<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT 3 TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
STOCKUP.COM, INC.
--------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 88-0417949
- ---------------------------- ---------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
333 N. Rancho, Suite 900, Las Vegas, NV 89106
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(702) 648-6400
----------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
<S> <C>
None None
---------- ----------
---------- ----------
</TABLE>
Securities to be registered pursuant to section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. BUSINESS DEVELOPMENT
1. FORM AND YEAR OF ORGANIZATION
Courtleigh Capital, Inc., a Kansas corporation was first
incorporated under the laws of the state of Colorado as ANCR, Inc. on July 30,
1985. On July 23, 1987, ANCR, Inc. changed its name to CEA Lab, Inc. and on
October 16, 1995 reincorporated in the State of Kansas as CEA Lab, Inc. On
September 12, 1997, it amended its articles to change its name to Courtleigh
Capital, Inc. Courtleigh Capital, Inc. commenced trading during December,
1998 under the symbol CTLH on the Over the Counter/BulletinBoard. On February 2,
1999, Courtleigh Capital, Inc. changed its name to StockUp.com, Inc.
StockUp.com, Inc. a Kansas corporation, formerly Courtleigh Capital, Inc. was
reincorporated in the state of Nevada utilizing the name StockUp.com, Inc.
(the term the "Company" shall refer to the surviving Nevada corporation). The
Company changed its trading symbol to SKUP effective as of February 22, 1999.
Effective September 14, 1999 the Company effected a two for one forward stock
split. All share amounts set forth in this Form 10 reflect this stock split.
2. ANY BANKRUPTCY, RECEIVERSHIP OR SIMILAR PROCEEDING.
Not Applicable.
3. ANY MATERIAL RECLASSIFICATION, MERGER, CONSOLIDATION, OR
PURCHASE OR SALE OF A SIGNIFICANT AMOUNT OF ASSETS NOT IN THE ORDINARY COURSE OF
BUSINESS.
On February 22, 1999 certain computer hardware and office furniture
assets, valued at $368,178 were acquired by the Company from Marketing Direct
Concepts, Inc. in exchange for 9 million shares. The $368,178 constituted the
book value of the assets as of December 30, 1998. StockUp.com, Inc. a Kansas
corporation was reincorporated in the state of Nevada, by merging
StockUp.com, Inc., a Nevada corporation with StockUp.com, Inc., a Kansas
corporation. StockUp-Nevada is the surviving entity.
B. BUSINESS OF ISSUER.
The Company develops second-generation Internet technology-TM- based
upon Microsoft's operating system which is deployed upon the Company's server
computers. The Company owns and is developing a system of fully integratable
modular software products (products which may be deployed either
independently or together in a single integrated system) which are intended
to aggressively increase and retain Internet traffic. Although the Company's
software is adaptable to many different applications and industries on the
Internet, the Company has selected the financial information and services
industry to provide an initial showcase for its technology. The Company's web
site is currently under construction at http://www.stockup.com. The Company
believes that its software products provide a fully customizable,
interactive, dynamic Internet experience, relative to the increasingly
prevalent static portal models installed throughout the world wide web. The
Company is a Microsoft Certified Solutions Provider and its team of in excess
of twenty programmers and animators, has based its technologies upon
Microsoft's operating system.
1. PRINCIPAL PRODUCTS AND SERVICES AND THEIR MARKET.
a. THE MARKET
The rapid growth of the Internet and the World Wide Web is changing
the way companies do business. Web sites are providing a new medium for
working and interacting with customers, suppliers and business partners,
while corporate intranets promise to transform the way companies gather and
distribute information internally.
1
<PAGE>
The Internet is not another newspaper generating advertising
revenue or a television show to be observed passively. Yet many Internet
companies employ technology that achieves nothing more than that
traditionally achieved by newspapers . The Company believes that its
integrated software products, when fully deployed, will for the first time
take full advantage of the "computing power" giving rise to the Internet.
Unlike newspapers and magazines, the Company's technologies will allow
end-users to fully customize what they want to see and how they want to see
it. Further, unlike television, end-users will interact with the Company's
technology; this interactivity will allow end-users to click advertisements
or other web page buttons providing for the display of data or other
information. This interactivity provides data regarding the end users product
and service preferences. This data may be utilized to develop a user profile,
thereby providing advertisers with data regarding the audience to which our
technology is providing access. While the Company has selected the financial
services sector as its initial technology showcase, its technology has been
intentionally developed to be deployable among a number of vertical
applications. These applications may involve sites proprietary to the Company
or they may involve other Internet companies which license all or a part of
the Company's technology.
The Company's software products provide a fully customizable,
interactive, dynamic Internet experience, relative to the increasingly
prevalent static portal models installed throughout the world wide web. The
Company is a Microsoft Certified Solutions Provider and its team of over
twenty programmers and animators have based the Company's proprietary
technologies upon Microsoft's operating system.
b. PRINCIPAL PRODUCTS AND SERVICES
The Company's business focuses upon two areas, its system and
technology and its current financial services business application. The
Company' s systems and technology utilize proprietary software capable of
servicing in excess of one million users per day. The six major components of
the Company's system and technology are: (1) the desktop portal, (2) the
digital nervous system, (3) on-line analytical processing, (4) English query
language, (5) interactive agents, and (6) the computer hardware network (all
collectively referred to as the "Systems and Technology"). Each of the
software components of the technology is completely modular and may be
licensed separately or with one or more other components of the Company's
software products.
(i) SYSTEMS AND TECHNOLOGY PRODUCTS AND SERVICES
THE DESKTOP PORTAL
The Company has developed a desktop portal deployed in May, 1999
evidenced by a Window's icon that maintains a constant connection with the
Internet; it is comprised of a "streaming" series of news/advertisement
items, with e-commerce buttons linked to various industry specific sites. The
portal is the product of second-generation Internet technology-TM- and is
more customizable and interactive than anything currently available on the
Internet. This private desktop portal is fully deployable from the user's
desktop, capable of receiving data from virtually any third party news feed,
proprietary content developed by StockUp or any advertiser. The end-user then
customizes these various data feeds to when and how the end-user wishes to
view the data. This portal grants access to major Internet search engines,
provides full audio and video streaming capability and has multiple e-mail
source monitoring capability. The Company has initially incorporated this
technology into its QuoteStream-TM-product, which was introduced in May, 1999
and may be downloaded at www.quotestream.com.
The Company has designed the desktop portal to retain aggregate
user data for marketing purposes and the Company believes that this data will
promote partnerships and co-branding alliances between the portal and other
sites viewing the portal as a strategic source of retaining existing
customers and obtaining new subscribers. This data is secured upon the portal
being downloaded and then is constantly updated to the end user or subscriber
of QuoteStream-TM-. The device or portal acts as a gateway and link to all
sources of information the user is interested in obtaining (both current and
updating) from the information sources.
2
<PAGE>
THE DIGITAL NERVOUS SYSTEM
The Company is developing a proprietary "middleware" which monitors
the items customized on the desktop portal. All of the information
potentially available for those items is then electronically stored in this
middleware and is then readily accessible by the end-user when and if needed.
The Company has labeled this customized middleware as "The Digital Nervous
System".
The primary advantage of this system is its increased speed in
delivering data according to the customized specifications of the end user.
For example, assume that a QuoteStream-TM- end-user has selected five stocks
to include in his/her QuoteStream-TM-, including a large computer
manufacturing company. Current financial information sites provide the
requested data, which is typically price and volume for the trading day. If
additional information is required (for example price history, charting, etc.),
this information is relatively slow in being displayed because the request
for this additional information has "triggered" an additional data search.
StockUp stores all data regarding the hardware manufacturer in its digital
nervous system (middleware) and when additional information is requested, it
is provided virtually instantly because no additional search is needed. This
increased speed becomes critical in displaying the high technology
applications developed by StockUp, including three-dimensional charting
capabilities. In summary, the digital nervous system acts like an electronic
brain. As an individual's usage of the middleware increases, the more
familiar the brain becomes with the user's requests providing the data
results faster with each experience.
ONLINE ANALYTICAL PROCESSING (OLAP)
Online Analytical Processing ("OLAP") is an analytical tool that
allows the user to track multidimensional data (for example five stocks, over
five different variables) in an easy natural way. Through its current use of
OLAP technology, the Company empowers users to perform spreadsheet operations
and financial analysis on the web site. A library of spreadsheet templates is
available for commonly performed analysis. The user will also be able to
construct his/her own spreadsheets for a more customized approach. Utilizing
OLAP applications will deliver fast analysis of shared multidimensional
information. OLAP is the technology that drives the stock screening feature
and organizes data so that StockUp.com-TM- interactive charting software can
plot any set of data available at the site in an entirely customizable
format, at a very high speed. With OLAP, users can see as little or as much
information as they desire.
ENGLISH QUERY
Through the application of the Company's innovative
second-generation Internet technology-TM- called English Query, users are
able to make both text and verbal requests for data using a natural English
query such as "Show stocks that have Market Capitalization in excess of
$20 billion and have declared a dividend within the past twenty-four hours."
The Company believes that this feature is not available on the Internet to
the degree of functionality that StockUp offers. English Query permits users
to bypass drop down menus and scroll bars, contributes to the overall
interactivity of the site, and makes specific data more accessible.
INTERACTIVE AGENTS
The Company has expanded upon Microsoft's operating system in
developing customized interactive agents which not only play a roll in both
providing a help feature for end-users navigating an Internet site, but also
provide a dynamic alternative to static banner advertisements currently
employed throughout the Internet. These interactive agents will be deployed
simultaneous with the deployment of the StockUp website in Fall, 1999.
These agents take the form of animated characters (currently to be
deployed as a Bull and Bear on the StockUp web site) which "walk and talk" an
end user through the various features of a particular Internet site. The
Company believes that these agents deliver a new level of vibrancy and
user-friendliness relative to the traditional text based help features
usually incorporated into web sites. Further, the interactive agents have the
limited ability of identifying when a user is experiencing problems and then
appear to assist the user to a solution.
3
<PAGE>
The Company also plans to use these interactive agents to replace
the static banner advertisements currently used by Internet companies. The
Company is currently developing technology, to be deployed in
October/November 1999, which will replace traditional banners with
interactive three-dimensional advertising agents. The interface comprising
the agent will be customizable according to the end-users preferences and
each agent will monitor the end users activities on the Internet, thereby
focusing the agents "advertising pitch" to the end users historical patterns.
Licensees of the agents may select from a number of "interface" characters
depending upon the customer base to be solicited.
The Company has developed seven animated agent characters that may
be licensed in a number of applications. Further, the Company intends to
continue to develop up to an additional 10-20 such characters. While the
character/animation comprising the user interface is unique to each
application, the underlying software is readily adaptable to virtually any
Internet industry application.
THE NETWORK
StockUp's network is a state of the art system that is scalable,
secure, and fast. The focus of the Company's network is to provide up to the
minute technology, security and speed.
The scalability of the Company's system allows the Company to link
multiple servers as demand requires, performing as one single unit. The
Company believes that the cost advantages of this system to the Company are
two fold: (i) it allows the Company to reduce its fixed costs by acquiring
servers according to traffic demands and (ii) by linking these servers
together, the Microsoft operating system allows the servers to operate at a
level equivalent to a single high price system. Existing technologies have
been optimized for high speed performance and work load balancing preventing
potential data bottlenecks within the server and all networking components.
The Company is directly connected to the Internet through Sprint's
Asynchronous Transfer Mode (ATM) backbone, and separately at a Sprint
DS3 connection at a different point of presence (POP). StockUp has signed an
agreement with Sprint for 90Mbps per second of burstable bandwidth from the
Sprint backbone. This is the equivalent of two T-3 connections or 56 T1 lines.
Each T3 line is delivered from a separate source providing redundancy in the
event one source fails. This technology can handle a greater volume of data
as the business grows, is impervious to electromagnetic interference, is
resistant to eaves dropping, and can travel long distances before the signal
has to be regenerated and retransmitted.
The Company has an array of high capacity Intel Pentium based
systems that are expandable to accommodate the business needs of the company.
StockUp runs on the Microsoft operating system and utilizes structured query
language software to operate its servers. These servers are configured with
RAID 5 technology. RAID 5 copies all parts of all data across five drives. If
one drive goes down, the remaining four drives can still access information
from the fifth drive. Collectively, all Dell servers provide the Company with
600 GB of storage capacity, enabling the Company to house large volumes of
day-to-day data and archive data for quick retrieval. Server load balancing
is handled in a back end Internet Work Packet Exchange (IPX) sub-net. StockUp
employs a load balance utility that evenly distributes http responses across
to incoming http requests. Because the Company has direct access to the
Internet, it serves as its own Internet Service Provider ("ISP"). As such,
the Company must allocate a server toward handling domain name service
("DNS") requests and, in order to handle the projected heavy traffic, the
Company has allocated two servers as DNS servers.
The Company employs the Microsoft Proxy Server as its firewall. A
firewall determines what types of traffic the Company will accept and which
traffic will be rejected. StockUp is designed to run 24 hours a day. Each
server and network device has redundancy built into the devices themselves.
StockUp has three state of the art DLT taped backups. In the event of power
fluctuations the Company has 12 American Power Conversion Uninterrupted Power
Sources that will protect all mission critical equipment from surges, spikes,
black outs and brown outs. In the event of a blackout all servers would
institute normal automatic shut down procedures before the power fails.
Finally, the Company employs dedicated isolated circuits on every server.
This substantially reduces the chance that a singe point of failure will
impact the entire network.
4
<PAGE>
(ii) FINANCIAL INFORMATION SYSTEM
As discussed above, the Company has developed a series of modular
software products, which may be licensed separately or on a fully integrated
basis. During calendar year 1999 the Company is deploying a fully integrated
system containing all of these products in the financial information and
services area. The Company's products are designed to increase subscriber
base on web sites, build proprietary content, and offer turn key
second-generation Internet technology-TM- solutions to other Internet
companies. These products offer users a highly customized Internet experience
and are designed to substantially increase and retain traffic on web sites
that employ them. The application of this technology will initially focus
upon three products:
QUOTESTREAM-TM-
QuoteStream-TM- is the engine that will increase and retain traffic
and subscribers for the StockUp.com-TM- web site and any other web site
developed by the Company. QuoteStream-TM- is a desktop news and stock ticker
that maintains a persistent connection to the Internet. It may be downloaded
at www.quotestream.com. The QuoteStream-TM- application offers the user a
broad range of customization features including: business, finance, sports,
entertainment, and local news, as well as any other general information it
obtains from its strategic partners and alliances; instant messaging;
automatic e-mail notification from multiple sources; streaming audio and
video; access to the Internet through multiple search engines; and use of the
most sophisticated financial glossary on the Internet, to be utilized in the
financial information industry which is available free of charge at
www.quotestream.com. The primary purpose of the desktop portal (as
demonstrated by QuoteStream-TM-) is to increase, direct and retain Internet
traffic in a strategic fashion dictated by the business plan of the portal's
"owner".
The power of QuoteStream-TM- lies in its ability to increase and
retain traffic on host web sites. The stock quotes and articles displayed on
QuoteStream-TM-'s tickers are linked to the QuoteStream-TM- site that
provided the article or information in the data feed. When a user double
clicks on an article or stock quote, a browser is opened displaying the
desired item (which is located on the QuoteStream-TM- web site). When the
user reads the article or conducts research on a given stock they do so from
the host web site, thereby generating traffic on that site (i.e. the
StockUp.com-TM- web site or whichever partner web site that is supplying the
news or stock information to QuoteStream-TM-). The e-mail notification system
operates similarly in that the free e-mail distributor's web site is
displayed when the user opts to check e-mail via the e-mail notification
system.
The StockUp.com-TM- web site is the host site for all research on
stock quotes, glossary terms, or streaming audio and video. Users that select
local news stories or magazine articles will be transported to the web site
of the appropriate media partner, generating traffic for the partner. The
Company is nearing completion of the StockUp.com-TM- website and anticipates
that the website will go "online" during Fall, 1999.
STOCKUP.COM-TM- WEB SITE AND STRATEGIC AFFILIATED WEB SITES
The StockUp.com-TM- web site will be the flagship of
StockUp.com-TM- and the showcase for some of its second-generation Internet
technologies. The power of StockUp.com-TM- lies in its ability to deliver raw
data in a highly customizable format to as large and target an audience as
possible. The Company acquires its raw data by paying a fixed monthly or
quarterly fee from industry sources including S&P Comstock; Market Guide;
Comtex; Reuters; and others. The Company does not pay a fee to its strategic
alliance partners, such as newspapers. The Company's second-generation
proprietary Internet technology-TM- allows subscribers to customize more than
300 data elements into a highly interactive financial monitoring and research
tool that employs proprietary interactive agents to assist users with the
application of the many research tools and features of the web site.
QuoteStream has an existing non-paid subscriber base of more than 150,000. It
is the intention of the Company to solicit the QuoteStream-TM- subscribers to
become subscribers for the StockUp.com-TM- web site.
5
<PAGE>
The StockUp.com-TM- web site will provide the user with the
following customizable and interactive features:
INTERACTIVE AGENTS. An animated talking bear and bull that are
linked to the help menu and can walk the user through any aspect of the site
in as much detail as needed. These agents are the proprietary technology of
StockUp.com-TM-and are available for licensing to other companies. In
summary, while StockUp.com-TM- has focused upon the bull/bear interactive
agents as the "user interface" for its financial web site, the technology
underlying the animation/software comprising the interactive agents has
applications in many different industries.
INTERACTIVE CHARTING. A second-generation interactive charting
application that incorporates a greater degree of customization than is
currently available on the Internet. The interactive charting component
allows users to chart 50 separate data elements on four levels of charting
and offers zoom in capability on each level, as well as three dimensional
charting features allowing more in-depth analysis.
CUSTOMIZABLE STOCK PORTFOLIO. The Customizable Stock Portfolio
allows the user to build a customized stock portfolio and manipulate and
analyze combinations of over 300 data elements. This will be the most
interactive customizable portfolio available and offer more features than any
personal stock portfolio currently on the Internet.
STOCK SELECTOR. Allows the user to build customized stock screening
criteria from over 100 data elements and to make comparisons to its
corresponding industry, economic sector, and the S&P 500. Additionally users
can select stock criteria in a natural language format. In summary, the
selector allows the user to build a profile meeting any criteria composed of
one or all of 100 financial data elements.
EDUCATIONAL ARCHIVES. A reference section of finance and business
related articles compiled over three years and being continuously expanded by
the Company's 15 staff writers.
STOCKUP.COM-TM- FINANCIAL GLOSSARY. The most sophisticated
financial glossary on the Internet with over 6,000 definitions of finance
related terms including expanded references to each term linked to articles
in the educational archives.
The Company is rapidly developing partnerships and alliances
through its debut product QuoteStream-TM-. StockUp.com-TM- believes that the
implementation of its second-generation Internet technology-TM- products as
demonstrated on QuoteStream-TM- and its showcase web site will build
affiliate partnerships and subscriber base. These partnerships and
subscribers will provide the necessary components required by the market to
value StockUp.com-TM-, because the alliances and partnerships add subscriber
base and proprietary content to its ongoing technology development.
INTERACTIVE ADVERTISING AGENTS
The Company's Interactive Advertising Agents are scheduled to be
released in October/November, 1999. As mentioned above, static banner
advertisements have increasingly become the focus of many Internet companies
claimed revenue models. The Company's technology will replace traditional
banners with interactive three-dimensional advertising agents. The interface
comprising the agent will be customizable according to the end-users
preferences and each agent will monitor the end users activities on the
Internet, thereby focusing the agents "advertising pitch" to the end users
historical patterns. Licensees of the agents may select from a number of
"interface" characters depending upon the customer base to be solicited.
2. DISTRIBUTION
As discussed above, the Company's financial information services
are distributed via the Internet. A critical component of the Company's
business plan involves the establishment of various strategic joint venture
partners providing a variety of content and services to the Company and its
subscriber base. This content is currently distributed through the Company's
QuoteStream product.
6
<PAGE>
In exchange for using QuoteStream-TM- to display its content, each
partner places an icon on their web site promoting QuoteStream-TM-. This builds
recognition for QuoteStream-TM- and increases traffic to the partners web site
because information displayed on QuoteStream-TM- is linked directly to the
partners web site. In this manner, each partner is a contributor of content to
QuoteStream-TM- and serves as a distribution outlet by making QuoteStream-TM-
available to its membership from its web site.
The following is a list of current strategic partners:
<TABLE>
<S> <C> <C> <C>
American Photojournal Grand Rapids Family Rawlins Daily Times Pittsburgh LIVE
Magazine
Athens Messenger Grand Rapids Magazine Register-Herald Daily Courier(The)
Baker City Herald Great Ben Tribune Reno.com Dispatch (The)
Banner Graphic Gulf Coast Golf The Rolla Daily News Herald (The)
Internet Magazine
Barter News Helena Independent Record San Diego Daily Transcript Leader Times (The)
Beloit Daily News Herald and News Santa Barbara News-Press North Hills News
Record
Bend Bulletin High Point Enterprise Senior World Online Standard Observer
(The)
Blytheville Courier News Hugo Daily News Siskiyou Daily News Tribune Review
Business Digest Item(The) Southwest Daily Times Valley Independent
(The)
Business Examiner Journal Newspapers Steamboard Pilot/Today Valley News Dispatch
Business Journal Alexandria Journal St. Louis Small Business Poteau Daily News & Sun
Monthly
Business Times of Arlington Journal Sun Chronicle (The) Providence Daily News & Sun
Western CO
Canton Daily Ledger Fairfax Journal Tahoe.com Puyallup Herald
Chanute Tribune Prince George's Journal Tahoe Daily Tribune
Clay County Advocate Prince William Daily Nevada Appeal
Press Journal
Concord Monitor Prince William Journal North Lake Tahoe
Bonanza
Conway Daily Sun Lake Sun Leader Record Courier
Courier (The) Lehighton Times News Tahoe World
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
Cybergolf Northwest Ludington Times News Sierra Sun
Daily Guide Market Pulse Journal Texas Golf Resort
(mag.)
Daily Home Matton Journal-Gazette Times-News
Daily Post Athenian Maui News Tracy Press
(The)
Daily Triplicate (The) Maysville Ledger- Tribune Star
Independent
Decor and Style Minden Press-Herald Union Democrat
Magazine
Denton Record Chronicle Montana Standard Upbeat Entertainment
Duncan Banner Morning News Valley Morning Star
Durango Herald Mr. Pleasant Daily Tribune Vegas.com
El Reno Tribune Navajo Times Las Vegas Life
(Magazine)
Evening Sun (The) Nevada Business Journal Las Vegas Sun
Fairbanks Daily News- News Sun & Evening Star Las Vegas Weekly
Miner
Filmfax Magazine North Knox Leader Showbiz (Magazine)
Gateway Peninsula Northwest Signal West Central Tribune
Gocarson.com Oakland Press (The) Williamson News
Golf Houston Observer-Reporter Wyoming Tribune Eagle
Grand Rapids Business Peru Daily Tribune
Journal
</TABLE>
The Company's products will be distributed through strategic
alliances with media and Internet related companies. Establishing a broad
base of affiliate relationships will build proprietary content for
QuoteStream-TM- which in turn will create an extensive network of channels
which will link to the StockUp.com-TM- web site or other web sites developed
by the Company.
StockUp.com-TM- will target the following types of companies to form
partnerships and distribute its products:
1. No charge direct distribution services (such as freesoftware
and e-mail web sites)
2. Local newspapers (conventional and online)
3. Magazines (conventional and online)
4. Online brokerage firms
5. Radio and television stations(conventional and online)
6. Technology companies (conventional and online)
7. E-commerce web sites
8
<PAGE>
3. STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE.
QuoteStream-TM- is currently available and can be downloaded at
www.quotestream.com. The beta version of the StockUp.com-TM- web site is
scheduled to be launched in Fall, 1999, and the interactive advertising
agents are scheduled to be available in October/November, 1999. Upon the
successful launching of each of these products, the underlying technology
will be available for licensing to third parties. The Company has designed
its technology to specifically gather data/information from multiple sources
and redistribute this information in a format customized by the end user.
While there is no assurance, the Company believes that technology license
fees may potentially become a material component of its revenues; it is
impossible for the Company to estimate the amount or percentage of our
revenues, if any, which will eventually be derived from technology licensing.
4. COMPETITION
The Company is a technology developer that has elected to initially
showcase its proprietary second-generation Internet applications on the
StockUp.com-TM- web site and QuoteStream-TM-, its desktop portal. The Company's
major competitors are in the areas of Internet portals and news related web
sites. These include:
- software development companies;
- publishers and distributors of traditional media, including
print, radio, and television, such as The Wall Street Journal,
Fortune, Bloomberg Business Radio, and CNBC;
- providers of terminal-based financial news and data, such as
Bloomberg Business News, Reuters News Service, Dow Jones Markets,
and Bridge News Service;
- web "portal" companies, such as Yahoo! and America Online; and
The Company believes that the principal competitive factors in its
market are brand name recognition, wide selection, personalized service, ease of
use, 24-hour accessibility, customer service, convenience, reliability, quality
of search engine tools, and quality of editorial and other site content. Many of
the Company's current and potential competitors have longer operating histories,
larger customer bases, greater brand name recognition and significantly greater
financial, marketing and other resources than the Company. In addition, other
websites may be acquired by, receive investments from or enter into other
commercial relationships with larger, well-established and well-financed
companies as use of the Internet and other online services increases. Certain of
the Company's competitors may be able to devote greater resources to marketing
and promotional campaigns, and devote substantially more resources to Web site
and systems development than the Company. Increased competition may result in
reduced operating margins, loss of market share and a diminished franchise
value. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, and competitive pressures
faced by the Company may have a material adverse effect on the Company's
business, prospects, financial condition and results of operations. Further as a
strategic response to changes in the competitive environment, the Company may,
from time to time, make certain service or marketing decisions or acquisitions
that could have a material adverse effect on its business, prospects, financial
condition and results of operations. New technologies and the expansion of
existing technologies may increase the competitive pressures on the Company. In
addition, companies that control access to transactions through network access
or Web browsers could promote the Company's competitors or charge the Company a
substantial fee for inclusion.
5. THE SOURCES AND AVAILABILITY OF RAW MATERIALS.
The Company is not dependent on any raw materials. All software which
comprises a material component of its technology is developed at the Company's
headquarters. All other software which might be of potential use constitutes
readily available programs distributed at a number of locations.
9
<PAGE>
6. DEPENDENCE ON A SINGLE OR FEW CUSTOMERS.
The Company currently does not have any customers. It has developed
multiple strategic alliances with newspapers located throughout the United
States to provide proprietary content to its web site. The Company does not
anticipate that it will be dependent on a single or small group of customers.
7. THE IMPORTANCE OF PATENTS, TRADEMARKS, LICENSES, FRANCHISES
AND CONCESSIONS HELD.
To protect its rights to its intellectual property, the Company
relies on a combination of trademark and copyright law, patent, trade secret
protection, confidentiality agreements, and other contractual arrangements
with its employees, affiliates, clients, strategic partners, and others. The
protective steps it has taken may be inadequate to deter misappropriation of
the Company's proprietary information. The Company may be unable to detect
the unauthorized use of, or take appropriate steps to enforce its
intellectual property rights. StockUp.com-TM- has registered certain of its
trademarks in the United States and has pending U.S. applications for other
trademarks and patents. Effective trademark, copyright, patent, and trade
secret protection may not be available in every country in which it offers or
intends to offer its services. In addition, although StockUp.com-TM- believes
that its proprietary rights do not infringe on the intellectual property
rights of others, other parties may assert infringement claims against the
Company or claims that it has violated a patent or infringed a copyright,
trademark, or other proprietary right belonging to them. These claims, even
if not meritorious, could result in the expenditure of significant financial
and managerial resources on its part, which could materially adversely affect
the Company's business, results of operations, and financial condition. The
Company incorporates certain licensed third-party technology in some of its
services. In these license agreements, the licensors have generally agreed to
defend, indemnify, and hold the Company harmless with respect to any claim by
a third party that the licensed software infringes any patent or other
proprietary right. The Company cannot assure that these provisions will be
adequate to protect from infringement claims. The loss or inability to obtain
or maintain any of these technology licenses could result in delays in
introduction of new services.
8. GOVERNMENT APPROVAL.
No government approval is required for any of the Company's current
products or services.
9. EFFECT OF ANY EXISTING OR PROPOSED GOVERNMENT REGULATIONS.
Other than normal government regulations that any business encounters,
the Company's business is not effected by any government regulations.
10. RESEARCH AND DEVELOPMENT COSTS.
Since the Company began operations in February 1999 it has spent in
excess of $1.5 million on the research and development of its proprietary
technology. The revenues the Company achieves will be primarily from strategic
alliances and subscriber fees. Revenues generated, while paying directly for
research and technology costs accrued to date, will fund the operations of the
Company, which includes funding on-going technological development.
11. COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS AND
REGULATIONS.
The Company is not involved in a business which involves the use of
materials in a manufacturing stage where such materials are likely to result in
the violation of any existing environmental rules and/or regulations. Further,
the Company does not own any real property which would lead to liability as a
land owner. Therefore, the Company does not anticipate that there will be any
costs associated with the compliance of environmental laws and regulations.
12. EMPLOYEES.
As of the date hereof, the Company employs approximately 100
full-time employees and 15 part-time employees. The Company hires independent
contractors on an "as needed" basis only. The Company has no collective
10
<PAGE>
bargaining agreements with its employees. The Company believes that its
employee relationships are satisfactory. In the long term, the Company will
attempt to hire additional employees as needed based on its growth rate.
13. YEAR 2000.
The Company has begun to address possible remedial efforts in
connection with computer software that could be affected by the Year 2000
("Y2K") problem. The Y2K problem is the result of computer programs being
written using two digits rather than four to define the applicable year. Any
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a major system
failure or miscalculation.
The Y2K problem can affect any modern technology used by a business
in the course of its day. Any machine that uses embedded computer technology
is susceptible to this problem, including for example, telephone systems,
postage meters and scales, and of course, computers. The impact on a company
is determined to a large extent by the company's dependence on these
technologies to perform their day to day operations.
Internally, the Company has begun reviewing all such equipment and
has determined that many of its systems are Y2K compliant. The Company
anticipates that all system and software will be fully reviewed and brought
into compliance by November 1999. If certain systems are not brought up to
Y2K compliance by the end of November 1999, then the non-compliant technology
will be disabled so as not to have an impact on the systems that are
compliant. Any such events would not have a serious impact on the Company's
day to day operations, nor would any valuable information be lost. The
Company backs up all computer systems daily to protect against data loss.
The costs of bringing the Company's technology up to Y2K compliance
is expected to be less than $5,000. This is because the majority of the
"patches" or programs designed to make software Y2K compliant can be obtained
over the Internet from manufacturers for little or no cost and the Company
does not expect to rely heavily on outside consultants to upgrade its systems
as most of the work can be performed in-house.
The Company's current software assures that in the event a
strategic partner or news source is providing information to a Company
product and such provider is not Y2K compliant, that the Company's software
will either discard such data or transfer such data into Company files which
are Y2K compliant. The Company has discussed Y2K compliance issues with all
of its information providers and has been assured that all such suppliers
either are or intend to be Y2K compliant prior to December 1, 1999.
In the event that the Company does experience Y2K problems, it
could result in a suspension of the Company's revenues. A suspension of
revenues could result in material losses from operations and a reduction of
the Company's working capital. Management is unable at this time to quantify
the impact that the Y2K problem could have on the Company's results of
operations and financial condition.
The Company does not have a contingency plan in the event the
Microsoft operating system upon which its Internet site is based is not Y2K
compliant. The Company has discussed this matter extensively with Microsoft and
has received repeated assurance that the Microsoft operating system is Y2K
compliant. In the event the Microsoft operating system is not Y2K compliant, not
only would the Company's operations be severely adversely effected, but the
thousands of other companies on the Internet basing their Internet site upon
this operating system would also fail.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The Company has generated minimal revenues and does not anticipate
generating any material revenues until at least the first quarter of the Year
2000. The Company does not anticipate breaking even in its financial operations
until at least January, 2001. As a result, the Company's sole source of capital
during 1999 shall be investment capital provided by third parties. Further, the
Company anticipates that it will require additional capital contributions to
fund its operations during the Year 2000. On June 21, 1999 the Company commenced
a private offering of its securities to raise up to $12 million. In the event
the Company is unsuccessful in this offering, then it is the intention of the
11
<PAGE>
Company to secure capital from the original group of investors who provided
capital in 1999 or from another source of capital which is not identified as
of the date of this filing. If the Company is unsuccessful in securing
additional capital then it will be required to materially curtail or cease
operations altogether. Further, in the event the Company does attract such
capital, but is unable to generate revenues sufficient to support its
expenses, then the Company would be required to eventually curtail or even
cease operations. The Company's substantial financial losses since its
inception have raised a substantial doubt with the Company's auditors as to
the Company's ability to continue as a going concern.
a. PLAN OF OPERATIONS
The Company began operations in February 1999 for the purpose of
developing proprietary Internet software and related technologies to be
deployed by both the Company, as well as third-party Internet companies. The
Company has a limited operating history on which to evaluate its prospects.
The risks, expense, and difficulties encountered by startup companies must be
considered when evaluating the Company's prospects. The Company's plan of
operations for the next twelve months is to further develop its products
while seeking strategic alliances with media and Internet related companies
in order to demonstrate its technology to companies and consumers. The
Company believes that its existing funds in combination with funds raised in
private offerings and the revenues generated by its operations will be
sufficient to fund its operations for the next twelve months. However, there
is no guarantee that the Company will be able to raise sufficient capital.
The operating expenses of the Company cannot be predicted with certainty.
They will depend on several factors, including the amount of marketing
expenses, the acceptance of the Company's services in the market, and
competition for such services. Management may be able to control the timing
of development expenses in part by speeding up or slowing down marketing,
development and distribution activities.
The Company is currently is in the process of introducing its
products to the market. QuoteStream-TM- was introduced in May, 1999 and
currently has in excess of 150,000 subscribers, the beta version of the
StockUp.com-TM- web site is scheduled to be available in Fall, 1999 and the
Company anticipates that the Interactive advertising agents will be also be
available in Fall, 1999. While the Company believes that it will comply with
this schedule, there is no assurance that it will comply with this schedule.
If the Company is unsuccessful in raising additional capital, the probability
of it complying with this schedule will be adversely effected. The Company
does not anticipate a purchase or sale of a plant or significant equipment
and does not anticipate any significant changes in the number of employees.
12
<PAGE>
b. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of StockUp's
financial condition and results of operations. Detailed information is contained
in the financial statements included with this document. This section contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this document should be read as being applicable
to all related forward-looking statements wherever they appear in this document.
The following table sets forth, for the period indicated, selected financial
information for the Company. All share data has been adjusted for a 2 for 1
stock split effective September 14, 1999:
STOCKUP.COM, INC.
SELECTED FINANCIAL DATA SCHEDULE
FROM INCEPTION TO APRIL 30, 1999
AND FOR THE TWO MONTHS ENDED JUNE 30, 1999 (unaudited)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Period from Period from
February 3, 1999 For the Two February 3, 1999
(inception) to Months Ended (inception) to
April 30, 1999 June 30, 1999 June 30, 1999
-------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Selling, general and administrative expenses $ 1,049,538 $ 894,128 $ 1,943,666
Loss from operations (1,049,538) (894,128) (1,943,666)
Other income (expense)
Investment income 1,363 7,902 9,265
Forgiveness of debt 81,822 -0- 81,822
Financing expense (1,557,335) -0- (1,557,335)
------------ ------------ ------------
Total other income (expense) (1,474,150) 7,902 (1,466,248)
------------ ------------ ------------
Net Loss $ (2,523,688) $ (886,266) $ (3,409,914)
============ ============ ============
Basis Loss per share $ (0.20) $ (0.07)
============ ============
Diluted loss per share $ (0.20) $ (0.07)
============ ============
Weighted average shares outstanding 12,440,790 12,677,880
============ ============
</TABLE>
13
<PAGE>
BALANCE SHEET
<TABLE>
<CAPTION>
April 30, 1999 June 30, 1999
-------------- -------------
(unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 583,692 $ 1,564,419
Notes receivable-employee 11,800 20,600
Subscriptions receivable 1,800,000 -----
Prepaid services 56,992 56,992
Prepaid expenses 36,540 8,564
------ -----
Total Current Assets $2,488,954 $1,650,505
Furniture and equipment, net 438,988 528,681
Other Assets 51,509 52,756
------ ------
. Total Assets $2,979,451 $2,231,942
========= =========
Liabilities and Stockholder's Equity
Accounts payable and accrued expenses $ 172,860 $ 80,895
Total current liabilities 172,860 80,895
Stockholder's equity
Common stock, $0.001 par value
50,000,000 shares authorized
12,649,024 and 12,702,358
(unaudited) shares issued and
outstanding 12,649 12,702
Additional paid-in capital 5,317,630 5,548,259
Deficit accumulated during the development stage (2,523,688) (3,409,914)
----------- -----------
Total stockholder's equity 2,806,591 2,151,047
Total Liabilities and Stockholders' equity $2,979,451 $2,231,942
========== ==========
</TABLE>
The Company is a development stage company and did not generate any
operating revenues from its inception on February 2, 1999 to June 30, 1999. The
Company is currently focusing its efforts on developing quality products and
establishing a large consumer base for these products. While there is no
assurance, the Company anticipates that by developing quality products and
establishing a consumer base, it will be in a position to receive revenues in
the future. The Company's predecessor, Courtleigh Capital, had no operations
accordingly there is no meaningful comparative data available for the year
ending April 1998.
14
<PAGE>
From its inception to date, the Company has incurred costs associated
with the development and launch of its products, probable markets and business.
The Company has established relationships with information providers which
increase the quality and marketability of the Company's products. While there is
no assurance, management believes that the Company's products will commence
generating revenues during fourth quarter of 1999.
The Company financed its expenditures primarily through the sale of
its common stock. Since inception through August 1, 1999, the company issued
12,702,358 shares of common stock. The Company raised $2.9 million from four
accredited investors as follows: (i) February 1999 issuance of 1,333,332 shares
in exchange for $900,000; and (ii) May and June 1999 options, issued under Rule
506 of Regulation D promulgated under Section 4(2) of the Securities Act of
1933, to acquire units comprised of 1.2 million shares and 600,000 warrants
exercisable at $2.50 per share and options to acquire 290,836 shares at an
aggregate exercise price of $125,000( "May/June Offering") in exchange for $2.0
million. The February, 1999 Offering was conducted under Rule 504 and it
provided the necessary seed capital to commence implementation of the Company's
business plan. The May/June Offering was primarily an option to participate in a
unit offering of restricted stock and warrants. 1,200,000 of these shares are
currently restricted and subject to a demand registration right as of January 1,
2000. The 1,200,000 shares and the shares underlying the 600,000 warrants are
subject to reasonable underwriter trading restrictions in the event of a public
offering. These investors are also entitled to anti-dilution rights in the event
the Company issues stock at less than $2.50 per share.
The Company is currently conducting a private offering of its
securities and it has extended the deadline for this offering to October 31,
1999, however, the Company has reserved the right to terminate this offering by
providing five business days notice of its intention to terminate the private
offering. In the event the Company is unable to attract additional investor
capital either through its pending private offering or other capital sources,
the Company's operations will be severely adversely effected. There is no
assurance that any of these capital raising efforts will be successful.
From inception through April 30, 1999 the Company's selling, general,
and administrative expenses were $1,049,538. In addition the Company incurred
financing expenses of $1,557,335. These expenses are partially offset by income
from investments in the amount of $1,363 and debt forgiveness in the amount of
$81,822, resulting in a net loss of $2,523,688.
As of April 30, 1999, the Company had current assets of $2,488,954 and
$490,497 in furniture, equipment and other assets, resulting in total assets of
$2,979,451. The Company's current liabilities were $172,860.
For the two months ended June 30, 1999, the Company's selling,
general and administrative expenses were $894,128. These expenses are
partially offset by investment income of $7,902 resulting in a net loss of
$886,266. For the two months ended June 30, 1999, the Company had current
assets of $1,650,505 and $581,437 in furniture, equipment and other assets
resulting in total assets of $2,231,942. The Company's current liabilities
were $80,895.
ITEM 3. DESCRIPTION OF PROPERTY
The main administrative offices of the Company are located at 333
N. Rancho Drive, Suite 600, Las Vegas, Nevada 89106. The Company leases
approximately 14,100 square feet at this location, with an aggregate rental
payment of $22,646 per month. The Company's leases expire for 13,000 square
feet and 1100 square feet on March 31, 2003 and July 31, 2000 respectively.
The lease payments are scheduled to increase by approximately $400 on March
31st of each year of the lease term.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock, as of July 14, 1999 by (i)
each stockholder known by the Company to be the beneficial owner of more than
five percent of the outstanding Common Stock, (ii) each director of the Company,
(iii) each executive officer of the
15
<PAGE>
Company, and (iv) all directors and executive officers as a group.
Unless otherwise indicated, the address for each stockholder is 333 N. Rancho
Drive, Suite 600, Las Vegas, NV 89106.
<TABLE>
<CAPTION>
PERCENTAGE
Name Number of Shares (1) Beneficially Owned
- ---- ---------------- ------------------
<S> <C> <C>
Michael Calderone(2)(3) 7,900,600 62.00%
Kerry Nicponski(2) 70,000 0.55%
Leo Verheul(2) 0 0.00%
Paul Yeager 0 0.00%
All officers and directors 7,970,600 62.55%
as a group (4 persons)
</TABLE>
_______________
(1) Except as otherwise indicated, the Company believes that the beneficial
owners of Common Stock listed above, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities. Shares of Common Stock subject to options or warrants
currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person holding
such options or warrants, but are not deemed outstanding for purposes of
computing the percentage of any other person.
(2) c/o Company's address: 333 N. Rancho Drive, Suite 600, Las Vegas, NV 89106.
(3) Includes 20,000 shares held in his name as guardian for his son, Gage
Calderone.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---------------------------------------------------------------------------------
<S> <C> <C>
Michael Calderone 39 Chief Executive Officer, Chairman of the Board
Kerry Nicponski 38 Chief Operating Officer, Director
Leo Verheul 54 Chief Information Officer, Director
Paul Yeager 61 Chief Financial Officer
</TABLE>
MR. MICHAEL CALDERONE - PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE
BOARD, has 17 years prior business experience. From 1988 through 1991 Mr.
Calderone was the President of two companies, Express Tel 900, which was a long
distance service for 800 and 900 lines and Access Media Network, a direct
response advertising agency. Immediately prior to the formation of Marketing
Direct Concepts (during 1993-94) Mr. Calderone trained race horses. From 1995 to
1998, Mr. Calderone was the President of Marketing Direct Concepts, Inc., a
financial public relations firm.
KERRY NICPONSKI - CHIEF OPERATING OFFICER AND DIRECTOR. Mr. Nicponski brings a
wealth of experience to StockUp.com-TM-, having previously served as an
independent contractor providing software applications, accounting services, and
general business consulting to a group of affiliated entities, which included MV
Entertainment, Southwest Entertainment, Jodati, Inc. And United Retail
Management. During 1997-1998, Mr. Nicponski managed software development and MS
SQL databases while giving technical support to a telemarketing operation for a
500-member sales team at NOS Communications. He also rewrote Visual Basic and
Access programs used daily to automate account information updates for Household
Credit Services. Mr. Nicponski also designed a SQL data warehouse that he
integrated with web applications for the credit company. Also during that time,
Mr. Nicponski served as Project Manager for Casino Management Systems at
International Thunderbird Gaming, programmed the dispatch system for
16
<PAGE>
a 100-filed technician operation at United Coin Machine Company, and held the
position of Project Manager of Report Development for Fairbanks Capital
Corporation. From 1994 to 1997, Mr. Nicponski worked for Gaming Systems
International. He received his BS in Business Administration/Computer Science
at Southern Utah University. Among his many other accomplishments, Mr.
Nicponski is a Captain in the United States Army Reserve.
MR. LEO VERHEUL - CHIEF INFORMATION OFFICER AND DIRECTOR, brings a wealth of
experience to his position as Chief Information Officer for the Company
Appointed in March 1997 by Governor Pete Wilson to the position of Chief
Information Officer and Deputy Director of the Information Systems Division of
the State of California, Department of Motor Vehicles, Mr. Verheul oversaw a
department with 450 employees, and a budget of more than $72 million. From May
1995 to March 1997 , he was CIO of Kaiser B. Hill, LLC, one of the largest
engineering, construction and consulting services companies in the United
States, located in Denver, Colorado and assumed the leadership role of all
statewide IT functions. As Director of Information Services at Porsche Cars
North America, from 1985 to 1990 , Mr. Verheul was responsible for the overall
management of all corporate IT systems as well as the U.S. Porsche dealer
network systems. Within two years, he replaced an outsourced telecommunications
function with an in-house developed system, which turned the MIS organization
from a cost center into a profit center. Mr. Verheul attended the California
State University at Hayward and graduated with a BS in Business
Administration/Management Systems.
MR. PAUL YEAGER -CHIEF FINANCIAL OFFICER. Mr. Yeager's previous experience was
as Chief Financial Officer of Color Spot Nurseries from February 1997 to August,
1998. Prior to Color Spot, Mr. Yeager was employed for over 20 years by The
Scotts Company (NYSE:SMG), a lawn and garden chemical technologies and consumer
products company. The last position he held with the Scotts Company was Chief
Financial Officer.
On or about September 23, 1999 Mr. Steven Liebowitz resigned as a
member of the Company's board of directors, its Executive Vice President and its
Site Director. Mr. Liebowitz did not provide Company management with a reason
for his decision to resign.
ITEM 6. EXECUTIVE COMPENSATION.
The Company began operations in February 1999. Accordingly, no salary
or other benefits were awarded to any executive officers or directors prior to
that date. All information provided below is for the current fiscal year.
17
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ------------------------- --------------------------------------------- -------------------------------------------------
Long Term Compensation
Annual Compensation Awards Payouts
------------------------------------------- -------------------------------------------------
Other Restricted All other
Name and Principal annual Stock Options LTIP Compen-
Position Year Salary Bonus Compen- Awards SARs Payo sation
sation uts
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael Calderone, 1999 $ 225,000 N/A N/A N/A 1,200,000(1) N/A N/A
Chief Executive
Officer, President
Kerry Nicponski, 1999 $ 65,000 N/A N/A N/A 140,000(2) N/A N/A
Chief Operating
Officer, Director of
Programming and
Software Development
Leo Verheul, 1999 $ 60,000 N/A N/A N/A 50,000(3) N/A N/A
Chief Information
Officer
Paul Yeager 1999 $75,000(4) N/A N/A N/A 200,000(5) N/A N/A
Chief Financial
Officer
</TABLE>
-----------------------
(1) These options were granted to Mr. Calderone on April 9, 1999. They
entitle Mr. Calderone to acquire 1,200,000 shares of common stock of
the Company at $4.25 per share and are exercisable on April 2, 2000
and expire April 2, 2002. The options vest at a rate of 1/15th of the
total options per month.
(2) These options were granted to Mr. Nicponski on April 9, 1999. They
entitle Mr. Nicponski to acquire 140,000 shares of common stock of the
Company at $4.25 per share and are exercisable on April 2, 2000 and
expire April 2, 2002. The options vest at a rate of 1/15th of the
total options per month commencing on Mr. Nicponski's employment
commencement date.
(3) These options were granted to Leo Verheul on April 9, 1999. They
entitle Mr. Verheul to acquire 50,000 shares of common stock of the
Company at $4.25 per share and are exercisable on April 2, 2000 and
expire April 2, 2002. The options vest at a rate of 1/15th of the
total options per month commencing on Mr. Verheul's employment
commencement date.
(4) Upon completion of the initial 90 days of his employment with the
Company, Mr. Yeager will be entitled to receive an increase in his
base salary to $100,000 annually.
(5) These options entitle Mr. Yeager to acquire 200,000 shares of common
stock of the Company at $4.25 per share and are exercisable on
December 17, 2000 and expire December 17, 2002. The options vest at a
rate of 1/15th of the total options per month commencing on Mr.
Yeager's employment commencement date.
As the Company did not commence operations until February, 1999, the
Company did not grant any stock options in the last fiscal year.
18
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company approved the issuance of options to purchase common
stock of the Company to certain of its employees commencing on April 9, 1999.
These options took two forms: a Series A option and a Series B option.
A total of 156,000 Series A options were granted. 8,000 of these
options were revoked in August/September, 1999 as the grantee's employment
was terminated. The Series A options grant their holders the right to
purchase common stock of the Company at $4.25 per share. Each Series A option
is exercisable on the later to occur of the two following conditions: (i) the
option holder has been employed full-time by the Company for six months; or
(ii) April 2, 2000. The options vest over a 15 month period of time,
typically commencing upon the employee's employment commencement date. The
option terminates two years after it first becomes exercisable. However, if
the option holder is terminated for violating the Company's Employee Manual,
the option holder loses all rights in all vested and non-vested options. If
the option holder's employment with the Company is terminated for any other
reason, the holder retains all vested options but all non-vested options
immediately terminate. In addition, the non-vested options automatically
terminate if there is a change in control of the company. The options are not
assignable.
A total of 2,257,000 Series B options are currently outstanding. The
Series B options are substantially similar to the Series A options with the
following differences: (i) in the event there is a change in control of the
Company all options immediately vest; (ii) the option holder agrees not to work
for any company developing second-generation Internet technology-TM- for six
months following any termination of employment with the Company; and (iii)
Michael Calderone's options are assignable for the express purpose of attracting
key management personnel to work for the Company.
ITEM 8. DESCRIPTION OF REGISTRANT'S SECURITIES.
The Company's Articles of Incorporation authorize the issuance of
50,000,000 shares of Common Stock, with a par value of $.001 per share, of
which 12,702,358 shares are currently outstanding.
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common
stock have no cumulative voting rights. Accordingly, the holders of in excess
of 50% of the aggregate number of shares of Common Stock outstanding will be
able to elect all of the directors of the Company and to approve or
disapprove any other matter submitted to a vote of all shareholders.
Holders of shares of common stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time, by the Board of
Directors in its discretion, from funds legally available therefor. The
Company does not currently anticipate paying any dividends on its Common
Stock. In the event of a liquidation, dissolution or winding up of the
Company, the holders of shares of common stock are entitled to share pro rata
all assets remaining after payment in full of all liabilities. Holders of
common stock have no preemptive rights to purchase the Company's common
stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. All of the outstanding shares of
common stock are fully paid and non-assessable.
Shares of Common Stock are registered at the transfer agent and are
transferable at such office by the registered holder (or duly authorized
attorney) upon surrender of the Common Stock certificate, properly endorsed.
No transfer shall be registered unless the Company is satisfied that such
transfer will not result in a violation of any applicable federal or state
securities laws. The Company's transfer agent is Securities Transfer
Corporation, whose address is 16910 Dallas Parkway, Suite 100, Dallas, TX
75248.
19
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS' COMMON EQUITY
AND OTHER STOCKHOLDERS MATTERS
A. MARKET INFORMATION
The Company's common stock traded in the over-the-counter bulletin
board market from December 15, 1999 through February 22, 1999 under the
symbol CTLH. On February 2, 1999 the Company changed its name to
StockUp.com-TM- and on February 22, 1999 commenced trading under the symbol
SKUP.
The following table sets forth the high and low bid prices for the
Company's common stock since its inception. All such prices are prior to the
reverse stock split which was completed on September 21, 1999. The prices
below also reflect inter-dealer quotations, without retail mark-up, mark-down
or commissions and may not represent actual transactions:
<TABLE>
<CAPTION>
Low High
Quarter ended Bid Bid
--------------------------------------------------------------------
<S> <C> <C>
12/31/98 3 3
3/31/99 10 10
6/30/99 13.5 16
</TABLE>
On February 22, 1999, there was a 1:13 reverse stock split.
Effective September 14, 1999, the Company effected a 2:1 stock split. As of
September 21, 1999 (the date upon which the common stock was split) the
closing bid price of the Company's common shares was $10.00.
B. HOLDERS
As of July 14, 1999, there were approximately 256 holders of Company
Common Stock, as reported by the Company's transfer agent.
C. DIVIDENDS
The Company has not paid any dividends on its Common Stock. The
Company currently intends to retain any earnings for use in its business, and
therefore does not anticipate paying cash dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings or claims.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Effective as of December 30,1998 the Company issued 9 million shares
of its common stock in exchange for certain office furniture and equipment with
a book value of $368,178. As of December 30, 1998 the Company had no assets and
very little value, other than its status as a non-reporting trading corporation
on the OTC Bulletin Board. The number of shares issued was determined in on an
arms length basis by the respective boards of directors of Marketing Direct
Concepts and StockUp. The Company relied on an exemption available under Section
3(a)(11) of the Act.
20
<PAGE>
Marketing Direct Concepts was a sophisticated investor which acquired
information about the Company in its due diligence investigation in
connection with the sale of assets.
The Company raised $2.9 million from four accredited investors as
follows: (i) February 1999 issuance of 1,333,332 shares in exchange for
$900,000; and (ii) May and June 1999 options, issued under Rule 506 of
Regulation D promulgated under Section 4(2) of the Securities Act of 1933, to
acquire units comprised of 1.2 million shares and 600,000 warrants
exercisable at $2.50 per share and options to acquire 290,836 shares at an
aggregate exercise price of $125,000 ("May/June Offering") in exchange for
$2.0 million. The February, 1999 Offering was conducted under Rule 504 and it
provided the necessary seed capital to commence implementation of the
Company's business plan. The May/June Offering was primarily an option to
participate in a unit offering of restricted stock and warrants. 1,200,000 of
these shares are currently restricted and subject to a demand registration
right as of January 1, 2000. The 1,200,000 shares and the shares underlying
the 600,000 warrants are subject to reasonable underwriter trading
restrictions in the event of a public offering. These investors are also
entitled to anti-dilution rights in the event the Company issues stock at
less than $2.50 per share.
As of June 21, 1999 the Company is offering up to 2,000,000 shares
of its Common Stock at $6.00 per share to accredited investors and up to 35
non-accredited investors in reliance upon the Section 4(2) exemption. Single
investors who provide $1 million receive a price of $5 per share. Investors
who provide at least $18,000 shall also receive a warrant for every three
shares acquired with a two year term exercisable at $5.00; investors
providing at least $1 million shall receive the same type of warrant except
the exercise price shall be $4.50. The Company has extended this offering
through October 31, 1999, however, the Company has reserved the right to
terminate the offering by providing five business days notice of its
intention to terminate the private offering. The Company is obligated to
register the shares issued in its June 21, 1999 offering in any subsequent
registration statement filed with the Securities and Exchange Commission,
subject to an underwriter's trading lock-up which shall not exceed 180 days.
ITEM 12. INDEMNIFICATIONS OF DIRECTORS AND OFFICERS.
The Nevada Revised Statutes and the Company's Articles of
Incorporation and Bylaws authorize indemnification of a director, officer,
employee or agent of the Company against expenses incurred by him or her in
connection with any action, suit, or proceeding to which such person is named
a party by reason of having acted or served in such capacity, except for
liabilities arising from such person's own misconduct or negligence in
performance of duty. In addition, even a director, officer, employee or agent
of the Company who was found liable for misconduct or negligence in the
performance of duty may obtain such indemnification if, in view of all the
circumstances in the case, a court of competent jurisdiction determines such
person is fairly and reasonably entitled to indemnification. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
PART F/S
FINANCIAL STATEMENTS
The following financial statements are included herein:
Audited Financial Statements from inception through April 30, 1999.
Unaudited Financial Statements as of and for the two months ended June 30, 1999
21
<PAGE>
PART III
ITEM 1 AND
ITEM 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Document Description
<S> <C>
2.1 Plan and Agreement of Merger
3.1 Articles of Incorporation, dated February 18, 1999
3.2 Bylaws, dated March 1, 1999
3.3 Certificate of Amendment of Articles of Incorporation, dated August 31,
1999
4.1 Specimen of Common Stock Certificate
4.2 Form of Series A Option Agreement and Certificate
4.1 Form of Series B Option Agreement and Certificate
4.2 Form of Vesting Agreement
10.1 Lease, dated February 5, 1999
10.2 Sublease, dated May 15, 1999
10.3 Agreement with Travis Morgan Securities, Inc.
10.4 Asset Purchase Agreement
10.5 Employment Memorandum for Michael Calderone
</TABLE>
22
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
STOCKUP.COM, INC.
By: Michael Calderone
Michael Calderone
Its: President
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Michael Calderone President October 15, 1999
- ----------------------
Michael Calderone
/s/ Kerry Nicponski Chief Operating Officer, Director October 15, 1999
- -------------------
Kerry Nicponski
/s/ Leo Verheul Chief Information Officer, Director October 15, 1999
- ----------------
Leo Verheul
</TABLE>
23
<PAGE>
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 3, 1999
(INCEPTION) TO APRIL 30, 1999 AND
FOR THE TWO MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
<PAGE>
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
APRIL 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5 - 6
Notes to Financial Statements 7 - 18
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
StockUp.com, Inc.
We have audited the accompanying balance sheet of StockUp.com, Inc. (a
development stage company) as of April 30, 1999, and the related statements of
operations, stockholders' equity and cash flows for the period from February 3,
1999 (inception) to April 30, 1999. These 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.
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 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 financial statements referred to above present fairly, in
all material respects, the financial position of StockUp.com, Inc. as of April
30, 1999, and the results of its operations and its cash flows for the period
from February 3, 1999 (inception) to April 30, 1999 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company incurred a net loss of $2,523,688 during the
period from February 3, 1999 (inception) to April 30, 1999, and it had negative
cash flows from operations of $496,986. These factors, among others, as
discussed in Note 2 to the financial statements, raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
June 4, 1999
<PAGE>
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
APRIL 30, 1999 AND JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
June 30, April 30,
1999 1999
--------------- ----------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,564,419 $ 583,692
Notes receivable - employee 20,600 11,800
Subscriptions receivable - 1,800,000
Prepaid services 56,922 56,922
Prepaid expenses 8,564 36,540
--------------- ----------------
Total current assets 1,650,505 2,488,954
FURNITURE AND EQUIPMENT, net 528,681 438,988
OTHER ASSETS 52,756 51,509
--------------- ----------------
TOTAL ASSETS $ 2,231,942 $ 2,979,451
=============== ================
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 80,895 $ 172,860
--------------- ----------------
Total current liabilities 80,895 172,860
--------------- ----------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value
50,000,000 shares authorized
12,702,358 (unaudited) and 12,649,024 shares
issued and outstanding 12,702 12,649
Additional paid-in capital 5,548,259 5,317,630
Deficit accumulated during the development stage (3,409,914) (2,523,688)
--------------- ----------------
Total stockholders' equity 2,151,047 2,806,591
--------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,231,942 $ 2,979,451
=============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 3, 1999 (INCEPTION) TO APRIL 30, 1999 AND
FOR THE TWO MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period from Period from
For the February 3, February 3,
Two Months 1999 1999
Ended (Inception) to (Inception) to
June 30, April 30, June 30,
1999 1999 1999
---------------- --------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES $ 894,128 $ 1,049,538 $ 1,943,666
---------------- --------------- ----------------
LOSS FROM OPERATIONS (894,128) (1,049,538) (1,943,666)
---------------- --------------- ----------------
OTHER INCOME (EXPENSE)
Interest income 7,902 1,363 9,265
Forgiveness of debt - 81,822 81,822
Financing expense - (1,557,335) (1,557,335)
---------------- --------------- ----------------
Total other income (expense) 7,902 (1,474,150) (1,466,248)
---------------- --------------- ----------------
NET LOSS $ (886,226) $ (2,523,688) $ (3,409,914)
================ =============== ================
BASIC LOSS PER SHARE $ (0.07) $ (0.20)
================ ===============
DILUTED LOSS PER SHARE $ (0.07) $ (0.20)
================ ===============
WEIGHTED-AVERAGE SHARES OUTSTANDING 12,677,880 12,440,790
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 3, 1999 (INCEPTION) TO APRIL 30, 1999 AND
FOR THE TWO MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
--------------------------------- Paid-In Development
Shares Amount Capital Stage Total
------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 3,
1999 (INCEPTION) - $ - $ - $ - $ -
INITIAL CAPITALIZATION 465,692 466 (466) -
SHARES ISSUED FOR
FURNITURE AND
EQUIPMENT 9,000,000 9,000 359,178 368,178
ISSUANCE OF COMMON
STOCK IN PRIVATE
PLACEMENT 2,533,332 2,533 3,197,467 3,200,000
OFFERING COSTS (300,000) (300,000)
ISSUANCE OF COMMON
STOCK FOR LEGAL
SERVICES 500,000 500 99,500 100,000
ISSUANCE OF BELOW-
MARKET
stock options 864,335 864,335
warrants 693,000 693,000
ISSUANCE OF BELOW-
MARKET STOCK OPTIONS
TO EMPLOYEES 312,766 312,766
ISSUANCE OF COMMON
STOCK FOR CASH 150,000 150 91,850 92,000
NET LOSS (2,523,688) (2,523,688)
------------ -------------- --------------- --------------- ---------------
BALANCE, APRIL 30,
1999 12,649,024 12,649 5,317,630 (2,523,688) 2,806,591
ISSUANCE OF BELOW-
MARKET STOCK
OPTIONS TO
EMPLOYEES
(unaudited) 30,682 30,682
ISSUANCE OF COMMON
STOCK FOR CASH
(unaudited) 53,334 53 199,947 200,000
NET LOSS (unaudited) (886,226) (886,226)
------------ -------------- --------------- --------------- ---------------
BALANCE, JUNE 30,
1999 (UNAUDITED) 12,702,358 $ 12,702 $ 5,548,259 $ (3,409,914) $ 2,151,047
============ ============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 3, 1999 (INCEPTION) TO APRIL 30, 1999 AND
FOR THE TWO MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period from Period from
For the February 3, February 3,
Two Months 1999 1999
Ended (Inception) to (Inception) to
June 30, April 30, June 30,
1999 1999 1999
---------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (886,226) $ (2,523,688) $ (3,409,914)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 26,908 40,512 67,420
Common stock issued for services - 100,000 100,000
Financing expense recognized for issuing
below-market warrants - 693,000 693,000
Financing expense recognized for issuing
below-market stock options - 864,335 864,335
Compensation expense recognized for issuing
below-market stock options 30,682 312,766 343,448
(Increase) decrease in
Notes receivable - employee (8,800) (11,800) (20,600)
Prepaid expenses 27,976 (36,540) (8,564)
Prepaid services - (56,922) (56,922)
Other assets (1,247) (51,509) (52,756)
Increase (decrease) in
Accounts payable and accrued expenses (91,965) 172,860 80,895
---------------- ------------- -------------
Net cash used in operating activities (902,672) (496,986) (1,399,658)
---------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment (116,601) (111,322) (227,923)
---------------- ------------- -------------
Net cash used in investing activities (116,601) (111,322) (227,923)
---------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 200,000 92,000 292,000
Proceeds from private placement of common stock 1,986,000 1,214,000 3,200,000
Offering costs (186,000) (114,000) (300,000)
---------------- ------------- -------------
Net cash provided by financing activities 2,000,000 1,192,000 3,192,000
---------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE PERIOD FROM FEBRUARY 3, 1999 (INCEPTION) TO APRIL 30, 1999 AND
FOR THE TWO MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period from Period from
For the February 3, February 3,
Two Months 1999 1999
Ended (Inception) to (Inception) to
June 30, April 30, June 30,
1999 1999 1999
--------------- --------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Net increase in cash and cash equivalents $ 980,727 $ 583,692 $ 1,564,419
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 583,692 - -
---------------- --------------- ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,564,419 $ 583,692 $ 1,564,419
================ =============== ================
</TABLE>
SUPPLEMENT DISCLOSURES OF CASH FLOW INFORMATION
During the period from February 3, 1999 (inception) to April 30, 1999, the two
months ended June 30, 1999, and the period from February 3, 1999 (inception) to
June 30, 1999, the Company paid no income taxes or interest.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the period from February 3, 1999 (inception) to April 30, 1999 and the
period from February 3, 1999 (inception) to June 30, 1999, the Company acquired
furniture and equipment valued at $368,178 in exchange for 9,000,000 shares of
the Company's common stock. The equipment is recorded as furniture and equipment
on the accompanying balance sheet.
The Company issued 2,533,332 shares of common stock in a private placement for a
total consideration of $2,900,000, net of offering costs. $1,100,000 was
collected prior to April 30, 1999, leaving a subscription receivable of
$1,800,000, which was collected subsequent to April 30, 1999.
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
STOCKUP.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM FEBRUARY 3, 1999 (INCEPTION) TO APRIL 30, 1999 AND
FOR THE TWO MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
(THE INFORMATION WITH RESPECT TO THE TWO MONTHS ENDED
JUNE 30, 1999 IS UNAUDITED.)
- --------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF BUSINESS
StockUp.com, Inc. (the "Company") was incorporated in Nevada on February
18, 1999 and is developing second-generation Internet technology(TM)
products that will be licensed to other websites and distributed to end
users. The Company's products offer the end user increased levels of
customization and interactivity. Websites deploying the technology will
benefit from increased traffic, enhanced user retention, and the ability to
build targeted aggregate marketing profiles of users.
Courtleigh Capital, Inc. ("Courtleigh"), a Kansas corporation and a
publicly traded corporation, was first incorporated under the name ANCR,
Inc. on July 30, 1985 under the laws of the State of Colorado. ANCR, Inc.
became an inactive shell corporation, and on July 23, 1997 changed its name
to CEA Lab, Inc. Furthermore, on October 16, 1995, CEA Lab, Inc.
reincorporated in the State of Kansas and subsequently changed its name to
Courtleigh Capital, Inc. In February 1999, Courtleigh subsequently changed
its name to StockUp.com, Inc. and reincorporated in the State of Nevada.
On December 30, 1998, Marketing Direct Concepts, Inc. ("MDC"), a Nevada
corporation, entered into an Asset Purchase and Escrow Agreement, whereby
it sold assets and liabilities, valued at $368,178, to the Company in
exchange for 9,000,000 shares of Courtleigh's common stock.
Courtleigh had minimal assets and liabilities at the date of the
acquisition and did not have operations prior to the acquisition.
Therefore, no pro forma information is presented.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of
the Company as a going concern. However, during the period from February 3,
1999 (inception) to April 30, 1999 and the two months ended June 30, 1999,
the Company incurred net losses of $2,523,688 and $886,226 (unaudited),
respectively, and it had negative cash flows from operations of $496,986
and $902,672 (unaudited), respectively. These factors raise substantial
doubt about the Company's ability to continue as a going concern.
7
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (Continued)
Recovery of the Company's assets is dependent upon future events, the
outcome of which is indeterminable. Successful completion of the Company's
development program and its transition to the attainment of profitable
operations is dependent upon the Company achieving a level of sales
adequate to support the Company's cost structure. In addition, realization
of a major portion of the assets in the accompanying balance sheets is
dependent upon the Company's ability to meet its financing requirements and
the success of its plans to sell products. The financial statements do not
include any adjustments relating to the recoverability and classification
of recorded asset amounts or amounts and classification of liabilities that
might be necessary should the Company be unable to continue in existence.
In addition to the capital raised as of June 30, 1999 through private
equity offerings, the Company is currently negotiating with certain
investors about raising additional capital through private placement
offerings. Unless the Company raises additional funds, either by debt or
equity issuances, management believes that its current cash on hand will be
insufficient to cover its working capital needs until the Company's sales
volume reaches a sufficient level to cover operating expenses.
ESTIMATES
The preparation of 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
disclosures of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS
For the purpose of the statements of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of three
months or less to be cash equivalents.
DEVELOPMENT STAGE ENTERPRISE
The Company is a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises." The Company is devoting substantially all
of its present efforts to establish a new business, and its planned
principal operations have not yet commenced. All losses accumulated since
inception have been considered as part of the Company's development stage
activities.
8
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
The Company expenses advertising costs as incurred. Advertising costs for
the period from February 3, 1999 (inception) to April 30, 1999 and the two
months ended June 30, 1999 were $60,029 and $53,992 (unaudited),
respectively.
FURNITURE AND EQUIPMENT
Furniture and equipment are recorded at cost. Depreciation and amortization
are provided using the straight-line method over estimated useful lives as
follows:
<TABLE>
<S> <C>
Furniture and equipment 7 years
Computer hardware and software 3 years
Leasehold Improvements 10 months (lease term)
</TABLE>
Maintenance and minor replacements are charged to expense as incurred.
Leasehold improvements are amortized over the lease period or the useful
life of the asset, whichever is shorter.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the assets to future net
cash flows expected to be generated by the assets. If the assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount exceeds the fair value of the
assets. To date, no impairment has occurred.
INCOME TAXES
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred income
taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The provision for income taxes represents the tax
payable for the period and the change during the period in deferred tax
assets and liabilities.
9
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER SHARE
For the period from February 3, 1999 (inception) to April 30, 1999 and for
the two months ended June 30, 1999, the Company adopted SFAS No. 128,
"Earnings per Share." Basic loss per share is computed by dividing loss
available to common stockholders by the weighted-average number of common
shares outstanding. Diluted loss per share is computed similar to basic
loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares
were dilutive. For the period from February 3, 1999 (inception) to April
30, 1999 and the two months ended June 30, 1999, the Company incurred net
losses; therefore, basic and diluted loss per share are the same.
STOCK SPLIT
On February 22, 1999, the Company effected a one-for-13 reverse stock split
of its common stock. All share and per share data have been retroactively
restated to reflect this stock split.
On September 14, 1999, the Company effected a two-for-one stock split of
its common stock. All per share data have been retroactively restated to
reflect this stock split.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash and cash equivalents, notes
receivable - employee, and accounts payable and accrued expenses, the
carrying amounts approximate fair value due to their short maturities.
CONCENTRATIONS OF CREDIT RISK
The financial instrument which potentially subjects the Company to
concentrations of credit risk is cash. The Company places its cash with
high quality financial institutions, and at times it may exceed the Federal
Deposit Insurance Corporation $100,000 insurance limit. As of April 30,
1999 and June 30, 1999, uninsured portions held at the financial
institutions aggregated to $650,446 and $1,768,801 (unaudited),
respectively.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Post-Retirement Benefits." The Company does not expect adoption of SFAS No.
132 to have a material impact, if any, on its financial position or results
of operations.
10
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," is effective for financial statements with fiscal years
beginning after June 15, 1999. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. The Company does not expect adoption of SFAS No. 133 to have a
material effect, if any, on its financial position or results of
operations.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," is effective for financial statements with the first fiscal
quarter beginning after December 15, 1998. The Company does not expect
adoption of SFAS No. 134 to have a material effect, if any, on its
financial position or results of operations.
SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical
Corrections," is effective for financial statements with fiscal years
beginning February 1999. This statement is not applicable to the Company.
COMPREHENSIVE INCOME
For the period from February 3, 1999 (inception) to April 30, 1999 and for
the two months ended June 30, 1999, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting comprehensive income and its components in a financial statement.
Comprehensive income as defined includes all changes in equity (net assets)
during a period from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include foreign
currency translation adjustments and unrealized gains and losses on
available-for-sale securities. Comprehensive income is not presented in the
Company's financials statements since the Company did not have any of the
items of comprehensive income in the periods presented.
11
<PAGE>
NOTE 3 - FURNITURE AND EQUIPMENT
Furniture and equipment consisted of the following:
<TABLE>
<CAPTION>
June 30, April 30,
1999 1999
----------- ---------
(unaudited)
<S> <C> <C>
Furniture and equipment $ 93,327 $ 86,227
Computer hardware and software 481,266 371,765
Leasehold improvements 21,508 21,508
----------- ---------
596,101 479,500
Less accumulated depreciation and amortization 67,420 40,512
----------- ---------
TOTAL $528,681 $438,988
=========== =========
</TABLE>
Depreciation and amortization expense for the period from February 3, 1999
(inception) to April 30, 1999 and the two months ended June 30, 1999 was
$40,512 and $26,908 (unaudited), respectively.
NOTE 4 - COMMITMENTS
LEASES
The Company leases certain facilities for its corporate and operations
offices under long-term, non-cancelable operating lease agreements that
expire through March 31, 2003.
Future minimum aggregate lease payments under non-cancelable operating
leases with initial terms of one year or more at April 30, 1999 were as
follows:
<TABLE>
<CAPTION>
Years Ending
April 30,
------------
<S> <C>
2000 $223,000
2001 170,000
2002 170,000
2003 160,000
--------
TOTAL $723,000
========
</TABLE>
12
<PAGE>
NOTE 4 - COMMITMENTS (CONTINUED)
LEASES (Continued)
Rent expense for the period from February 3, 1999 (inception) to April 30,
1999 and the two months ended was $32,206 and $46,666 (unaudited),
respectively.
EMPLOYMENT AGREEMENT
During the period from February 3, 1999 (inception) to April 30, 1999, the
Company entered into a new employment agreement with a key officer of the
Company. This officer will receive an annual salary of $225,000, a monthly
personal allowance of $3,000, and all automobile expenses paid.
Subsequent to April 30, 1999, the Company entered into two new employment
agreements with key officers of the Company. These officers will receive an
annual aggregate salary of $145,000 (unaudited).
NOTE 5 - STOCKHOLDERS' EQUITY
COMMON STOCK
In December 1998, the Company entered into an agreement with MDC to
purchase certain assets in exchange for 9,000,000 shares of common stock.
In February 1999, the Company entered into an agreement to issue an
aggregate of 500,000 shares of common stock for legal services rendered or
to be rendered. The shares were to be issued according to three stages of
completion. In connection with the issuance of the common stock, the
Company recorded $43,078 of legal expenses and $56,922 as a prepaid asset
in the accompanying balance sheet.
13
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY (CONTINUED)
PRIVATE PLACEMENT
In February 1999, the Company entered into a subscription agreement to
offer up to $900,000 worth of shares of common stock for 1,333,332 shares
and $2,300,000 worth of units to accredited investors. Each unit was
comprised of one share of the Company's common stock (or 1,200,000 shares)
and 0.5 warrant at an exercise price of $2.50 per share. The warrants are
deemed granted below market value, for which an expense of $693,000 has
been recorded. The warrants may be exercised, commencing upon the date the
Company closes a public offering of its stock pursuant to a Registration
Statement registering the shares underlying the warrants and terminating
30 days thereafter. The warrant holders have the right to demand
registration of the shares if such shares have not been registered by
January 1, 2000. In addition, the warrants are callable at the option
of the Company on and after the date that (i) the shares underlying the
warrants are registered and (ii) the Company's common stock is traded on
any exchange, at a Market Price, as defined below, equal to or exceeding
$10 per share for 10 consecutive trading days. The Market Price shall be
the closing bid price of the common stock.
A total offering of $2,900,000, net of offering costs, was completed, of
which $1,100,000, net of offering costs, was collected prior to April 30,
1999, leaving a subscription receivable of $1,800,000, which was collected
subsequent to April 30, 1999.
Stock options were granted in connection with the private placement,
granting an aggregate of 290,836 shares at exercise prices of $50,000 and
$75,000. The options were granted below market, for which an expense of
$864,335 has been recorded.
STOCK OPTION PLAN
The Company's Board of Directors adopted the Option Agreement and
Certificate (the "Agreement") in order to issue options to purchase common
stock of the Company to certain employees, commencing on April 9, 1999.
These options took two forms: a Series A option and a Series B option.
14
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTION PLAN (Continued)
The Series A options grant their holders the right to purchase common
stock of the Company at $4.50 per share. Each Series A option is
exercisable on the latter of the following: (i) the option holder has been
employed full-time by the Company for six months or (ii) April 2, 2000.
Once the option is exercisable, one-fifteenth of the shares granted by the
option become exercisable each month. The option terminates two years
after it first becomes exercisable or within three years from the date of
issuance. However, if the option holder is terminated for violating the
Company's employee manual, the option holder loses all rights in all
vested and non-vested options. If the option holder's employment with the
Company is terminated for any other reason, the holder retains all vested
options, but all non-vested options immediately terminate. In addition,
the non-vested options automatically terminate if there is a change in
control of the Company. In addition, the options are not assignable.
The Series B options are substantially similar to the Series A options
with the following differences: (i) the option holder does not lose all
rights in vested and non-vested options if his or her employment is
terminated for violating the Company's employee manual; (ii) the option
holder agrees not to work for any company developing Internet technology
for six months following any termination of employment with the Company;
and (iii) the key officer's options are assignable for the express purpose
of attracting key management personnel to work for the Company.
The Company has adopted only the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." It applies Accounting
Principles Bulletin ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations in accounting for its plans
and does not recognize compensation expense for its stock-based
compensation plans other than for restricted stock and options/warrants
issued to outside third parties. If the Company had elected to recognize
compensation expense based upon the fair value at the grant date for
awards under its plan consistent with the methodology prescribed by SFAS
No. 123, the Company's net loss and loss per share would be increased to
the pro forma amounts indicated below for the period from February 3,
1999 (inception) to April 30, 1999:
<TABLE>
<S> <C>
Net loss
As reported $ (2,523,688)
Pro forma $ (5,958,773)
Basic loss per common share
As reported $ (0.20)
Pro forma $ (0.50)
</TABLE>
15
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTION PLAN (Continued)
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense
related to grants made before 1995. The fair value of these options was
estimated at the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions for the period from
February 3, 1999 (inception) to April 30, 1999: dividend yield of 0%;
expected volatility of 100%; risk-free interest rate of 5.2%; and expected
life of three years. The weighted-average fair value of options granted
during the period from February 3, 1999 (inception) to April 30, 1999 for
which the exercise price was less than the Market Price at the grant date
was $2.94.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
The following summarizes the stock option transactions under the stock
option plan:
<TABLE>
<CAPTION>
Weighted-
Average
Stock Options Exercise
Outstanding Price
--------------- ----------------
<S> <C> <C>
Balance, February 3, 1999 (inception) - $ -
Granted 2,356,000 $ 4.25
---------------
Balance, April 30, 1999 2,356,000 $ 4.25
Granted (unaudited) 92,000 $ 4.87
Canceled (unaudited) (160,000) $ 4.25
---------------
BALANCE JUNE 30, 1999 (UNAUDITED) 2,288,000 $ 4.87
===============
EXERCISABLE, JUNE 30, 1999 (UNAUDITED) - $ -
===============
</TABLE>
16
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTION PLAN (Continued)
The weighted-average remaining contractual life of the options outstanding
is 2.92 years at April 30, 1999.
During the period from February 3, 1999 (inception) to April 30, 1999, the
Company issued 2,356,000 stock options to employees when the exercise
price was less than the fair value of the Company's stock at the date of
the grant. The Company incurred compensation expense of $589,000, of which
$312,766 is recorded as of April 30, 1999 and $30,682 (unaudited) as of
June 30, 1999, and the remainder will be expensed according to the vesting
period of the options.
NOTE 6 - INCOME TAXES
As of April 30, 1999, the Company had $2,523,688 in net operating loss
carryforwards that may be offset against future taxable income. No
provision for income taxes for the period from February 3, 1999
(inception) to April 30, 1999 has been made, except for minimum state
taxes, since the Company incurred a loss during the period. The deferred
income tax benefit of the loss carryforward is the only significant
deferred income tax asset or liability of the Company. It has been offset
by a valuation allowance of the same amount since management does not
believe the recoverability of this deferred tax asset is more likely than
not. Accordingly, no deferred income tax benefit has been recognized in
these financial statements.
NOTE 7 - YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its computer systems
to identify the systems that could be affected by the Year 2000 Issue.
The Issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do
not properly recognize such information could generate erroneous data or
cause a system to fail. The Company is dependent on computer processing in
the conduct of its business activities.
17
<PAGE>
NOTE 7 - YEAR 2000 ISSUE (CONTINUED)
Based on the comprehensive review of the computer systems, management has
determined that the Company's computer systems will not be materially
affected and does not believe the cost of implementation will be material
to the Company's financial position and results of operations.
Externally, the Year 2000 Issue may impact other entities with which the
Company transacts business. The Company cannot predict the effect of the
Year 2000 Issue on such entities, nor their effect on the Company. With
regard to those companies that the Company does business with on a daily
basis, the Company cannot guarantee that they will be vigilant about their
Year 2000 Issue plan of action.
In the event that the Company does experience Year 2000 Issue problems, it
could result in a suspension of the Company's revenues. A suspension of
revenues could result in material losses from operations and a reduction
of the Company's working capital. Management is unable at this time to
quantify the impact that the Year 2000 Issue could have on the Company's
results of operations and financial condition.
NOTE 8 - SUBSEQUENT EVENTS (UNAUDITED)
As of June 21, 1999, the Company is offering up to 2,000,000 shares of its
common stock at $6.00 per share. Single investors who provide $1,000,000
receive a price of $5 per share. Investors who provide at least $18,000
shall also receive a warrant with a two-year term exercisable at $4.75.
The Company has extended its offering through September 30, 1999.
Subsequent to June 30, 1999, the Company granted 220,000 options to
employees with exercise prices ranging from $4.25 to $10.25.
18
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION, DATED AUGUST 31, 1999
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Michael Calderone certifies that:
1. He is the President and Secretary of STOCKUP.COM, INC., a Nevada
corporation (the "Company").
2. The Articles of Incorporation of the Company were filed with the
Nevada Secretary of State on February 5, 1999.
3. The following amendment to the articles of incorporation for the
Company has been duly approved by written consent of a majority of the
shareholders and Directors.
He hereby adopts the following amendment to the articles of incorporation
of this corporation:
The Third Article is amended to read as follows:
"THIRD. The total number of shares which the corporation is authorized
to issue is Fifty Million (50,000,000) shares of common stock with a par value
of $.001 per share. The Corporation is authorized to conduct a two or one
forward split of the approximate 6,353, 179 shares of common stock outstanding
as of August 30, 1999."
FILED
IN THE OFFICE OF THE /s/ Michael Calderone
SECRETARY OF STATE OF THE Michael Calderone
STATE OF NEVADA President and Secretary
SEP 15 1999
No.: C2762-99
DEAN HELLER
DEAN HELLER, SECRETARY OF STATE
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
On this 31st day of August , 1999 before me, the undersigned Notary Public,
personally appeared Michael Calderone , personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is subscribed
to the within Instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the Instrument to the person,
or the entity upon behalf of which the person acted, executed the Instrument.
JENNIFER WATTS
Notary Public, State of Nevada
Appointment No. 9723881
My Appt. Expires June 24, 2001 /s/ Jennifer Watts
Notary Public
