
approach.
In 1992 Mr. Lewis emigrated from London, England to join his family in Western
Canada, leaving a position he had held for 6 years at British Telecom as a
strategic marketing manager for personal communications. At British Telecom
he served as the company representative on a multi-company and university Pan-
European Study of Global Social Change to identify the changing customer
attitudes, values and expectations that drive consumer purchase behavior. He
also worked on several corporate business initiatives as a Marketing Futurist
including personal communications, broadband networks, and other specialized
projects. From 1993 to 1998, Mr. Lewis was President of Helpful By Design,
Inc., a Vancouver, British Columbia-based software and Internet design and
development firm. From June 1998 to date, Mr. Lewis was President and Chief
Executive Officer of TopClick Corporation, an Internet design and development
firm also located in Vancouver, British Columbia.
GRANT LEE, DIRECTOR AND SECRETARY - Grant Lee has been a director since May
2000. He was previously a director of one of our subsidiaries, TopClick
Canada, Inc. from October 1998, to November 1999 and the Director of
Administration for TopClick Canada, Inc. from February 2000 to June 2000. In
1988, he founded West Connect Imports Inc., an import wholesale company which
imported products used in the medical and dental fields. From 1993 to 1996,
he worked as an international market researcher for the Ministry of Economic
Development, Small Business and Trade with the Government of British Columbia.
In 1996, Grant opened two restaurant franchise businesses, which he operated
until November 1999. Mr. Lee was the President and director of a company that
was petitioned into bankruptcy in September 1999.
Mr. Lee holds an MBA from the University of Washington, an International
Business Diploma from Capilano College in Vancouver, Canada, and a BSc in
BioPsychology from the University of British Columbia.
Item 10. Executive Compensation.
------- ----------------------
Any compensation received by officers, directors, and management personnel of
the Company will be determined from time to time by the Board of Directors of
the Company. Officers, directors, and management personnel of the Company
will be reimbursed for any out-of-pocket expenses incurred on behalf of the
Company.
SUMMARY COMPENSATION TABLE. The table set forth below summarizes the annual
and long-term compensation for services in all capacities to the Company
payable to the Chief Executive Officer of the Company. There are no other
officers of the Company, nor have there been since our last report on Form 10-
KSB, whose total annual salary and bonus exceeded $100,000.
<PAGE>
<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation(1) Awards Payouts
-------------------------- ------------------- ---------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(2) ($) SARs ($) ($)
--------------- ------- -------- ----- --------- --------------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chris Lewis 1999 $144,000 None None None None None None
2000 $126,720 None None None None None None
------------------------------
</TABLE>
<PAGE>
<PAGE>
Aggregated Option Exercises In The Year Ended June 30, 2000 And June 30, 2000
Option Values
------------------------------------------------------------------------
The following table sets forth certain information concerning the number and
value of unexercised options held by the named executive officers and
directors at June 30, 2000. No options were exercised during the year ended
June 30, 2000.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at June 30, in the Money Options
2000 at June 30, 2000
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Chris Lewis 400,000 - $ - $ -
Grant Lee 39,000 12,000 $ - $ -
</TABLE>
Options are in the money if the market value of the shares covered thereby is
greater than the option exercise price. This calculation is based on the
estimated fair market value of the common stock at June 30, 2000, of $0.25 per
share, less the exercise price.
COMPENSATION OF DIRECTORS. The Company does not have a formal director
compensation plan.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
------- --------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of June 30, 2000 by (I) each person
or entity known by the Company to be the beneficial owner of more than 5% of
the outstanding shares of common stock, (ii) each of the Company's directors
and named executive officers, and (iii) all directors and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
Name and Address of Nature of Number of Percent
Beneficial Owner Beneficial Owner Shares Held of Class
-------------------- ---------------- ----------- ---------
<S> <C> <C> <C>
Chris Lewis
1636 West 2nd Street
Vancouver, BC Officer and Director 5,680,571 40.8%
Grant Lee Director 97,000 0.7%
All officers and
directors as a group
(two persons) 5,777,571 41.5%
</TABLE>
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. In accordance with Commission rules, shares of the Company's
common stock which may be acquired upon exercise of stock options or warrants
which are currently exercisable or which become exercisable within 60 days of
the date of the table are deemed beneficially owned by the optionees. Subject
to community property laws, where applicable, the persons or entities named in
the table above have sole voting and investment power with respect to all
shares of the Company's common stock indicated as beneficially owned by them.
CHANGES IN CONTROL. Management of the Company is not aware of any
arrangements which may result in "changes in control" as that term is defined
by the provisions of Item 403(C) of Regulation S-B.
Item 12. Certain Relationships and Related Transactions.
------- ----------------------------------------------
Related Party Transactions.
--------------------------
During the year ended June 30, 2000, the Company paid certain expenses on
behalf of Chris Lewis, the Chief Executive Officer of the Company. The total
sum of these expenses, $24,166 was repaid subsequent to year-end. During the
year ended June 30, 2000, each of the five directors of the Company's
subsidiary, TopClick (Canada) Inc. was awarded 10,000 restricted shares of
common stock plus 15,000 stock options at an exercise price of $0.50. During
the year ended June 30, 2000, the Company paid or accrued contractor fees of
$88,200 (1999 - $nil) to a director of the Company and $24,892 (1999 - $nil)
to a company controlled by a relative of a director of the Company. In
addition, both directors currently hold stock options as disclosed below.
Item 13. Exhibits and Reports on Form 8-K
------- --------------------------------
During the fourth quarter, the Company filed the following Reports on Form 8-
K:
On May 11, 2000 the Company filed a report on Form 8-K pursuant to Item 5 of
such Form, regarding a restructuring of the Company's affairs.
On May 23, 2000 the Company filed a report on Form 8-K pursuant to Items 4 and
7 of such Form, regarding a change of the Company's accountants.
On June 2, 2000 the Company filed an amendment to the May 23, 2000 report on
Form 8-K pursuant to 7 of such Form, providing additional disclosure
concerning the change of the Company's accountants.
<PAGE>
SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Vancouver, British Columbia, on November 2,
2000.
TOPCLICK INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Chris Lewis
----------------------------------
Chris Lewis
Its: President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Chris Lewis
----------------------------------
Chris Lewis
Director
<PAGE>
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
JUNE 30, 2000
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of
Topclick International, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated balance sheet of Topclick
International, Inc. as at June 30, 2000 and the related consolidated
statements of operations, comprehensive loss, stockholders' equity and cash
flows for the year ended June 30, 2000 and for the period from commencement of
development stage on May 15, 1998 to June 30, 2000. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and the significant estimates made by management, as well as
evaluating the overall 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 financial position of Topclick
International, Inc. as at June 30, 2000 and the results of its operations,
changes in stockholders' equity and its cash flows for the year ended June 30,
2000 and for the period from commencement of development stage on May 15, 1998
to June 30, 2000 in conformity with generally accepted accounting principles
in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that Topclick International, Inc. will continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, unless the
Company attains future profitable operations and/or obtains additional
financing, there is substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regards to these matters are
discussed in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The audited consolidated financial statements as at June 30, 1998 and for the
year then ended were examined by other auditors who expressed an opinion
without reservation on those statements in their report dated September 1,
1999.
Vancouver, Canada Chartered Accountants
October 3, 2000
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TOPCLICK INTERNATIONAL, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(Expressed in United States Dollars)
June 30, June 30,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 165,115 $ 1,702,291
Receivables 53,940 16,414
Prepaid expenses 26,805 -
Due from related party (Note 6) 24,166 -
---------- --------------
Total current assets 270,026 1,718,705
Capital assets (Note 7) 127,971 78,324
Software development costs (Note 8) - 260,019
---------- --------------
Total assets $ 397,997 $ 2,057,048
========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued
liabilities $ 36,903 $ 23,569
Due to related party - 450
----------- --------------
Total current liabilities 36,903 24,019
----------- --------------
Stockholders' equity
Capital stock (Note 9)
Authorized
99,980,000 common shares,
par value of $0.001
20,000 preference shares, par value of
$0.001
Issued
13,463,215 common shares (1999 -
13,407,473 common shares) 13,463 13,407
Additional
paid-in capital 2,608,785 2,465,714
Deficit accumulated during the
development stage (2,286,919) (464,014)
Accumulated comprehensive other
income 25,765 17,922
------------ ------------
361,094 2,033,029
------------ ------------
Total liabilities and stockholders'
equity $ 397,997 $ 2,057,048
============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TOPCLICK INTERNATIONAL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in United States Dollars)
From
Commence-
ment of
Development
Stage on
May 15, Year Ended Year Ended
1998 to June 30, June 30,
June 30, 2000 2000 1999
-------------- ---- -----
<S> <C> <C> <C>
REVENUE $ - $ - $ -
------------ ----------- -----------
EXPENSES
Advertising and promotion 75,643 56,537 19,106
Bank charges 1,637 1,300 305
Consulting fees 33,789 - 33,789
Contractor fees 598,112 404,848 193,264
Depreciation 36,324 33,964 2,360
Directors' fees 50,124 50,124 -
Internet services 97,993 84,783 13,210
Investor relations 108,923 81,529 27,394
Office and miscellaneous 149,160 110,424 38,736
Professional fees 200,579 119,526 79,674
Rent 100,173 78,046 22,127
Stock-based compensation 113,127 113,127 -
Telephone and utilities 13,738 3,455 10,283
Transfer agent and
registrar 12,754 12,754 -
Travel and automobile 92,707 75,918 16,789
Wages and benefits 360,764 335,121 25,643
Write-off of software
development costs
(Note 8) 260,019 260,019 -
------------ ----------- ----------
(2,305,566) (1,821,475) (482,680)
----------- ----------- -----------
Loss before other items (2,305,566) (1,821,475) (482,680)
------------ ----------- -----------
OTHER ITEMS
Interest income 56,639 32,584 24,055
Write-off of deferred
charges (3,978) - (3,978)
Litigation settlement
(Note 16) (34,014) (34,014) -
----------- ----------- -----------
18,647 (1,430) 20,077
----------- ----------- -----------
Loss for the period $(2,286,919) $(1,822,905) $ (462,603)
============= ============ ============
Basic and diluted loss per
share $ (0.14) $ (0.04)
============ =============
Weighted average number of
shares of common stock
outstanding 13,444,684 12,000,682
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TOPCLICK INTERNATIONAL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
(Expressed in United States Dollars)
From
Commence-
ment of
Development
Stage on
May 15, Year Ended Year Ended
1998 to June 30, June 30,
June 30, 2000 2000 1999
------------- ---- ----
<S> <C> <C> <C>
Loss for the period $(2,286,919) $(1,822,905) $ (462,603)
Other comprehensive income
Foreign currency
translation adjustments 25,765 7,843 17,922
----------- ------------ -------------
Comprehensive loss for the
period $(2,261,154) $(1,815,062) $ (444,681)
------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
TOPCLICK INTERNATIONAL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in United States Dollars)
Deficit Accumu-
Accumu- lated
lated Compre-
Number of Additional During the hensive
Common Paid-in Development Other
Shares Amount Capital Stage Income Total
------ ------ ------- ----------- ------- -----
<C> <C> <C> <C> <C> <C>
Balance at May 15, 1998 2,450,000 $ 2,450 $17,456 $ (16,583) $ - $ 3,323
Cash proceeds from the
issuance of common
stock by Topclick
(Canada) Inc. - - 51,625 - - 51,625
Loss for the period - - - (1,411) - (1,411)
--------- -------- -------- ---------- ---------- ---------
Balance at June 30, 1998 2,450,000 2,450 69,081 (17,994) - 53,537
Common stock of Topclick
Corporation issued for
acquisition of internet
property (Note 8) 6,972,774 6,973 141,577 - - 148,550
Common stock of Topclick
Corporation issued for
acquisition of Topclick
(Canada) Inc. (Note 5a) 514,929 515 51,243 - - 51,758
Common stock of Topclick
Corporation issued
for contractor fees 20,000 20 19,980 - - 20,000
Common stock of Topclick
Corporation issued for cash 192,297 192 255,298 - - 255,490
Common stock of Topclick
Corporation surrendered in
acquisition of Topclick
International, Inc.
(Note 5b) (7,700,000) (7,700) (519,723) - - (527,423)
Issuance of common stock
for acquisition of Topclick
International, Inc.
(Note 5b) 8,800,000 8,800 450,415 16,583 - 475,798
Common stock issued for
cash 2,157,473 2,157 1,997,843 - - 2,000,000
Loss for the period - - - (462,603) - (462,603)
Cumulative translation
adjustment - - - - 17,922 17,922
------------ -------- --------- ----------- ----------- -----------
Balance at June 30, 1999 13,407,473 13,407 2,465,714 (464,014) 17,922 2,033,029
Common stock issued for
directors' fees 50,000 50 24,950 - - 25,000
Common stock issued for
contractor fees 5,742 6 4,994 - - 5,000
Stock-based compensation for
options issued to
consultants and
non-employees - - 113,127 - - 113,127
Loss for the period - - - (1,822,905) - (1,822,905)
Cumulative translation
adjustment - - - - 7,843 7,843
------------ -------- --------- ----------- ---------- -----------
Balance at June 30, 2000 13,463,215 $13,463 $2,608,785 $(2,286,919) $ 25,765 $361,094
============ ================== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TOPCLICK INTERNATIONAL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in United States Dollars)
From
Commence-
ment of
Development
Stage on
May 15, Year Ended Year Ended
1998 to June 30, June 30,
June 30, 2000 2000 1999
------------- --------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss for the period $(2,286,919) $(1,822,905) $ (462,603)
Adjustments to reconcile
loss to net cash
used in operating
activities:
Depreciation 36,324 33,964 2,360
Write-off of deferred
charges 3,978 - 3,978
Write-off of software
development costs 260,019 260,019 -
Issuance of shares for
contractor fees 25,000 5,000 20,000
Issuance of shares for
directors' fees 25,000 25,000 -
Stock-based compensa-
tion 113,127 113,127 -
Changes in other operating
assets and liabilities:
Increase in receivables (53,940) (37,526) (16,414)
Increased in prepaid
expenses (26,805) (26,805) -
(Increase) decrease in due
from related party (24,166) (24,616) 350
Increase in accounts
payable and accrued
liabilities 33,058 13,334 17,624
--------- --------- ----------
Net cash used in operating
activities (1,895,324) (1,461,408) (434,705)
------------- ----------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of capital
assets (174,370) (83,611) (90,759)
Software development
costs (101,394) - (101,394)
------------- ------------ --------------
Net cash used in investing
activities (275,764) (83,611) (192,153)
------------- ------------ -------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Issuance of shares of
common stock for
cash 2,307,115 - 2,255,490
------------- ------------ --------------
Net cash provided by
financing activities 2,307,115 2,255,490
------------- ------------ -------------
Change in cash and cash
equivalents during the
period 136,027 (1,545,019) 1,628,632
Effect of exchange rate
changes on cash
and cash equivalents 25,765 7,843 17,922
------------ ------------ -------------
Net change in cash and cash
equivalents during the
period 161,792 (1,537,176) 1,646,554
Cash and cash equivalents,
beginning of period 3,323 1,702,291 55,737
------------ ----------- -------------
Cash and cash equivalents,
end of period $ 165,115 $ 165,115 $ 1,702,291
============ ============ =============
Cash paid during the period
for:
Interest expense $ - $ - $ -
Income taxes - - -
============ ============ =============
Supplemental disclosure for non-cash operating, financing and investing
activities (Note 12)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE>
TOPCLICK INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States Dollars)
JUNE 30, 2000
1. HISTORY AND ORGANIZATION OF THE COMPANY
Topclick International, Inc. (the "Company") was incorporated on October
3, 1996 under the laws of the state of Delaware in the United States of
America and is considered a development stage company in accordance with
Statement of Financial Accounting Standards No. 7. The Company changed its
name from Galveston Oil & Gas, Inc. to Topclick International, Inc. on
February 5, 1999. The Company is in the business of operating an Internet
website providing users with a one-stop information index to the top Internet
guides.
Effective February 23, 1999, the Company acquired all the issued and
outstanding common stock of Topclick Corporation by issuing 8,800,000 shares
of common stock (Note 5b). As a result of the share exchange, control of the
combined companies passed to the former shareholders of Topclick Corporation.
This type of share exchange has been accounted for as a capital transaction
accompanied by a recapitalization of Topclick Corporation. Recapitalization
accounting results in consolidated financial statements being issued under the
name of Topclick International, Inc., but are considered a continuation of
Topclick Corporation. As a result, the financial statements presented
represent the consolidated financial position of the above companies as at
June 30, 2000 and the results of operations of Topclick Corporation from its
deemed date of inception on May 15, 1998 and the results of operations of
Topclick International, Inc. from the date of acquisition on February 23,
1999. The number of shares of common stock outstanding at June 30, 2000 as
presented are those of Topclick International, Inc.
Topclick Corporation was incorporated under the laws of the state of
Delaware on July 8, 1998. Effective July 8, 1998, Topclick Corporation
acquired all the issued and outstanding common stock of Topclick (Canada) Inc.
(Note 5a), 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 on May 15, 1998. Since
Topclick (Canada) Inc. was acquired by Topclick Corporation, a company under
common control, the deemed date of inception of Topclick Corporation is May
15, 1998.
In addition, Topclick Corporation purchased certain Internet assets (Note
8) from Helpful by Design Inc., a company also under common control. This has
been accounted for at predecessor historical costs.
2. GOING CONCERN
The Company's consolidated financial statements are prepared using
the generally accepted accounting principles applicable to a going concern,
which contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the company has no current source of
revenue. Without realization of additional capital, it would be unlikely that
the Company could continue as a going concern. It is management's plan to
seek additional capital through equity financings.
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
------ -------
<S> <C> <C>
Deficit accumulated during the
development stage $ (2,286,919) $ (464,014)
Working capital 233,123 1,694,686
</TABLE>
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
---------------------------
These consolidated financial statements include the accounts of Topclick
International, Inc. and its wholly-owned subsidiaries Topclick Corporation and
Topclick (Canada) Inc. All significant inter-company balances and
transactions have been eliminated in consolidation.
Cash and cash equivalents
-------------------------
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Estimates
---------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Foreign currency translation
----------------------------
The Company has determined that the functional currency of its operations
is the local currency, the Canadian dollar. In accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation", the
assets and liabilities denominated in foreign currency are translated into
U.S. dollars at the year-end exchange rates. Revenue and expenses are
translated at the rates of exchange prevailing on the dates such items are
recognized in earnings. Related exchange gains and losses are included in a
separate component of stockholders' equity under cumulative translation
adjustment. Exchange gains and losses resulting from foreign currency
transactions are included in income for the year.
Capital assets
--------------
Capital assets are stated at cost. Depreciation is provided over the
estimated useful life using the following methods:
<TABLE>
<CAPTION>
<S> <C> <C>
Computer equipment and software 30% declining balance
Furniture and office equipment 20% declining balance
Leasehold improvements Straight-line basis over term of lease
</TABLE>
In the year of acquisition, depreciation is provided at one-half the
above rates.
Software development costs
--------------------------
The Company has adopted Statement of Position 98-1 ("SOP 98-1")
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", as its accounting policy for internally developed computer
software costs. Under SOP 98-1, computer software costs incurred in the
preliminary development stage are expensed as incurred. Computer software
costs incurred during the application development stage are capitalized and
amortized over the software's estimated useful life.
Stock based compensation
------------------------
Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation", encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and has adopted the disclosure only provisions of
SFAS 123. Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date
of the grant over the amount an employee is required to pay for the stock.
The Company accounts for stock-based compensation issued to non-employees
and consultants in accordance with the provisions of SFAS 123 and the Emerging
Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for
Equity Instruments that are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling, Goods or Services".
Accounting for derivative instruments and hedging activities
------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities" which establishes
accounting and reporting standards for derivative instruments and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In June 1999, FASB issued SFAS 137 to defer
the effective date of SFAS 133 to fiscal quarters of fiscal years beginning
after June 15, 2000. The Company does not anticipate that the adoption of the
statement will have a significant impact on its financial statements.
Income taxes
-------------
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between financial
and tax reporting and net operating loss carryforwards. Deferred tax expenses
(benefit) result from the net change during the year of deferred tax assets
and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
Comprehensive income
--------------------
The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income". This statement establishes
rules for the reporting of comprehensive income and its components.
Loss per share
--------------
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
requires basic and diluted earnings per share to be presented. Basic earnings
per share is computed by dividing income available to common shareholders by
the weighted average number of shares of common stock outstanding during the
period. Diluted earnings per share takes into consideration shares of common
stock outstanding (computed under basic earnings per share) and potentially
dilutive shares of common stock.
Disclosure about segments of an enterprise and related information
------------------------------------------------------------------
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosure About Segments of an Enterprise and Related Information" requires
use of the "management approach" model for segment reporting. The management
approach model is based on the way a company's management organizes segments
within the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal
structure, management structure, or any other manner in which management
disaggregates a company. Currently, SFAS 131 has no effect on the Company's
consolidated financial statements as substantially all of the Company's
operations are conducted in one industry segment in Canada.
Comparative figures
-------------------
Certain comparative figures have been reclassified to conform with the
current year's presentation.
Recent accounting pronouncements
--------------------------------
In March 2000, the Financial Accounting Standards Board, or FASB,
released FASB Interpretation No.44, "Accounting for Certain Transactions
involving Stock Compensation, an interpretation of APB Opinion No. 25," which
provides clarification of Opinion 25 for certain issues such as the
determination of who is an employee, the criteria for determining whether a
plan qualifies as a noncompensatory plan, the accounting consequence of
various modifications to the terms of a previously fixed stock option or
award, and the accounting for an exchange of stock compensation awards in a
business combination. We believe that our practices are in conformity with
this guidance, and therefore Interpretation No. 44 will have no impact on our
consolidated financial statements.
In March 2000, the Emerging Issues Task Force of the FASB, or EITF,
issued EITF 00-2, "Accounting for the Costs of Developing a Website." This
issue addresses how an entity should account for costs incurred to develop a
website. We believe that our current accounting practices relating to costs
of developing a website are in conformity with this announcement and that it
will have no impact on our consolidated financial statements.
4. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
receivables, amounts due from related party and accounts payable. Unless
otherwise noted, it is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate their
carrying values, unless otherwise noted.
5. BUSINESS COMBINATIONS
a) On July 8, 1998, Topclick Corporation acquired all the issued and
outstanding common stock of Topclick (Canada) Inc. from Helpful by Design Inc.
As consideration, Topclick Corporation issued 514,929 shares of common stock.
The acquisition was accounted for using the purchase method.
Since Topclick Corporation and Helpful by Design, Inc. were
companies under common control, the purchase was recorded at historical costs.
The total purchase price of $51,758 was allocated as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Cash $ 37,158
Receivable 16,000
Accounts payable (1,400)
----------
$ 51,758
==========
</TABLE>
b) On February 23, 1999, Topclick International, Inc. acquired all the
issued and outstanding common stock of Topclick Corporation consisting of
7,700,000 shares of common stock. As consideration, Topclick International,
Inc. issued 8,800,000 shares of common stock. Legally, Topclick
International, Inc. is the parent of Topclick Corporation. However, as a
result of the share exchange described above, control of the combined
companies passed to the former shareholders of Topclick Corporation. This
type of share exchange has been accounted for as a capital transaction
accompanied by a recapitalization of Topclick Corporation rather than a
business combination. Accordingly, the net assets of Topclick Corporation are
included in the balance sheet at book values, with the net assets of Topclick
International, Inc. recorded at fair market value at the date of acquisition.
The revenues and expenses and assets and liabilities reflected in the
consolidated financial statements prior to the date of acquisition are those
of Topclick Corporation. Revenue and expenses and assets and liabilities
subsequent to the date of acquisition include the accounts of Topclick
International, Inc.
6. DUE FROM RELATED PARTY
Amounts due from a director of the Company are unsecured, non-interest
bearing and have no fixed terms of repayment.
The fair value of amounts due from a director are not determinable as
they have no specified repayment terms.
7. CAPITAL ASSETS
<TABLE>
<CAPTION>
Accumulated Net Book Value
Cost Depreciation 2000 1999
---- ------------ ---- ----
<S> <C> <C> <C> <C>
Computer equipment
and software $ 124,869 $ 36,715 $ 88,154 $ 57,091
Furniture and office
equipment 36,149 8,341 27,808 21,233
Leasehold improve-
ments 13,352 1,343 12,009 -
---------- --------- ---------- -----------
$ 174,370 $ 46,399 $ 127,971 $ 78,324
</TABLE>
During the year ended June 30, 1999, $10,075 of depreciation of computer
equipment was capitalized as software development costs.
8. SOFTWARE DEVELOPMENT COSTS
Software development costs are comprised of hardware and software costs
incurred and acquired by the Company in developing its Internet website.
In July 1998, Topclick Corporation acquired Internet website property
from Helpful by Design Inc. As consideration, Topclick Corporation issued
6,972,774 shares of common stock. Since Topclick Corporation and Helpful by
Design, Inc. were companies under common control, the purchase was recorded at
historical costs of $148,550.
During the current year, the Company decided to write off to operations
its software development costs of $260,019 to reflect the uncertainty of these
costs generating any future economic benefits.
9. CAPITAL STOCK
Additional paid-in capital
--------------------------
The excess of proceeds received for common shares over their par value of
$0.001, less share issue costs, is credited to additional paid-in capital.
10. STOCK OPTIONS
Stock option plan
-----------------
In 1999, the board of directors approved the creation of the 1999 Stock
Option Plan. This plan provides for the grant of incentive stock options to
employees, directors and consultants. Options issued under this plan will
expire over a maximum term of ten years from the date of grant.
Stock based compensation expense
--------------------------------
SFAS 123, "Accounting for Stock-Based Compensation", encourages but does
not require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to account for
stock-based compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Accordingly, compensation cost
for stock options is measured as the excess, if any, of quoted market price of
the Company's stock at the date of grant over the option price.
The Company accounts for stock issued to non-employees in accordance with
the provisions of SFAS 123 and the Emerging Issues Task Force consensus in
Issue No. 96-18, "Accounting for Equity Instruments that are Issued to Other
Than Employees for Acquiring or in Conjunction with Selling, Goods or
Services".
Following is a summary of the stock option activity:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
<S> <C> <C>
Outstanding at June 30, 1998
and 1999 - $ -
Granted 1,661,500 0.55
Forfeited (231,250) 0.50
Exercised - -
----------- ----------
Outstanding at June 30, 2000 1,430,250 0.56
========== ==========
</TABLE>
The weighted average fair value of options granted to non-employees and
consultants during the current year is approximately $0.26 per share.
Following is a summary of the status of options outstanding at June 30,
2000:
<TABLE>
<CAPTION>
Outstanding Options Exercisable
Options
-------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
ContractualExercise Exercise
Exercise Price Number Life Price Number Price
-------------- ----------------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
$ 0.50 1,234,250 2.4 $ 0.50 621,188 $ 0.50
0.70 46,000 1.0 0.70 46,000 0.70
1.00 150,000 1.0 1.00 75,000 1.00
---------- ------- -------- -------- --------
1,430,250 742,188
========== ========
</TABLE>
The Company granted 939,000 options to consultants and non-employees
during the current year which are accounted for under SFAS 123 and EITF 96-18.
Accordingly, using the Black-Scholes option pricing model, the options are
marked to fair value through charges to operations as stock-based
compensation. Stock-based compensation recognized during the year ended June
30, 2000 was $113,127.
The assumptions used in calculating the fair value of options granted
using the Black-Scholes option pricing model are as follows:
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
---- ----
<S> <C> <C>
Risk-free interest rate 6.0% -
Expected life of the options 1.5 years -
Expected volatility 11.5% -
Expected dividend yield - -
========= =========
</TABLE>
11. RELATED PARTY TRANSACTIONS
The Company entered into the following transactions with related parties:
a) Paid or accrued directors' fees of $50,124 to directors of the
Company.
b) Paid or accrued contractor fees of $88,200 to a director of the
Company and $24,892 to a company controlled by a relative of a director of the
Company.
12. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING AND
INVESTING ACTIVITIES
Significant non-cash transactions for the year ended June 30, 2000:
a) The Company issued 50,000 shares of common stock at a deemed value
of $25,000 for directors' fees.
b) The Company issued 5,742 shares of common stock at a deemed value of
$5,000 for contractor fees.
Significant non-cash transactions for the year ended June 30, 1999:
a) The Company acquired Internet website property at a deemed value of
$148,550 through the issuance of 6,972,774 shares of common stock of Topclick
Corporation (Note 8).
b) The Company acquired Topclick (Canada) for a purchase price of
$51,758 through the issuance of 514,929 shares of common stock of Topclick
Corporation (Note 5a).
c) Topclick Corporation issued 20,000 shares of common stock at a
deemed value of $20,000 for contractor fees.
d) The Company issued 8,800,000 shares of common stock to acquire all
the issued and outstanding common stock of Topclick Corporation (Note 5b).
13. INCOME TAXES
The Company's total deferred tax asset is as follows:
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
<S> <C> <C> <C>
Tax benefit of net operating
loss carryforward $1,160,100 $ 207,900
Valuation allowance (1,160,100) (207,900)
----------- ----------
$ - $ -
=========== ===========
</TABLE>
The Company has a net operating loss carryforward of approximately
$2,578,000 (1999 - $462,000). The valuation allowance increased to $1,160,000
from $207,900 during the year ended June 30, 2000 since the realization of the
operating loss carryforwards are doubtful. It is reasonably possible that the
Company's estimate of the valuation allowance will change.
The operating loss carryforwards expire as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
2006 $ 462,000
2007 2,116,000
-----------
$ 2,578,000
============
</TABLE>
14. ACCUMULATED COMPREHENSIVE OTHER INCOME
Total comprehensive loss for the year ended June 30, 2000, and the year
ended June 30, 1999 is $1,815,062 and $444,681, respectively. The only item
included in other comprehensive income is foreign currency translation
adjustments in the amounts of $7,843 for the year ended June 30, 2000 and
$17,922 for the year ended June 30, 1999.
<TABLE>
<CAPTION>
Foreign
Currency Accumulated
Translation Comprehensive
Adjustment Other Income
----------- -------------
<S> <C> <C>
Beginning balance, June 30, 1998 $ - $ -
Current year change 17,922 17,922
----------- -------------
Ending balance, June 30, 1999 17,922 17,922
Current year change 7,843 7,843
----------- --------------
Ending balance, June 30, 2000 $ 25,765 $ 25,765
=========== =============
</TABLE>
15. COMMITMENTS
The Company is committed to future minimum lease payments for operating
leases for premises of:
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ending June 30
2001 $ 38,264
2002 3,189
-----------
$ 41,453
===========
</TABLE>
16. LITIGATION SETTLEMENT
During the current year, the Company settled a lawsuit by an individual
claiming he was owed shares of common stock of the Company as part of the
acquisition of Topclick (Canada) and Internet property from Helpful By Design
Inc. (Note 5a and 8). The lawsuit was settled in April 2000 with a cash
payment of $34,014.
17. SUBSEQUENT EVENTS
The following transactions occurred subsequent to June 30, 2000:
a) The Company issued 165,000 shares of common stock at a deemed value
of $41,250 as consideration for contractor services.
b) The Company entered into a Finders and Assistance Agreement with
iCapital Corporation, effective September 15, 2000, whereby iCapital
Corporation will assist the Company in various merger and acquisition efforts
and transactions. As consideration, the Company will pay a 5% fee on the
value of any transactions involving iCapital Corporation under this agreement.
c) The Company entered into a Financial Consulting Services Agreement
with iCapital Corporation, effective September 19, 2000, for a term of one
year. The agreement calls for a $100,000 cash engagement fee to be paid which
can be satisfied through the issuance of 1,500,000 shares of common stock of
the Company and a $15,000 cash payment.
