<PAGE>
As filed with the Securities and Exchange Commission on December 12, 2000
Reg. No. ______________
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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PCSupport.com, Inc.
(Name of Small Business Issuer in its Charter)
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Nevada 7389 98-0211769
(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
3605 Gilmore Way, 3/rd/ Floor,
Burnaby, British Columbia, Canada V5G 4X5
(604) 419-4490
(Address and telephone number of principal executive offices)
--------------------------------------------------------------------------------
Same
(Address and telephone number of principal place of business)
--------------------------------------------------------------------------------
David W. Rowat
Vice President and Chief Financial Officer
PCSupport.com, Inc.
3605 Gilmore Way, 3/rd/ Floor
Burnaby, British Columbia, Canada V5G 4X5
(604) 419-4490
(Name, address and telephone number of agent for service)
Copy to:
Sanford J. Hillsberg, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
(310) 553-4441
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be registered offering price per unit aggregate offering price Amount of registration
registered fee
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<S> <C> <C> <C> <C>
Common Stock, par
value $0.001 (1)
7,291,331(1) $3.03125(2) $22,101,847(2) $ 6,145(3)
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Common Stock, par
value $0.001 1,500,000 $ 0.83(4) $ 1,245,000(4) $ 329(5)
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</TABLE>
(1) These shares were previously registered on Form SB-2, File No. 333-37760.
(2) Estimated solely for the purpose of calculating the registration fee.
Based, pursuant to Rule 457(c), on the average of the high and low sale prices
of our Common Stock as reported on the OTC Electronic Bulletin Board on May 19,
2000.
(3) Previously paid.
(4) Estimated solely for the purpose of calculating the registration fee.
Based, pursuant to Rule 457(c), on the average of the high and low sale prices
of our Common Stock as reported on the OTC Electronic Bulletin Board on December
5, 2000.
(5) Amount due.
================================================================================
We hereby amend this registration statement on such date or dates as may be
necessary to delay its effective date until we shall file a further amendment
which specifically states that this registration statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933
or until the registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
included in this registration statement also relates to securities registered on
Form SB-2, File No. 333-37760 previously filed by the Company which have not
been offered or sold as of the date of this registration statement.
The information contained in this prospectus is not yet complete, and it
may be supplemented or amended in the final version. A registration statement
for the securities described in this prospectus has been filed with the
Securities and Exchange Commission. Neither we nor the selling stockholders may
sell these securities, or accept offers to buy them, until the registration
statement becomes effective. These securities will not be sold in any state
where their offer or sale, or solicitations of offers to buy them, would be
unlawful prior to their registration or qualification under the securities laws
of any state.
<PAGE>
PROSPECTUS
PCSUPPORT.COM, INC.
8,791,331 Shares of Common Stock
This prospectus relates to shares of our common stock that may be offered
for resale by the selling securityholders listed on pages 36-38 through public
or private transactions at prevailing market prices or at privately negotiated
prices. We will not receive any proceeds from the sale of the shares. Of the
8,791,331 shares of common stock offered by this prospectus, selling
stockholders are selling 2,820,838 shares that are issuable upon the exercise of
outstanding options and warrants.
Our common stock is traded on the OTC Electronic Bulletin Board under the
symbol "PCSP." On December 11, 2000 the closing price of our common stock was
$0.875 per share.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the common stock or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
An investment in our common stock involves a high degree of risk. Before
investing in our common stock, you should consider carefully the risks described
under "Risk Factors" beginning on page 3.
The date of this prospectus is _____________, 2000.
<PAGE>
All statements, other than statements of historical fact, included in this
prospectus, including without limitation the statements under "Our Business" and
"Management's Discussion and Analysis of Operations," involve assumptions, known
and unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by such statements
contained in this prospectus. Such potential risks and uncertainties include,
without limitation, the impact of competitive products and pricing, the need to
raise additional capital, uncertain markets for our products and services, our
dependence on third parties and licensing/service supply agreements, and the
ability of competitors to license the same technologies that we use for the PC
Support Center or develop or license other functionally equivalent technologies.
All statements are made as of the date of this prospectus and we assume no
obligation to update these statements, except as required by law. Therefore,
readers are cautioned not to place undue reliance on these statements.
Unless otherwise indicated, all dollar amounts are expressed in U.S.
currency values.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary may not contain all of the information you should consider before
investing in our common stock. You should read the entire prospectus carefully
before making an investment decision.
General Information About Us
----------------------------
We are a development stage corporation formed under the laws of the State
of Nevada on June 23, 1999 pursuant to the merger of PCSupport.com, Inc. and
Reconnaissance Technologies Inc. We provide personalized, proactive, and user-
focused technical support services via the Internet to personal computer users
worldwide. We are committed to minimizing the cost and productivity gaps
associated with software and hardware failure. We are partnering with ISPs,
Internet portals, personal computer ("PC") vendors, and corporations for the
sale and distribution of our online preventive maintenance and technical support
services. Our goal is to partner with all distribution channels serving PC
Internet users, offering branded support portals and customized technical
support solutions. Our principal executive offices are located at 3605 Gilmore
Way, 3rd Floor, Burnaby, British Columbia, Canada V5G 4X5, and our telephone
number is (604) 419-4490.
The Offering
------------
Common stock offered.................................. 8,791,331 shares (1)
Common stock currently outstanding.......................... 13,171,662 (2)
Common stock to be outstanding after the offering........ 15,992,500(1) (3)
OTC Electronic Bulletin Board Symbol.................................. PCSP
______________________________
(1) This assumes the issuance of all shares issuable upon exercise by the
selling securityholders of the warrants for the shares of common stock
covered by this prospectus.
(2) Based on the number of shares of common stock outstanding on December 11,
2000. This number includes shares of outstanding common stock offered by
this prospectus, but excludes 2,820,838 shares covered by this prospectus
that are issuable upon exercise of outstanding options and warrants,
250,000 additional shares issuable upon exercise of outstanding warrants
and 1,295,000 shares reserved for issuance upon the exercise of options
granted under our stock option plan.
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(3) Based on the number of shares of common stock outstanding on December 11,
2000. This number includes all of the outstanding shares and other shares
of common stock covered by this prospectus, including the shares issuable
upon exercise of outstanding options and warrants, but excludes 250,000
shares issuable upon exercise of outstanding warrants and 1,295,000 shares
reserved for issuance upon the exercise of options granted under our stock
option plan.
RISK FACTORS
Our operations and securities are subject to a number of risks, including
those described below. If any of the following risks actually occur, our
business, financial condition or operating results and the trading price or
value of our securities could be materially adversely affected.
Limited Operating History
-------------------------
Our limited operating history makes it difficult to evaluate our current
business and prospects or to accurately predict our future revenue or results of
operations. Our revenue and income potential are unproven, and our business
model is constantly evolving. Because the Internet is constantly changing, we
may need to modify our business model to adapt to these changes. Companies in
early stages of development, particularly companies in new and rapidly evolving
Internet industry segments, are generally more vulnerable to risks,
uncertainties, expenses and difficulties than more established companies.
New and Unproven Business Model
-------------------------------
Our model for conducting business and generating revenue is new and
unproven. Our success will depend primarily on our ability to generate revenue
from multiple sources, including:
. Subscriptions for services
. Advertising
. Customization fees
As the market for our services is new and evolving, it is difficult to
predict the size of the market, its future rate of growth, if any, or the level
of prices the market will pay for our services. To date, only a very limited
number of persons have subscribed to the PC Support Center on a paying basis.
We have received several revenue contracts from corporations, but few have
generated significant revenue to date. We are not certain that our business
model will be successful or that we can generate revenue growth or be
profitable. There can be no assurance that any increase in marketing and sales
efforts will result in a larger market or increase in market acceptance for our
services. We may sell service contracts to provide warranty services or bundle
our services for a fixed fee based on only limited historical experience as to
the level of expenditures we will need to incur to satisfy our contractual
obligations. If markets for our services develop more slowly than expected or
become saturated with competitors, or our services do not achieve or sustain
market acceptance, or we are unable to set prices for our services that are
sufficient to cover our costs and generate a profit, we will be unlikely to be
able to successfully operate our business.
History of Operating Losses and Anticipated Losses and Negative Cash Flow for
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the Foreseeable Future
----------------------
To date, we have incurred operating losses and negative cash flow. We
expect to significantly increase our expenditures for sales and marketing,
content development, and technology and infrastructure development to enhance
our business from current levels and that our operating losses and negative cash
flow will continue for the foreseeable future. With increased on-going
operating expenses, we will need to generate significant revenue
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to achieve profitability. Consequently, it is possible that we may never achieve
profitability, and even if we do achieve profitability, we may not sustain or
increase profitability on a quarterly or annual basis in the future. If we do
not achieve or sustain profitability in the future, we may be unable to continue
our operations. The auditors' report with respect to our financial statements
for the fiscal year ended June 30, 2000 includes an additional explanatory
paragraph on these conditions that raises substantial doubt about our ability to
continue as a going concern.
Need for Additional Capital
---------------------------
Between February and November 2000, we raised aggregate gross proceeds of
$8,903,625 from the sale of common stock, $232,404 from the exercise of
previously issued warrants and options, and $1,000,000 from the issuance of
convertible debt that was converted entirely into equity in May 2000. However,
our current financial commitments and business plan will require working capital
in excess of our cash reserves, which we believe are sufficient to sustain our
operations at their current levels until at least February 2001.
We anticipate funding our additional working capital requirements through
the proceeds from a private placement of our common stock, together with
anticipated revenues generated from customers. Although the investment banking
firm which we have engaged has agreed to use its best efforts to secure
additional financing for us in the form of an institutional private placement of
our equity securities, we do not currently have any commitment from any third
party to provide this or any other additional financing. Furthermore, the
financial markets have become very unreceptive to early-stage Internet-based
companies such as ours. We may be unable to obtain financing on reasonable
terms or at all. Furthermore, if we raise additional working capital through
equity, our shareholders will experience dilution. If we are unable to secure
additional financing when needed and our revenues are inadequate to provide the
necessary working capital, we may be required to slow down or suspend our growth
or reduce the scope of our then current level of business operations, any of
which would have a material adverse effect on our business.
Our Web Site Will Need to Be Continually Enhanced
-------------------------------------------------
Due to the constantly evolving nature of the Internet and related
technologies, we must continuously monitor changes in PC support technologies
and Internet-based support offerings with the goal of adding additional
functionality in new releases of the PC Support Center. Our Web site will have
to be updated and enhanced on a timely basis in order for us to compete
effectively. There can be no assurance that we will have access to the working
capital, technology, or skilled personnel and outside contractors necessary in
order to deliver these updates and enhancements to the market on a timely basis.
We Will Incur Additional Expenses Related to the Acquisition of MyHelpDesk, Inc.
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In November, 2000, we acquired all of the assets and certain of the
liabilities of MyHelpDesk, Inc. The business of MyHelpDesk that we have acquired
has not previously generated meaningful revenues. Although we are restructuring
the merged operations, there can be no guarantee that the expenses of the
combined companies will not be greater than our expenses prior to the
acquisition, and thus place additional demands on our working capital.
Dependence on Other Outside Agents and Distributors
---------------------------------------------------
Our success will also depend, to a significant extent, upon our ability to
develop strategic alliances and a timely and multi-channel distribution system
based on independent third parties and distributors. Furthermore, the initial
market penetration for our products and services will depend heavily on the
sales agents of third parties and the quality of their relationships with their
current and future customers. There can be no assurance that such alliances
will develop or that they will prove successful over the course of our future
operations.
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Control of Rapid Growth
-----------------------
We expect to significantly expand operations to address potential growth in
our customer bases, the breadth of our service offerings, and other
opportunities. We expect that this expansion will strain our management,
operations, systems and financial resources. To manage our recent growth and any
future growth of our operations and personnel, we must improve and effectively
utilize our existing operational, management, marketing and financial systems
and successfully recruit, hire, train and manage personnel and maintain close
coordination among our technical, finance, marketing, sales and production
staffs. We will need to hire additional personnel in all areas during the
current fiscal year. In addition, we may also need to increase the capacity of
our software, hardware and telecommunications systems on short notice, and will
need to manage an increasing number of complex relationships with users,
strategic partners, advertisers and other third parties. The failure to manage
this growth could disrupt our operations and ultimately prevent us from
generating the revenue we expect.
We have not yet deployed our services on a mass basis, and have not yet
tested our ability to provide our services on a mass basis. There can be no
assurance that the software platforms upon which our services operate will be
able to handle the volume of information necessary to meet our operating
requirements. The failure of those software platforms to handle the necessary
volume of information would seriously affect our business.
Dependence On Key Personnel and Need For Additional Personnel
-------------------------------------------------------------
Our future success depends to a significant extent on the continued
services of senior management, including Michael McLean, Steven Macbeth, David
Rowat, Bruce McDonald and Brian McAdams.
We have employment contracts with Messrs. McLean, Macbeth, Rowat, McDonald
and McAdams but these contracts do not require any of them to remain with us for
any particular period of time. The loss of any of these senior managers would
likely have an adverse effect on our business. Competition for personnel
throughout the industry is intense and we may be unable to retain our current
key employees or attract, integrate or retain other highly qualified employees
in the future. If we do not succeed in attracting new personnel or retaining and
motivating our current personnel, our business could be materially adversely
affected.
The Market is Highly Competitive and We May Not Be Able to Compete Successfully
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Against Our Current and Future Competitors
------------------------------------------
The market for PC support services through the Internet is a new and highly
competitive market which is subject to rapid change. We expect competition in
the market to increase because there are few barriers to entry. We face
competitive pressures from numerous actual and potential competitors.
Competition in the PC support business is likely to increase significantly
as new companies enter the market and current competitors expand their services.
Many of our current and potential competitors have substantial competitive
advantages, including:
. significantly greater financial, technical and marketing resources
. relationships with strong partners
. longer operating histories
. greater brand name recognition
. larger existing customer bases
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<PAGE>
We also face significant competition from numerous competitors in the
online data backup business.
Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements and devote greater resources
to develop, promote and sell their products or services. Services offered by
existing and potential competitors may be perceived by users or advertisers as
being superior to ours. In addition, increased competition could result in
reduced subscriber fees, advertising rates and margins and loss of market share,
any of which could harm our business.
Brand Recognition
-----------------
To attract users we must develop a brand identity and increase public
awareness of the services we offer. Our marketing activities may, however, not
result in increased revenue and, even if they do, any increased revenue may not
offset the expenses incurred in building brand recognition. Moreover, despite
these efforts, which may be adversely impacted by our limited working capital
that is currently available to support these efforts, we may be unable to
increase public awareness of our brands, which would have an adverse effect on
our business.
Reliance on Technology Partners
-------------------------------
Many of the online support technologies used on the PC Support Center are
licensed from unrelated third parties or have been acquired from third parties,
and we anticipate that we will need to gain access in the future to additional
technologies through licenses or acquisitions. We are highly reliant on the
technologies that we license or have acquired. There can be no assurance that
our licensors will take the necessary steps to assure that these technologies
will keep pace with technological changes. There can be no assurance that our
licensors will continue to grant us licenses in the future. We also may
encounter unanticipated difficulties in integrating the technologies that we
license or the technologies, personnel or operations that we acquire with our
existing technologies or operations. The loss of the right to use one or more
of these technologies may have a material adverse effect on our business.
Technological Change
--------------------
The market for Internet products and services is characterized by rapid
change, evolving industry standards and frequent introductions of new
technological developments. These new standards and developments could make our
existing or future products or services obsolete. In addition, personal
computers, operating systems software, and applications software are constantly
improving. Computer manufacturers and software developers may develop more
robust technologies for their products which could render our services obsolete
or reduce the demand for our services below the level required to profitably
support them.
Our keeping pace with the introduction of new standards and technological
developments could result in significant additional costs or prove difficult or
impossible. The failure to keep pace with these changes and to continue to
enhance and improve the responsiveness, functionality and features of our
services could harm our ability to attract and retain users. Among other
things, we may need to enhance our existing services or license or develop new
services or technologies, which may not be available to us on attractive terms
or at all.
Intellectual Property Protection
--------------------------------
We may be unable to acquire or maintain Web domain names in the United
States and other countries in which we may conduct business. We currently hold
various relevant domain names, including PCSUPPORT.com, GLOBALREPLACE.com,
PCREPLACE.com, PDASUPPORT.com, PCSUPPORTCENTER.com, PCSUPPORTCENTER.net,
PCRESTORE.com, RECON-TECH.com, MYHELPDESK.com, MYHELPDESK.net, MYHELPDESK.org,
MYHELPDESKSUCKS.com,
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FIRSTHELP.com, FIRSTHELP.org, 1STHELP.com, 1STHELP.net, AND 1STHELP.org. The
acquisition and maintenance of domain names generally is regulated by
governmental agencies and their designees and is subject to change. The
relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. Therefore, we could be
unable to prevent third parties from acquiring or using domain names that
infringe or otherwise decrease the value of our brand names and other
proprietary rights.
Also, third parties may assert trademark, copyright, patent and other types
of infringement or unfair competition claims against us. If forced to defend
against any such claims, whether they are with or without merit or are
determined in our favor, then we may face costly litigation, diversion of
technical and management personnel, or product shipment delays. As a result of
such a dispute, we may have to develop non-infringing technology or enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may be unavailable on terms acceptable to us, or at all. If there is
a successful claim of product infringement against us and we are unable to
develop non-infringing technology or license the infringed or similar technology
on a timely basis, it could harm business.
In addition, we rely on other third parties to provide services enabling
our operations. We could become subject to infringement actions by third
parties based upon the use of intellectual property provided by third-party
providers. It is also possible that we could become subject to infringement
actions based upon the content licensed from third parties. Any such claims or
disputes could subject us to costly litigation and the diversion of our
financial resources and technical and management personnel.
Further, if efforts to enforce our intellectual property rights are
unsuccessful or if claims by third parties against us are successful, we may be
required to pay financial damages or alter our business practices.
We rely on confidentiality, non-disclosure and non-competition arrangements
with our employees, representatives and other entities engaged in joint product
or business development with us, and expect to continue to enter into such
agreements with such persons. There can be no assurance that these agreements
will provide meaningful protection. There can be no assurance that other
companies will not acquire and use information which we consider to be
proprietary.
System Disruptions
------------------
Our ability to attract and retain subscribers depends on the performance,
reliability and availability of our services and network infrastructure. We may
experience periodic service interruptions caused by temporary problems in our
own systems or software or in the systems or software of third parties upon whom
we rely to provide service or support. Fire, floods, earthquakes, power loss,
telecommunications failures, break-ins, denial of service attacks and similar
events could damage these systems and interrupt our services. Computer viruses,
electronic break-ins or other similar disruptive events also could disrupt our
services. System disruptions could result in the unavailability or slower
response times of our Web site, which would lower the quality of our customers'
experience. Service disruptions could adversely affect our revenue and, if they
were prolonged, would seriously harm our business and reputation. We do not
carry business interruption insurance to compensate for losses that may occur as
a result of these interruptions. In addition, our customers will be dependent
on Internet service providers and other Web site operators for access to our Web
site. These providers and operators have experienced significant outages in the
past, and could experience outages, delays and other difficulties due to system
failures unrelated to our systems. Moreover, the Internet network
infrastructure may not be able to support continued growth. Any of these
problems could adversely affect our business.
Failure of Online Security Measures
-----------------------------------
Our relationship with our customers would be adversely affected if the
security measures that we use to protect their personal information are
ineffective. We cannot predict whether events or developments will result in a
compromise or breach of the technology we use to protect a customer's personal
information.
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The infrastructure relating to our services is vulnerable to unauthorized
access, physical or electronic computer break-ins, computer viruses and other
disruptive problems. Internet service providers have experienced, and may
continue to experience, interruptions in service as a result of the accidental
or intentional actions of Internet users, current and former employees and
others. Anyone who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our operations.
Security breaches relating to our activities or the activities of third-party
contractors that involve the storage and transmission of proprietary information
could damage our reputation and our relationships with our subscribers and
strategic partners. We could be liable to our subscribers for the damages
caused by such breaches or it could incur substantial costs as a result of
defending claims for those damages. We may need to expend significant capital
and other resources to protect against such security breaches or to address
problems caused by such breaches. Security measures that we take may not prevent
disruptions or security breaches.
Development and Maintenance of the Internet and the Availability of Increased
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Bandwidth to Users
------------------
The success of our business will rely on the continued improvement of the
Internet as a convenient means of consumer interaction and commerce. Our
business will depend on the ability of our customers to use our Web site without
significant delays or aggravation that may be associated with decreased
availability of Internet bandwidth and access to our Web site. This will depend
upon the maintenance of a reliable network with the necessary speed, data
capacity and security, as well as timely development of complementary products,
such as high speed modems, for providing reliable Internet access and services.
The failure of the Internet to achieve these goals may reduce our ability to
generate significant revenue.
Our penetration of a broader consumer market will depend, in part, on
continued proliferation of high speed Internet access. The Internet has
experienced, and is likely to continue to experience, significant growth in the
numbers of users and amount of traffic. As the Internet continues to experience
increased numbers of users, increased frequency of use and increased bandwidth
requirements, the Internet infrastructure may be unable to support the demands
placed on it. In addition, increased users or bandwidth requirements may harm
the performance of the Internet. The Internet has experienced a variety of
outages and other delays and it could face outages and delays in the future.
These outages and delays could reduce the level of Internet usage as well as the
level of traffic, and could result in the Internet becoming an inconvenient or
uneconomical source of products and services which would cause its revenue to
decrease. The infrastructure and complementary products or services necessary
to make the Internet a viable commercial marketplace for the long term may not
be developed successfully or in a timely manner. Even if these products or
services are developed, the Internet may not become a viable commercial
marketplace for the products or services that we offer.
We May Need to Change the Manner in Which We Conduct Our Business if Government
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Regulation Increases or Changes
-------------------------------
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future, however, that address issues such as user privacy, pricing,
taxation, content, copyrights, distribution, security, and the quality of
products and services. For example, the Telecommunications Act of 1996 sought
to prohibit transmitting certain types of information and content over the Web.
Several telecommunications companies have petitioned the Federal Communications
Commission to regulate Internet service providers and online services providers
in a manner similar to long distance telephone carriers and to impose access
fees on these companies. Any imposition of access fees could increase the cost
of transmitting data over the Internet. In addition, the growth and development
of the market for online commerce may lead to more stringent consumer protection
laws, both in the United States and abroad, that may impose additional burdens
on the Company. The United States Congress recently enacted Internet laws
regarding children's privacy, copyrights, taxation and the transmission of
sexually explicit material. The law of the Internet, however, remains largely
unsettled, even in areas where there has been some legislative action.
Moreover, it may take years to determine the extent to which existing laws
relating to issues such as property
8
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ownership, libel and personal privacy are applicable to the Web. Any new, or
modifications to existing, laws or regulations relating to the Web could
adversely affect our business.
If one or more states or any foreign country successfully asserts that we
should collect sales or other taxes on the provision of our services, our net
sales and results of operations could be harmed. We do not currently collect
sales or other similar taxes on the provision of our services in any state.
However, one or more states may seek to impose sales tax collection obligations
on companies which engage in or facilitate the provision of services on the
Internet. A number of proposals have been made at the state and local level
that would impose additional taxes on the sale of products and services through
the Internet. Such proposals, if adopted, could substantially impair the growth
of electronic commerce and could adversely affect our opportunity to derive
financial benefit from the provision of our services. Moreover, if any state or
foreign country were to successfully assert that we should collect sales or
other taxes on the provision of our services, our results of operations could be
adversely affected.
Legislation limiting the ability of the states to impose taxes on Internet-
based transactions has been enacted by Congress. However, this legislation,
known as the Internet Tax Freedom Act of 1998, imposes only a three-year
moratorium ending on October 21, 2001 on state and local taxes on electronic
commerce where such taxes are discriminatory and on Internet access unless such
taxes were generally imposed and actually enforced before October 1, 1998.
Failure to renew this legislation would allow various states to impose taxes on
Internet-based commerce.
Collection of Taxes
-------------------
As our business grows, we hope to generate sales from consumers and
businesses around the world. Each jurisdiction collects sales taxes of various
kinds in different ways. We may need to quickly develop an understanding of a
myriad of tax regimes and to customize our electronic commerce and accounting
systems to collect and remit such taxes for each one. There can be no assurance
that we will be able to develop an understanding of every system and collect and
remit such taxes in a timely manner. Failure to do so may expose us to
significant sanctions, penalties and fines which may have a material adverse
impact on our business.
Operating Results May Prove Unpredictable, and May Fluctuate Significantly
--------------------------------------------------------------------------
Our operating results are likely to fluctuate significantly in the future
due to a variety of factors, many of which are outside of our control. Because
our operating results may be volatile and difficult to predict, in the future
the operating results may fall below the expectations of securities analysts and
investors. In this event, the trading price of our common stock may fall
significantly. Factors that may cause operating results to fluctuate
significantly include the following:
. rapid changes in the prices and costs of online services
. fluctuations in the levels of user visits to our Web site and the
amount of time that users spend on the Web site
. new Web sites, services or products introduced by us or by our
competitors
. general economic conditions, as well as economic conditions specific
to users of our services and the public markets for Internet-related
companies
Common Stock Price May Be Volatile
----------------------------------
The market prices of securities of Internet and technology companies are
extremely volatile. Factors that may contribute to the volatility of the trading
price of our common stock include, among others:
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. public announcements of technical innovations relating to our
business, new products or services by us or our competitors, or
acquisitions or strategic alliances by us or our competitors
. public reports concerning our services or those of our competitors
. the announcement of large and noteworthy business deals by our
competitors or us
. our quarterly results of operations
. the variance between our actual quarterly results of operations and
predictions by stock analysts
. financial predictions and recommendations by stock analysts concerning
Internet companies and companies competing in our market in general,
and concerning us in particular
. the operating and stock price performance of other companies that
investors or stock analysts may deem comparable to us
. the general investment climate and the climate for Internet-related
public companies, such as PCsupport.com, which has historically been
very volatile
In addition to the foregoing factors, the trading prices for equity
securities in the stock market in general, and of Internet-related companies in
particular, have been subject to wide fluctuations that may be unrelated to the
operating performance of the particular company affected by such fluctuations.
Consequently, broad market fluctuations may have an adverse effect on the
trading price of our common stock, regardless of our results of operations.
Limited Market for Our Common Stock
-----------------------------------
Although our common stock is quoted on the OTC Electronic Bulletin Board,
there is only a limited market for our common stock, and there can be no
assurance that this market will be maintained or broadened. The market price
for shares of common stock is likely to be very volatile, and numerous factors
beyond our control may have a significant effect on the market for these shares.
Substantial Sales of Common Stock Could Cause Stock Price to Fall
-----------------------------------------------------------------
As of December 11, 2000, we had outstanding 13,171,662 shares of common
stock of which approximately 10,138,648 shares were "restricted securities" (as
that term is defined under Rule 144 promulgated under the Securities Act of
1933). Currently, 4,487,493 of these restricted shares, as well as an additional
2,820,838 shares underlying currently exercisable options and warrants, are
eligible for sale pursuant to a registration statement that became effective in
June 2000, and the shares covered by the foregoing registration statement are
included in this prospectus as well. In addition, a substantial portion of the
remaining restricted shares are currently eligible for sale under Rule 144.
No prediction can be made as to the effect, if any, that sales of shares of
common stock or the availability of such shares for sale will have on the market
prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of common stock may be sold in the public market may
adversely affect prevailing market prices for our common stock and could impair
our ability to raise capital through the sale of our equity securities.
No Dividends
------------
The payment of dividends on our common stock is within the discretion of
our Board of Directors and
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will depend upon our future earnings, our capital requirements, our financial
condition, and other relevant factors. We do not currently intend to declare any
dividends on our common stock for the foreseeable future.
The Common Stock May Be Deemed "Penny Stock" and Therefore Subject to Special
-----------------------------------------------------------------------------
Requirements
------------
Our common stock may be deemed to be a "penny stock" as that term is
defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934.
Penny stocks are stocks (i) with a price of less than five dollars per share;
(ii) that are not traded on a "recognized" national exchange; (iii) whose prices
are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks
must still meet requirement (i) above); and (iv) in issuers with net tangible
assets of less than $2,000,000 (if the issuer has been in continuous operation
for at least three years) or $5,000,000 (if in continuous operation for less
than three years), or with average revenues of less than $6,000,000 for the last
three years.
Section 15(g) of the Securities Exchange Act of 1934, and Rule 15g-2
promulgated under the Securities Exchange Act of 1934, require broker-dealers
dealing in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Moreover, Rule 15g-9 promulgated under the
Securities Exchange Act of 1934 requires broker-dealers in penny stocks to
approve the account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure requires the broker-
dealer to (i) obtain from the investor information concerning his or her
financial situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions in penny
stocks are suitable for the investor and that the investor has sufficient
knowledge and experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement from the
investor, confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives. Compliance with
these requirements may make it more difficult for investors in our common stock
to resell their shares to third parties or to otherwise dispose of them.
Executive Officers, Directors and Major Stockholders Exercise Significant
-------------------------------------------------------------------------
Control
-------
As of December 11, 2000, our executive officers and Directors and the
holders of 5% or more of our outstanding common stock together beneficially
owned approximately 31% of our outstanding common stock. These stockholders are
able to significantly influence all matters requiring approval by stockholders,
including the election of directors and the approval of significant corporate
transactions. This concentration of ownership may also have the effect of
delaying, deterring or preventing a change in control and may make some
transactions more difficult or impossible to complete without the support of
these stockholders.
Risks of International Operations
---------------------------------
We expect a substantial portion of our revenues to be based on sales and
services rendered to customers in the United States, while a significant amount
of our operating expenses will be incurred in Canada. As a result, our financial
performance will be affected by fluctuations in the value of the U.S. dollar to
the Canadian dollar. At the present time, we have no plan or policy to utilize
forward contracts or currency options to minimize this exposure, and even if
these measures are implemented there can be no assurance that such arrangements
will be available, be cost effective or be able to fully offset such future
currency risks. Similarly, we anticipate expanding our subscriber base and other
operations in other countries, which may expose us to difficulties and costs of
staffing and managing these operations, differing technology standards,
dependence on local vendors and changes in currency exchange rates and controls.
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USE OF PROCEEDS
This prospectus relates to an aggregate of 8,879,331 shares of common stock
that may be sold from time to time by the selling securityholders, including
2,820,838 shares that are issuable upon the exercise of outstanding options and
warrants. Although we will pay the expenses of registration of these shares,
including legal and accounting fees, we will not receive any proceeds from the
sale of the shares. We will receive the exercise price of any of the warrants
which are exercised. We intend to use these proceeds for working capital. If all
of the warrants are exercised for cash, we will receive a total of $5,029,801.
OUR BUSINESS
Business Development
--------------------
We are a development stage corporation formed under the laws of the State
of Nevada on June 23, 1999 pursuant to the merger (the "Merger") of
PCSupport.com ("PCS") and Reconnaissance Technologies Inc. ("RTI"). PCS was the
resulting entity from a prior merger of PCSupport.com and Mex Trans Seafood
Consulting Inc. ("Mex Trans"). Mex Trans was incorporated in the State of Texas
on February 13, 1989 under the name "Mutual Produce, Inc." and later changed its
name to "Mex Trans Seafood Consulting, Inc."
RTI was incorporated in British Columbia, Canada, on December 10, 1997 for
the purpose of engaging in the development and provision of notebook computer
support services to end users through the Internet. Prior to the Merger, PCS
(and its predecessor, Mex Trans) did not have any active business and had only
nominal assets and liabilities and was seeking to acquire a new business. In
early 1999 RTI was seeking further capital to develop its business and to merge
with a public entity to provide liquidity for its shareholders. Management of
RTI and PCS began discussions for a merger of the two companies in March 1999.
In anticipation of the Merger, Mex Trans merged on April 7, 1999 with PCS, a
Nevada corporation incorporated on that date solely for the purpose of
transferring the corporate jurisdiction of Mex Trans to Nevada. In April 1999,
in anticipation of the Merger, PCS completed a private placement of its common
shares that generated gross proceeds of approximately $950,000. The shares to be
issued in and proceeds from this private placement were placed in escrow and
released upon completion of the Merger.
RTI and PCS entered into a formal merger agreement on May 5, 1999, and the
following transactions were carried out to complete the Merger:
1. Each of RTI and PCS obtained shareholder approval for the Merger;
2. PCS underwent a reverse split of its common stock on a 15 old shares
for one new share basis;
3. RTI transferred its governing corporate jurisdiction from British
Columbia to Wyoming; and
4. RTI merged with PCS.
In the Merger, each shareholder of RTI received one share of our common
stock for each five shares of RTI held. Each shareholder of PCS received one
share of our common stock for each share of PCS held. Each holder of outstanding
warrants of RTI received one warrant of the Company for each five warrants of
RTI held. (See "Market for Common Equity and Other Shareholder Matters" below
for a description of outstanding warrants.)
The Company has a wholly-owned subsidiary, Reconnaissance International
Ltd., a British Virgin Islands company. The subsidiary has no assets or
liabilities.
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Business of the Company
-----------------------
Principal Products and Services and their Markets
Market Overview
Personal computers ("PCs"), both desktop and laptop or notebook types,
suffer from a wide variety of technical problems that occasionally impair their
performance, causing lost productivity and frustration for end-users. For
example:
. PC hardware, software, drivers, and operating systems (and their
interaction) have become more complex, and this is causing an
increasing number of problems. As a result, computer crashes can
occur, resulting in lost data and unscheduled downtime.
. Software publishers continually issue bug fixes. End-users, however,
are typically not aware of, nor do they know how to find, bug fixes on
the Internet and install them on their PCs.
. Over time, PC hard drives become cluttered with temporary files,
missing drivers for applications and hardware peripherals. The
registry, which acts as the "table of contents" for the PC can also
become cluttered and disorganized. The hard drive becomes fragmented
from normal use. Consequently, over time, the PC performs more slowly,
and is subject to crashes. Often, the end-user is not aware that he or
she has a problem. In response, the Windows 95/98/2000/NT operating
systems provide a utility for users to de-fragment their hard drives.
. PCs are often subject to configuration problems, in which the various
software, hardware and operating systems cannot communicate with each
other.
. PCs are continuously vulnerable to the advent of new viruses which are
designed to impair their operation or destroy the user's data.
. Frequently, the dialer program that end-users invoke to access the
Internet using a dial-up connection becomes corrupted, preventing them
from logging on.
With respect to the technical problems described above, until recently, the
end-user had only a few inefficient and costly options to obtain technical
support. End-users in a large corporation typically have skilled technicians
employed in a management information systems ("MIS") group to assist them, but
SME, SOHO and home end-users have to rely on themselves and volunteers. Hardware
manufacturers and software publishers (collectively, "vendors") provide access
to libraries of support information over the Internet, but these data bases are
typically voluminous and hard for the end-user to navigate. Alternatively, the
end-user can phone one of the many help desks operated by these vendors, but the
process is often time-consuming and frustrating for the end-user and very
expensive for the vendor or the end-user.
End-users can also purchase utilities from a local software retailer, such
as a disk maintenance package. Finally, the end-user can either bring his PC
into a depot repair facility or call a local PC service company to send a
technician to the end-user's place to repair the problem. Both of these latter
options are expensive, and can result in several days of lost productivity for
the end-user.
In sum, the traditional options for the solution of technical problems for
PCs are inefficient and expensive, both for the PC end-user and the vendor
supplying the technology. The result is a high level of
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dissatisfaction among end-users with the reliability and ease of use of personal
computers, and increasing costs of support among vendors.
The growing popularity of the Internet provides new options to significantly
improve the levels of satisfaction among end-users and to lower the costs of
support among vendors. From 1998 onwards, many companies began to offer
solutions to PC support problems over the Internet. As described below under
"Competitive Business Conditions and the Company's Competitive Position,"
several companies offered point solutions to a narrow range of problems,
including but not limited to the following:
. Online virus scans and download and update of virus solution
libraries.
. Knowledgebases of solutions to technical problems, many with natural-
language search engines to allow easier access to end-users.
. Email and online chat access to technicians.
. Online updates for drivers and software bug fixes.
. Technical forums where users can ask questions online and have them
answered by one or more technicians loosely affiliated with such
online technical forum.
. Remote diagnostic and repair technologies.
A support portal is a destination on the World Wide Web dedicated to
providing technical support services for PC end-users. In 1999 and 2000, the
first of the support portals were introduced, with the Company and several other
companies, including McAfee.com, all.com, MyHelpDesk.com, and Service911 among
those launching support portals. The largest PC manufacturers, including Dell,
IBM, HP, Toshiba, Gateway and Micron, introduced support portals in 2000. In
general, these support portals aggregate a number of point solutions to solve a
broad range of PC technical problems.
We have developed and implemented, and continue to improve upon, a suite of
services to address the technical needs of PC users described above.
Market Segmentation
PC users can be segmented into three categories. Users in large corporations
typically have MIS departments from which to access technical help. SME PC users
have all of the same technical problems, yet generally do not have an MIS
department for support. The third segment, SOHO or individual users, are often
completely on their own. We are marketing to these three segments.
Currently, we are primarily marketing to businesses with technical support
obligations to their own clients and/or employees. The revenue sources will
include one-time fees from customized support center development, subscription
fees from the service packages and incidental support services delivered through
both private-label support centers powered by PCSupport.com and our website.
Products and Services
Our primary service, the PC Support Application, is a Web-based mechanism for
delivering support services for PCs which aggregates a number of support
technologies, including interactive online technical trouble-shooting, a user
self-help knowledgebase, hard disk maintenance and other automated support
tools. Previously, we offered Online Data Backup, an on-line backup service for
notebook and desktop computers and Phoenix, which allowed a notebook user to
transfer a full-image of all data, applications, preferences and settings to a
new notebook. However, we recently discontinued both Online Data Backup and
Phoenix.
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PC Support Application
We have developed the PC Support Center, a Web-based support portal
offering the services of the PC Support Application, for all PC users to provide
a service which will react to technical problems and pro-actively maintain the
user's computer to prevent problems from occurring. The first version of the PC
Support Center was launched on our Web site, www.pcsupport.com, in October 1999.
The PC Support Center aggregates various technical solutions, such as
interactive online technical trouble-shooting, a user self-help knowledgebase,
hard disk maintenance and other automated support tools.
In July 2000, we launched an eCommerce engine, introduced 24 x 7 service
(24 hours per day, seven days a week), segregated certain of our previously-free
services and introduced a premium service for which we charge subscribers. Such
services include Live Assist and Remote Repair, services in which the end-user
can engage a technician in an online chat session to solve technical problems
and provide advice, and with the user's permission, take control of the end-
user's PC and solve the problem online while the end-user watches. The premium
service package also includes four-hour turnaround on email requests for
service.
In November, 2000, we completed the acquisition of the assets and certain
liabilities of MyHelpDesk, Inc. which allowed us to incorporate a comprehensive
searchable knowledgebase to solutions to support problems for thousands of
computer hardware and software products.
We intend to add new functions to the PC Support Application during the
fiscal year ending June 30, 2001, including a deeper personalization of support
services specific to each end-user's configuration and usage, and stand-alone
services such as telephone support, an electronic birth certificate, and an
Internet dialer module. We also plan to further develop the architecture of
the PC Support Center to maintain a comprehensive data base of support incidents
and subscriber statistics to provide continuous feedback to the online support
process. We also plan for future versions of the PC Support Center to regularly
advise subscribers via email to return to the Company's Web site to maintain
their PCs. These maintenance and upgrade services will simplify support for the
user because of regular reminders and automatic maintenance.
We offer the PC Support Application to end users in two ways. Primarily,
we seek to enter into partnership agreements with companies which provide
technical support to end users. In this case, we develop a branded version of
the PC Support Center with the partner's logo, look and feel. The partner then
offers this version to its end users. Secondly, users can become subscribers to
the PC Support Center simply by registering on our Web site. In July 2000, we
launched our premium service package for which we charge subscribers for
additional premium services. We are not actively promoting the PC Support
Center at this time.
It is our intent to market the PC Support Center to the corporate and SME
market segments or through strategic partnerships with ISPs, hardware
manufacturers, extended warranty providers, computer services companies, and
distribution channels serving consumer end-users.
Distribution Methods of Products and Services
We intend to employ a distribution strategy that targets corporate and SME
users, with the goal of positioning ourselves as the leading provider of online
computer technical support services. We will market our services through
branded support portals to corporate, and SME users.
Direct to Consumer
Any PC Internet user can become a subscriber to the PC Support Center by
visiting the Center at www.pcsupport.com and registering. Through online
-----------------
searches, word-of-mouth, our own Web marketing efforts, and reviews in the
computer trade print and online journals, subscribers have registered from 169
countries as of September 1, 2000. In November, 2000, we increased our annual
subscription fee to $149. We are not actively
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promoting our consumer service at this time.
In April 2000, we entered into a strategic alliance with AltaVista Company,
a leading search and information marketplace. Pursuant to the agreement, we
built a branded HelpDesk support portal for AltaVista which we launched in July
2000. In November 2000, we reached an agreement with AltaVista under which we
paid a portion of the accrued balance that we owed AltaVista and terminated the
agreement with no further financial obligations.
Business to Business
We also offer partnerships in the PC Support Center to companies such as PC
vendors, software vendors, ISPs and large corporations that by the nature of
their business are required to provide technical support to their users. Many
such companies are now paying significant sums to provide support to their users
by employing traditional methods such as telephone call centers and dedicated
MIS centers. We believe that the partners will benefit from better support to
their customers as follows:
(i) Reduced Costs
Since many support problems will now be solved through the PC Support
Center, providers will significantly reduce their internal support costs.
(ii) Improved Customer Relationships
By providing a customized, comprehensive, and easy-to-use site at which
users' computers can be easily maintained, and where many problems in using
applications can be more easily solved, fewer problems are likely to occur, and
will be more easily solved. Customers will become more productive in the use of
their computers. Customers will also become more likely to purchase additional
products and services from the vendor.
(iii) Tech Support Center Becomes More Productive
The PC Support Center will reduce the involvement of trained technicians in
solving many problems, and reduce the time required to solve problems when their
help is required. The technicians will become more productive.
Business to Business Partners
Our potential business to business partners include the following types of
companies:
Internet Service Providers
We have negotiated and are seeking to enter into additional agreements or
letters of intent with companies offering internet access to offer PC Support
Center services through a branded support portal to their users. In August 2000,
we entered into an agreement with TELUS, Canada's second largest
telecommunications provider, to provide certain of our online support services
to TELUS subscribers, for which TELUS will pay us a fee per subscriber.
Extended Warranty Providers
We have negotiated and are seeking to enter into additional agreements or
letters of intent with companies offering extended warranties to PC purchasers
to offer our PC Support Center services. Some such extended warranties may be
sold through a branded support portal, and others at the point of sale. In May
2000, we entered into an agreement with the Walker Group, a company offering
extended warranty and affinity programs to
16
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retailers, manufacturers and distributors, in which we agreed to bundle our
eSupport solution into warranty offers sold by the Walker Group through its
distribution channels. In October 2000, we entered into an agreement with AON
Innovative Solutions, Inc. ("AIS"), a division of AON Corporation, for AIS to
market eSupport products and services for warranty offers to AIS's retailers and
their customers. PC purchasers who buy the bundled warranty package will receive
software that installs an icon onto the user's desktop and gives the user access
to online technical support.
Hardware Vendors
We are negotiating with large personal computer manufacturers to bundle our
services with the sale of hardware.
Resellers
There are several large international resellers and systems integrators of
computer services whose market focus is large corporations. Each has long-
standing relationships with its current client base and are constantly looking
for new products and services.
In April 1999, we entered into a two-year agreement with one such systems
integrator, Unisys of Canada Inc. ("Unisys"), an international computer service
company. Pursuant to the terms of this agreement, Unisys was marketing the
Online Data Backup Suite under its own brand name to Unisys's corporate
customers. Unisys agreed to pay us a fee equal to 75% of our suggested list
price for the Online Data Backup services. Recently, Unisys has begun actively
selling our PC Support Application, and discontinued marketing of our Online
Data Backup product. We intend to enter into a reseller agreement with Unisys on
similar terms to the current agreement.
We intend to expand our marketing activities to include other large
international resellers. There can be no assurance that any further agreements
will be reached with any resellers.
Distribution Channels
We are developing relationships with corporations who distribute computer
services to their customers. In September, 2000, we signed an agreement with BT,
formerly known as British Telecom, a large Telco serving the United Kingdom.
Under the terms of the agreement, we will build a branded support portal for BT,
called BT24X7.com, to serve the customers of BT's SME Division. After a trial
period which began in November, 2000, BT will market our support services to
their 30,000 SME customers.
Direct Sales
We have begun to develop a direct sales force to market our services
directly to a small number of companies in the United States and Canada. As of
September 1, 2000, five sales people had been hired and now have begun selling
directly to potential partners, supplemented by the efforts of our senior
management.
Revenue Generation
We intend to earn revenues in any or all of the following ways:
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i. Commissioning Fees
We may private-label the PC Support Center for our partners so that the
partners can offer our services under the partners' own brand names. We will
charge a commissioning fee for such customization.
ii. Bundling Fees
We will negotiate with our hardware vendor partners to include an icon
directing users to a web site at which our services may be accessed on the
desktops of all computers shipped. We will seek to earn a bundling fee from
each unit shipped.
iii. Software Sales
We will include discrete components of our support software in sales to
distribution channels, including extended warranty providers.
iv. Subscription Fees
In lieu of a bundling fee, we may negotiate with our hardware vendor
partners and other original equipment manufacturer ("OEM") partners who
integrate PCs, Internet access and other related services with the PC Support
Center, a monthly fee for providing the PC Support Center to each end-user to
whom a PC is shipped.
v. Per-incident Fees
We may sell support services individually as an end user requests them and
charge an incident fee.
vi. Subscriber Fees
For improving the level of customer satisfaction for these partners, and
lowering the costs of providing support to their users, we intend to charge the
partners a fee per user per month. In some cases, we may share revenue generated
from their users with the partners.
vii. Premium Services
In July, 2000, we launched a package of premium services as part of our PC
Support Center, including email assist, Live Assist, and Remote Repair, for
which we now charge subscribers an annual fee of $149. We are not actively
promoting the PC Support Center at this time and do not expect to earn
significant revenue from it.
There can be no assurance that we will be able to negotiate agreements that
will generate sufficient revenue or profits for us. Failure to successfully
negotiate such agreements will have a material adverse impact on our business.
Technology Acquisitions
In addition to our own research and development, we seek to acquire
technology, software and products to enhance our products and services through
licensing agreements and purchases. Such acquisitions include the following:
Remote Diagnostics, Inc.
In July 2000, we received a worldwide, nonexclusive, irrevocable license
for software from Remote
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Diagnostics, Inc. that enables us to customize and improve dial-ups and DSL
connections of end-users to their ISPs and the Internet. The license fee was
100,000 shares of our common stock, plus $100,000 in cash. We are obligated to
issue warrants for up to an additional 266,666 shares of our common stock if we
reach certain sales milestones.
Tavisco Ltd.
On September 15, 2000, we acquired substantially all of the assets of
Tavisco Ltd. ("Tavisco"), a producer of anti-virus services and products.
Tavisco. designs, develops and provides state-of-the-art virus diagnostic
products for computer service professionals. Its products include virus scanners
and cleaners, a full-featured anti-virus protection system, and a rapid
screening test that protects against virus infections. The purchase price for
Tavisco's assets consisted of 200,000 shares of our common stock (with up to
100,000 of these shares subject to cancellation under certain circumstances) and
a cash payment of $50,000. In November 2000 we agreed to assign back to Tavisco
certain of the intellectual property that we had acquired from Tavisco and to be
granted certain exclusive and nonexclusive licenses by Tavisco to this
intellectual property, and Tavisco agreed to the cancellation of 50,000 shares
of the common stock which were subject to cancellation under certain
circumstances. We intend to develop an Internet version of Tavisco's virus-
scanning software to provide online scanning and virus removal in the future,
but are not actively developing any virus remediation software at this time.
MyHelpDesk, Inc.
In November, 2000 we acquired all of the assets and certain liabilities of
MyHelpDesk, Inc. a provider of live technical support, proactive maintenance
services, software updates, virus scans, online backup, email support
newsletters and an extensive knowledge-base of computer self-help directories.
This allowed us to incorporate the world's largest directory of computer help
and productivity resources into the PC Support Application.
Under the terms of the Asset Purchase Agreement, the Company issued
1,000,000 shares of its common stock to MyHelpDesk and is required within twelve
months following this initial issuance to issue an additional 387,500 shares of
common stock to MyHelpDesk and 112,500 shares of common stock to eight present
and former employees of MyHelpDesk, with the number of shares to be issued in
the subsequent issuances being subject to reduction in the event of certain
breaches of the representations and warranties of MyHelpDesk under the Asset
Purchase Agreement.
Competitive Business Conditions and the Company's Competitive Position
We are a development stage company with no history of earnings. While we
believe that the aggregation of our services is unique, there are no substantial
barriers to entering into the field of PC support services, and we expect
competition to intensify. Competitors may be able to provide services similar to
our services more efficiently, and many of our potential competitors have
substantially greater financial, marketing, service, customer support and
research and development resources than we do. There can be no assurance that we
will be able to develop a market for any of our services against these
competitors.
PC Support Application
There are many sellers of computer support and service components. We are
among the first to integrate several support technologies and implement a pro-
active service such as the PC Support Application, which is independent of any
vendor of PCs or software. The competitive landscape is changing rapidly. Our
existing competitors frequently revise and augment their offerings and we
encounter new competitors regularly. We expect the competitive picture to
continue to change rapidly for the foreseeable future. We are currently aware of
the following competition to the PC Support Application:
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. Techknow-how.com recently launched an online support portal competitive to
the PC Support Center. This competitor offers online chat, email assist,
technical support forum, software updates and other services which compete
directly with ours.
. Service911 offers B2B eSupport services like telephone support, email
support, self-help, live chat support and dispatch (on site) support. Through
partners, the company offers free drivers, video tutorials, product support
(directory of support links) and knowledge base. Service911 also recently
launched what it calls "Webskin" Technology, designed to integrate support
portals into a client's existing websites.
. All.com recently launched a support portal offering remote repair capability
based on technology licensed from Motive, which directly competes with the
remote repair features of our service. To the best of our knowledge, however,
all.com is not planning to offer real time services such as our Live Assist.
. ePeople (formerly NoWonder.com) currently offers email support, live chat,
collaborative support (screen sharing) and self help (searchable
knowledgebase). ePeople recently announced the launch of a data harvesting
system to send user information to technicians along with a support request.
ePeople does not currently utilize any remote repair solutions. The company
is trying to position itself as "The world's largest help desk", and is
entering the B2B space.
. PC Pitstop.com offers users a number of detailed analyses of their PCs'
hardware, software and operating system. From this information, PC
Pitstop.com provides both automated solutions and advice on setting the
machine for optimal performance and fixing problems that impede the machine's
efficiency. All of PC Pit Stop's offerings are free to visitors to their
site.
. Other companies offer all or some of the following services: technical
support forum, expert advice, technical knowledge base, and answers to
frequently asked questions (FAQs), including 32bit.com, about.com,
computing.net, Ehow.com, GoofyGuys.com, and VirtualDr.com.
. Macafee.com and Symantec (Norton Web Services) have launched support portals,
but such competitive portals are closely tied to the software products
marketed by those companies.
Partnerships are beginning to emerge among various competitors. Support.com
has launched a support portal that is allied with Excite@Home and Sykes
Enterprises, a major telephone call center. Sykes itself purchased
AnswerExpress, an online support knowledgebase, from Intel in 1999, possibly
signaling Sykes' intention to provide online support services which may compete
with us. Service911 has announced partnerships with McAfee.com and Support.com.
Competition also exists from firms that are selling individual features
that compete with one or more of the services of the PC Support Center. Support
software and services, which will likely be the most significant component of
the PC Support Center, are sold in conjunction with a number of companies
producing support software that feature extensive knowledge bases and remote
diagnoses and fixes. The prominent competitors in this group include Motive
Communications, Computer Support Technologies, and Support.com. Support.com also
provides the service technology infrastructure to allow other companies to build
their own support portal. Other firms include Aveo Inc., Full Circle Software,
and INFACT Technologies.
We also expect significant competition from utilities manufacturers and
distributors. The PC Support Center will include diagnostic, automatic upgrades
and driver updates, disk maintenance, and virus protection software, segments
which are already well-served in the computer services marketplace. Competitors
are found in established brands such as Macafee.com, Symantec's Norton Web,
ZDNet, and Catch*Up from Manageable Software (which was purchased by CNET in
1999).
Further competition will come from Internet sites offering free software
downloads. Websites such as
20
<PAGE>
SoftSeek, ZDNet, and Ziff-Davis continually obtain and review the latest
shareware, publish rankings, and provide free copies for anyone to use. The
technical support forum part of the PC Support Center will encounter competition
from companies providing online support tips such as ExpertCity.com, Roadnews,
Ojatex, TipWorld, Hardware Central, Experts Exchange, and Newbie-U. There are
many companies offering online helpdesks including Microsoft, PC Guide, PC
Mechanic, and ePeople (formerly NoWonder).
Hardware and software vendors are also potential competitors. Notebook
computer manufacturers such as Dell, Compaq and IBM already bundle support
services with their product, as do other large firms in the industry such as
Intel and Microsoft. Earlier this year, computer manufacturers, including,
Micron, Hewlett Packard, Toshiba launched support portals, which could compete
with us in the future.
Competitors that provide telephone support include Sykes Enterprises, and
several other companies offering traditional telephone support services.
ExpertCity recently added a free telephone support and a service resembling our
LiveAssist, and has a partnership with ZDNet, a prominent Web portal.
We believe that the PC Support Center's strongest competitors currently
include Techknow-how.com, all.com, McAfee.com, ePeople, Service911 and
Support.com, and the various partnerships that they may form.
Sources of Materials
The only significant materials which we require to carry on our operations
other than servers, internet access equipment, telephone lines and the like are
compact disks (also known as CD's) and notebook computers for our hardware
replacement and Phoenix programs. CD's are readily available from a variety of
competing distributors. We will initially lease notebook computers, which are
also available from a variety of sources.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements,
or Labor Contracts
We do not hold any patents or trademarks. We are in the process of
applying for certain trademarks, including "pcsupport.com," but there can be no
assurance that any such applications will be granted. We currently hold the
following domain names: PCSUPPORT.com, GLOBALREPLACE.com, PCREPLACE.com,
PDASUPPORT.com, PCSUPPORTCENTER.com, PCSUPPORTCENTER.net, PCRESTORE.com, RECON-
TECH.com, MYHELPDESK.com, MYHELPDESK.net, MYHELPDESK.org, MYHELPDESKSUCKS.com,
FIRSTHELP.com, FIRSTHELP.org, 1STHELP.com, 1STHELP.net, and 1STHELP.org. We are
also applying for certain similar domain names in jurisdictions outside North
America. Domain names are obtained by applying to Network Solutions, Inc., or
one of a small number of other companies competing to register domain names, and
paying a fee to register each unique domain name. While we have registered the
foregoing domain names, there can be no assurance that we will be able to
maintain these names in the future, or register further domain names, should we
so require. The loss of the domain names could result in confusion for our
customers, and a resultant loss of goodwill. In particular, the loss of the
domain names PCSUPPORT.COM and MYHELPDESK.com would have a material adverse
impact on our business.
There can be no assurance that third parties will not bring claims of
copyright, patent or trademark infringement against us or claim that certain of
our products, technology, processes or features violate the patent rights or
other intellectual property rights of others. There can be no assurance that
third parties will not claim that we have misappropriated their creative ideas
or formats or otherwise infringed upon their proprietary rights. Any claims of
infringement, with or without merit, could be time consuming to defend, result
in costly litigation, divert management attention, or require us to enter into
costly royalty or licensing arrangements to enable us to use important
technologies or methods, any of which could have a material adverse effect on
our business, financial condition or operating results.
21
<PAGE>
Regulation
We are not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulation applicable to businesses
generally. However, due to the increasing popularity and use of the Internet,
it is possible that a number of laws and regulations may be adopted with respect
to the Internet or covering issues such as user privacy, pricing, content,
copyrights, distribution and characteristics and quality of products and
services. Such new regulations would require us to expend significant resources
to understand and comply with such regulations, which may have a material
adverse impact on our business.
We do not believe that current regulations governing the Internet and
computer service industry will have a material effect on our current operations.
However, various federal and state agencies may propose new legislation that may
adversely affect our business, financial condition and results of operations.
Research and Development
From inception until June 30, 1998, for the year ended June 30, 1999, for
the year ended June 30, 2000, and for the quarter ended September 30, 2000, we
and our predecessor, RTI, expended approximately $2,814, $17,646, $923,259 and
$294,075, respectively, on the development of our services. We expect to
significantly increase research and development expenditures during the fiscal
year ending June 30, 2001, consisting primarily of the development of additional
functions for the PC Support Center, for which we anticipate spending
approximately $2,000,000 for the fiscal year ending June 30, 2001.
Employees and Contractors
As of November 30, we had 69 full-time employees employed as follows:
<TABLE>
<CAPTION>
Employees
---------
<S> <C>
Administration 12
Research and Development 23
Marketing and Sales 17
Technical Support 17
</TABLE>
We also purchase technical support to staff our email assist, live assist
and remote repair services provided through the PC support center from
Firstring, Inc., a Delaware corporation with offices and technicians in India.
Principal Business Facilities
We maintain our principal place of business at Suite 300, 3605 Gilmore Way,
Burnaby, British Columbia, Canada V5G 4X5, where we lease approximately 24,750
square feet at an annual rate of (Cdn) $17.00 per square foot, plus operating
costs of approximately (Cdn) $7.00 per square foot per year. This lease will
expire on August 31, 2005. Pursuant to the acquisition of MyHelpDesk, we also
lease 8,302 square feet at an office in Norwood, MA, for an average annual rent
of $67,600. This lease expires in February, 2002. We anticipate that the space
provided by these facilities will be sufficient to meet our requirements for at
least the next twelve months.
Investment Policies
We currently have no policies regarding the acquisition or sale of assets
primarily for possible capital gain or for income. We do not presently hold any
investments or interests in real estate mortgages or securities of or interests
in persons primarily engaged in real estate activities.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
--------
PCsupport.com, Inc. provides eSupport solutions for businesses and
consumers. We specialize in providing online, proactive and user-focused
technical support services to personal computer users worldwide. Our PC Support
Application offers a comprehensive eSupport solution which is designed to reduce
technical support costs and increase user satisfaction. We provide eSupport
solutions to businesses which have an obligation to provide technical support to
their employees or customers, and to consumers through various marketing
channels.
Year Ended June 30, 2000 Compared With Year Ended June 30, 1999
----------------------------------------------------------------
Revenue
Revenue generated by PC Support Center and online backup services was
$29,482 for the year ended June 30, 2000. For the year ended June 30, 1999,
total revenue was $99. Service and other revenue was primarily earned from the
development of a privately-branded support gateway. One customer accounted for
a substantial majority of the revenue recorded in the period. We expect the
number of subscribers to the PC Support and branded portal revenue to increase
rapidly over the next year.
Cost of Support Center and Online Backup Services
Cost of support center and online backup services consists of direct labor
and related costs associated with maintaining the PC Support Center, including
payments to third parties, and costs of license fees under technology license
agreements. Cost of license fees and services increased by $197,080 over the
prior year due to the increase in personnel required to maintain the PC Support
Center, outsourcing agreements with third parties to provide technical support
and recently acquired technology licenses. We had anticipated that there would
be a significant lag between incurring the expenses to support the PC Support
Center and generating significant revenues from these expenditures.
Development Costs
Development costs consist primarily of payroll and related expenses for
research and development personnel and outsourced development. Development
costs increased by $905,613 over the prior fiscal year primarily due to an
increase in research and development personnel. Our primary research and
development effort will be to continue to add features to the PC Support Center
and to release subsequent versions during the next year. Due to the constantly
evolving nature of the Internet and related technologies, we will continuously
monitor changes in PC support technologies and Internet-based support offerings
with the goal of adding additional functionality to the PC Support Application.
Marketing and Promotion
Marketing and promotion expenses consist primarily of payments to third
parties for web portal advertising and payroll and related expenses for
marketing personnel. Marketing and promotion expenses increased by $1,300,192
over the prior fiscal year largely due to commitments under co-branding and
advertising agreements, and to a lesser extent due to an increase in the number
of marketing personnel. We plan to increase marketing efforts for our services
through direct and indirect channels, including PC manufacturers, OEMs, computer
service companies and direct sales.
23
<PAGE>
General and Administrative
General and administrative expenses consist principally of payroll expenses
and related costs of administrative personnel and professional fees for legal,
accounting and other professional services. General and administrative expenses
increased by $1,148,627 in the year ended June 30, 2000 over the prior fiscal
year. This increase was primarily due to an increase in legal, accounting and
other consulting costs incurred in connection with the expansion of business
activities and our operations as a public company.
Stock-based Compensation Expense
Stock-based compensation expense relates to the issuance of stock options
and other equity instruments to employees, directors and consultants for
services. We recorded stock compensation expense of $412,246 during the year
ended June 30, 2000 as compared with $486,191 in the prior fiscal year. This
compensation expense relates to options awarded to individuals in all operating
expense categories. Total deferred stock compensation is amortized over the
vesting periods of the options.
Interest Income (Expense), Net
Interest income (expense), net includes interest income from cash and cash
equivalents offset by interest expense. Net interest expense was $2,756,572 for
the year ended June 30, 2000 as compared with $6,513 for the prior fiscal year.
The majority of this expense was a non-cash charge primarily due to a beneficial
conversion feature related to the issuance of convertible promissory notes on
February 29, 2000 and certain warrants in connection with this financing. The
notes, including $16,666 in accrued interest, were converted in May 2000 into
508,333 of our common shares.
Quarter Ended September 30, 2000 Compared With Quarter Ended September 30, 1999
-------------------------------------------------------------------------------
Revenue
License fee revenue increased by $1,620 in the current period over the
three months ended September 30, 1999, primarily due to the introduction of a
user fee in July 2000 for use of the PC Support Center which was launched in
October 1999. Service and other revenue was primarily earned from the
development of a privately-branded support gateway. One customer accounted for
94% of the revenue recorded in the period. We expect the number of subscribers
to the PC Support and branded portal revenue to increase rapidly over the next
year.
Cost of License Fees and Services
Cost of license fees and services consists of direct labor and related
costs associated with maintaining the PC Support Center, including payments to
third parties, and costs of license fees under technology license agreements.
Cost of license fees and services increased by $377,755 over the three months
ended September 30, 1999 due to the increase in personnel required to maintain
the PC Support Center, outsourcing agreements with third parties to provide
technical support and recently acquired technology licenses. We had anticipated
that there would be a significant lag between incurring the expenses to support
the PC Support Center and generating significant revenues from these
expenditures.
Development Costs
Development costs consist primarily of payroll and related expenses for
research and development personnel. Development costs for the period increased
by $73,021 over the three months ended September 30, 1999 primarily due to an
increase in research and development personnel. Our primary research and
development effort will be to continue to add features to the PC Support Center
and to release subsequent versions during the next year. Due to the constantly
evolving nature of the Internet and related technologies, we will continuously
monitor changes in PC support technologies and Internet-based support offerings
with the goal of adding
24
<PAGE>
additional functionality in new releases of the PC Support Center.
Marketing and Promotion
Marketing and promotion expenses consist primarily of payments to third
parties for web portal advertising and payroll and related expenses for
marketing personnel. Marketing and promotion expenses increased by $789,532
over the three months ended September 30, 1999 largely due to commitments under
co-branding and advertising agreements, and to a lesser extent due to an
increase in the number of marketing personnel. We plan to increase marketing
efforts for our services through direct and indirect channels, including PC
manufacturers, OEMs, computer service companies and direct sales.
General and Administrative
General and administrative expenses consist principally of payroll expenses
and related costs of administrative personnel and professional fees for legal,
accounting and other professional services. General and administrative expenses
increased by $457,799 in the current quarter over the three months ended
September 30, 1999. This increase was primarily due to an increase in legal,
accounting and other consulting costs incurred in connection with the expansion
of business activities and our operations as a public company.
Stock-based Compensation Expense
Stock-based compensation expense relates to the issuance of stock options
and other equity instruments to employees, directors and consultants for
services. We recorded stock compensation expense of $58,979 during the current
quarter as compared to $113,688 in the three months ending September 30, 1999.
This compensation expense relates to options awarded to individuals in all
operating expense categories. Total deferred stock compensation as of September
30, 2000 is being amortized over the vesting periods of the options.
Interest Income (Expense), Net
Interest income (expense), net includes interest income from cash and cash
equivalents offset by interest expense. Interest income (expense) was $112,497
for the three months ended September 30, 2000 as compared to $7,853 for the
three months ended September 30, 1999. The increase is primarily due to
interest earned on investment funds derived from recent financings.
Liquidity and Capital Resources
-------------------------------
Net cash used in operations was $1,257,874 for the three months ended
September 30, 2000 compared with $497,388 for the same period in the prior year.
Net cash used in operations in the period was largely the result of net losses
partially offset by a reduction in prepaid expenses and deposits and an increase
in accounts payable and accrued liabilities. Net cash used in investing
activities was $711,882 for the three months ended September 30, 3000 as
compared with $100,917 for the three months ended September 30, 1999. The
increase was primarily due to the cash costs of acquisition and deferred
acquisition costs and investment in equipment and licenses during the period.
Net cash provided by financing activities was $17,000 for the three months ended
September 30, 2000 as compared with $58,266 in the three months ended September
30, 1999. The significant change in the three months ended September 30, 2000
is due to the exercising of $17,000 of stock options in that period versus the
exercise of $58,266 of warrants in the prior period.
Net cash used in operations was $3,501,341 for the year ended June 30, 2000
compared with $300,404 for the prior year. Net cash used in operations for the
fiscal year ended June 30, 2000 was largely the result of net losses and prepaid
expenses, partially offset by the amortization of a deemed discount on the
promissory note and the amortization of deferred stock compensation. Net cash
used in operations for the year ended June 30, 1999 was largely the result of
net losses, partially offset by the issuance of common stock for services. Net
cash used
25
<PAGE>
in investing activities was $513,934 for the fiscal year ended June 30, 2000 as
compared with $16,541 for the prior year. The increase was primarily due to the
cash costs of investment in property and equipment during the year ended June
30, 2000. Net cash provided by financing activities was $8,368,756 for the year
ended June 30, 2000 as compared with $1,112,754 for the prior year. Net cash
from financing activities includes the proceeds from the sale of common stock,
promissory notes and the exercise of share purchase warrants, occurring in the
year ending June 30, 2000. In the prior fiscal year, we acquired $888,932 of
cash in connection with the Merger.
We had working capital of $2,348,521 as of September 30, 2000. Subsequent
to September 30, 2000, we completed a private placement for the subscription of
1,350,000 common shares for net proceeds totaling $1,822,500 after payment of
commissions. As of September 30, 2000, our principal commitments consisted of
obligations under operating leases. These commitments, together with the
funding of anticipated operating losses, will require working capital in excess
of our current cash reserves.
In April 2000, we entered into a strategic alliance with AltaVista Company,
a leading search and information marketplace. Pursuant to the agreement, we
built a branded HelpDesk support portal for AltaVista which we launched in July
2000. In November 2000, we reached an agreement with AltaVista under which we
paid a portion of the accrued balance that we owed AltaVista and terminated the
agreement with no further financial obligations.
In November 2000, we acquired all of the assets and certain of the
liabilities of MyHelpDesk, Inc. We will need to continue to fund certain
MyHelpDesk operations which we are merging into our business.
We anticipate funding our working capital requirements through proceeds
from private placements together with future revenues generated from customers.
We do not currently have any further commitments from any third party to provide
additional financing and may be unable to obtain financing on reasonable terms
or at all. In particular, the equity markets for early stage Internet companies
such as ours is extremely unreceptive at the current time. Furthermore, if we do
raise additional working capital through the sale of equity securities, our
shareholders will experience dilution. If we are unable to secure additional
financing when needed and our revenues are inadequate to provide the necessary
working capital, we may be required to slow down or suspend our growth or reduce
the scope of our then current business operations, any of which would have a
material adverse effect on our competitive position.
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
--------------------------------
Each of our Directors will hold office until the later of (a) the next
annual meeting of shareholders (at which time such Director will be eligible for
re-election by the shareholders), or (b) until his successor shall have been
duly elected and qualified.
Michael G. McLean, age 39, has been our President and CEO and a Director
since the Merger, and was President and a director of RTI from December 1997
until the Merger. Mr. McLean has over 12 years experience with technology
organizations and has a broad base of technical and marketing experience. Most
recently, from March 1997 to June 1997, he was Product Development Manager at
Riptide Technologies, a software development company that focuses on providing
products and services to the lottery industry, where he was charged with
creating the infrastructure for a successful product development group. Prior
to that, from May 1996 to December 1996, he was General Manager of a business
unit at Simba Technologies, a software development and marketing company,
managing a staff of 17 responsible for product development, product marketing,
customer support and professional services.
26
<PAGE>
At HealthVISION Corporation, a software company serving the health care
industry, from 1993 - 1996, Mr. McLean developed and managed a strategic
partnership to allow HealthVISION to private label the partner's software. He
also managed several other reseller partnerships. Subsequently, also at
HealthVISION, he was a senior Software Development Manager managing 35 technical
and user support staff across 3 product lines. Before starting his career in
technology, Mr. McLean founded a construction company and grew it to 35
employees.
Steven W. Macbeth, age 31, has been our Chief Technology Officer,
Secretary/Treasurer and a Director since the Merger. Mr. Macbeth was Chief
Executive Officer and a director of RTI from December 1997 until the Merger.
Mr. Macbeth has over 13 years executive and project management experience in
technology companies. Most recently, he co-founded and served as Director,
Product Development from June 1996 to June 1997 at Riptide Technologies, a
software development company that focuses on providing products and services to
the lottery industry. In that position, he managed three development projects
and project teams of up to 25 employees.
Prior to Riptide, Mr. Macbeth served as Technical Project Manager at MPR
Teltech from August 1995 to May 1996, and as Software Development Manager at
HealthVISION Corporation from May 1994 to July 1995.
W. Benjamin Catalano, age 36, has been one of our Directors since the
Merger. Mr. Catalano has, since 1986, been self employed in personal business
ownership as well as participating as a licensed professional in the investment
brokerage and real estate industries. Mr. Catalano is currently Vice President
of Corporate Affairs and a Director of Themescapes, Inc., a technology company
developing three-dimensional acoustic products.
Bruce S. Nelson, age 48 has been one of our Directors since June 2, 2000.
Since 1999, Mr. Nelson has been an independent consultant. From 1998 to 1999,
Mr. Nelson was the Vice Chairman and a member of the Management Committee of
Young & Rubicam Inc., a global marketing and communications company. Prior to
this he was with McCann-Erickson Worldwide for 19 years, most recently serving
as Executive Vice President and Director of Worldwide Accounts and Director of
Strategy for Worldwide Accounts (1994-1998). While at McCann-Erickson, Mr.
Nelson created global branding strategies for American Express, Citibank, Texas
Instruments, United Parcel Service and Lufthansa. He also created U.S. branding
strategies for GeoCities, AT&T, Sony and America Online. Mr. Nelson is also a
member of the board of directors of, iTurf Inc. and previously served as a
director for Official Payments Corporation and Euro American Capital Partners.
David W. Rowat, age 45, has been our Vice President and Chief Financial
Officer since the Merger. Mr. Rowat held the same position with RTI from April
1, 1999 until the Merger. He is a Professional Engineer, earned his MBA from
Harvard University in 1986 and has a broad operational background with a
specialty in public and private finance, strategic partnering, and mergers and
acquisitions for early stage technology companies. He served as Vice-President
of Sales, Development and Finance at various times for Nexus Engineering from
August 1986 to January 1992, a technology company developing cable television
headend products, Vice President and Chief Financial Officer for Xillix
Technologies from June 1993 to January 1995, a technology company developing
medical imaging products, and Chief Executive Officer of Merit Technologies from
January 1995 to April 1995, a manufacturer of point-of-sale terminals. From
October 1995 to December 31, 1999, Mr. Rowat was the president of Strategic
Catalysts Inc., a consulting company he founded to serve the technology
industry.
Brian McAdams, age 57, was appointed our Vice Chairman on November 27,
2000. Prior to that he was CEO and a director of MyHelpDesk from May 2000 to
November 2000. From February 1997 to January 2000, Mr. McAdams was CEO of
Stratvis Inc., a private investment company. During that time he also was an
executive partner with Gryphon Investors Inc. From October 1994 to December
1996 he was Chairman and CEO of National Media Corp, a transactional television
company. In 1976 Mr. McAdams co-founded McAdams &
27
<PAGE>
Ong, an advertising, marketing and design company and served as CEO of that
company until September 1994. Mr. McAdams is a director of Crusader Holding
Corp, Purity Products and Odyssey Pharmaceuticals. He holds a BS degree from
St. Joseph's University.
Significant Employees
---------------------
There are no significant employees who are not described as executive
officers above, except as follows:
Bruce McDonald, age 33, was appointed our Vice President, Operations on
December 10, 1999. From August 1996 to January 2000, Mr. McDonald was the
Director of Customer and Technical Services for Seanix Technology Inc., a
Vancouver-based manufacturer of personal computer and server hardware systems
sold under its own name and under private labels. Mr. McDonald was responsible
for the delivery of customer satisfaction throughout North America for both the
post-sales support and technical services divisions. From November 1995 to
August 1996, Mr. McDonald was National Sales Manager with Seanix, responsible
for Seanix's national sales organization in all Canadian provinces excluding
Quebec. From June 1994 to November 1995, Mr. McDonald was Regional Sales
Manager with Seanix, responsible for the development of sales first in British
Columbia and then elsewhere in Western Canada.
Family Relationships
--------------------
There are no family relationships among Directors, executive officers or
any nominees to these positions.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
-----------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of December 11, 2000, by (i) each person who is
known by the Company to own beneficially more than 5% of the Company's
outstanding voting securities; (ii) each of the Company's Directors; (iii) the
Company's Chief Executive Officer; and (iv) all executive officers and Directors
of the Company as a group:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Amount of Common Approximate Percent
Stock & Nature of of Ownership of
Name & Address/(1)/ Beneficial Ownership/(2)/ Common Stock
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael G. McLean 661,609/(3)/ 5.0%
----------------------------------------------------------------------------------------------------
Steven W. Macbeth 687,584/(4)/ 5.2%
----------------------------------------------------------------------------------------------------
W. Benjamin Catalano 85,454/(5)/ 0.6%
----------------------------------------------------------------------------------------------------
Bruce S. Nelson 5,833(/6)/ -
----------------------------------------------------------------------------------------------------
Brian McAdams 0 -
----------------------------------------------------------------------------------------------------
MyHelpDesk 1,000,000/(7)/ 7.6%
----------------------------------------------------------------------------------------------------
ICE Securities - Client Account(8) 1,100,000/(9)/ 8.3%
----------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Amount of Common Approximate Percent
Stock & Nature of of Ownership of
Name & Address/(1)/ Beneficial Ownership/(2)/ Common Stock
----------------------------------------------------------------------------------------------------
<S> <C> <C>
ICE Holdings(8) 712,000/(10)/ 5.3%
----------------------------------------------------------------------------------------------------
All executive officers and Directors as a group 1,772,172/(11)/ 13.1%
----------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise indicated, the address of each person is c/o the Company
at 3605 Gilmore Way, 3/rd/ Floor, Burnaby, British Columbia, Canada V5G
4X5.
(2) 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, warrants or convertible securities that are currently
exercisable, or exercisable within 60 days, are deemed outstanding for
computing the percentage of the person holding such options, warrants or
convertible securities but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote and
subject to community property laws where applicable, the persons named in
the table have sole voting and investment power with respect to all shares
of common stock shown as beneficially owned by them.
(3) Includes half of the 553,440 shares owned by Dromond Technologies Group,
Inc., as to which Messrs. McLean and Macbeth have shared voting and
investment power. Also includes 36,389 shares issuable pursuant to options
that are currently exercisable, or exercisable within 60 days.
(4) Includes half of the 553,440 shares of common stock owned by Dromond, as to
which Messrs. McLean and Macbeth have shared voting and investment power.
Also includes 55,864 shares issuable pursuant to options that are currently
exercisable, or exercisable within 60 days.
(5) Includes 30,000 shares issuable pursuant to options that are currently
exercisable, or exercisable within 60 days.
(6) Includes 5,833 shares issuable pursuant to options that are currently
exercisable, or exercisable within 60 days.
(7) Under the terms of the Asset Purchase Agreement, the Company is also
required within twelve months following the initial issuances to issue an
additional 387,500 shares of common stock to MHD and 112,500 shares of
common stock to eight present and former employees of MHD with the number
of shares to be issued in the subsequent issuances subject to reduction in
the event of certain breaches of the representations and warrants of MHD
under the Asset Purchase Agreement.
(8) The address of ICE Securities Limited is c/o ICE Holdings, whose address is
645 Madison Ave., 13/th/ Floor, New York, NY 10022. Includes the shares
held by ICE Securities NA LLC, ICE Securities, Limited and ICE Consult
GmbH, which are all under common ownership.
(9) ICE Securities Limited holds these shares in a client account for Meditor
Capital Management Ltd., which is the beneficial owner of the shares.
(10) Includes 250,000 shares issuable pursuant to options that are currently
exercisable, or exercisable within 60 days.
(11) Includes 259,778 shares issuable pursuant to options that are currently
exercisable, or exercisable within 60 days. Also includes the 553,440
shares of common stock owned by Dromond, as to which Messrs. McLean and
Macbeth have shared voting and investment power.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation which we paid to Michael G.
McLean, our Chief Executive Officer (the "named executive officer"), for the
fiscal years ended June 30, 1998, 1999 and 2000. No other officer of the
Company received a combined salary and bonus in excess of $100,000 during the
last fiscal year. As we completed
29
<PAGE>
the merger with RTI on June 23, 1999, the information provided in the table
includes information for our predecessor, RTI, for the period December 10, 1997
to June 23, 1999.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term All Other
------------------- Compensation Compensation
------------ ------------
-----------------------------------------------------------------------------------------------------------------------
Securities
Fiscal Underlying
Name & Principal Position Year/(1)/ Salary Bonus Options
------------------------- --------- ------ ----- -------
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael G. McLean 2000 $77,324/(2)/ $23,456 50,000 $ -0-
CEO & President
------------------------------------------------------------------------------------
1999 $45,565/(2)/ $ -0- 0 $151,274/(3)/
------------------------------------------------------------------------------------
1998 $26,176/(2)/ $ -0- 0 $ 29,388/(4)/
------------------------------------------------------------------------------------
</TABLE>
(1) For the twelve months ended June 30, 2000 ("fiscal 2000"), the twelve
months ended June 30, 1999 ("fiscal 1999") and the period from December 10,
1997 to June 30, 1998 ("fiscal 1998").
(2) Includes fees paid to ST Technologies Inc., a company of which Mr. McLean
is the sole owner, amounting to $11,122 for fiscal 2000, $2,926 for fiscal
1999 and $10,788 for fiscal 1998. Also includes Mr. McLean's share of
consulting fees paid by the Company to Dromond, of which Mr. McLean owns
50%, amounting to $35,516 for fiscal 2000, $42,639 for fiscal 1999 and
$15,388 for fiscal 1998.
(3) Includes the difference between the price paid by Mr. McLean in April, 1999
for shares of common stock of PCsupport.com, Inc. ("PCS"), the company
which merged with RTI to form our Company and the then market price of
these shares. See "Certain Relationships and Related Transactions." Also
includes $26,962 in common stock, representing Mr. McLean's 50% share of
63,440 shares of common stock in RTI issued on January 6, 1999 for services
rendered to RTI (as adjusted to reflect the one-for-five exchange ratio in
the merger with PCS).
(4) Represents Mr. McLean's share of the difference between the price paid by
Dromond in January 1998 for 489,800 shares of common stock of RTI and the
then market price.
Compensation of Directors
We grant non-employee directors options to purchase 30,000 shares of Stock
upon their initial election to the Board of Directors. The exercise price of
these options is the market value of the Common Stock at the time the option is
granted, and the options vest on a monthly basis over three years. Directors
who are also officers of the Company receive no additional compensation for
their services as directors. Except for the option grants to non-employee
directors, none of our directors received any compensation for their services as
directors during the last fiscal year. We compensate one of our directors for
his services as a consultant. See "Certain Relationships and Related
Transactions - Consulting Agreement with Director."
1999 Stock Option Plan
We adopted a stock option plan in July 1999 (the "1999 Plan"). The 1999
Plan authorizes the grant of stock options to our directors, officers,
consultants and employees. Under the terms of the Plan, at no time may the
number of shares subject to options result in:
(a) the number of shares reserved for issuance pursuant to stock options
granted to insiders exceeding 15% of our issued and outstanding shares of
Common Stock;
(b) the issuance to insiders, within a one-year period, of a number of shares
exceeding 15% of our issued and outstanding shares of Common Stock; or
(c) the issuance to any one individual, within a one-year period, of a number
of shares exceeding 5% of our issued and outstanding shares of Common
Stock.
The following table sets forth the grants of stock options to the named
executive officer during our fiscal year ended June 30, 2000:
30
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
% of Total
Number of Securities Options/SARS
Underlying Options/SARs Granted to Employees in
Name Granted Fiscal Year Exercise or Base Price Expiration Date
---- ------- ----------- ---------------------- ---------------
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael G. McLean 50,000 3.8% $1.00 July 2, 2004
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth information concerning the value of unexercised
stock options held by the named executive officer as of June 30, 2000:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options at Fiscal
Shares Acquired on at Fiscal Year-End Year End
Name Exercise Value Realized (Exercisable/Unexercisable) (Exercisable/Unexercisable)
---- -------- -------------- ------------------------------- -------------------------------
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael G. McLean 0 0 16,666/33,334 $16,666/$33,334
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Employment Agreements
We have entered into an employment agreement with Michael G. McLean, our
Chief Executive Officer, that commenced in March 2000. Under this agreement,
Mr. McLean received an initial monthly salary of (Cdn.) $8,300 which increased
to (Cdn.) $12,500 in April 2000. An annual cash bonus equal to up to 75% of the
annual salary will be paid, based upon achieving performance standards that are
agreed to by Mr. McLean and the Company. Either Mr. McLean or the Company may
terminate the agreement at any time. If the Company terminates Mr. McLean's
employment agreement without cause, the Company is required to pay him severance
equal to a total of nine months salary plus one month for each year or partial
year of his employment with the Company.
31
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Private Placement of Common Shares
The following current and former directors and officers of the Company
participated in a private placement of common stock of PCS completed in April
1999 at a price of $0.01 per share as set forth below. This private placement
was conducted before the completion of the merger of PCS and RTI (with issuance
of the securities in this offering being subject to completion of the merger),
at a time when the foregoing directors and officers were not directors and
officers of PCS, but were directors and officers of RTI. A total of 3,222,255
shares were sold in the private placement. 1,500,000 of these shares were sold
to directors and officers of RTI at a price of $0.01 per share, as detailed in
the chart below. An additional 593,000 shares were sold at a price of $0.01 per
share, 399,000 shares were sold at a price of $0.50 per share, and the remaining
730,255 shares were sold at a price of $1.00 per share to persons who were not
affiliated with PCS or RTI.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Number of PCS
Name of Director or Officer Shares Acquired
--------------------------- ---------------
---------------------------------------------------------------------------------------
<S> <C>
Michael G. McLean 362,500
---------------------------------------------------------------------------------------
Steven W. Macbeth 362,500
---------------------------------------------------------------------------------------
Alan Ackerman/1/ 275,000
---------------------------------------------------------------------------------------
David W. Rowat 200,000
---------------------------------------------------------------------------------------
Gary Yurkovich/2/ 300,000
---------------------------------------------------------------------------------------
Total 1,500,000
---------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Ackerman resigned as a director on June 23, 1999.
(2) Mr. Yurkovich's employment with us ended on June 28, 1999, and we
repurchased 285,000 of these shares for $0.01 per share.
Stock Pooling and Escrow Agreement
Pursuant to a Stock Pooling and Escrow Agreement, dated July 31, 1999
("Pooling Agreement"), and amended on March 6, 2000, Messrs. McLean, Macbeth,
Rowat, Rowlands and Ackerman and Dromond and Advanced have agreed to pool an
aggregate of 2,179,429 shares of Common Stock and options and warrants to
purchase 266,666 shares of Common Stock. These securities may not be sold or
transferred until they are released from the pool. If Messrs. McLean, Macbeth
or Rowat cease to participate on a full-time basis in our business, we have the
option to repurchase certain of their shares at a price of $0.01 per share.
This right of repurchase lapses as to a certain number of shares each month
depending upon the individual, and lapses completely on January 1, 2002.
The shares, options and warrants will be released from the pool in
accordance with the following schedule:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
March 6, 2000 May 25, 2000 November 25, 2000 May 25, 2001
----------------------- ----------------------- ------------------------- ----------------------
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares 100,000 500,000 850,000 729,429
---------------------------------------------------------------------------------------------------------------------------
Options 0 133,334 66,666 66,666
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
Consulting Agreement with Director
We have engaged one of our directors, Bruce Nelson, to perform certain
consulting services for us. Under the terms of this Agreement, we have paid
Bruce Nelson $50,000 for each of the fiscal years ending June 30, 2000 and 2001.
Transactions with ICE Holdings
In March 2000, the Company entered into an agreement with ICE Holdings
pursuant to which ICE agreed to provide certain investment banking services to
the Company. In connection with this agreement, the Company reimbursed ICE
Holdings for $40,000 of its legal and certain other out-of-pocket expenses and
paid ICE Holdings a commission equal to 7.5% of the proceeds received by the
Company from a private placement of 600,000 shares of Common Stock arranged by
ICE Holdings at $2.125 per share. (ICE Holdings and its affiliates purchased
345,000 of the shares in the foregoing private placement.) The Company's
agreement with ICE Holdings further provides for the issuance of two-year
warrants to ICE Holdings to purchase up to 1,000,000 shares of Common Stock upon
the achievement of certain specified financing milestones. In May 2000, the
Company agreed to accelerate the issuance of a portion of these warrants, which
were issued to an affiliate of ICE Holdings as follows:
(a) warrants to purchase 125,000 shares at $4.50 per share;
(b) warrants to purchase 62,500 shares at $3.38 per share; and
(c) warrants to purchase 62,500 shares at $2.25 per share.
The Company also agreed to pay ICE Holdings a commission equal to 7.5% of
the offering proceeds in connection with a subsequent private placement in which
$2,025,000 of securities have been sold to date. In addition, upon completion of
this private placement, which will require an additional placement, an
additional 250,000 warrants will be issued to ICE Holdings and the Company will
pay ICE $50,000 of corporate finance consulting fees. Upon closing of the
private placement, the 250,000 warrants described in the previous paragraph will
be re-priced and the 250,000 warrants described in this paragraph will be
priced, together, as follows:
(a) warrants to purchase 250,000 shares at $1.50 per share;
(b) warrants to purchase 125,000 shares at $1.25 per share; and
(c) warrants to purchase 125,000 shares at $1.00 per share.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our by-laws provide that no officer or Director shall be personally liable
for any of our obligations of or for any duties or obligations arising out of
any acts or conduct of said officer or Director performed for or on our behalf.
Our by-laws also provide that we will indemnify and hold harmless each person
who serves at any time as one of our Directors or officers, and his or her heirs
and administrators, from and against any and all claims, judgments and
liabilities to which such person shall become subject by reason of his or her
having been a Director or officer, or by reason of any action alleged to have
been taken or omitted to have been taken by him or her as such Director or
officer, and shall reimburse such person for all legal and other expenses
reasonably incurred by him or her in connection with any such claim or
liability. We also have the power to defend such person from all suits or
claims in accord with the Nevada General Corporation Law. However, no such
person shall be indemnified against, or be reimbursed for, any expense incurred
in connection with any claim or liability arising out of his or her own
negligence or willful misconduct. The rights accruing to any person under our
by-laws do not exclude any other right to which any such person may lawfully be
entitled, and we may indemnify or reimburse such person in any proper case, even
though not specifically provided for by the by-laws.
33
<PAGE>
We believe that it is the position of the Securities and Exchange
Commission that, insofar as any of the foregoing by-law provisions may be
invoked to disclaim liability for damages arising under the Securities Act of
1933, the provisions are against public policy as expressed in the Securities
Act of 1933 and are, therefore, unenforceable.
DESCRIPTION OF SECURITIES
The total authorized share capital stock of the Company consists of
100,000,000 shares of common stock with a par value of $0.001 per share. There
are 13,171,662 shares of common stock issued and outstanding. Each holder of
common stock is entitled to one vote for each share held. The common stock ranks
equally in all respects. The holders of common stock are entitled to attend and
vote at all meetings of our shareholders on the basis of one vote for each share
of common stock held by them. The holders of common stock are also entitled to
receive dividends if, as and when declared by the Board of Directors on our
common stock and to receive our remaining property upon liquidation, dissolution
or winding-up.
MARKET FOR COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
Market Information
------------------
Shares of our common stock are traded on the OTC Electronic Bulletin Board
under the symbol "PCSP." From August 18, 1998 until the Merger, the common
stock of PCS traded on the OTC Electronic Bulletin Board under the symbol
"MXTS," reflecting the previous name of PCS as Mex Trans Seafood Consulting Inc.
Our common stock began trading on the OTC Electronic Bulletin Board on June 24,
1999 under the symbol "PCSP." The following table sets forth the high and low
bid prices for our common stock for the quarters indicated. The information has
been adjusted for all periods presented to reflect the reverse stock split of
our common stock which occurred in connection with the Merger.
<TABLE>
<CAPTION>
Quarter Ended High Low
<S> <C> <C>
December 31, 1998 $ 1.88 $ 1.70
March 31, 1999 2.50 1.56
June 30, 1999 2.00 0.78
September 30, 1999 2.00 0.5625
December 31, 1999 1.9375 0.875
March 31, 2000 9.6875 0.97
June 30, 2000 5.50 1.94
September 30, 2000 2.28 1.25
</TABLE>
Quotations posted on the OTC Electronic Bulletin Board reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily
reflect actual transactions.
Holders
-------
We have approximately 241 shareholders of record of common stock.
Dividends
---------
We have not, to date, paid any dividends on our common stock. The payment
of dividends on our common stock is within the discretion of the Board of
Directors and will depend upon our future earnings, our
34
<PAGE>
capital requirements, our financial condition, and other relevant factors. We do
not currently intend to declare any dividends on our common stock for the
foreseeable future.
35
<PAGE>
SELLING SECURITYHOLDERS
Except as indicated below, none of the selling securityholders has held any
position or office or had any other material relationship with us within the
past three years. The following table shows the beneficial ownership of our
common stock for each of the selling stockholders. The table assumes that the
selling stockholders will sell all of the shares and that the selling
stockholders will make no other purchases or sales of our common stock. However,
the selling stockholders are not obligated to sell their shares at any time or
at any price. Therefore, we cannot state with certainty the number of shares of
common stock that will be owned by each of the selling stockholders upon the
termination of this offering. The number of shares of common stock that each
holder may own may also change due to stock splits or other anti-dilution
adjustments.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Beneficial Ownership Beneficial Ownership
Before Offering(1) After Offering (1)
----------------------------------------------------------------------------------------------------------------
Number of
Number of Shares Number of
Selling Stockholder Shares Percent Being Offered Shares Percent
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bradley T. Aelicks 35,000 * 35,000 0 0
----------------------------------------------------------------------------------------------------------------
A. Jakubowski Holding Co. 20,000(2) * 20,000(2) 0 0
----------------------------------------------------------------------------------------------------------------
Algernon Investment Limited 40,000 * 40,000 0 0
----------------------------------------------------------------------------------------------------------------
Al Heaps & Associates 4,000 * 4,000 0 0
----------------------------------------------------------------------------------------------------------------
Donald G. Allison (a) 25,000 * 25,000 0 0
----------------------------------------------------------------------------------------------------------------
Amadro Equities 35,000 * 35,000 0 0
----------------------------------------------------------------------------------------------------------------
Thomas Ball 20,000(3) * 20,000(3) 0 0
----------------------------------------------------------------------------------------------------------------
Steve Bastable 59,000 * 59,000 0 0
----------------------------------------------------------------------------------------------------------------
J. A. Beaulieu 7,838(4) * 7,838(4) 0 0
----------------------------------------------------------------------------------------------------------------
Marty Biegel (b) 10,000(5) * 10,000(5) 0 0
----------------------------------------------------------------------------------------------------------------
Big Sky Holdings, Inc. 51,000(6) * 51,000(6) 0 0
----------------------------------------------------------------------------------------------------------------
Don Bolin 50,000 * 50,000 0 0
----------------------------------------------------------------------------------------------------------------
William Boutillier 2,400 * 2,400 0 0
----------------------------------------------------------------------------------------------------------------
Graham Boyle 4,000 * 4,000 0 0
----------------------------------------------------------------------------------------------------------------
Daniel J. Brimm 56,250(7) * 56,250(7) 0 0
----------------------------------------------------------------------------------------------------------------
Tammy Brimm 4,000 * 4,000 0 0
----------------------------------------------------------------------------------------------------------------
Ward Cameron 10,000(8) * 10,000(8) 0 0
----------------------------------------------------------------------------------------------------------------
Capilano West Capital Inc. 230,000 1.7% 230,000 0 0
----------------------------------------------------------------------------------------------------------------
Capilano West Capital Ventures 1 L.P. 35,000 * 35,000 0 0
----------------------------------------------------------------------------------------------------------------
Paul Cargiulo 25,000 * 25,000 0 0
----------------------------------------------------------------------------------------------------------------
Bill Catalano (c) 35,000 * 35,000 0 0
----------------------------------------------------------------------------------------------------------------
CGTF, LLC 590,000(9) 4.4% 590,000(9) 0 0
----------------------------------------------------------------------------------------------------------------
Paul Champagne 35,000 * 35,000 0 0
----------------------------------------------------------------------------------------------------------------
Collins Enterprises 4,000 * 4,000 0 0
----------------------------------------------------------------------------------------------------------------
Erica Crichton 4,000 * 4,000 0 0
----------------------------------------------------------------------------------------------------------------
Amy E. Cutting Revocable
Living Trust 33,042 * 33,042 0 0
----------------------------------------------------------------------------------------------------------------
Rebecca L. Cutting
Revocable Living Trust 35,583 * 35,583 0 0
----------------------------------------------------------------------------------------------------------------
Cypress Capital Management Ltd. 34,000 * 34,000 0 0
----------------------------------------------------------------------------------------------------------------
John Dekam 35,000 * 35,000 0 0
----------------------------------------------------------------------------------------------------------------
Jerome J. DeLuccio 112,500(10) * 112,500(10) 0 0
----------------------------------------------------------------------------------------------------------------
Discovery View Estates 33,000 * 33,000 0 0
----------------------------------------------------------------------------------------------------------------
Brian Donnelly (d) 7,500(11) * 7,500(11) 0 0
----------------------------------------------------------------------------------------------------------------
Elizabeth A. Eger
Revocable Living Trust 12,708 * 12,708 0 0
----------------------------------------------------------------------------------------------------------------
Stanley Elbaum (e) 30,000(12) * 30,000(12) 0 0
----------------------------------------------------------------------------------------------------------------
Bob Farley 4,000 * 4,000 0 0
----------------------------------------------------------------------------------------------------------------
Friend Family Trust Reg. (f) 125,000 * 125,000 0 0
----------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Grant Ferguson 8,000(13) * 8,000(13) 0 0
-------------------------------------------------------------------------------------------------------------------
Eileen Finnigen 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
FMWP (BWI) Inc. 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Gordon Friesen 55,000 * 55,000 0 0
-------------------------------------------------------------------------------------------------------------------
Robert Gelfand 36,000 * 36,000 0 0
-------------------------------------------------------------------------------------------------------------------
Mary Ann Gould (g) 3,750(14) * 3,750(14) 0 0
-------------------------------------------------------------------------------------------------------------------
Robert S. Grigg 56,250(15) * 56,250(15) 0 0
-------------------------------------------------------------------------------------------------------------------
Claudio Grubner 45,000 * 45,000 0 0
-------------------------------------------------------------------------------------------------------------------
Gerry Hamilton 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Grant Hempell 44,000 * 44,000 0 0
-------------------------------------------------------------------------------------------------------------------
Alan Hetherington 50,000 * 50,000 0 0
-------------------------------------------------------------------------------------------------------------------
HFIC, Inc. 150,000(16) 1.1% 150,000(16) 0 0
-------------------------------------------------------------------------------------------------------------------
Sanford J. Hillsberg (h) 56,250(17) * 56,250(17) 0 0
-------------------------------------------------------------------------------------------------------------------
Bruno Hoffman (i) 2,250(18) * 2,250(18) 0 0
-------------------------------------------------------------------------------------------------------------------
Rey Holdings 12,000(19) * 12,000(19) 0 0
-------------------------------------------------------------------------------------------------------------------
Ashley Howard (j) 7,500(20) * 7,500(20) 0 0
-------------------------------------------------------------------------------------------------------------------
ICE Consult GmbH (k) 359,500 2.7% 359,500 0 0
-------------------------------------------------------------------------------------------------------------------
ICE Holdings North America, LLC (l) 45,000 * 45,000 0 0
-------------------------------------------------------------------------------------------------------------------
ICE Securities Limited 58,500 * 58,500 0 0
-------------------------------------------------------------------------------------------------------------------
ICE Securities - Client Account (m) 1,100,000 8.3% 1,100,000 0 0
-------------------------------------------------------------------------------------------------------------------
ICE Securities - Client Account (n) 32,000 * 32,000 0 0
-------------------------------------------------------------------------------------------------------------------
Frank Holler 34,000 * 34,000 0 0
-------------------------------------------------------------------------------------------------------------------
Keresan Capital Corp. 8,000 * 8,000 0 0
-------------------------------------------------------------------------------------------------------------------
John C. Kleinert 50,000 * 50,000 0 0
-------------------------------------------------------------------------------------------------------------------
Ross Kondo 35,000 * 35,000 0 0
-------------------------------------------------------------------------------------------------------------------
Richard and Laurie Kraniak JTWROS 600,000(21) 4.5% 600,000(21) 0 0
-------------------------------------------------------------------------------------------------------------------
Josip Kresna 35,000 * 35,000 0 0
-------------------------------------------------------------------------------------------------------------------
Doug Lahay 34,000 * 34,000 0 0
-------------------------------------------------------------------------------------------------------------------
Dick Lee 5,000 * 5,000 0 0
-------------------------------------------------------------------------------------------------------------------
Eung Bum Lee 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Eva Lee 10,000 * 10,000 0 0
-------------------------------------------------------------------------------------------------------------------
Robert Lee 34,000 * 34,000 0 0
-------------------------------------------------------------------------------------------------------------------
Stella Lee 5,000 * 5,000 0 0
-------------------------------------------------------------------------------------------------------------------
Maurice Levy (o) 40,000(22) * 40,000(22) 0 0
-------------------------------------------------------------------------------------------------------------------
Lloyds TSB Bank plc 145,000 1.1% 145,000 0 0
-------------------------------------------------------------------------------------------------------------------
Fiona Lo 70,000 * 70,000 0 0
-------------------------------------------------------------------------------------------------------------------
Loon Properties 55,000 * 55,000 0 0
-------------------------------------------------------------------------------------------------------------------
Sandy MacDougall 53,500 * 53,500 0 0
-------------------------------------------------------------------------------------------------------------------
Dick, Ray, Bill and Bon Machin 20,000 * 20,000 0 0
-------------------------------------------------------------------------------------------------------------------
Anil Madan 40,000 * 40,000 0 0
-------------------------------------------------------------------------------------------------------------------
George Magill 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Margaret C. Manuel 33,042 * 33,042 0 0
-------------------------------------------------------------------------------------------------------------------
Joseph B. Marsh 127,083 1.0% 127,083 0 0
-------------------------------------------------------------------------------------------------------------------
Patrick J. Mason 25,417 * 25,417 0 0
-------------------------------------------------------------------------------------------------------------------
Gordon McConkey 38,000 * 38,000 0 0
-------------------------------------------------------------------------------------------------------------------
Gary McDonald 50,000 * 50,000 0 0
-------------------------------------------------------------------------------------------------------------------
Dorothy Mae McKim 4,000(23) * 4,000(23) 0 0
-------------------------------------------------------------------------------------------------------------------
Brett McLean (p) 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Don and Barb McLean (q) 800 * 800 0 0
-------------------------------------------------------------------------------------------------------------------
Jim McMahon 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Charlene Meehan 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Ray Melissa 63,500 * 63,500 0 0
-------------------------------------------------------------------------------------------------------------------
M & J Investment Trust (r) 600,000(24) 4.5% 600,000(24) 0 0
-------------------------------------------------------------------------------------------------------------------
Anthony Murray 25,000 * 25,000 0 0
-------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
National Bank Financial 34,000 * 34,000 0 0
-------------------------------------------------------------------------------------------------------------------
Mike Newman 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Aaron Nielsen (s) 7,500(25) * 7,500(25) 0 0
-------------------------------------------------------------------------------------------------------------------
Kerry Noon (t) 2,000 * 2,000 0 0
-------------------------------------------------------------------------------------------------------------------
Odlum Brown Ltd. (u) 2,000 * 2,000 0 0
-------------------------------------------------------------------------------------------------------------------
Irwin Olian (v) 385,000(26) 2.9% 385,000(26) 0 0
-------------------------------------------------------------------------------------------------------------------
Danielle Oliver 35,000 * 35,000 0 0
-------------------------------------------------------------------------------------------------------------------
Curtis Palmer 52,500(27) * 52,500(27) 0 0
-------------------------------------------------------------------------------------------------------------------
Robert Pellatt 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Kwee Peng Jo 34,000 * 34,000 0 0
-------------------------------------------------------------------------------------------------------------------
Ennio and Lisa Petrella 12,708 * 12,708 0 0
-------------------------------------------------------------------------------------------------------------------
Don Pollard 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Premier Technology Fund 100,000 * 100,000 0 0
-------------------------------------------------------------------------------------------------------------------
Peter Reid 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
David Risley 4,160 * 4,160 0 0
-------------------------------------------------------------------------------------------------------------------
Harry Ross 75,000(28) * 75,000(28) 0 0
-------------------------------------------------------------------------------------------------------------------
Paul T. Rubery, Jr. 51,000(29) * 51,000(29) 0 0
-------------------------------------------------------------------------------------------------------------------
Wayne Leslie Saxbee 6,000 * 6,000 0 0
-------------------------------------------------------------------------------------------------------------------
Ken H. Schaeffers 38,000 * 38,000 0 0
-------------------------------------------------------------------------------------------------------------------
Edwin B. Shaw and Felicia P. Shaw 25,417 * 25,417 0 0
Jt. Tenants
-------------------------------------------------------------------------------------------------------------------
Edwin B. Shaw, Robert B. Nelson & Dawn 25,417 * 25,417 0 0
E. Kidd, TTEES
-------------------------------------------------------------------------------------------------------------------
Lyle H. Shuert 25,417 * 25,417 0 0
Revocable Living Trust
-------------------------------------------------------------------------------------------------------------------
Matthew Charles Shuert and Kelly Rosa 12,708 * 12,708 0 0
Shuert
-------------------------------------------------------------------------------------------------------------------
Mark R. Siewart 112,500(30) * 112,500(30) 0 0
-------------------------------------------------------------------------------------------------------------------
Sitrick & Company, Inc. (w) 34,000 * 34,000 0 0
-------------------------------------------------------------------------------------------------------------------
Andrew P. Smith (x) 25,000 * 25,000 0 0
-------------------------------------------------------------------------------------------------------------------
Edyta Smith (y) 25,000 * 25,000 0 0
-------------------------------------------------------------------------------------------------------------------
Robert A. Spence 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
Paul Stanley 127,083 1.0% 127,083 0 0
-------------------------------------------------------------------------------------------------------------------
Roma Stewart 35,000 * 35,000 0 0
-------------------------------------------------------------------------------------------------------------------
Tavisco Ltd. 150,000 * 150,000 0 0
-------------------------------------------------------------------------------------------------------------------
William Trimble 34,000 * 34,000 0 0
-------------------------------------------------------------------------------------------------------------------
Troy & Gould Profit Sharing Plan FBO
William D. Gould (z) 47,250(31) * 47,250(31) 0 0
-------------------------------------------------------------------------------------------------------------------
Valor Invest Ltd. 50,000 * 50,000 0 0
-------------------------------------------------------------------------------------------------------------------
Pamela Anne Vandy 34,000 * 34,000 0 0
-------------------------------------------------------------------------------------------------------------------
William H. Vanover 12,708 * 12,708 0 0
-------------------------------------------------------------------------------------------------------------------
Harjit Virk 35,000 * 35,000 0 0
-------------------------------------------------------------------------------------------------------------------
Richard M. Wilson 4,000 * 4,000 0 0
-------------------------------------------------------------------------------------------------------------------
David and Terry Wohlberg (aa) 160,000(32) 1.2% 150,000(32) 10,000 *
-------------------------------------------------------------------------------------------------------------------
Wolverton Securities Ltd. (bb) 504,000(33) 3.8% 504,000(33) 0 0
-------------------------------------------------------------------------------------------------------------------
Chris Wong 40,000 * 40,000 0 0
-------------------------------------------------------------------------------------------------------------------
Martin Woodward 38,000 * 38,000 0 0
-------------------------------------------------------------------------------------------------------------------
Paul Woodward 38,800 * 38,800 0 0
-------------------------------------------------------------------------------------------------------------------
Darryl J. Yea 100,000 * 100,000 0 0
---------------------------------
TOTAL 8,791,331(34)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
_________________________
* Indicates less than 1% beneficial ownership.
(a) Mr. Allison is the Chief Financial Officer of ICE Holdings North America,
LLC, which has provided us with investment banking services since December
1999.
(b) Mr. Biegel served as a financial consultant for us from August 1999 to
May, 2000.
(c) Bill Catalano is the father of Ben Catalano, who is one of our Directors.
38
<PAGE>
(d) We have employed Mr. Donnelly as Sales Director since December 1999.
(e) Mr. Elbaum has served as a financial consultant for us since June 1999.
(f) Friend Family Trust Reg. is affiliated with ICE Holdings North America,
LLC, which has provided us with investment banking services since December
1999.
(g) Ms. Gould is the wife of William D. Gould, who is a member of Troy & Gould
Professional Corporation, which has served as legal counsel to us since
July 1999 and is giving a legal opinion on the validity of the shares
covered by this prospectus.
(h) Mr. Hillsberg is a member of Troy & Gould Professional Corporation, which
has served as legal counsel to us since July 1999 and is giving a legal
opinion on the validity of the shares covered by this prospectus.
(i) We have employed Mr. Hoffman as Sales Director since December 1999.
(j) We have employed Ms. Howard in several capacities since January 2000.
(k) ICE Consult GmbH is an affiliate of ICE Holdings North America, LLC, which
has provided us with investment banking services since December 1999.
(l) ICE Holdings North America, LLC has provided us with investment banking
services since December 1999.
(m) ICE Securities holds these shares in a client account for Meditor, Capital
Management Ltd., which is the beneficial owner of the shares.
(n) ICE Securities holds these shares in a client account for Derham O'Neill,
who is the beneficial owner of the shares.
(o) Mr. Levy has served as a financial consultant for us since August 1999.
(p) Brett McLean is a cousin of Michael McLean, who is our President and CEO.
(q) Don and Barb McLean are an uncle and aunt, respectively, of Michael McLean,
who is our President and CEO.
(r) M & J Investment Trust is affiliated with Mike Lee & Associates, which
provided us with financial consulting services in connection with our
private placement of convertible notes in February 2000.
(s) We have employed Mr. Nielsen as Manager, Finance and Investor Relations
since May 1999.
(t) Ms. Noon served as our Controller from our inception in December 1997 until
November, 2000.
(u) Odlum Brown provided us with financial consulting services in connection
with our private offering of common stock in April 1999.
(v) Mr. Olian has served as a financial consultant for us since June 1999.
(w) Sitrick and Company provided us with investor relations services from
October 2000 to May 2000.
(x) Mr. Smith is a managing director of ICE Holdings North America LLC, which
has provided us with investment banking services since December 1999.
(y) Ms. Smith is the mother of Andrew Smith, who is a managing director of ICE
Holdings North America LLC, which has provided us with investment banking
services since December 1999.
(z) Mr. Gould is a member of Troy & Gould Professional Corporation, which has
served as legal counsel to us since July 1999 and is giving a legal opinion
on the validity of the shares covered by this prospectus.
(aa) Mr. Wohlberg is of counsel to Troy & Gould Professional Corporation, which
has served as legal counsel to us since July 1999 and is giving a legal
opinion on the validity of the shares covered by this prospectus.
(bb) Wolverton Securities Ltd. provided us with financial consulting services in
connection with our private offering of common stock in March 2000.
(1) 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, warrants and convertible securities currently
exercisable or convertible, or exercisable or convertible within 60 days,
are deemed outstanding, including for purposes of computing the percentage
ownership of the person holding the option, warrant or convertible
security, but not for purposes of computing the percentage of any other
holder.
(2) Consists of shares issuable upon exercise of warrants.
(3) Consists of shares issuable upon exercise of warrants.
(4) Consists of shares issuable upon exercise of warrants.
(5) Consists of shares issuable upon exercise of options.
(6) Includes 17,000 shares issuable upon exercise of warrants.
(7) Includes 18,750 shares issuable upon exercise of warrants.
(8) Includes 7,000 shares issuable upon exercise of warrants.
(9) Includes 240,000 shares issuable upon exercise of warrants.
(10) Includes 37,500 shares issuable upon exercise of warrants.
(11) Includes 2,500 shares issuable upon exercise of warrants.
(12) Consists of shares issuable upon exercise of warrants.
(13) Consists of shares issuable upon exercise of warrants.
(14) Includes 1,250 shares issuable upon exercise of warrants.
(15) Includes 18,750 shares issuable upon exercise of warrants.
(16) Includes 50,000 shares issuable upon exercise of warrants.
(17) Includes 18,750 shares issuable upon exercise of warrants.
(18) Includes 750 shares issuable upon exercise of warrants.
(19) Consists of shares issuable upon exercise of warrants.
(20) Includes 2,500 shares issuable upon exercise of warrants.
(21) Consists of shares issuable upon exercise of warrants.
39
<PAGE>
(22) Consists of shares issuable upon exercise of options.
(23) Consists of shares issuable upon exercise of warrants.
(24) Consists of shares issuable upon exercise of warrants.
(25) Includes 2,500 shares issuable upon exercise of warrants.
(26) Consists of 330,000 shares issuable upon exercise of warrants and 55,000
shares issuable upon the exercise of options.
(27) Includes 17,500 shares issuable upon exercise of warrants.
(28) Includes 25,000 shares issuable upon exercise of warrants.
(29) Includes 17,000 shares issuable upon exercise of warrants.
(30) Includes 37,500 shares issuable upon exercise of warrants.
(31) Includes 15,750 shares issuable upon exercise of warrants.
(32) Includes 50,000 shares issuable upon exercise of warrants.
(33) Consists of shares issuable upon exercise of warrants.
(34) Includes 2,715,838 shares issuable upon exercise of warrants and 105,000
shares issuable upon exercise of options.
PLAN OF DISTRIBUTION
As used in this prospectus, "selling stockholders" includes the pledgees,
donees, transferees or others who may later hold the selling stockholders'
shares of common stock We will pay the costs and fees of registering the shares
of common stock, but the selling stockholders will pay any brokerage
commissions, discounts or other expenses relating to the sale of these shares.
The selling stockholders may sell the shares of common stock in the over-
the-counter market or otherwise, at market prices prevailing at the time of
sale, at prices related to the prevailing market prices or at negotiated prices.
In addition, the selling stockholders may sell some or all of their shares
through:
. a block trade in which a broker-dealer may resell a portion of the
block, as principal, in order to facilitate the transaction;
. purchases by a broker-dealer, as principal, and resale by the
broker-dealer for its account; or
. ordinary brokerage transactions and transactions in which a broker
solicits purchasers.
When selling the shares of common stock, the selling stockholders may enter
into hedging transactions. For example, the selling stockholders may:
. enter into transactions involving short sales of the shares by
broker-dealers;
. sell shares short themselves and redeliver the shares to close out
their short positions;
. enter into option or other types of transactions that require the
selling stockholder to deliver shares to a broker-dealer, who will
then resell or transfer the common shares under this prospectus; or
. loan or pledge the shares to a broker-dealer, who may sell the
loaned shares or, in the event of default, sell the pledged shares.
The selling stockholders may negotiate and pay broker-dealers commissions,
discounts or concessions for their services. Broker-dealers engaged by the
selling stockholders may allow other broker-dealers to participate in resales.
However, the selling stockholders and any broker-dealers involved in the sale or
resale of the shares of common stock may qualify as "underwriters" within the
meaning of Section 2(a)(11) of the Securities Act of 1933. In addition, the
broker-dealers' commissions, discounts or concession may qualify as
underwriters' compensation under the Securities Act of 1933.
In addition to selling their shares under this prospectus, the selling
stockholders may:
. agree to indemnify any broker-dealer or agent against liabilities
related to the selling of the shares, including liabilities arising
under the Securities Act of 1933;
40
<PAGE>
. transfer their shares in other ways not involving market makers or
established trading markets, including directly by gift,
distribution or other transfer; or
. sell their shares under Rule 144 of the Securities Act of 1933
rather than under this prospectus, if the transaction meets the
requirements of Rule 144.
EXPERTS
Our financial statements for the years ended June 30, 2000 and June 30,
1999 have been included in this prospectus in reliance upon the report of KPMG
LLP, Vancouver, British Columbia, Canada, appearing elsewhere in this
prospectus, and upon the authority of KPMG LLP as experts in accounting and
auditing.
The report of KPMG LLP covering the June 30, 2000 financial statements
contains an explanatory paragraph that states that the Company's recurring
losses from operations and negative cash flows from operations raise substantial
doubt about the entity's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
that uncertainty.
LEGAL MATTERS
Troy & Gould Professional Corporation, Los Angeles, California, has
rendered an opinion with respect to the validity of the shares of common stock
covered by this prospectus. Troy & Gould Professional Corporation, together
with certain members and of counsel of that firm and their spouses own in the
aggregate 181,500 shares of our common stock and warrants to purchase 85,750
shares of our common stock.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On July 15, 1999, the Company engaged KPMG LLP, Vancouver, British
Columbia, Canada, as its principal accountant to audit the Company's financial
statements. Neither the Company nor its predecessor for accounting purposes,
RTI, had engaged any accountants prior to the engagement of KPMG LLP.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act for the common stock offered
under this prospectus. We are subject to the informational requirements of the
Exchange Act, and file reports, proxy statements and other information with the
Commission. These reports, proxy statements and other information filed by
PCSupport.com, Inc. can be inspected and copied at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 7 World Trade Center, Suite 1300,
New York, New York 10048 and CitiCorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of these materials can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a Web
site that contains reports, proxy statements, information statements and other
information concerning PCSupport.com, Inc. at the site located at
http://www.sec.gov. This prospectus does not contain all the information in the
registration statement and its exhibits which we have filed with the Commission
under the Securities Act and to which reference is made.
41
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Audited Annual Financial Statements
-----------------------------------
Independent Auditors' Report to Annual Financial Statements............... F-1
Balance Sheets as of June 30, 2000 and 1999............................... F-2
Statements of Operations for the Years Ended June 30, 2000 and 1999, and
the Period from December 10, 1997 (inception) to June 30, 2000............ F-3
Statements of Stockholders' Equity for the Years Ended June 30, 2000 and
1999 and the Period from December 10, 1997 (inception) to June 30, 2000... F-4
Statements of Cash Flows for the Years Ended June 30, 2000 and 1999 and
the Period from December 10, 1997 (inception) to June 30, 2000............ F-5
Notes to Annual Financial Statements...................................... F-6
Unaudited Interim Financial Statements
--------------------------------------
Balance Sheets as of September 30, 2000 and September 30, 1999............ F-21
Statements of Operations for the Three Months Ended September 30, 2000
and 1999 and the Period from December 10, 1997 (inception) to September
30, 2000.................................................................. F-22
Statements of Stockholders' Equity for the Three Months Ended September
30, 2000 and the Period from December 10, 1997 (inception) to September
30, 2000.................................................................. F-23
Statements of Cash Flows for the Three Months Ended September 30, 2000
and 1999 and the Period from December 10, 1997 (inception) to September
30, 2000.................................................................. F-24
Notes to Interim Financial Statements..................................... F-25
42
<PAGE>
Consolidated Financial Statements of
PCSUPPORT.com, INC. and subsidiary
(A Development Stage Enterprise)
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
PCSupport.com, Inc.
We have audited the consolidated balance sheets of PCSupport.com, Inc. and
subsidiary (a Development Stage Enterprise) as of June 30, 2000 and 1999 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended June 30, 2000 and 1999 and for the period from
December 10, 1997 (inception) to June 30, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of PCSupport.com, Inc. and subsidiary
as of June 30, 2000 and 1999, and the results of their operations and their cash
flows for the years ended June 30, 2000 and 1999 and for the period from
December 10, 1997 (inception) to June 30, 2000, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and negative cash flows from operations that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
"KPMG LLP"
/s/ KPMG LLP
---------------
Chartered Accountants
Vancouver, Canada
August 25, 2000, except with respect
to notes 10(e) and 10(f) which are as
of September 15, 2000
F-1
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,149,290 $ 795,809
Goods and services taxes recoverable and other receivables 89,933 14,728
Prepaid expenses and deposits 335,113 33,950
Other current assets 111,860 49,256
----------- ----------
Total current assets 5,686,196 893,743
Property and equipment (note 4) 411,817 11,210
Deferred acquisition costs 25,000 -
Intangible assets (note 5) 7,052 2,697
----------- ----------
$ 6,130,065 $ 907,650
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 657,050 $ 68,266
Stockholders' equity (note 6):
Common stock, $0.001 par value, authorized 100,000,000 shares;
issued 10,477,662 shares in 2000 and 6,007,169 shares in 1999 10,478 6,007
Additional paid-in capital 13,765,041 1,981,782
Deferred stock compensation (387,563) (198,909)
Deficit accumulated during the development stage (7,914,941) (949,496)
----------- ----------
Total stockholders' equity 5,473,015 839,384
----------- ----------
Commitments and contingencies (note 7)
Subsequent events (note 10)
$ 6,130,065 $ 907,650
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Consolidated Statements of Operations
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
December 10,
1997
Year ended Year ended (inception) to
June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- --------------
<S> <C> <C> <C>
Revenue:
Support center $ 340 $ - $ 340
Online backup 29,142 99 29,241
----------- ---------- -----------
29,482 99 29,581
Operating expenses:
Support center and online back-up 197,166 86 197,252
Development costs 923,259 17,646 943,719
Marketing and promotion 1,418,465 118,273 1,657,656
General and administrative 1,287,219 138,592 1,484,373
Stock-based compensation expense 412,246 486,191 898,437
----------- ---------- -----------
4,238,355 760,788 5,181,437
----------- ---------- -----------
Loss from operations (4,208,873) (760,689) (5,151,856)
Interest expense, net (note 6(a)(ii)) 2,756,572 6,513 2,763,085
----------- ---------- -----------
Loss for the period $(6,965,445) $ (767,202) $(7,914,941)
=========== ========== ===========
Net loss per common share, basic and diluted $(1.01) $ (0.46) $ (2.22)
=========== ========== ===========
Weighted average common shares outstanding,
basic and diluted 6,884,464 1,659,455 3,572,640
=========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
Period from December 10, 1997 (inception) to June 30, 2000
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Shares Additional Deferred During Total
----------------------- Paid-in Stock Development Stockholders'
Shares Amount Capital Compensation Stage Equity
---------- -------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 10, 1997 (inception) 200 $ - $ - $ - $ - $ -
Issuance of common stock for services in
January, valued at $.13 per share 489,800 490 65,157 - - 65,647
Sale of common stock in January,
$0.13 per share 510,000 510 67,642 - - 68,152
Net loss - - - - (182,294) (182,294)
---------- ------- ----------- ----------- ------------- -----------
Balance, June 30, 1998 1,000,000 1,000 132,799 - (182,294) (48,495)
Fair value of common stock purchase
warrants granted to creditor - - 8,407 - - 8,407
Sale of common stock in January,
approximately $.85 per share, net of
issuance costs of $131,708 291,838 292 116,062 - - 116,354
Issuance of common stock for services in
January and May, valued at approximately
$.85 per share 52,848 53 45,101 - - 45,154
Conversion of note payable to common stock 66,029 66 109,977 - - 110,043
Issuance of common stock for services in
January 63,440 63 53,861 - - 53,924
Issuance of common stock for services in
April 1,500,000 1,500 777,620 (392,356) - 386,764
Amortization of deferred stock compensation - - - 45,247 - 45,247
Issuance of common stock for acquisition in
June, net of acquisition costs of $46,753
(note 3) 3,033,014 3,033 886,155 - - 889,188
Treasury stock repurchased by Company in
June, not cancelled (285,000) - (148,200) 148,200 - -
Net loss - - - - (767,202) (767,202)
---------- ------- ----------- ----------- ------------- -----------
Balance, June 30, 1999 5,722,169 6,007 1,981,782 (198,909) (949,496) 839,384
Exercise of warrants in July, 1999 68,400 69 58,197 - - 58,266
Shares issued in exchange for service 4,160 4 6,504 - - 6,508
Fair value of options issued to employees
and consultants - - 600,900 (600,900) - -
Conversion of notes payable in January,
net of $5,803 in cash financing costs
(note 6(a)(i)) 350,000 350 494,747 - - 495,097
Fully paid warrants issued as financing
compensation cost (note 6(a)(ii)) - - 1,794,000 (1,794,000) - -
Beneficial conversion feature of notes payable
issued in February (note 6(a)(ii)) - - 1,000,000 - - 1,000,000
Amortization of deferred stock compensation - - - 2,206,246 - 2,206,246
Sale of units in March and April, $2.00 per
unit, net of $38,820 in cash financing
costs 666,000 666 1,292,514 - - 1,293,180
Sale of common stock in March, $2.00 per
share, net of $36,222 in cash financing
costs 2,054,000 2,054 4,069,724 - - 4,071,778
Exercise of warrants in March for cash 140,600 141 188,263 - - 188,404
Sale of common stock in April, $2.00 per
share 34,000 34 67,966 - - 68,000
Sale of common stock in April, $2.125 per
share, net of $175,694 in cash
financing costs 645,000 645 1,194,286 - - 1,194,931
Conversion of promissory notes
payable in May (note 6(a)(ii)) 508,333 508 1,016,158 - - 1,016,666
Net loss - - - - (6,965,445) (6,965,445)
---------- ------- ----------- ----------- ------------- -----------
Balance, June 30, 2000 10,192,662 $10,478 $13,765,041 $ (387,563) $(7,914,941) $ 5,473,015
========== ======= =========== =========== ============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
December 10,
1997
Year ended Year ended (inception) to
June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss for the period $(6,965,445) $ (767,202) $(7,914,941)
Items not affecting cash:
Depreciation and amortization 108,972 5,336 114,927
Common stock issued in exchange for services 6,508 440,944 513,099
Deemed discount amortization on promissory note 1,000,000 - 1,000,000
Amortization of deferred stock compensation 2,206,246 45,247 2,251,493
Discount on notes payable - 8,407 8,407
Loss on debt extinguishments and other 17,566 - 17,566
Changes in operating assets and liabilities:
Goods and services taxes recoverable and
other receivables (75,205) (14,728) (89,933)
Prepaid expenses and deposits (326,163) (33,950) (360,113)
Other current assets (62,604) (49,014) (111,860)
Accounts payable and accrued liabilities 588,784 64,556 657,050
----------- ---------- -----------
Net cash used in operating activities (3,501,341) (300,404) (3,914,305)
----------- ---------- -----------
Cash flows from investing activities:
Purchase of property and equipment (507,357) (13,055) (523,733)
Purchase of intangible asset (6,577) (3,486) (10,063)
----------- ---------- -----------
Net cash used in investing activities (513,934) (16,541) (533,796)
----------- ---------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable - 62,314 110,043
Proceeds from issuance of bridge loan - 17,088 17,088
Repayment of bridge loan - (17,088) (17,088)
Cash acquired in acquisition - 888,932 888,932
Cash costs of conversion of debt to equity (5,803) - (5,803)
Proceeds from promissory notes 1,500,000 - 1,500,000
Proceeds from exercise of share purchase warrants 246,670 - 246,670
Net proceeds from sale of common stock 6,627,889 161,508 6,857,549
----------- ---------- -----------
Net cash provided by financing activities 8,368,756 1,112,754 9,597,391
----------- ---------- -----------
Net increase in cash and cash equivalents 4,353,481 795,809 5,149,290
Cash and cash equivalents at beginning of period 795,809 - -
----------- ---------- -----------
Cash and cash equivalents at end of period $ 5,149,290 $ 795,809 $ 5,149,290
=========== ========== ===========
Supplemental disclosure:
Cash paid for:
Income taxes $ - $ - $ -
Interest 7,200 - 7,200
Non-cash activities:
Notes payable and promissory notes
converted into common stock 1,516,666 110,043 1,626,709
Deferred stock compensation 2,394,900 392,356 2,787,256
Treasury stock acquired - 285 285
Discount on promissory note payable 1,000,000 - 1,000,000
Discount on notes payable - 8,407 8,407
Common stock issued for services 6,508 486,191 558,346
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
1. Nature of development stage activities:
Mex Trans Seafood Consulting, Inc. was incorporated in Texas on February 13,
1989 and was a holding company prior to its merger with Reconnaissance
Technologies Inc. ("Reconnaissance"). In anticipation of this merger, a
shell company was incorporated in Nevada in April, 1999 and Mex Trans
Seafood Consulting, Inc. was merged into it, with PCSupport.com, Inc.
("PCS") as the surviving company. PCS had no substantive operations at that
time. In June 1999, PCS merged with Reconnaissance, with PCSupport.com, Inc.
(the "Company") being the surviving corporation (note 2(a)). The Company
currently operates in one business segment and is in the business of
developing and commercializing support services for the personal computer
market. The Company's services include providing daily secured backup of
personal computer hard-drives over the Internet, overnight laptop
replacements and an aggregation of web-based computer support services.
These consolidated financial statements have been prepared on a going
concern basis in accordance with United States generally accepted accounting
principles. The going concern basis of presentation assumes the Company will
continue in operation for the foreseeable future and will be able to realize
its assets and discharge its liabilities and commitments in the normal
course of business. Certain conditions, discussed below, currently exist
which raise substantial doubt upon the validity of this assumption. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
The Company's future operations are dependent upon the market's acceptance
of its services and the Company's ability to secure cost effective third
party license and service supply agreements. There can be no assurance that
the Company's services will be able to secure market acceptance or that cost
effective license and service supply agreements will exist or continue to
exist. As of June 30, 2000, the Company is considered to be in the
development stage as the Company has not generated significant revenues, is
continuing to develop its business, and has experienced negative cash flow
from operations. Operations have primarily been financed through the
issuance of common stock and debt. The Company does not have sufficient
working capital to sustain operations until the end of the year ended June
30, 2001. The Company has contracted with third parties to assist them in
securing funds through additional debt or equity financings. Such financings
may not be available or may not be available on reasonable terms.
2. Significant accounting policies:
(a) Reverse take-over and basis of presentation:
On June 23, 1999, PCS merged with Reconnaissance, with Reconnaissance's
stockholders receiving the largest number of shares and control of the
Company. Accordingly, Reconnaissance is deemed the accounting acquiror
for financial statement purposes.
F-6
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(a) Reverse take-over and basis of presentation (continued):
The acquisition is accounted for as a reverse take-over using the
purchase method. The Company's historical financial statements reflect
the results of operations and cash flows of Reconnaissance from the
date of its incorporation on December 10, 1997 under the Company Act
(British Columbia). During June, 1999, Reconnaissance continued its
incorporation into Wyoming. The historical stockholders' equity gives
effect to the shares issued to the stockholders of Reconnaissance. The
financial position and results of operations of PCS are included from
the date of acquisition, June 23, 1999.
(b) Basis of consolidation:
These consolidated financial statements have been prepared using
generally accepted accounting principles in the United States. The
financial statements include the accounts of the Company's wholly-owned
subsidiary, Reconnaissance International Ltd. All significant
intercompany balances and transactions have been eliminated in the
consolidated financial statements.
(c) Use of estimates:
The preparation of consolidated financial statements in accordance with
United States generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial
statements and reported revenues and expenses for the reporting
periods. Actual results may significantly differ from these estimates.
(d) Contract revenue recognition:
Revenue from customer support service contracts is recognized over the
term of the customer support agreement. The Company also provides web-
based computer solutions to customers, including developing customized
branded web-based support portals or other products. Revenue from these
services are recognized when the product is delivered and no
significant performance obligations remain. For longer-term contracts
with significant customization, the Company recognizes revenue based on
the percentage of completion method of accounting.
Anticipated losses on contracts are charged to earnings as soon as such
losses can be estimated. Changes in estimated profits on contracts are
recognized during the period in which the change in estimate is known.
F-7
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(e) Foreign currency:
The functional currency of the Company and its subsidiary is the United
States dollar. Transactions in foreign currencies are translated to
United States dollars at the rates in effect on the transaction date.
Exchange gains or losses arising on translation or settlement of
foreign currency denominated monetary items are included in the
consolidated statement of operations.
(f) Cash and cash equivalents:
The Company considers all short-term investments with a maturity date
at purchase of three months or less to be cash equivalents.
(g) Prepaid expenses and deposits:
Prepaid expenses and deposits primarily includes prepaid advertising
and software license fees and deposits relating to its office operating
leases.
(h) Property and equipment:
Property and equipment are recorded at cost and are depreciated using
the straight-line method over their estimated useful lives as follows:
Computer equipment and software 2 years
Furniture and fixtures 7 years
Office equipment 7 years
Leasehold improvements Over the lease term
The cost of maintenance and repairs are charged to expenses as
incurred. The Company reviews property and equipment for impairment
whenever events or changes in circumstances indicate the carrying value
may not be recoverable. If the sum of future cash flows expected to
result from the use of the asset and its eventual disposition is less
than the carrying amount, an impairment loss is recognized for the
excess of the carrying amount of the asset over the fair value of the
asset.
(i) Income taxes:
The Company follows the asset and liability method of accounting for
income taxes. Under this method, current taxes are recognized for the
estimated income taxes payable for the current period.
Deferred income taxes are provided based on the estimated future tax
effects of temporary differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases as
well as the benefit of losses available to be carried forward to future
years for tax purposes.
F-8
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(i) Income taxes (continued):
Deferred tax assets and liabilities are measured using enacted tax
rates that are expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in operations in the period that includes
the substantive enactment date. A valuation allowance is recorded for
deferred tax assets when it is more likely than not that such deferred
tax assets will not be realized.
(j) Research and development:
Research and development costs are expensed when incurred.
The Company accounts for the costs of developing and maintaining its
website in accordance with EITF 00-02 and SOP 98-1. Costs incurred
during the preliminary project stage are expensed as incurred. Costs
incurred during the application development stage are capitalized and
costs incurred during the operating stage are expensed, unless they
represent upgrades or enhancements that result in additional
functionality. Costs capitalized are reviewed for impairment in
accordance with SFAS 121. Also included in development costs are costs
incurred to develop branded support portals for third parties under
contract.
(k) Net loss per share:
Basic earnings per share is computed using the weighted average number
of common stock outstanding during the periods. Diluted loss per share
is computed using the weighted average number of common and potentially
dilutive common stock issuances outstanding during the period. As the
Company has a net loss in each of the periods presented, basic and
diluted net loss per share is the same.
Excluded from the computation of diluted loss per share for the year
ended June 30, 2000 are warrants to purchase 2,965,838 (1999 - 311,838)
shares of common stock and options to purchase 1,311,869 (1999 - nil)
shares of common stock because their effects would be anti-dilutive.
(l) Stock-based compensation:
The Company accounts for its stock-based compensation arrangement in
accordance with provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense under fixed plans would
be recorded on the date of grant only if the market value of the
underlying stock at the date of grant exceeded the exercise price. The
Company recognizes compensation expense for stock options, common stock
and other equity instruments issued to non-employees for services
received based upon the fair value of the services or equity
instruments issued, whichever is more reliably determined. This
information is presented in note 6(b)(ii).
F-9
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(l) Stock-based compensation (continued):
SFAS No. 123, Accounting for Stock Based Compensation, requires
entities that continue to apply the provisions of APB Opinion No. 25
for transactions with employees to provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair-value-based method defined
in SFAS No. 123 had been applied to these transactions. This
information is presented in note 6(b)(i).
(m) Comparative figures:
Certain comparative figures have been reclassified to conform to the
basis of presentation adopted for the current period.
3. Acquisitions:
In June, 1999, PCS merged with Reconnaissance. As described in note 2(a),
the acquisition was a reverse take-over with Reconnaissance being the deemed
accounting acquiror for financial statements purposes.
Net assets acquired through the issuance of common stock consisted of cash
and cash equivalents with a fair value of $935,685. The cash and cash
equivalents held by PCS were obtained through a private placement.
Acquisition related costs of $46,753 were incurred and were recorded as a
decrease in the acquisition amount carried in stockholders' equity.
The following table reflects unaudited pro forma information which combines
the operations of PCS and Reconnaissance for the year ended June 30, 1999
and the period from December 10, 1997 (inception) to June 30, 1998 as if the
acquisition of PCS had taken place at the beginning of the period. There
were no pro forma adjustments required in combining this information of
these two entities. This pro forma information does not reflect any non-
recurring charges or credits directly attributable to the transaction. This
pro forma information does not purport to be indicative of the revenues and
net loss that could have resulted had the acquisition been in effect for the
period presented and is not intended to be a projection of future results or
trends.
F-10
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
3. Acquisitions (continued):
<TABLE>
<CAPTION>
Period from
December 10,
Year ended 1997 (inception)
June 30, to June 30,
1999 1999
---------- ----------------
<S> <C> <C>
Revenue $ 99 $ 99
Expenses:
On-line back-up 86 86
Research and development 17,646 20,460
Marketing and promotion 477,103 598,021
General and administrative 317,685 376,247
Interest, net 6,513 6,513
--------- -----------
Net loss for the period $(818,934) $(1,001,228)
========= ===========
Net loss per share $ (0.14) $ (0.23)
========= ===========
</TABLE>
4. Property and equipment:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
June 30,
-----------------------------
2000 1999
--------- -----------
<S> <C> <C>
Computer equipment $ 335,546 $ 14,173
Furniture and fixtures 51,608 1,584
Office equipment 64,184 -
Leasehold improvements 71,776 -
--------- -----------
523,114 15,757
Less accumulated depreciation 111,297 4,547
--------- -----------
$ 411,817 $ 11,210
========= ===========
</TABLE>
5. Intangible assets:
Intangible assets includes the cost of acquiring the Company's World Wide Web
domain names and trademarks and is amortized straight-line over a three year
period.
F-11
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 7
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
6. Stockholders' equity:
(a) Convertible debt:
(i) Promissory notes:
In November, 1999, the Company issued promissory notes to an
investor totaling $500,000 with interest payable monthly, not in
advance, at a rate of 10% per annum. On January 11, 2000, the
Company agreed to convert the notes into 350,000 common shares and
warrants to purchase 240,000 common shares at a price of $1.40 per
share. The loss on extinguishment of the debt was approximately
$900.
(ii) Convertible promissory notes:
On February 29, 2000, the Company issued promissory notes
("Convertible Promissory Notes") to private investors totaling
$1,000,000, convertible into common stock of the Company at a
conversion rate of $2.00 per common share. The notes bore interest
at an annual rate of 10% and payable monthly. The notes carried a
beneficial conversion feature valued at $1,250,000, equal to the
aggregate excess of the market value of the Company's common
shares at the date of agreement over the conversion rate. The
beneficial conversion feature recorded was limited to the proceeds
of the promissory note offering of $1,000,000 and was amortized to
interest expense over the period to the earliest conversion date,
which resulted in full amortization of the $1,000,000 to interest
expense during the year.
The notes, including $16,666 in accrued interest, were converted
in May 2000 into 508,333 common shares.
Under the terms of the financing agreement, the Company granted
1,000,000 "A" warrants and 500,000 "B" warrants to its agent for
the $1,000,000 Convertible Promissory Notes financing and for
future general financing services. Each "A" warrant entitles the
holder to acquire one common share at an exercise price of $1.25
per share to February 28, 2001 and $1.75 thereafter to February
28, 2002. Each "B" warrant entitles the holder to acquire one
common share at an exercise price of $2.00 per share to February
28, 2001 and $2.50 thereafter to February 28, 2002. The estimated
fair value of the warrants of $1,794,006 was recorded as deferred
financing costs and was amortized to interest expense over the
period to the earliest conversion date, which resulted in full
amortization of the $1,794,000 to interest expense during the
current year.
F-12
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 8
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
6. Stockholders' equity (continued):
(b) Stock options and stock-based compensation:
(i) Stock options:
On July 2, 1999, the Company adopted a fixed stock option plan that
provides for the issuance of incentive and non-qualified stock
options to officers, directors, employees, and consultants to
acquire shares of the Company's common stock.
The Board of Directors determines the terms of the options granted,
including the number of options granted, the exercise price and the
vesting schedule. The exercise price for qualified incentive stock
options shall not be less than the fair market value of the
underlying stock at the date of grant, and have terms no longer
than five years from the date of grant. Subsequent to year end, the
Company amended certain terms of its stock option plan (note
10(a)).
Stock option activity since the inception of the plan is presented
below:
<TABLE>
<CAPTION>
Weighted
Number average
of shares exercise price
--------- --------------
<S> <C> <C>
Outstanding, July 1, 1999 - $ -
Granted 1,311,869 2.32
Exercised - -
Cancelled - -
--------- --------------
Outstanding, June 30, 2000 1,311,869 $2.32
========= ==============
</TABLE>
The following table summarizes the stock options outstanding at
June 30, 2000:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------------------- ----------------------------
Weighted
average Weighted Weighted
Number remaining average Number average
Range of exercise price of shares contractual life exercise price exercisable exercise price
----------------------- --------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$1.00 - $1.50 691,000 4.1 years 1.01 314,750 1.01
$1.69 - $2.48 201,369 4.9 years 2.02 119,008 1.99
$2.67 - $3.95 105,000 4.9 years 3.14 3,194 3.21
$4.22 - $6.06 314,500 4.8 years 5.10 28,167 5.08
--------- ---------------- ---- ------- ----
1,311,869 4.5 years 2.32 465,119 1.52
========= ================ ==== ======= ====
</TABLE>
As at June 30, 2000, 465,119 stock options have vested and are
exercisable. The weighted average fair value of the options granted
during the year ended June 30, 2000 was $1.72 per option.
F-13
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 9
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
6. Stockholders' equity (continued):
(b) Stock options and stock-based compensation (continued):
(i) Stock options (continued):
As explained in note 2(l), the Company adopted only the disclosure
provisions of FAS No. 123 for options granted under the existing
employee stock option plan. FAS No. 123 uses a fair value method of
calculating the cost of stock option grants. Had compensation cost
for the employee stock option plan been determined by this method,
loss and basic loss per share would have been as follows:
<TABLE>
<CAPTION>
June 30, 2000
-------------
<S> <C>
Loss:
As reported $ (6,965,445)
Pro-forma (7,295,259)
=============
Basic loss per share:
As reported $ (1.01)
Pro-forma (1.06)
=============
</TABLE>
The Company recognizes the calculated compensation cost at the date
of granting the stock options on a straight-line basis over the
vesting period.
The Company has estimated the fair value of each option on the date
of the grant using the Black-Scholes option-pricing model with the
following assumptions:
<TABLE>
<CAPTION>
June 30, 2000
-------------
<S> <C>
Expected dividend yield -
Expected stock price volatility 70%
Risk-free interest rate 6%
Expected life of options 4 years
</TABLE>
(ii) Stock-based compensation:
In January, 1998, the Company recorded non-cash compensation
expense of $65,647 related to the sale of 489,800 common shares at
$0.01 per share to certain stockholders and officers of the
Company. The fair value of the common shares was estimated at $0.13
per share at the time of the transaction.
In January, 1999, the Company recorded non-cash interest expense of
$8,407 related to the issuance of warrants to purchase 20,000
shares of common stock. The warrants were exercisable immediately
at an exercise price of $0.85 per share and expired in January,
2000.
In January and May, 1999, the Company issued 52,848 shares of
common stock in exchange for services relating to share issuances.
The fair value of these services was estimated based upon the
estimated fair value of the shares at $0.85 per share or $45,154.
The costs were deducted from the additional paid-in capital from
the sale of common stock in January, 1999.
F-14
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 10
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
6. Stockholders' equity (continued):
(b) Stock options and stock-based compensation (continued):
(ii) Stock-based compensation (continued):
In January, 1999, the Company recorded non-cash compensation
expense of $53,924 related to the issuance of 63,440 shares of
common stock to certain stockholders and officers of the Company.
The fair value of the shares was estimated at $0.85 per share at
the time of the transaction.
In April, 1999, the Company recorded non-cash compensation expense
and deferred compensation expense of $779,120 related to the
issuance of 1,500,000 shares of common stock at no cost to certain
officers and stockholders. The value of the shares was estimated
at $0.52 per share. A certain portion of these shares are subject
to vesting over a period of time. The compensatory element
relating to these shares were recorded as deferred stock
compensation to be amortized over their respective vesting
periods. In June, 1999, the Company repurchased 285,000 common
shares at $0.001 per share and recorded the transaction as shares
held in treasury as of June 30, 1999.
Common shares held in treasury total 285,000 at June 30, 2000.
Pursuant to an agreement dated July 31, 1999, the Company has the
option to re-purchase certain shares held by executive officers if
their employment ceases with the Company prior to January 1, 2002
at a price of $0.01 per share.
(c) Share purchase warrants:
In July, 1999 and March, 2000, warrants to purchase 68,400 and 140,600
common shares at a price of $0.85 and $1.34 per common share,
respectively, were exercised.
Share purchase warrants outstanding at June 30, 2000 and 1999 are as
follows:
<TABLE>
<CAPTION>
Shares issuable on exercise of
outstanding warrants
------------------------------
Expiry dates Exercise price per share June 30, 2000 June 30, 1999
------------ ------------------------ -------------- -------------
<S> <C> <C> <C>
March, 2001 (6(c)(iii)) $2.00 333,000 -
January, 2000 (6(b)(ii)) $0.85 - 20,000
January, 2002(6(a)(ii)) $1.40 240,000 -
February, 2002 (6(a)(iii)) $1.25 / $1.75 1,000,000 -
February, 2002 (6(a)(iii)) $2.00 / $2.50 500,000 -
March, 2002 (6(c)(ii)) $2.00 500,000 -
June, 2002 (6(c)(iv)) various 250,000 -
January, 2003 (6(c)(iv)) $1.05 10,000 -
April, 2003 (6(c)(iv)) $5.40 50,000 -
Various (6(c)(i)) $1.34 82,838 291,838
--------- -------
2,965,838 311,838
========= =======
</TABLE>
F-15
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 11
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
6. Stockholders' equity (continued):
(c) Share purchase warrants (continued):
(i) Between January 26, 1999 and February 18, 1999, the Company issued
warrants which are exercisable at $0.85 per share for a period
expiring three months after the completion of an initial public
offering by the Company of its common shares at a price per share
of $0.85 prior to July 18, 1999 and $1.34 per share thereafter.
(ii) In March 2000, the Company completed a private placement for
2,054,000 common shares of the Company for proceeds of $4,071,778,
being net of $36,222 of cash financing costs. The Company agreed to
issue warrants to purchase 500,000 common shares of $2.00 per share
for consulting and advisory services in connection with this
transaction. The warrants will expire March 2002. The estimated
fair value of these warrants at the date of grant was $1,736,000
and has been recorded as a charge against additional paid-in
capital.
(iii) In March and April, 2000, the Company completed a private placement
issuing 666,000 units to investors for proceeds of $1,293,180, net
of $38,820 of cash financing costs. Each unit consists of one
common share of the Company and one-half of one warrant, with two
one-half warrants exercisable to purchase an additional one common
share at an exercise price of $2.00 per share, with the warrants
expiring in March 2001.
(iv) In April, 2000, the Company completed a private placement for
645,000 common shares for proceeds of $1,194,931, net of $175,694
of cash financing costs. The Company also issued warrants to
purchase 310,000 common shares as compensation for arranging the
financing. The exercise price of 250,000 of the warrants is
dependent on the issuance price of an expected future private
placement. The value of these warrants have initially been measured
at their fair value using current market information and will be
readjusted as this fair value changes until the date of the future
private placement. The value assigned to these warrants is recorded
in equity. Of the remaining warrants, 10,000 and 50,000 have
exercise prices of $1.05 and $5.40, respectively. The estimated
fair value of the warrants of $260,451 has been recorded as a
charge against additional paid-in capital.
F-16
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 12
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
7. Commitments and contingencies:
(a) Operating leases:
The Company leases office facilities in British Columbia under
operating lease agreements that expire in November, 2002 and June,
2005. Minimum lease payments under these operating leases and other
license software and lease equipment are as follows:
<TABLE>
<S> <C>
2001 $493,500
2002 495,500
2003 357,000
2004 280,500
2005 280,500
Thereafter 46,500
</TABLE>
Rent expense totalled $79,413 and $9,587 for the years ended June 30,
2000 and 1999, respectively.
(b) Internet portal advertising agreement:
The Company entered into an agreement with an Internet service company
to allow the Company to advertise its services on the Internet service
Company's website for a one year term. Also, the Company has agreed to
create a co-branded website to provide its services to the Internet
service Company's customers for a two year term. The Company paid
$570,000 under the agreement for fiscal year 2000 and is committed to
paying $2,460,000 in fiscal year 2001 and $2,250,000 in fiscal year
2002. The agreement is subject to cancellation after one year at the
Company's option.
(c) Financing agreement:
The Company entered into a financing agreement with ICE Holdings North
America, LLC in March, 2000. Subject to the completion of direct and
indirect financing milestones, the Company will be required to issue
and register with the United States Securities and Exchange Commission
1,000,000 warrants as consideration for their services. As at June 30,
2000, 250,000 warrants were earned and issued (note 6(c)(iv)).
F-17
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 13
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
8. Deferred tax assets and liabilities:
<TABLE>
<CAPTION>
June 30,
------------------------
2000 1999
----------- ---------
<S> <C> <C>
Deferred tax assets:
Start-up costs and other $ 311,200 $ 269,953
Operating loss carry forwards 1,413,000 -
Property and equipment 71,056 4,547
Accounts payable and accrued liabilities 6,207 -
----------- ---------
Total deferred tax assets before valuation allowance 1,801,463 274,500
Valuation allowance (1,801,463) (274,500)
----------- ---------
Net deferred tax assets $ - $ -
=========== =========
</TABLE>
Management believes that it is not more likely than not that it will create
sufficient taxable income sufficient to realize its deferred tax assets. It
is reasonably possible these estimates could change due to future income and
the timing and manner of the reversal of deferred tax liabilities. Due to
its losses, the Company has no income tax expense.
The Company has operating loss carry forwards for income tax purposes at
June 30, 2000 of approximately $4,137,000. Operating losses begin to expire
in fiscal year 2020.
9. Financial instruments:
(a) Fair values:
The Company regularly invests funds in excess of its immediate needs in
money market accounts. The fair value of cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities
approximates their financial statement carrying amounts due to the
short-term maturities of these instruments. The carrying amount of
notes payable approximates fair value since they have a short-term to
maturity.
(b) Foreign currency risk:
The Company operates internationally which gives rise to the risk that
cash flows may be adversely impacted by exchange rate fluctuations. The
Company does not enter into foreign currency hedge transactions.
(c) Market risk:
Approximately 83% (1999 - 100%) of the Company's revenues were from one
Canadian customer for the year ended June 30, 2000. All of the
Company's capital assets are located in Canada.
F-18
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 14
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
10. Subsequent events:
(a) In July 2000, the Company amended its stock option plan whereby all
options granted to a starting employee in any fiscal quarter will have
an exercise price equal to the average closing price for every trading
day in the previous quarter. All options granted since January 1, 2000
are to be retroactively repriced in accordance with the amended terms
unless the new exercise price exceeds the original exercise price. For
accounting purposes, all repriced options will be considered to be
variable plan options and compensation expense will be recognized to
the extent that the market price of the Company's stock increases to
the exercise or expiry date.
(b) Subsequent to June 30, 2000 the Company granted 68,500 stock options
to officers, directors and employees with an exercise price of $3.44
per share.
(c) In July 2000, the Company obtained a license to use specific dial-up
connection technology in exchange for minimum payments of $100,000 in
cash and 100,000 common shares. The Company is required to issue
warrants for each incremental 100,000 licenses sold to users over
400,000 licenses. These warrants will entitle the holder for a period
of five years to purchase shares of the Company at the stated prices.
(d) In August 2000, the Company issued 50,000 common shares and received
as consideration a note receivable in the amount of $261,800. This
note bears interest at 6.62% per annum payable at the end of each year
and is payable in full on July 25, 2005.
(e) On September 7, 2000, the Company signed a Letter of Intent to acquire
all of the assets and assume certain liabilities of MyHelpDesk, Inc.
in exchange for 1,250,000 common shares of the Company and a further
250,000 common shares one year after closing. MyHelpDesk, Inc. is a
development stage company that provides web-based computer support
services.
(f) On September 15, 2000, the Company acquired substantially all of the
assets of Tavisco Ltd., a producer of anti-virus services and
products. The purchase price for Tavisco Ltd.'s assets consisted of
200,000 shares of common stock (with up to 100,000 of these shares
subject to cancellation under certain circumstances related to
continued employment) and a cash payment of $50,000. Tavisco Ltd.
designs, develops and provides state-of-the-art virus diagnostic
products for computer service professionals. Its products include
virus scanners and cleaners, a full-featured anti-virus protection
system, and a rapid screening test that prevents virus infections.
F-19
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 15
(Expressed in U.S. Dollars)
Years ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
10. Subsequent events (continued):
(f) Continued:
The total purchase price of $376,000, including estimated acquisition
costs is allocated to the assets acquired based upon these relative
fair values as follows:
<TABLE>
<S> <C>
Software $338,400
Licences, patents and other intangibles 37,600
--------
$376,000
========
Consideration:
Cash $ 70,000
Common shares 306,000
--------
$376,000
========
</TABLE>
The common shares issued have been recorded at their market value at
September 15, 2000. The purchase price allocation is an estimate only
and is subject to change.
F-20
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Balance Sheets
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
------------ -----------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,196,534 $ 5,149,290
Trade receivables 79,661 -
Other receivables 40,624 89,933
Prepaid expenses 244,512 257,625
Deposits 70,213 189,348
------------ -----------
Total current assets 3,631,544 5,686,196
Property and equipment (note 3) 813,659 411,817
Deferred acquisition costs (note 4) 370,000 25,000
Intangible assets (note 3) 288,443 7,052
------------ -----------
$ 5,103,646 $ 6,130,065
============ ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,259,700 $ 657,050
Deferred revenue 23,323 -
------------ -----------
Total current liabilities 1,283,023 657,050
Stockholders' equity (note 5):
Common stock, $0.001 par value, authorized 100,000,000 shares;
issued 10,844,662 shares at September 30, 2000 and 10,477,662
shares at June 30, 2000 10,795 10,478
Additional paid-in capital 14,323,478 13,765,041
Deferred stock compensation (495,338) (387,563)
Deficit accumulated during the development stage (10,018,312) (7,914,941)
------------ -----------
Total stockholders' equity 3,820,623 5,473,015
------------ -----------
$ 5,103,646 $ 6,130,065
============ ===========
</TABLE>
Commitments and contingencies (note 6)
Subsequent event (note 7)
See accompanying notes to interim consolidated financial statements.
F-21
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Statements of Operations
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
December 10, 1997
Three months ended (inception) to
September 30, September 30,
2000 1999 2000
(unaudited) (unaudited)
----------- ---------- ------------
<S> <C> <C> <C>
Revenue:
License fees $ 2,326 $ 706 $ 2,666
Services and other 96,223 - 125,464
----------- ---------- ------------
98,549 706 128,130
Costs and expenses:
Cost of license fees and services 378,465 710 575,717
Development costs 294,075 221,054 1,237,794
Marketing and promotion 954,080 164,548 2,611,736
General and administrative 628,818 171,019 2,113,191
Stock-based compensation expense 58,979 113,688 957,416
----------- ---------- ------------
2,314,417 671,019 7,495,854
----------- ---------- ------------
Loss from operations (2,215,868) (670,313) (7,367,724)
Interest income (expense), net 112,497 7,853 (2,650,588)
----------- ---------- ------------
Loss for the period $(2,103,371) $ (662,460) $(10,018,312)
=========== ========== ============
Net loss per common share, basic and diluted $(0.21) $(0.11) $(2.40)
=========== ========== ============
Weighted average common shares outstanding,
basic and diluted 10,243,803 6,029,969 4,176,722
=========== ========== ============
</TABLE>
See accompanying notes to interim consolidated financial statements.3
F-22
<PAGE>
PCSUPPORT.COM, INC. and subsidiary
(A Development Stage Enterprise)
Interim Consolidated Statements of Stockholders' Equity
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended September 30, 2000
Period from December 10, 1997 (inception) September 30, 2000
<TABLE>
<CAPTION>
Common Shares
-----------------------------
Shares Amount
-------------- ------------
<S> <C> <C>
Balance, December 10, 1997 (inception) 200 $ -
Issuance of common stock for services in January, valued at $.13 per share 489,800 490
Sale of common stock in January, $0.13 per share 510,000 510
Net loss - -
------------ -------------
Balance, June 30, 1998 1,000,000 1,000
Fair value of common stock purchase warrants granted to creditor - -
Sale of common stock in January, approximately $.85 per share, net of 291,838 292
issuance costs of $131,708
Issuance of common stock for services in January and May, valued at 52,848 53
approximately $.85 per share
Conversion of note payable to common stock 66,029 66
Issuance of common stock for services in January 63,440 63
Issuance of common stock for services in April 1,500,000 1,500
Amortization of deferred stock compensation - -
Issuance of common stock for acquisition in June, net of acquisition costs of 3,033,014 3,033
$46,753 (note 3)
Treasury stock repurchased by Company in June, not cancelled (285,000) -
Net loss - -
------------ -------------
Balance, June 30, 1999 5,722,169 6,007
Exercise of warrants in July, 1999 68,400 69
Shares issued in exchange for service 4,160 4
Fair value of options issued to employees and consultants - -
Conversion of notes payable in January, net of $5,803 in cash financing costs 350,000 350
(note 6(a)(i))
Fully paid warrants issued as financing compensation cost (note 6(a)(ii)) - -
Beneficial conversion feature of notes payable issued in February (note - -
6(a)(ii))
Amortization of deferred stock compensation - -
Sale of units in March and April, $2.00 per unit, net of $38,820 in cash 666,000 666
financing costs
Sale of common stock in March, $2.00 per share, net of $36,222 in cash 2,054,000 2,054
financing costs
Exercise of warrants in March for cash 140,600 141
Sale of common stock in April, $2.00 per share 34,000 34
Sale of common stock in April, $2.125 per share, net of $175,694 in cash 645,000 645
financing costs
Conversion of promissory notes payable in May (note 6(a)(ii)) 508,333 508
Net loss - -
------------ -------------
Balance, June 30, 2000 10,192,662 $ 10,478
Issuance of common stock for acquisition of license (note 5(b)) 100,000 100
Issuance of common shares under subscription (note 5(b)) 50,000 50
Less: note receivable for common shares subscription - (50)
Exercise of stock options in September 17,000 17
Issuance of common stock for acquisition (note 3) 100,000 100
Issuance of contingent common shares (note 3) 100,000 100
Fair value of options issued employees and consultants - -
Adjustment to deferred stock compensation due to cancellations - -
Amortization of deferred stock compensation - -
Net loss - -
------------ -------------
Balance, September 30, 2000 10,559,662 $ 10,795
<CAPTION>
Additional Deferred
Paid-in Stock
Capital Compensation
------------- --------------
<S> <C> <C>
Balance, December 10, 1997 (inception) $ - $ -
Issuance of common stock for services in January, valued at $.13 per share 65,157 -
Sale of common stock in January, $0.13 per share 67,642 -
Net loss - -
------------- -------------
Balance, June 30, 1998 132,799 -
Fair value of common stock purchase warrants granted to creditor 8,407 -
Sale of common stock in January, approximately $.85 per share, net of 116,062 -
issuance costs of $131,708
Issuance of common stock for services in January and May, valued at 45,101 -
approximately $.85 per share
Conversion of note payable to common stock 109,977 -
Issuance of common stock for services in January 53,861 -
Issuance of common stock for services in April 777,620 (392,356)
Amortization of deferred stock compensation - 45,247
Issuance of common stock for acquisition in June, net of acquisition costs of 886,155 -
$46,753 (note 3)
Treasury stock repurchased by Company in June, not cancelled (148,200) 148,200
Net loss - -
------------- -------------
Balance, June 30, 1999 1,981,782 (198,909)
Exercise of warrants in July, 1999 58,197 -
Shares issued in exchange for service 6,504 -
Fair value of options issued to employees and consultants 600,900 (600,900)
Conversion of notes payable in January, net of $5,803 in cash financing costs 494,747 -
(note 6(a)(i))
Fully paid warrants issued as financing compensation cost (note 6(a)(ii)) 1,794,000 (1,794,000)
Beneficial conversion feature of notes payable issued in February (note 1,000,000 -
6(a)(ii))
Amortization of deferred stock compensation - 2,206,246
Sale of units in March and April, $2.00 per unit, net of $38,820 in cash 1,292,514 -
financing costs
Sale of common stock in March, $2.00 per share, net of $36,222 in cash 4,069,724 -
financing costs
Exercise of warrants in March for cash 188,263 -
Sale of common stock in April, $2.00 per share 67,966 -
Sale of common stock in April, $2.125 per share, net of $175,694 in cash 1,194,286 -
financing costs
Conversion of promissory notes payable in May (note 6(a)(ii)) 1,016,158 -
Net loss - -
------------- -------------
Balance, June 30, 2000 $ 13,765,041 $ (387,563)
Issuance of common stock for acquisition of license (note 5(b)) 174,900 -
Issuance of common shares under subscription (note 5(b)) 261,750 -
Less: note receivable for common shares subscription (261,750) -
Exercise of stock options in September 16,983 -
Issuance of common stock for acquisition (note 3) 199,900 -
Issuance of contingent common shares (note 3) 199,900 (200,000)
Fair value of options issued employees and consultants 25,000 (25,000)
Adjustment to deferred stock compensation due to cancellations (58,246) 58,246
Amortization of deferred stock compensation - 58,979
Net loss - -
------------- -------------
Balance, September 30, 2000 $ 14,323,478 $ (495,338)
<CAPTION>
Deficit
Accumulated
During Total
Development Stockholders'
Stage Equity
------------- -------------
<S> <C> <C>
Balance, December 10, 1997 (inception) $ - $ -
Issuance of common stock for services in January, valued at $.13 per share - 65,647
Sale of common stock in January, $0.13 per share - 68,152
Net loss (182,294) (182,294)
------------ -----------
Balance, June 30, 1998 (182,294) (48,495)
Fair value of common stock purchase warrants granted to creditor - 8,407
Sale of common stock in January, approximately $.85 per share, net of - 116,354
issuance costs of $131,708
Issuance of common stock for services in January and May, valued at - 45,154
approximately $.85 per share
Conversion of note payable to common stock - 110,043
Issuance of common stock for services in January - 53,924
Issuance of common stock for services in April - 386,764
Amortization of deferred stock compensation - 45,247
Issuance of common stock for acquisition in June, net of acquisition costs of - 889,188
$46,753 (note 3)
Treasury stock repurchased by Company in June, not cancelled - -
Net loss (767,202) (767,202)
------------ -----------
Balance, June 30, 1999 (949,496) 839,384
Exercise of warrants in July, 1999 - 58,266
Shares issued in exchange for service - 6,508
Fair value of options issued to employees and consultants - -
Conversion of notes payable in January, net of $5,803 in cash financing costs - 495,097
(note 6(a)(i))
Fully paid warrants issued as financing compensation cost (note 6(a)(ii)) - -
Beneficial conversion feature of notes payable issued in February (note - 1,000,000
6(a)(ii))
Amortization of deferred stock compensation - 2,206,246
Sale of units in March and April, $2.00 per unit, net of $38,820 in cash - 1,293,180
financing costs
Sale of common stock in March, $2.00 per share, net of $36,222 in cash - 4,071,778
financing costs
Exercise of warrants in March for cash - 188,404
Sale of common stock in April, $2.00 per share - 68,000
Sale of common stock in April, $2.125 per share, net of $175,694 in cash - 1,194,931
financing costs
Conversion of promissory notes payable in May (note 6(a)(ii)) - 1,016,666
Net loss (6,965,445) (6,965,445)
------------ ----------
Balance, June 30, 2000 $(7,914,941) $5,473,015
Issuance of common stock for acquisition of license (note 5(b)) - 175,000
Issuance of common shares under subscription (note 5(b)) - 261,800
Less: note receivable for common shares subscription - (261,800)
Exercise of stock options in September - 17,000
Issuance of common stock for acquisition (note 3) - 200,000
Issuance of contingent common shares (note 3) - -
Fair value of options issued employees and consultants - -
Adjustment to deferred stock compensation due to cancellations - -
Amortization of deferred stock compensation - 58,979
Net loss (2,103,371) (2,103,371)
------------ ----------
Balance, September 30, 2000 $(10,018,312) $3,820,623
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-23
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Interim Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from
December 10, 1997
Three months ended (inception) to
September 30, September 30,
2000 1999 2000
----------- --------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Loss for the period $(2,103,371) $(662,460) $(10,018,312)
Items not affecting cash:
Depreciation and amortization 58,649 9,649 173,576
Common stock issued in exchange for services - 39,492 513,099
Deemed discount amortization on promissory note - - 1,000,000
Amortization of deferred stock compensation 58,979 74,226 2,310,472
Discount on notes payable - - 8,407
Loss on debt extinguishment and other - - 17,566
Changes in operating assets and liabilities:
Trade receivables (79,661) - (79,661)
Other receivables 49,309 (35,511) (40,624)
Prepaid expenses 13,113 31,097 (244,512)
Deposits 119,135 24,899 (70,213)
Accounts payable and accrued liabilities 602,650 21,220 1,259,700
Deferred revenue 23,323 - 23,323
----------- --------- ------------
Net cash used in operating activities (1,257,874) (497,388) (5,147,179)
----------- --------- ------------
Cash flows from investing activities:
Purchase of property and equipment (192,882) (100,917) (716,615)
Deferred acquisition and acquisition cash costs (419,000) - (444,000)
Purchase of intangible asset (100,000) - (110,063)
----------- --------- ------------
Net cash used in investing activities (711,882) (100,917) (1,270,678)
----------- --------- ------------
Cash flows from financing activities:
Proceeds from issuance of notes payable - - 110,043
Proceeds from issuance of bridge loan - - 17,088
Repayment of bridge loan - - (17,088)
Cash acquired in acquisition - - 888,932
Cash costs of conversion of debt to equity - - (5,803)
Proceeds from promissory notes - - 1,500,000
Proceeds from exercise of stock options 17,000 - 17,000
Proceeds from exercise of share purchase warrants - 58,266 246,670
Net proceeds from sale of common stock - - 6,857,549
----------- --------- ------------
Net cash provided by financing activities 17,000 58,266 9,614,391
----------- --------- ------------
Net increase (decrease) in cash and cash equivalents (1,952,756) (540,039) 3,196,534
Cash and cash equivalents at beginning of period 5,149,290 795,809 -
----------- --------- ------------
Cash and cash equivalents at end of period $ 3,196,534 $ 255,770 $ 3,196,534
=========== ========= ============
Supplemental disclosure
Cash paid for interest $ 1,000 - $ 8,200
Non-cash activities:
Notes payable and promissory notes
converted into common stock $ - $ - $ 1,626,709
Deferred stock compensation 166,754 74,226 2,954,010
Treasury stock acquired - - 285
Discount on notes payable and promissory notes - - 1,008,407
Common stock issued for intangibles 175,000 - 175,000
Common stock issued on acquisition 200,000 - 200,000
Common stock issued for services - - 558,346
See accompanying notes to interim consolidated financial statements.
</TABLE>
F-24
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended September 30, 2000
Period from December 10, 1997 (inception) to September 30, 2000
--------------------------------------------------------------------------------
1. Nature of development stage activities:
These interim consolidated financial statements have been prepared on a
going concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes the
Company will continue in operation for the foreseeable future and will be
able to realize its assets and discharge its liabilities and commitments in
the normal course of business. Certain conditions, as discussed below,
currently exist which raise substantial doubt upon the validity of this
assumption. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company's future operations are dependent upon the market's acceptance
of its services and the Company's ability to secure cost-effective third
party license service supply agreements. There can be no assurance that
the Company's services will be able to secure market acceptance or that
cost effective license and service supply agreements will exist or continue
to exist. As of September 30, 2000, the Company is considered to be in the
development stage as the Company has not generated significant revenues and
is continuing to develop its business. Operations have primarily been
financed through the issuance of equity instruments and debt. The Company
does not have sufficient working capital to sustain operations until
September 30, 2001. The Company has contracted with third parties to assist
them in securing funds through additional debt or equity financings. Such
financings may not be available or may not be available on reasonable
terms.
2. Basis of presentation:
(a) These interim consolidated financial statements have been prepared
using generally accepted accounting principles in the United States.
The interim financial statements include the accounts of the Company
and its wholly-owned subsidiary, Reconnaissance International Ltd., and
all adjustments, consisting solely of normal recurring adjustments,
which in management's opinion are necessary for a fair presentation of
the financial results for the interim periods. The financial statements
have been prepared consistent with the accounting policies described in
the Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission for the year ended June 30, 2000, and should be
read in conjunction therewith. Certain comparative figures have been
reclassified to conform to the presentation adopted in the current
period.
(b) Use of estimates:
The preparation of interim consolidated financial statements in
accordance with United States generally accepted accounting principles
requires management to make estimates and assumptions that affect the
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial
statements and reported revenues and expenses for the reporting
periods. Actual results may significantly differ from these estimates.
F-25
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 2
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended September 30, 2000
Period from December 10, 1997 (inception) to September 30, 2000
--------------------------------------------------------------------------------
2. Basis of presentation (continued):
(c) Net loss per share:
Basic loss per share is computed using the weighted average number of
common stock outstanding during the periods. Excluded from the weighted
average number of common stock outstanding are 100,000 shares held in
trust which are contingently returnable to the Company (note 3).
Diluted loss per share is computed using the weighted average number of
common and potentially dilutive common stock outstanding during the
period. As the Company has a net loss in each of the periods presented,
basic and diluted net loss per share is the same.
Excluded from the computation of diluted loss per share for the periods
ended September 30, 2000 are warrants to purchase 2,965,838 (September
30, 1999 - 243,438) shares of common stock and options to purchase
1,232,036 (September 30, 1999 - 527,950) shares of common stock because
their effects would be anti-dilutive.
3. Acquisition:
On September 15, 2000, the Company acquired substantially all of the
assets of Tavisco Ltd., a producer of anti-virus services and products.
The purchase price for Tavisco Ltd.'s assets consisted of 100,000
shares of common stock valued at $200,000 and a cash payment of $50,000
and other related acquisition costs of $24,000. The total purchase
price of $274,000, including estimated acquisition costs, is allocated
to the assets acquired based upon their relative fair values as
follows:
<TABLE>
<S> <C>
Software $252,000
Licenses, patents and other 22,000
intangibles --------
$274,000
--------
Consideration
Cash $ 74,000
Common shares 200,000
--------
$274,000
--------
</TABLE>
The common shares issued have been recorded at their market value at
June 12, 2000, the date when the terms of the acquisition were publicly
announced. Under the terms of the acquisition, an additional 100,000
common shares have been issued to Tavisco Ltd. The shares are subject
to cancellation under circumstances related to continued employment of
former Tavisco employees with the Company. The issuance of these shares
have been recorded as deferred stock compensation and amortized over
the relative service period.
F-26
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 3
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended September 30, 2000
Period from December 10, 1997 (inception) to September 30, 2000
--------------------------------------------------------------------------------
3. Acquisition (continued):
The following table reflects unaudited pro-forma information which
combines the operations of Tavisco Ltd. and the Company for the three
months ending September 30, 2000 and 1999, and for the period from
December 10, 1997 (inception) to September 30, 2000, as if the
acquisition had taken place at the beginning of these periods.
Appropriate adjustments have been made to reflect the accounting basis
used in recording these acquisitions. This pro-forma information does
not purport to be indicative of the results of operations that would
have resulted had the acquisition been in effect for the periods
presented, and is not intended to be a projection of future results or
trends.
<TABLE>
<CAPTION>
Three months ended Three months ended Period from December 10,
September 30, 2000 September 30, 1999 1997 (inception) to
September 30, 2000
<S> <C> <C> <C>
Revenue $ 98,549 $ 706 $ 128,130
Net loss for the period $(2,136,703) $(695,792) $(10,290,478)
Net loss per common share, basic and diluted $ (0.21) $ (0.12) $ (2.41)
</TABLE>
4. Deferred acquisition costs:
Deferred acquisition costs is comprised of cash advances to MyHelpDesk,
Inc. ("MHD") with whom the Company signed a Letter of Intent on
September 7, 2000 to acquire all of the assets and assume certain
liabilities in exchange for 1,250,000 common shares of the Company and
a further 250,000 common shares one year after closing. MHD is a
development stage company that provides web-based computer support
services. The Company is committed to assuming the ongoing costs of
maintaining the business of MHD effective September 1, 2000 to the
closing or cancellation to a maximum of $100,000 per week. If the
Company cancels the transaction, all funding will convert to a senior
debenture bearing interest at 1% per month.
F-27
<PAGE>
PCSUPPORT.COM, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 3
(Unaudited)
(Expressed in U.S. Dollars)
Three months ended September 30, 2000
Period from December 10, 1997 (inception) to September 30, 2000
--------------------------------------------------------------------------------
5. Stockholders' equity:
(a) Stock options and stock-based compensation:
During the three months ended September 30, 2000, the Company granted
85,500 stock options with exercise prices ranging from $1.95 to $3.44
and having a vesting period ranging from immediate up to 36 months.
Stock compensation expense for the three months ended September 30,
2000 totaling $58,979 (1999 - $113,688) would be allocated $16,265
(1999 - $4,167) to Development costs, $13,172 (1999 - $62,265) to
Marketing and promotion costs, and $29,542 (1999 - $47,256) to General
and administrative costs.
(b) Shares:
The Company issued 100,000 common shares valued at $175,000 and paid
$100,000 in cash in exchange for a license to use specific on line
support technology. The Company is required to issue warrants for each
incremental 100,000 licenses sold to users over 400,000 licenses. These
warrants will entitle the holder for a period of five years to purchase
shares of the Company at the stated prices.
In August 2000, the Company issued 50,000 common shares and received as
consideration a note receivable in the amount of $261,800. This note
bears interest at 6.62% per annum payable at the end of each year and
is payable in full on July 25, 2005.
6. Commitments and contingencies:
Subsequent to September 30, 2000, the Company entered into a sublease
of one of its office premises. Under the terms of the agreement, the
lessee has operating lease commitments to the Company equal to the
Company's own commitments in the following annual amounts:
<TABLE>
<S> <C>
2001 $121,500
2002 125,076
2003 20,846
</TABLE>
7. Subsequent event:
Subsequent to September 30, 2000, the Company completed a private
placement for the subscription of 1,350,000 common shares at a price
per share of $1.50. Proceeds, net of commissions paid, of $1,822,500
were received by the Company at closing. The Company has agreed to
issue 250,000 warrants as compensation for arranging the financing.
F-28
<PAGE>
================================================================================
We have not authorized anyone to give any information or make any
representations, other than those contained in this prospectus. You must not
rely on any unauthorized information or representations. Only the shares
described within this prospectus are being offered, and only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
-----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary ........................................................ 2
Risk Factors .............................................................. 3
Use of Proceeds ........................................................... 12
Our Business .............................................................. 12
Management's Discussion and Analysis of
Financial Condition and Results of Operations .......................... 23
Directors, Executive Officers, Promoters and
Control Persons ...................................................... 26
Security Ownership of Certain Beneficial
Owners and Management ................................................ 28
Executive Compensation .................................................... 29
Certain Relationships and Related
Transactions ......................................................... 32
Disclosure of Commission Position of
Indemnification for Securities Act Liabilities ....................... 33
Description of Securities ................................................. 34
Market For Common Equity and Related
Stockholder Matters .................................................. 34
Selling Securityholders ................................................... 36
Plan of Distribution ...................................................... 40
Experts ................................................................... 41
Legal Matters ............................................................. 41
Changes In and Disagreements With
Accountants on Accounting and Financial Disclosure ................... 41
Where You Can Find More Information ....................................... 41
Financial Statements ...................................................... 42
</TABLE>
8,791,331 Shares of Common Stock
PCSUPPORT.COM, INC.
___________________
PROSPECTUS
___________________
================================================================================
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our by-laws provide that no officer or Director shall be personally liable
for any of our obligations or for any duties or obligations arising out of any
acts or conduct of said officer or Director performed for or on our behalf. We
indemnify and hold harmless each person who serves at any time as a Director or
officer, and his heirs and administrators, from and against any and all claims,
judgments and liabilities to which such person shall become subject by reason of
his having been a Director or officer, or by reason of any action alleged to
have been taken or omitted to have been taken by him as such Director or
officer, and shall reimburse such person for all legal and other expenses
reasonably incurred by him in connection with any such claim or liability. We
also have the power to defend such person from all suits or claims in accord
with the Nevada General Corporation Law. However, no such person shall be
indemnified against, or be reimbursed for, any expense incurred in connection
with any claim or liability arising out of his own negligence or willful
misconduct. The rights accruing to any person under our by-laws do not exclude
any other right to which he may lawfully be entitled, and we may indemnify or
reimburse such person in any proper case, even though not specifically provided
for by the by-laws. We shall be fully protected in taking any action or making
any payment, or in refusing so to do, in reliance upon the advice of counsel, as
shall our Directors, officers, employees and agents.
Insurance. We may purchase and maintain insurance on behalf of any person
who is or was our Director, officer or employee, or is or was serving at our
request as a Director, officer, employee or agent of another company,
partnership, joint venture, trust or other enterprise against liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the we would have the power to indemnify him
against liability under the provisions of this section. We currently do not
maintain any such insurance.
Settlement by the Company. The right of any person to be indemnified is
subject always to our right by our Board of Directors, in lieu of such
indemnity, to settle any such claim, action, suit or proceeding at our expense
by the payment of the amount of such settlement and the costs and expenses
incurred in connection therewith.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We estimate that expenses in connection with the distribution described in
this registration statement (other than brokerage commissions, discounts or
other expenses relating to the sale of the shares by the selling stockholders)
will be as set forth below. All of the expenses as set forth below that are
incurred with respect to the distribution will be paid us, and such amounts,
with the exception of the Securities and Exchange Commission registration fee,
are estimates.
SEC registration fee........................................... $ 6,474
Accounting fees and expenses................................... 10,000
Legal fees and expenses........................................ 55,000
Printing expenses.............................................. 10,000
Miscellaneous.................................................. 1,500
Total....................................................... $82,974
=======
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
a. On January 31, 1999, PCS (then Mex Trans) issued 38,666 shares of common
stock at a deemed aggregate price of $49,000, for services rendered by a
former director of PCS. This offering was made without registration under
the Act in reliance upon the exemptions from registration afforded by
Sections 4(2) and 3(b) of the Act and Rule 504 of Regulation D promulgated
thereunder.
b. On April 7, 1999, PCS issued an aggregate of 214,817 shares of common stock
for aggregate proceeds of $951,000 to 140 investors. This placement was
completed in connection with the Merger, and the purchasers included
certain directors and officers of RTI. This offering was made without
registration under the Act in reliance upon the exemptions from
registration afforded by Sections 4(2) and 3(b) of the Act and Rule 504 of
Regulation D promulgated thereunder.
All share and per share information set forth above in (a) and (b) has been
adjusted to reflect PCS's one-for-fifteen reverse split in connection with
the Merger.
c. On June 23, 1999, the Company issued 1,474,155 shares of common stock to
the former shareholders of RTI (50 Canadian residents and one U.S.
resident) and 311,838 warrants to purchase an aggregate of 311,838 shares
of common stock to the former warrant holders of RTI (44 Canadian residents
and one U.S. resident), in connection with the Merger. Of the warrants,
20,000 are exercisable to acquire one share of common stock each until
January 26, 2000, at a price of $0.85 per share. The remaining 291,838
warrants are each exercisable to acquire one share of common stock for a
period expiring three months after the completion of an initial public
offering of the Company's common stock, at a price of $1.34 per share. If,
at any time prior to the expiration of these warrants, the Company
completes a financing for gross proceeds of more than (Cdn)$400,000 and
issues shares of common stock, at a price which is higher than the exercise
price of these warrants, the warrant holders have ten days to exercise the
warrants, after which the exercise price is increased to the price at which
the securities were sold. The shares and warrants issued to the former RTI
shareholders were issued without registration under the Act, in reliance on
the exemptions from registration contained in Regulation S and Section 4(2)
of the Act due to the foreign nationality of the investors (except for one
accredited U.S. investor), in exchange for an aggregate of 7,370,775 shares
of the common stock of RTI, and 1,559,190 warrants of RTI.
The shares and warrants of RTI were originally issued as follows (as
adjusted to reflect the one- for-five exchange ratio in the subsequent
Merger):
(1) On December 10, 1997, RTI issued 200 shares of common stock to Dromond, in
connection with the incorporation of RTI. These shares were issued
pursuant to the exemption from registration contained in Regulation S under
the Act due to the foreign nationality of the investor and RTI.
(2) On January 6, 1998, RTI issued an aggregate of 999,800 common shares to
Dromond and Advanced for aggregate gross cash proceeds of $74,965 and
services rendered having an aggregate value of $58,834. These shares were
issued pursuant to Regulation S under the Act due to the foreign
nationality of the investors and RTI.
(3) On January 16, 1999, 63,440 common shares of RTI were issued to Dromond for
services rendered having an aggregate value of $53,924. These shares were
issued pursuant to Regulation S under the Act due to the foreign
nationality of the investor and RTI.
II-2
<PAGE>
(4) On January 6, 1999, RTI issued an aggregate of 66,029 common shares to
Advanced for aggregate gross proceeds of $110,043. These shares were
issued pursuant to Regulation S under the Act due to the foreign
nationality of the investor and RTI.
(5) Between January 26, 1999 and February 18, 1999, RTI issued an aggregate of
291,838 units, each unit consisting of one (1) common share and one (1)
common share purchase warrant, to 45 investors, for aggregate gross
proceeds of $248,062. Each warrant entitled the holder to acquire a
further common share of RTI for a period expiring three (3) months after
the completion of an initial public offering of RTI's common shares, at a
price of (Cdn)$1.25, if exercise on or before July 18, 1999, and thereafter
at a price of (Cdn)$2.00 per share. If RTI completed a second financing
for proceeds of (Cdn)$400,000 before the expiration of the warrants in
which the common shares of RTI were sold at a price greater than the
exercise price of the warrants, the warrant holders had ten (10) days to
exercise the warrants, after which the exercise price increased to the
price at which the shares were sold in the financing. RTI paid finders'
fees of: (i) 4,496 common shares and (Cdn)$5,620 to Odlum Brown Ltd., of
1800, 609 Granville Street, Vancouver, British Columbia; and (ii) 4,352
common shares and (Cdn)$5,440 to Wolverton Securities Inc., of 17th Floor,
777 Dunsmuir Street, Vancouver, British Columbia for services provided, in
connection with locating investors for RTI. Odlum Brown Ltd. and Wolverton
Securities Inc. are securities dealers based in Vancouver, B.C. These
shares were issued pursuant to Regulation S and Section 4(2) of the Act due
to the foreign nationality of the investors (except for one accredited U.S.
investor).
(6) On January 26, 1999, RTI issued 30,000 common shares to a consulting firm
in connection with the provision of corporate finance advice which
culminated in the completion of the financing described in paragraph (5)
above. On May 19,1999, RTI issued 6,000 common shares to the same firm in
connection with the provision of further financial advice. These shares
were issued pursuant to Regulation S under the Act due to the foreign
nationality of the investor and RTI.
(7) On January 26, 1999, RTI issued 20,000 warrants to Advanced in
consideration for the non-interest bearing credit facility in the amount of
(Cdn)$50,000 provided by Advanced to RTI until completion of the financing
set out in paragraph (5) above. Each warrant entitled Advanced to acquire
one common share of RTI for a period of one year expiring January 26, 2000,
at a price of (Cdn)$1.25 per share. These securities were issued pursuant
to Regulation S under the Act due to the foreign nationality of the
investor and RTI. These warrants expired unexercised.
(8) On January 26, 1999, RTI issued an aggregate of 8,000 common shares to the
law firm of Anfield, Sujir, Kennedy, and Durno in consideration of legal
advice which culminated in the completion of the financing described in
paragraph (5) above. These shares were issued pursuant to Regulation S
under the Act due to the foreign nationality of the investor and RTI.
d. On July 17, 1999, the Company issued 68,400 shares of common stock to 14
investors upon the exercise of 68,400 warrants, for aggregate gross
proceeds of $58,266. These shares were issued pursuant to Regulation S
under the Act due to the foreign nationality of the investors.
e. On December 27, 1999, the Company agreed to issue 4,160 shares of common
stock to an online publisher of PC maintenance and support information in
consideration of such publisher's agreement to make such information
available to the Company for publication on the Company's Web site. This
offering was made without registration under the Act in reliance upon the
exemption from registration afforded by Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder.
II-3
<PAGE>
f. On January 11, 2000, the Company issued 350,000 shares of common stock and
240,000 warrants to a private investor who agreed to accept these
securities in discharge of $500,000 in indebtedness owing to such investor
by the Company. This offering was made without registration under the Act
in reliance upon the exemption from registration afforded by Section 4(2)
of the Act and Rule 506 of Regulation D promulgated thereunder.
g. On January 11, 2000, the Company issued 10,000 warrants to two individuals
in connection with corporate finance services, including the introduction
of the Company to ICE Holdings North America LLC. These warrants enable
the holders to purchase 10,000 common shares at a price of $1.05 for three
years. This offering was made without registration under the Act in
reliance upon the exemption from registration afforded by Section 4(2) of
the Act and Rule 506 of Regulation D promulgated thereunder.
h. On February 29, 2000, the Company issued promissory notes convertible into
common shares to 13 investors for aggregate gross proceeds of $1,000,000.
These notes carried a coupon of 10% payable in common shares at a rate of
$2.00 per common share. These notes were also convertible into 500,000
common shares (plus accrued interest payable at a rate of $2.00 per common
share) at anytime at the holder's option, and at the Company's option at
any time after April 29, 2000. The Company converted these notes on May 1,
2000. On March 8, 2000, the Company issued 1,000,000 two-year "A" warrants
and 500,000 two-year "B" warrants to Mike Lee and Associates, an adviser,
in consideration of ongoing financial consulting services provided to the
Company, including services in connection with the placement of the
convertible notes described above and other related services. The "A"
warrants are exercisable into common shares at a price of $1.25 in the
first year and $1.75 in the second year. The "B" warrants are exercisable
into common shares at a price of $2.00 in the first year and $2.50 in the
second year. These offerings were made without registration under the Act
in reliance upon the exemption from registration afforded by Section 4(2)
of the Act and Rule 506 of Regulation D promulgated thereunder.
i. Between February 29, 2000 and April 21, 2000, the Company issued an
aggregate of 666,000 units, each unit consisting of one (1) common share
and one-half (1/2) common share purchase warrant, to 16 investors, for
aggregate gross proceeds of $1,332,000. Each warrant entitles the holder
to acquire a further common share for a period expiring twelve (12) months
after its original issuance at a price of $2.00 per share. This offering
was made without registration under the Act in reliance upon the exemption
from registration afforded by Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder.
j. On March 21, 2000, the Company issued 2,054,000 shares of common stock to
42 investors for aggregate gross proceeds of $4,108,000. This offering was
made without registration under the Act in reliance upon the exemption from
registration afforded by Section 4(2) of the Act and Rule 506 of Regulation
D promulgated thereunder. On March 24, 2000, the Company agreed to issue
500,000 warrants to Wolverton Securities, in consideration of financial
consulting services provided to the Company in connection with the sales of
the 2,054,000 shares described above. These offerings were made without
registration under the Act in reliance upon the exemption from registration
afforded by Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder.
k. On March 31, 2000, the Company agreed to issue 140,600 shares of common
stock to 29 investors upon the exercise of 140,600 warrants, for aggregate
gross proceeds of $188,404. These shares were issued pursuant to
Regulation S under the Act due to the foreign nationality of the investors.
II-4
<PAGE>
l. On April 20, 2000, the Company agreed to issue 645,000 shares to 9
investors for aggregate gross proceeds of $1,370,625. This offering was
made without registration under the Act in reliance upon the exemption from
registration afforded by Section 4(2) of the Act and Rule 506 of Regulation
D promulgated thereunder.
m. On April 21, 2000, the Company agreed to issue 50,000 warrants to two
individuals in connection with corporate finance services, including the
introduction of the Company to ICE Holdings North America LLC. These
warrants enable each individual to purchase 25,000 common shares at a price
of $5.47 for three years. This offering was made without registration
under the Act in reliance upon the exemption from registration afforded by
Section 4(2) of the Act and Rule 506 of Regulation D promulgated
thereunder.
n. On April 25, 2000, the Company agreed to issue 34,000 shares of common
stock to an investor for aggregate gross proceeds of $68,000. This
offering was made without registration under the Act in reliance upon the
exemption from registration afforded by Section 4(2) of the Act and Rule
506 of Regulation D promulgated thereunder.
o. In August 2000, the Company agreed to issue 50,000 shares of common stock
to an affiliate of the Company's public relations firm, receiving as
consideration a note receivable in the amount of $261,800. This note bears
interest at 6.62% per annum payable, which is due at the end of each year.
This offering was made without registration under the Act in reliance upon
the exemption from registration afforded by Section 4(2) of the Act and
Rule 506 of Regulation D promulgated thereunder.
p. On September 15, 2000, the Company agreed to issue 200,000 shares of common
stock to Tavisco, Ltd. in connection with the Company's acquisition of
substantially all of the assets of Tavisco Ltd. This offering was made
without registration under the Act in reliance upon the exemption from
registration afforded by Section 4(2) of the Act and Rule 506 of Regulation
D promulgated thereunder.
q. In October 2000, the Company issued 100,000 shares of common stock to a
company in connection with a licensing agreement with that company
regarding specific online support technology. Under the licensing
agreement, the Company is required to issue warrants to the licensor for
each incremental 100,000 licenses sold to users over 400,000 licenses.
This offering was made without registration under the Act in reliance upon
the exemption from registration afforded by Section 4(2) of the Act and
Rule 506 of Regulation D promulgated thereunder.
r. On November 7, 2000, the Company issued 1,350,000 shares of common stock to
four foreign institutional investors in exchange for approximately
$2,025,000. These issuances were made without registration under the Act in
reliance upon the exemption from registration afforded by Section 4(2) of
the Act and Rule 506 of Regulation D promulgated thereunder.
s. On November 27, 2000, the Company issued 1,000,000 shares of common stock
to MyHelpDesk, Inc. ("MHD") pursuant to an Asset Purchase Agreement between
the Company and MHD, in which the Company acquired all of the assets and
certain of the liabilities of MHD. Under the terms of the Asset Purchase
Agreement, the Company is also required within twelve months following the
initial issuance to issue an additional 387,500 shares of common stock to
MHD and 112,500 shares of common stock to eight present and former
employees of MHD, with the number of shares to be issued in the subsequent
issuances subject to reduction in the event of certain breaches of the
representations and warrants of MHD under the Asset Purchase Agreement.
These issuances were or will be made without registration under the Act in
reliance
II-5
<PAGE>
upon the exemption from registration afforded by Section 4(2) of the Act
and Rule 506 of Regulation D promulgated thereunder.
ITEM 27. EXHIBITS
Exhibit Number Description
-------------- -----------
2.1 Plan of Reorganization and Merger dated as of May 5, 1999
between the Company and RTI.*
3.1 Articles of Incorporation of the Company dated as of April
5, 1999.*
3.2 Articles/Certificate of Merger of the Company dated as of
April 5, 1999.*
3.3 Certificate of Correction of the Company dated as of June 2,
1999.*
3.4 Articles of Merger of the Company dated as of June 21,
1999.*
3.5 Bylaws of the Company.*
4.1 Specimen Stock Certificate****
4.2 Form of Warrant issued to former RTI warrantholders in
connection with the Merger.*
4.3 Form of Warrant issued to Advanced in connection with the
Merger.*
4.4 Warrant issued on January 11, 2000 to CGTF, LLC.**
4.5 Form of Warrants issued on January 11, 2000 to Irwin Olian
and Stanley Elbaum.***
4.6 Form of Warrants issued to Purchasers in February, 2000 Unit
Offering.***
4.7 Form of Convertible Notes issued on February 29, 2000.***
4.8 Form of "A" Warrant issued on March, 10, 2000 to Mike Lee &
Associates.***
4.9 Form of "B" Warrant issued on March, 10, 2000 to Mike Lee &
Associates.***
4.10 Form of Warrants issued to ICE Holdings North America, L.L.C
on June 23, 2000.******
5.1 Opinion of Counsel as to the legality of securities being
registered.
10.1 Contract for Services dated as of June 23, 1999 between the
Company and The Dromond Technologies Group.*
10.2 Notice of Termination dated as of March 31, 2000 from the
Company to The Dromond Technologies Group, Inc.***
II-6
<PAGE>
10.3 Consulting Contract dated as of April 1, 1999 between RTI
and Strategic Catalysts Inc.*
10.4 Termination Letter dated as of December 31, 1999 from the
Company to SCI.**
10.5 Employment Agreement dated as of March 1, 2000 between the
Company and Michael McLean.***
10.6 Employment Agreement effective January 1, 2000 between the
Company and Steve Macbeth.**
10.7 Employment Agreement effective January 1, 2000 between the
Company and David Rowat.**
10.8 Employment Agreement dated as of November 17, 1999 between
the Company and Bruce McDonald.**
10.9 Directors, Officers and Employee Stock Option Plan, as
amended by the Company's Board of Directors on November 30,
1999.***
10.10 Standard Form of Stock Option Agreement, as amended by the
Company's Board of Directors on November 30, 1999.***
10.11 Stock Pooling and Escrow Agreement dated as of July 31, 1999
among the Company, Advanced Financial Services Inc., Alan
Ackerman, David Rowat, Clifford Rowlands, Michael McLean,
Steve Macbeth, The Dromond Group Ltd., and Owen, Bird.*
10.12 Amendment dated as of March 7, 2000 to the Stock Pooling and
Escrow Agreement among the Company, Advanced Financial
Services Inc., Alan Ackerman, David Rowat, Clifford
Rowlands, Michael McLean, Steve Macbeth, The Dromond Group
Ltd., and Owen, Bird.***
10.13 Offer to Sub-Lease dated as of April 22, 1999 among
Electronic Arts (Canada), Inc., RTI, and Beutel Goodman Real
Estate Group.*
10.14 Lease dated as of March, 26, 1992 between The Canada Life
Assurance Company and Osiware Inc.*
10.15 Assignment Agreement dated as of July 29, 1997 among Infonet
Software Solutions Inc., Electronic Arts (Canada), Inc., and
547495 Ontario Limited.*
10.16 Sub-Lease Agreement between PCsupport.com and Chalk.com
10.17 Service Contract dated as of April 1, 1999 between the
Company and Unisys of Canada Inc.*
10.18 Consulting Contract dated as of August 6, 1999 between the
Company and M.A. Levy & Assoc.*
10.19 Consulting Agreement dated as of September 1, 1999 between
the Company and Irwin Olian.*
II-7
<PAGE>
10.20 Engagement Letter dated as of October 6, 1999 between the
Company and Sitrick and Company.**
10.21 Service Agreement dated as of January 7, 2000 between the
Company and Go Figure Technology, Inc.**
10.22 Agreement to Convert Notes Into Stock and Warrants dated as
of January 11, 2000 between the Company and CGTF, LLC.**
10.23 Term Sheet dated as of February 24, 2000 between the Company
and Mike Lee & Associates.***
10.24 Purchasing Schedule No. 2 dated as of March 13, 2000 between
the Company and Motive Communications, Inc.***
10.25 Engagement Letter dated as of March 21, 2000 between the
Company and ICE Holdings North America, L.L.C.****
10.26 Content License Agreement, dated as of April 4, 2000,
between the Company and AltaVista Company.****+
10.27 Advertising Agreement, dated as of April 7, 2000, between
the Company and AltaVista Company.****+
10.28 Lease, dated as of June 1, 2000, between the Company and
Discovery Parks Incorporated. *****
10.29 Services Distribution Agreement dated as of July 31, 2000
between the Company and ICE Holdings North America,
L.L.C.******
10.30 Revision to engagement letter dated May 20, 2000 between the
Company and ICE Holdings North America, L.L.C.******
10.31 Second Revision to engagement letter dated May 20, 2000
between the Company and ICE Holdings North America, L.L.C.
dated November 28, 2000.
10.32 Asset Purchase Agreement with Tavisco Ltd. dated September
15, 2000.******
10.33 Letter of Intent between the Company and MyHelpDesk dated
September 7, 2000.******
10.34 Asset Purchase Agreement between the Company and MyHelpDesk
dated November 27, 2000. ********
10.35 License Agreement dated September 24, 2000 between the
Company and Remote Diagnostics, Inc.******
10.36 Promissory Note dated as of July 25, 2000 between the
Company and Coffin Partners, LLC Series C.*******
II-8
<PAGE>
10.37 Subscription agreement dated as of July 25, 2000 between the
Company and Coffin Partners, LLC Series C.*******
23.1 Consent of Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24 Power of Attorney (see page II-11).
* Incorporated by reference to the Company's Form 10-SB filed on
October 18, 1999.
** Incorporated by reference to the Company's Amendment No. 2 to Form
10- SB filed on January 12, 2000.
*** Incorporated by reference to the Company's Report on Form 10-QSB
filed on May 15, 2000.
**** Incorporated by reference to the Company's Form SB-2 filled on May
24, 2000.
***** Incorporated by reference to the Company's Form SB-2A filed on June
19, 2000.
****** Incorporated by reference to the Company's Form 10-KSB filed on
September 28, 2000.
******* Incorporated by reference to the Company's Form 10-QSB filed on
November 16, 2000.
******** Incorporated by reference to the Company's Form 8-K filed on December
8, 2000.
+ Certain portions of this exhibit have been omitted pursuant to a
request for confidential treatment. Omitted portions will be filed
separately with the Securities and Exchange Commission.
ITEM 28. UNDERTAKINGS
A. Rule 415 Offering
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Company pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
II-9
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. Request for Acceleration of Effective Date
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-10
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements of filing on Form SB-2 and has authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Barnaby,
British Columbia, Canada, on December 11, 2000.
PCSUPPORT.COM, INC.
By /s/ Michael G. McLean
-----------------------------
Michael G. McLean
President and Chief Executive Officer
POWER OF ATTORNEY
The officers and directors of PCSupport.com, Inc., whose signatures appear
below, hereby constitute and appoint Michael G. McLean and David W. Rowat, and
each of them, their true and lawful attorneys and agents, each with power to act
alone, to sign, execute and cause to be filed on behalf of the undersigned any
amendment or amendments, including post-effective amendments, to this
registration statement. Each of the undersigned does hereby ratify and confirm
all that said attorneys and agents shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael G. McLean President, Chief Executive Officer and 12/11/00
------------------------------ Chairman (Principal Executive Officer)
Michael G. McLean
/s/ David W. Rowat Vice President and Chief Financial 12/11/00
------------------------------ Officer (Principal Financial and
David W. Rowat Accounting Officer)
/s/ Steven W. Macbeth Director 12/11/00
------------------------------
Steven W. Macbeth
/s/ W. Benjamin Catalano Director 12/11/00
------------------------------
W. Benjamin Catalano
/s/ Bruce Nelson Director 12/11/00
------------------------------
Bruce Nelson
</TABLE>
II-11
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
2.1 Plan of Reorganization and Merger dated as of May 5, 1999
between the Company and RTI.*
3.1 Articles of Incorporation of the Company dated as of April
5, 1999.*
3.2 Articles/Certificate of Merger of the Company dated as of
April 5, 1999.*
3.3 Certificate of Correction of the Company dated as of June 2,
1999.*
3.4 Articles of Merger of the Company dated as of June 21,
1999.*
3.5 Bylaws of the Company.*
4.1 Specimen Stock Certificate****
4.2 Form of Warrant issued to former RTI warrantholders in
connection with the Merger.*
4.3 Form of Warrant issued to Advanced in connection with the
Merger.*
4.4 Warrant issued on January 11, 2000 to CGTF, LLC.**
4.5 Form of Warrants issued on January 11, 2000 to Irwin Olian
and Stanley Elbaum.***
4.6 Form of Warrants issued to Purchasers in February, 2000 Unit
Offering.***
4.7 Form of Convertible Notes issued on February 29, 2000.***
4.8 Form of "A" Warrant issued on March, 10, 2000 to Mike Lee &
Associates.***
4.9 Form of "B" Warrant issued on March, 10, 2000 to Mike Lee &
Associates.***
4.10 Form of Warrants issued to ICE Holdings North America, L.L.C
on June 23, 2000.******
5.1 Opinion of Counsel as to the legality of securities being
registered.
10.1 Contract for Services dated as of June 23, 1999 between the
Company and The Dromond Technologies Group.*
10.2 Notice of Termination dated as of March 31, 2000 from the
Company to The Dromond Technologies Group, Inc.***
<PAGE>
10.3 Consulting Contract dated as of April 1, 1999 between RTI
and Strategic Catalysts Inc.*
10.4 Termination Letter dated as of December 31, 1999 from the
Company to SCI.**
10.5 Employment Agreement dated as of March 1, 2000 between the
Company and Michael McLean.***
10.6 Employment Agreement effective January 1, 2000 between the
Company and Steve Macbeth.**
10.7 Employment Agreement effective January 1, 2000 between the
Company and David Rowat.**
10.8 Employment Agreement dated as of November 17, 1999 between
the Company and Bruce McDonald.**
10.9 Directors, Officers and Employee Stock Option Plan, as
amended by the Company's Board of Directors on November 30,
1999.***
10.10 Standard Form of Stock Option Agreement, as amended by the
Company's Board of Directors on November 30, 1999.***
10.11 Stock Pooling and Escrow Agreement dated as of July 31, 1999
among the Company, Advanced Financial Services Inc., Alan
Ackerman, David Rowat, Clifford Rowlands, Michael McLean,
Steve Macbeth, The Dromond Group Ltd., and Owen, Bird.*
10.12 Amendment dated as of March 7, 2000 to the Stock Pooling and
Escrow Agreement among the Company, Advanced Financial
Services Inc., Alan Ackerman, David Rowat, Clifford
Rowlands, Michael McLean, Steve Macbeth, The Dromond Group
Ltd., and Owen, Bird.***
10.13 Offer to Sub-Lease dated as of April 22, 1999 among
Electronic Arts (Canada), Inc., RTI, and Beutel Goodman Real
Estate Group.*
10.14 Lease dated as of March, 26, 1992 between The Canada Life
Assurance Company and Osiware Inc.*
10.15 Assignment Agreement dated as of July 29, 1997 among Infonet
Software Solutions Inc., Electronic Arts (Canada), Inc., and
547495 Ontario Limited.*
10.16 Sub-Lease Agreement between PCsupport.com and Chalk.com.
10.17 Service Contract dated as of April 1, 1999 between the
Company and Unisys of Canada Inc.*
10.18 Consulting Contract dated as of August 6, 1999 between the
Company and M.A. Levy & Assoc.*
<PAGE>
10.19 Consulting Agreement dated as of September 1, 1999 between
the Company and Irwin Olian.*
10.20 Engagement Letter dated as of October 6, 1999 between the
Company and Sitrick and Company.**
10.21 Service Agreement dated as of January 7, 2000 between the
Company and Go Figure Technology, Inc.**
10.22 Agreement to Convert Notes Into Stock and Warrants dated as
of January 11, 2000 between the Company and CGTF, LLC.**
10.23 Term Sheet dated as of February 24, 2000 between the Company
and Mike Lee & Associates.***
10.24 Purchasing Schedule No. 2 dated as of March 13, 2000 between
the Company and Motive Communications, Inc.***
10.25 Engagement Letter dated as of March 21, 2000 between the
Company and ICE Holdings North America, L.L.C.****
10.26 Content License Agreement, dated as of April 4, 2000,
between the Company and AltaVista Company.****+
10.27 Advertising Agreement, dated as of April 7, 2000, between
the Company and AltaVista Company.****+
10.28 Lease, dated as of June 1, 2000, between the Company and
Discovery Parks Incorporated. *****
10.29 Services Distribution Agreement dated as of July 31, 2000
between the Company and ICE Holdings North America,
L.L.C.******
10.30 Revision to engagement letter dated May 20, 2000 between the
Company and ICE Holdings North America, L.L.C.******
10.31 Second Revision to engagement letter dated May 20, 2000
between the Company and ICE Holdings North America, L.L.C.
dated November 28, 2000.
10.32 Asset Purchase Agreement with Tavisco Ltd. dated September
15, 2000.******
10.33 Letter of Intent between the Company and MyHelpDesk dated
September 7, 2000.******
10.34 Asset Purchase Agreement between the Company and MyHelpDesk
dated November 27, 2000. ********
<PAGE>
10.35 License Agreement dated September 24, 2000 between the
Company and Remote Diagnostics, Inc.******
10.36 Promissory Note dated as of July 25, 2000 between the
Company and Coffin Partners, LLC Series C.*******
10.37 Subscription agreement dated as of July 25, 2000 between the
Company and Coffin Partners, LLC Series C.*******
23.1 Consent of Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24 Power of Attorney (see page II-11).
* Incorporated by reference to the Company's Form 10-SB filed on October
18, 1999.
** Incorporated by reference to the Company's Amendment No. 2 to Form 10-
SB filed on January 12, 2000.
*** Incorporated by reference to the Company's Report on Form 10-QSB
filed on May 15, 2000.
**** Incorporated by reference to the Company's Form SB-2 filled on May 24,
2000.
***** Incorporated by reference to the Company's Form SB-2A filed on June
19, 2000.
****** Incorporated by reference to the Company's Form 10-SB filed on
September 28, 2000.
******* Incorporated by reference to the Company's Form 10-QSB filed on
November 16, 2000.
******** Incorporated by reference to the Company's Form 8-K filed on December
8, 2000.
+ Certain portions of this exhibit have been omitted pursuant to a
request for confidential treatment. Omitted portions will be filed
separately with the Securities and Exchange Commission.
