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As filed with the Securities and Exchange Commission on May 24, 2000
Reg. No. ______________
________________________________________________________________________________
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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<S> <C> <C>
Nevada 7389 98-0211769
(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
Suite 280, 4400 Dominion Street,
Burnaby, British Columbia, Canada V5G 4G3
(604) 419-4490
(Address and telephone number of principal executive offices)
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Same
(Address and telephone number of principal place of business)
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David W. Rowat
Vice President, Finance and Business Development
PCSupport.com, Inc.
Suite 280, 4400 Dominion Street
Burnaby, British Columbia, Canada V5G 4G3
(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
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Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price per aggregate offering Amount of
registered registered unit (1) price (1) registration fee
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<S> <C> <C> <C> <C>
Common Stock, par
value $0.001 7,291,331 $3.03125 (1) $22,101,847 $6,145
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(1) 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 the Company's Common Stock as reported on the OTC Electronic Bulletin Board
on May 19, 2000.
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The Company hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the Company 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.
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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.
PROSPECTUS
PCSUPPORT.COM, INC.
7,291,331 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 39-41 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
7,291,331 shares of common stock offered by this prospectus, selling
stockholders are selling 2,820,838 shares that are issuable upon the exercise of
outstanding warrants.
Our common stock is traded on the OTC Electronic Bulletin Board under the
symbol "PCSP." On May 15, 2000, the closing price of our common stock was $3.25
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 2.
The date of this prospectus is __________, 2000.
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All statements, other than statements of historical fact, included in this
prospectus, including without limitation the statements under "Our Business" and
"Plan of Operation," 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,
competition, economic conditions, availability of capital, and other risk
factors detailed under "Risk Factors" and elsewhere herein. 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
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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 preventative 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 Suite 280,
4400 Dominion Street, Burnaby, British Columbia, Canada V5G 4G3, and our
telephone number is (604) 419-4490.
The Offering
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Common stock offered........................................7,291,331 shares (1)
Common stock currently outstanding.........................10,477,662 shares (2)
Common stock to be outstanding after the offering......13,298,500 shares (1) (3)
OTC Electronic Bulletin Board Symbol........................................PCSP
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(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 May 15, 2000.
This number includes 4,470,493 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 warrants, 50,000
additional shares issuable upon exercise of outstanding warrants and
901,750 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 May 15, 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 warrants, but excludes 50,000 shares issuable upon
exercise of outstanding warrants and 901,750 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
. Sale of our own related products through our Web site
. Commissions on the sale of third parties' related products
through our Web site
. Advertising
. Customization fees
. Sale of summary demographic information
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. 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. 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 the Foreseeable Future
To date, we have incurred operating losses and negative cash flow. We
expect our operating losses and negative cash flow to continue for the
foreseeable future and to increase significantly from current levels as we
significantly increase our expenditures for sales and marketing, content
development, and technology and infrastructure development to enhance our
business. With increased on-going operating expenses, we will need to generate
significant revenue to achieve profitability. Consequently, it is possible that
we may never achieve profitability, and even if we do
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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 on our fiscal 1999 financial statements includes an additional
explanatory paragraph on these conditions that raises substantial doubt about
our ability to continue as a going concern. The financial statements and this
prospectus include management's current plans to respond to these doubts.
Need for Additional Capital
Between February and April, 2000, we raised aggregate gross proceeds of
$6,810,625 from the sale of common stock, $188,404 from the exercise of
previously issued warrants, and $1,000,000 in convertible debt. We believe our
existing cash reserves are sufficient to sustain operations at their current
levels until at least September 30, 2000. However, we are planning to hire new
employees continuously to fulfill our obligations to AltaVista, Telus and other
partners and to continue the development and implementation of additional
features of the PC Support Center. The AltaVista agreement requires us to make
large and continuing payments. These commitments and plans will require working
capital in excess of our cash reserves. We anticipate funding these additional
working capital requirements either through the proceeds from a private
placement of our common stock or through 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, to be followed by a
potential public offering of our securities, we do not currently have any
commitment from any third party to provide this or any other additional
financing. 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.
Our Agreements with Alta Vista Demand Large Payments and the Ability
to Expand Rapidly
We have entered into an agreement with Alta Vista Company to allow us to
advertise our services on Alta Vista's Web site for a one-year term. We have
also agreed to create a co-branded Web site to provide our services to Alta
Vista's customers for a two-year term. These agreements demand that we make
significant payments to Alta Vista during our current and next two fiscal years.
In addition, we may be required to expand rapidly in order to adequately service
the additional users we expect to attract as a result of these agreements. There
can be no assurance that we will be able to secure adequate capital to both
satisfy our obligations to Alta Vista and take the other steps necessary to
proceed with our current business plan. Further, there can be no assurance that
we will be able to effectively expand our operations in response to expected
increases in demand. Finally, there can
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also be no assurance that our agreements with Alta Vista will produce
significant revenues or any revenues at all.
Reliance on Agreement with ManagedStorage International
At present, the backup portion of our operations are dependent upon
ManagedStorage International, Inc., which has recently been spun out from
Storage Technologies Inc., an unrelated third party. ManagedStorage
International has inherited the business relationship with PCsupport.com,
including a service supply agreement, pursuant to which ManagedStorage
International provides us with the online backup portion of our operations
through access to ManagedStorage International's existing operations and
facilities. Previously, ManagedStorage International agreed not to compete with
us or to supply any direct competitor during the term of the service supply
agreement. At the present time, we do not intend to develop or operate our own
online backup service independent of ManagedStorage International, nor do we
have an agreement with another party to provide a similar service. Accordingly,
the negotiation of, and successful and continued operation of a service supply
arrangement with ManagedStorage International, including the covenant by
ManagedStorage International not to compete with us or supply any direct
competitor, is essential to the backup portion of our operations. The term of
our service supply agreement with ManagedStorage International ends in June
2000. We have been negotiating with ManagedStorage International to extend its
contract for an additional two-year term. ManagedStorage International has
verbally assured us that ManagedStorage International intends to agree to the
extension, although there can be no assurance that we will be able to secure an
extension on terms acceptable to us. Any difficulties with, failure to extend,
or termination of, the existing arrangements with ManagedStorage International
would materially adversely affect our business. In addition, ManagedStorage
International is a newly formed company which has inherited the online backup
business from StorageTek. It is uncertain what effects, if any, ManagedStorage
International's inexperience and StorageTek's current financial difficulties and
restructuring plans (which are discussed in StorageTek's filings with the
Securities and Exchange Commission) will have on our business.
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.
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 2000. 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.
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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 Denise Holleran-Boswell. In addition, we believe that
it is necessary to hire additional senior management employees with sales and
marketing experience in order to proceed with our current business plan.
We have employment contracts with Messrs. McLean, Macbeth, Rowat and
McDonald and Ms. Holleran-Boswell 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 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 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
These 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 our Web site and the services we offer. To increase brand
awareness, traffic and revenue, we intend, to the extent we have adequate
financial and other resources to do so, to substantially increase our offline
and online advertising and promotional efforts. Our marketing activities may,
however, not result in
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increased revenue and, even if they do, any increased revenue may not offset the
expenses incurred in building brand recognition. Moreover, despite 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. We are highly reliant on these technology
partners. There can be no assurance that the technologies that they provide will
keep pace with technological changes or that they will continue to grant us
licenses in the future. The obsolescence or loss of the right to use one or more
of these technologies may have a material adverse effect on our business.
Technological Change
The technical features of ManagedStorage International's PowerBak online
backup software, the development of which we do not control, will in large part
determine the speed and accuracy, and hence marketability, of our online backup
service. There can be no assurance that current competitors or new market
entrants will not succeed in developing and introducing new or enhanced backup
systems having technologies and features superior to, or more effective than,
any technologies which have been or are being developed by us, or ManagedStorage
International, rendering our backup service obsolete or less marketable. There
can be no assurance that ManagedStorage International, and hence we, will be
able to keep pace with technological developments, or that our products will not
become obsolete. Technological obsolescence of the existing PowerBak technology
remains a possibility, which would have a material adverse affect on our online
backup service business.
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.
Keeping pace with 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.
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, and RECON-TECH.com. 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 name 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
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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.
Our success will depend in part on ManagedStorage International's ability
to obtain and enforce intellectual property protection for their back-up
technology in the United States, Canada and other countries. 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. The maintenance and operation of our
back-up service is dependent upon ManagedStorage International. 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 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, under our
service supply agreement with ManagedStorage International, ManagedStorage
International is not liable for any consequential damage or loss it may cause to
our business due to the failure of any of ManagedStorage International's
systems, and, accordingly, we will be unable to seek reimbursement from
ManagedStorage International for any such damage or loss. 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.
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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.
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 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 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
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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 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:
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. 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
. the timing and uncertainty of advertising sales cycles and
seasonal declines in advertising sales
. general economic conditions, as well as economic conditions
specific to users of our services
Common Stock Price May Be Volatile
The market prices of securities of Internet and technology companies are
extremely volatile and sometimes reach unsustainable levels that bear no
relationship to the past or present operating performance of such companies.
Factors that may contribute to the volatility of the trading price of our
common stock include, among others:
. 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
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
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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 May 15, 2000, we had outstanding 10,477,662 shares of common stock of
which approximately 7,150,000 shares were "restricted securities" (as that term
is defined under Rule 144 promulgated under the Securities Act of 1933). These
restricted shares are eligible for sale under Rule 144 at various times.
Further, upon the effectiveness of the registration statement of which this
prospectus is part, 4,470,493 of these restricted shares, as well as an
additional 2,820,838 shares underlying currently exercisable warrants, will be
eligible for sale.
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 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.
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Executive Officers, Directors and Major Stockholders Exercise
Significant Control
As of April 30, 2000, the executive officers, Directors and holders of 5%
or more of the outstanding common stock together beneficially owned
approximately 33.2% of the 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.
Exchange Rate Risk
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.
USE OF PROCEEDS
This prospectus relates to an aggregate of 7,291,331 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 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 $4,613,176.
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.
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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 Price 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 only asset of which is a licensing
agreement with StorageTek, as described below under "Products and Services -
Global Replace." The subsidiary has no other assets or liabilities.
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.
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. 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 dialler program that end-users invoke to access the
Internet using a dial-up connection becomes corrupted, preventing
them from logging on.
When PCs crash or are lost through theft or physical damage, frequently
some or all of the end-user's data can be lost, which is a catastrophic event
for those end-users who depend upon their PCs for their employment or home use.
Important files on PCs in a large office are often backed up to a central
server. PCs in small to medium enterprises ("SME") or small office / home
office ("SOHO") must rely on the end-users to use zip drives, tape drives or
online backup procedures to protect their data. Generally, only the important
files that the end-user selects are saved; not the entire contents of the end-
user's system. All of these systems rely on the end-user to remember to select
the correct files and to backup his or her data, which is bothersome and,
therefore, frequently not done. Until recently, there was no good system to
allow an end-user to automatically backup his or her entire system.
Consequently, there is a risk among individual and corporate PC end-users of the
irretrievable loss of valuable data in the event of a crash or total loss of the
PC.
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 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 backup for files which the user selects.
. 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.
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. 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 IBM,
Dell, HP, Toshiba, Gateway and Micron, indicated their intention to develop and
introduce support portals within the coming year. 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.
Products and Services
Our first service offerings were Global Replace and Phoenix. Global Replace
is an Internet-based online backup program combined with a hardware replacement
option. The backup portion is applicable to both desktop and notebook users. The
hardware replacement portion is only available for notebook users. Phoenix
provides a user purchasing a new notebook with the full image, including all
data, applications, preferences, and settings, pre-loaded onto the new machine.
More recently, our primary service offering has been a Web-based support
portal called the PC Support Center. The PC Support Center aggregates a number
of preventive maintenance and online support services designed to prevent,
ameliorate or solve PC technical problems.
As described below, we offer Global Replace and the PC Support Center
directly to PC end-users through our own Web site at www.pcsupport.com. We also
customize private-labeled versions of Global Replace and the PC Support Center
for other companies who wish to provide Global Replace's or the PC Support
Center's services to their customers under their own brand names. Phoenix
cannot currently be ordered over our Web site.
Retail prices for all services described herein may be adjusted frequently
in consideration of competitive forces. There can be no assurance that pricing
at any commercially viable level will be sufficient to allow us to earn a
profit.
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PC Support Center
We have developed the PC Support Center 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 PC Support Center
aggregates various technical solutions, such as updating operating systems
software, applications software and drivers, and disk maintenance. Upon a user
visiting the site and becoming a subscriber, the PC Support Center will, at the
subscriber's option, automatically scan the user's computer at each visit to the
site to maintain an up-to-date personal profile of the user's hardware,
peripherals, software applications and settings. The PC Support Center software
will, also at the user's option, diagnose and maintain the hard drive and advise
the user of software updates that are pertinent to the user's configuration.
Such updates will be performed at the user's request. The PC Support Center
also includes a technical support forum where subscribers can ask and have
answered technical support questions. Also, the PC Support Center offers a PC
user the ability to email a technical question to a skilled technician and
receive an answer within 24 hours or less. The PC Support Center has introduced
Live Assist and Fix My PC!, services in which the end-user can engage a
technician in an online chat sessions to solve technical problems and provide
advice, and with the user's permission, a technician can take control of the
end-user's PC and solve the problem online while the end-user watches. Also,
the PC Support Center hosts an Education Center from which the end-user will be
able to access tutorials on PC issues. As a premium chargeable service, the PC
Support Center provides subscribers with the opportunity to purchase from third
parties related support products and major software upgrades online. The PC
Support Center also offers the Backup Center, from which users can download and
install the Company's Global Replace backup software described below.
The first version of the PC Support Center was launched on our Web site,
www.pcsupport.com, in October 1999. We continue to add additional functionality
to the PC Support Center. In the first calendar quarter of 2000, we signed an
agreement with Motive Communications Inc., a prominent company providing PC
operating system and software applications repair technology. We expect
Motive's technology to enhance the ability of our technicians and the users
themselves to restore operations when a PC fails to perform. The technology
also protects the dialer function which users employ to dial into the Internet.
We intend to add new functions to the PC Support Center during calendar
year 2000, including virus scan, telephone support, hardware upgrades wizard,
computer theft and damage insurance and a user self-help capability. 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. See below
under "Plan of Operation - Research and Development." These maintenance and
upgrade services will simplify support for the user because of regular reminders
and automatic maintenance.
We offer the PC Support Center services to end users in two ways.
Consumers can become a subscribers to the PC Support Center simply by
registering on our Web site. Currently, there is no charge to become a
subscriber and we offer most of the PC Support Center's services for free to
subscribers. Within the next four months, we plan to begin to charge a fee
either on a subscription basis or per-incident. In addition to offering the PC
Support Center directly to consumers, we also 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.
We expect to incur additional costs of between $1,500,000 and $2,000,000
over the next nine months in order to develop and implement additional functions
for the PC Support Center, which are
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expected to include the enhancements described below under "Plan of Operation -
Research and Development."
It is our intent to market the PC Support Center to all three market
segments either directly through the PC Support Center to SOHO and consumers, or
through strategic partnerships with ISPs, internet portals, and hardware
manufacturers to all three segments.
Global Replace
To provide online backup, in June 1998 our wholly-owned subsidiary entered
into a service supply agreement with StorageTek Canada Inc., a wholly owned
subsidiary of Storage Technology Corp. (collectively "StorageTek") of
Louisville, Colorado. In March 1999, StorageTek launched PowerBAK, a secure
online data service, to its U.S. and Canadian customer base. StorageTek intends
to penetrate the growing market for support of mobile workers within its
existing corporate client base. Under the terms of the service supply
agreement, StorageTek has licensed us to sell run-time licenses of the PowerBAK
software under its own brand, Global Replace. Subscribers automatically and
transparently connect to StorageTek's data center online to backup their hard
drive. In addition, StorageTek has given us an exclusive opportunity to develop
a hardware replacement business tied to StorageTek's online backup service.
StorageTek has agreed not to enter the replacement business itself, nor to enter
into a similar agreement with any other company for the two-year term of our
contract. Recently, StorageTek spun out a separate company, ManagedStorage
International, to pursue the online backup business under dedicated management.
We have been negotiating with ManagedStorage International to renew the services
agreement for an additional two-year term. ManagedStorage International has
verbally assured us that ManagedStorage International intends to agree to the
extension, although there can be no assurance that we will be able to secure an
extension on terms acceptable us, or at all.
Combining the PowerBAK backup service with a hardware replacement option,
we have introduced our own service, Global Replace.
(i) Global Replace Suite
Global Replace is a full-service data protection program. Using
ManagedStorage International's online backup technology, Global Replace allows
users to backup their full image - operating systems, applications, data,
preferences and settings to a secure data center. The Global Replace software
is a branded version of ManagedStorage International's PowerBAK software. After
connecting the PC user to a ManagedStorage International data center, the
software examines every file on the user's system and compares them to the data
base of files in ManagedStorage International's data center. Every user file
that is either not already stored in a ManagedStorage International data center,
or has changed since the last backup, is queued for backup. In performing
backup, new files, and the segments of files that have changed, are sent online
over the Internet, in compressed and encrypted form, to the ManagedStorage
International data center, where the files or file segments are stored.
Global Replace allows PC users to restore data either online or through a
CD, and also provides, for notebook users, hardware restoration in the event
that the entire notebook is unusable. To restore a small number of files or
directories online, the Global Replace software connects users to the
ManagedStorage International data center online, where users enter a password.
The software then restores the file or files online to the user's hard drive.
If a PC user suffers a significant or total loss of data, the user may need
to restore his or her full image onto his or her hard drive. In such event, the
user contacts our help desk and requests a CD restoration. We then load the
user's full image onto a set of CDs which we then send by overnight
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courier to the user. The user then follows a simple set of instructions to load
the full image from the CDs onto his or her hard drive.
If a notebook customer suffers a total failure or loss of use (including
theft), he calls our help desk. The user's full image is restored to a
temporary replacement notebook at our operations center. After we receive a
security deposit, the fully functional replacement notebook is shipped to the
user using an overnight courier company. This notebook is loaned to the user
for up to 10 business days while the original notebook is being repaired or
replaced by the user.
We launched the Global Replace service in the second calendar quarter of
1999 but have not yet generated significant orders for this service. Global
Replace comes in two different packages to suit individual needs.
(ii) Global Replace - Basic
This basic package includes only the backup software. It is applicable to
both desktop and notebook users. Users pay for the amount of data stored, as
follows:
Backup Volume: Monthly Retail Prices:
First 30 days free
Less than 100 MB $ 7.50
Less than 200 MB $11.95
Less than 300 MB $14.95
Unlimited / Full Image $17.95
A discount of approximately 15% is available to users who pay for 12
month's service in advance.
The package includes free online data restoration for both desktop and
notebook PCs. Full image restoration is available from CD-ROM for desktop or
notebook users and from a replacement notebook for notebook users only, in
either case on a per-incident fee, as described above under "Global Replace
Suite."
(iii) Global Replace - Premium
The Premium service, available only to notebook users, is available at an
introductory monthly rate of $44.95 and includes, in addition to the services
provided in the basic package, free hardware restoration with a loaned notebook,
regardless of the number of times a replacement notebook is loaned to the user,
within reason.
PowerBAK Replace
Under the terms of a verbal licensing agreement which we have with
ManagedStorage International, ManagedStorage International's PowerBak Replace
incorporates the Global Replace - Premium package. All of the fees received by
ManagedStorage International for the PowerBak Replace service will be paid to
us, less a 25% commission. We will provide all of the hardware replacement
services to the customers who purchase the PowerBAK services.
It is our understanding that ManagedStorage International has begun to
market the Global Replace replacement option as part of its PowerBAK service,
but, to our knowledge, has not generated any sales to date. ManagedStorage
International currently has no obligation to market Global Replace. We are
negotiating a reseller agreement with ManagedStorage International under which
ManagedStorage International would agree to market Global Replace, but there can
be no assurance that such an agreement will be reached.
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Phoenix Program
The need for increased hard drive space and faster microprocessors means
notebook users need to replace their machines frequently as the technology
improves. Upgrading to a new machine can be problematic. Users are required to
identify all of their data and programs. Common operating systems, such as
Windows 95, 98, 2000 and NT usually come installed in the new machine, but
software applications must be re-installed from disks or CDs. In addition, it is
becoming more common for software to be downloaded from the Internet. These
files are numerous and often unrecognizable to the average user. Finding and
transferring them from one machine to another is often troublesome and time-
consuming.
Given the complexities involved in upgrading, we believe many users delay
the upgrade to a new machine as long as possible. The Phoenix Program is
intended to alleviate the problems involved with upgrading to a new notebook.
With the Phoenix Program, the user purchases the new notebook and ships it to
us. Once the new notebook is delivered to us, and the user has completed a full
image backup using the Global Replace software, we load the user's full image
onto the new notebook, and deliver it to the user.
We launched the Phoenix service in the third calendar quarter of 1999 but
have not yet generated any orders for this service. The Phoenix service is
initially being provided at $299, FOB plant.
Distribution Methods of Services
We intend to employ a distribution strategy that targets the corporate
user, the SME users, and the SOHO users, with the goal of positioning ourselves
as the leading provider of online computer technical support services. We will
market the services of the PC Support Center both directly to SOHO and consumers
and through branded support portals to corporate, SME, and consumers.
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 110
countries as of May 15, 2000.
In addition, we have entered into agreements with several companies
operating Web sites for which online technical support is an important
additional service. We have agreed to build a branded support portal for them
including many of the services of the PC Support Center. The partners have
agreed to promote the branded site and PCsupport.com. Subscribers to the
partners' branded support portals are also subscribers to the PC Support Center.
The Company believes that these agreements will increase the number of
subscribers to our support services.
In 2000, we entered into a strategic alliance with Alta Vista Company, one
of the largest portals on the Internet. AltaVista claims that over 50 million
unique visitors access its web site at www.altavista.com each month. Under the
-----------------
terms of the agreement, we will build a branded support portal for AltaVista in
which certain of our online technical support features will be bundled into a
site similar to the PC Support Center which will carry primary branding for
AltaVista and secondary "powered by PCsupport.com" branding. AltaVista has
committed to use PCsupport.com services for its Help Desk function, and to
promote the branded support portal and PCsupport.com throughout its site.
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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 ineffective methods such as telephone call centers and
onsite dispatch. We believe that the partners will benefit from better support
to their customers as follows:
(i) Improved Customer Relationship
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.
(ii) Reduced Costs
Since many support problems will now be solved through the PC Support
Center, providers will significantly reduce their internal support costs.
(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.
(iv) Comprehensive Database of Customer Profiles for Marketing
Purposes
The PC Support Center will continuously update a database on the
subscribers. This provides an opportunity to research market trends and future
product features.
Business to Business Partners
Our potential business to business partners include the following types of
companies:
Hardware Vendors
We are negotiating with large personal computer manufacturers to bundle our
services with the sale of hardware. We intend to expand our sales activities to
offer Global Replace, Phoenix, and the PC Support Center to additional hardware
vendors. We entered into a letter of intent with one large laptop vendor in
March, 2000 in which we agreed to build a customized backup center for the
vendor and the vendor agreed to distribute a customized version of Global
Replace on its laptops. The Company intends to pursue a definitive marketing
agreement with such vendor, but there can be no assurance that any definitive
agreements will be reached with any hardware manufacturer.
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 is constantly looking
for new products and services. Our primary products of interest to resellers
are the PC Support Center and Global Replace.
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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 is marketing the Global
Replace Suite under its own brand name to Unisys's corporate customers. Unisys
has agreed to pay us a fee equal to 75% of our suggested list price for the
Global Replace services, and has also agreed to use us exclusively for the
provision of such services. To date, Unisys has secured one customer for us,
representing approximately $1,000 per month in revenue for an unspecified term.
Under this agreement, Unisys is not obligated to secure any particular number of
customers or generate any revenues for us, on a best efforts basis or otherwise,
and it is therefore uncertain whether Unisys will secure additional customers or
revenues for us.
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.
Internet Vertical Portals
Internet vertical portals provide information online to a targeted
demographic audience. We have negotiated an agreement with one such portal,
PortableLife, to provide our PC Support Center services to the portal's
subscribers. There can be no assurance that any additional agreements will be
reached with any other Internet portal.
ManagedStorage International
We have reached an agreement with ManagedStorage International whereby
ManagedStorage International will integrate our hardware replacement service
into the PowerBAK online backup service. ManagedStorage International has
branded the replacement service, PowerBAK Replace, and will provide it as a
standard option through its existing sales channels.
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
May 15, 2000, four sales people had been hired and now have begun selling
directly to potential partners, supplemented by the efforts of our senior
management.
Web Promotion
Global Replace is available for purchase on the PC Support Center Web page.
We will also promote our services over the Web on other companies' Web sites.
Revenue Generation
We intend to earn revenues in any or all of the following ways:
(i) Commissioning Fees
We may private-label the PC Support Center for our partners so that the
partners can offer the services under the partners' own brand names. We will
charge a commissioning fee for such customization.
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(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 intend to earn a bundling fee from each
unit shipped.
(iii) 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.
(iv) Premium Services
We intend to bundle many premium services, such as email assist, Live
Assist, FixMyPC!, telephone support, onsite dispatch and other premium services
into several different packages for which we will charge either a subscription
or a fee-per-incident. We will also sell tutorials and other educational
materials.
(iv) Commissions
We earn commissions on the purchase of related support products and major
software upgrades from third party vendors.
(i) Per-incident Fees
We may sell support services individually as an end user requests them and
charge an incident fee.
(vi) Advertising
The PC Support Center may host advertisements from which we will earn fees.
(vii) Sale of Summary Demographics
The PC Support Center will continuously update a data base documenting many
aspects of subscribers' computer usage characteristics and personal
demographics. We intend to earn revenue from the sale of summary demographic
data.
(viii) Subscriber Fees
For improving the level of customer satisfaction for these partners, and
lowering the costs of providing support to their users, the Company intends to
charge a fee per user per month. In some cases, the Company may share revenue
generated from their users with the partners.
As we have not generated any revenue from the PC Support Center, there can
be no assurance that we will be able to negotiate any agreements that will
generate profits for us. Failure to successfully negotiate such agreements will
have a material adverse impact on our business.
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
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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 Center
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 Center 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.
All.com intends to launch a support portal in the near future offering
remote repair capability based on technology licensed from Motive, which
directly competes with our similar Motive-based service. To the best of our
knowledge, all.com is not planning to offer real time services such as our Live
Assist.
Service911 offers 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. These form a comprehensive set of features that rivals
PCsupport.com's support offering. Service911 has also recently launched a
"Solutions" offering that will compete with our branded support portal business.
NoWonder.com currently offers email support, live chat, collaborative
support (desktop sharing) and self help (searchable knowledgebase). NoWonder.com
does not currently utilize any remote repair solutions. The main appeal of the
company's service offer is the ease of use and lack of software downloads.
MyHelpDesk.com offers live technical support, proactive maintenance
services, software updates, virus scans, online backup, email support
newsletters and an extensive knowledge base.
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) previously had introduced
support portals, but such competitive portals are closely tied to the software
products marketed by those companies.
There are partnerships beginning to emerge among various competitors. We
believe that Support.com, in partnership with either or both of Excite@Home and
Sykes Enterprises, a major telephone call center operator, also intends to
launch a support portal in the near future. Sykes recently purchased
AnswerExpress, an online support knowledgebase, from Intel, possibly signaling
Sykes' intention to provide online support services which may compete with us.
Service911 has recently 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 competition 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
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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.
Companies that develop and maintain support knowledge bases include
ServiceWare and KnowledgeBroker.
Significant competition is expected 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(TM) from Manageable Software.
Further competition will come from Internet sites offering free software
downloads. Websites such as 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.
Hardware and software vendors are also potential competitors. Notebook
computer manufacturers such as Compaq and IBM already bundle support services
with their product, as do other large firms in the industry such as Intel and
Microsoft. Computer manufacturers, including Compaq, Dell, Micron, Hewlett
Packard, Toshiba and Gateway, also have announced their intention to launch
support portals which could compete with the Company in the future.
In the future, we intend to add technical helpdesk support to the PC
Support Center. There are many companies offering online helpdesks including
MyHelpDesk, Microsoft, PC Guide, PC Mechanic, and NoWonder.
Competitors in providing 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 our strongest competitors will include all.com, McAfee.com,
Service911, NoWonder, MyHelpDesk and Support.com, and the various partnerships
among them.
Online Backup Providers
There are approximately ten established online backup software
manufacturers who market their technology using a variety of channels, including
direct sales, licensing to resellers, and bundling by OEMs and hardware
manufacturers. The most widely used software is from @Backup, Connected Corp
(Connected Online Backup), and Veritas. In 1999, Veritas completed the
acquisition of Telebackup. Telebackup had previously licensed its backup
software to ManagedStorage International. Other on line backup competitors
include Atrieva (FileZonePlus), NovaStor (NovaNet-Web), Safeguard (Interactive
Backup), recently purchased by StorageTek and spunout to ManagedStorage
International, Previo (previously Stac Technologies), Vytalnet (VytalVault),
Sterling Software, and Divya (BackOnline).
Several companies are using the Web to increase the volume of data readily
accessible by companies and individuals during working sessions. Xdrive offers
100MB of free storage and Freedrive, a partner of EMC (which competes with
StorageTek) offers 50 MB free storage. These
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services are described as "virtual briefcases" and are not designed to provide
full-image backups for date recovery in the way that Global Replace is
positioned. IMediaIT also competes in this space.
Currently, only Telebackup, its acquiror, Veritas, its licensee,
ManagedStorage International (and its sublicensee, PCSupport.com), and Safeguard
can provide a full image backup, but other competitors are expected to introduce
this important feature in the future.
Current industry standards on the service side are a monthly fee ranging
from $7 to $20 for online backup and restoration, and the opportunity to order a
CD for a per-incident fee of about $25 to $40 when there is need to restore
larger volumes of data. Generally speaking, online backup is offered as a stand
alone service, with no other value-added features. Certain hardware vendors
(e.g. Compaq) and OEMs (e.g. Intel's AnswerExpress) also offer online backup as
part of a suite of services for computer users. We believe that competition will
accelerate and that prices and margins for online backup services will decrease
rapidly over the next 18 months.
We believe that there are currently no other service providers who offer
tiered service packages or temporary laptop replacement programs such as Global
Replace.
Most of the service providers have targeted individuals and SOHO end users.
Only a few possess the scalability and storage space required for accommodating
large corporate customers or offering enterprise-wide solutions. Some of the
software manufacturers (e.g. Connected and Previo) produce intranet based
versions that include dedicated servers and client licenses.
Hardware Replacement
Currently, we believe that there are no competitors who offer a service to
replace broken notebooks with another notebook loaded with the user's full
image. Computer repair companies, such as Inacom, can provide a replacement
notebook while the user's notebook is being repaired, but such replacement
notebook will not be loaded with the customer's image. Similarly, the hardware
manufacturers themselves offer warranty programs in which a broken notebook can
be replaced, but such replacement will not be loaded with the customer's image.
Phoenix
We believe that the Phoenix service is unique. The extended warranties
offered by hardware vendors can be considered as partial competitors, but even
though they may reload common applications before shipping the unit back to the
customer, they are not able to reconstruct personal settings and configurations
or data files. Regular backup is still the responsibility of the user.
Repair services such as Inacom can repair and quickly return the notebook
to its owner, but cannot install the user's data and personal settings. Notebook
replacement has to be done in conjunction with online backup in order for the
recovery of a full image. Accordingly, the Phoenix program carries a distinct
advantage over depot and manufacturer repair services.
The chief source of competition for the Phoenix program comes from large
corporations that set up in-house solutions through network-based backups and by
carrying an inventory of spare laptops. Such corporations can replace a notebook
quickly with a standard set of applications, but generally are unable to
reconstruct personal settings and configurations or data files.
Sources of Materials
The only significant materials which we require to carry on our operations
are compact disks (also known as CD's) and notebook computers. CD's are readily
available from a variety of
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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 and RECON-TECH.com. 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 name PCSUPPORT.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.
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, and
for the nine-month period ended March 31, 2000, we and our predecessor, RTI,
expended approximately $2,814, $17,646, and $556,719, respectively, on the
development of our services. We expect to significantly increase research and
development expenditures during the fiscal year ending June 30, 2001.
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Employees and Contractors
As of May 15, 2000, we had 45 full-time employees and one part-time
contractor employed as follows:
Part-Time
Employees Contractors
--------- -----------
Administration 8 1
Research and Development 14 -
Marketing and Sales 12 -
Client Services 1 -
Technical Support 10 -
Principal Business Facilities
We maintain our principal place of business at Suite 280, 4400 Dominion
Street, Burnaby, British Columbia, Canada V5G 4G3, which consists of
approximately 9,800 square feet which we currently sub-lease for (Cdn)$5.00 per
square foot per year, plus operating costs of approximately (Cdn)$10.00 per
square foot per year. 2,800 square feet of this space is rented free of charge
in the first year, which ends on June 1, 2000. The sub-lease expires on November
29, 2002 and the price per square foot per year increases in the second year to
(Cdn)$6.00, and to (Cdn)$6.50 in the third year. We have entered into an
agreement to lease approximately 24,750 sq. ft. at 3750 Gilmore Street, Burnaby,
at a rate of (Cdn.) $17.00 per sq. ft., plus operating costs of approximately
(Cdn.) $7.00 per sq. ft. This lease will expire on August 31, 2005. We also have
access to office space at 1875 Charleston Road, Mountain View, California 94043
at $210 per month under a month-to-month service agreement. Some sales and
marketing activities take place from this Mountain View office, but the majority
of our operations, sales, services and administration are conducted from our
offices in Burnaby. We expect that the space provided by these offices will be
sufficient to meet our requirements for the next twelve months.
Investment Policies
We do not currently have any 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.
PLAN OF OPERATION
The following describes in general terms our plan of operation and
development strategy for the next twelve-month period (the "Next Year"). During
the Next Year, our primary focus will be to expand marketing efforts for our
services, continue to enhance the PC Support Center, and to develop and/or
contract to provide the infrastructure necessary to deliver our services to
subscribers and customers.
Current Services
- ----------------
We currently offer three services. Our current primary service, the PC
Support Center, is a Web-based support portal for PCs which aggregates a number
of support technologies, including software and driver updates, hard disk
maintenance, a technical support forum, and others. Global Replace combines an
on-line backup service for notebook and desktop computers with three methods of
restoring data in the event of a PC failure. Phoenix allows a notebook user to
transfer a full-image of all data, applications, preferences and settings to a
new notebook.
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Cash Flow Requirements
- ----------------------
Between February and April, 2000, we raised aggregate gross proceeds of
$6,810,625 from the sale of common stock and units consisting of common stock
and warrants, $1,000,000 from the sale of convertible notes and $188,404 from
the exercise of previously issued warrants. We believe that our existing cash
reserves are sufficient to sustain operations at their current levels until at
least September 30, 2000. However, we are planning to hire new employees
continuously to fulfill our obligations to AltaVista, Telus and other partners
and to continue the development and implementation of additional features of the
PC Support Center. Our agreements with AltaVista require us to make large and
continuing payments. These commitments and plans will require working capital in
excess of our cash reserves. We anticipate funding these additional working
capital requirements either through the proceeds from a private placement of
securities or through 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, to be followed by a
potential public offering of our securities, we do not currently have any
commitment from any third party to provide this or any other additional
financing. 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 competitive position.
Sales and Marketing
- -------------------
We plan to increase marketing efforts for our services through direct and
indirect channels, including the following:
Web Portals. We have successfully negotiated agreements or letters of
intent with several companies to offer our PC Support Center services
through a branded support portal to their users, the largest of which are
AltaVista (with whom we have an agreement), Telus (with whom we have a non-
binding letter of intent) and Pivotal Corp (with whom we have a non-binding
letter of intent). We are continuing to develop additional partnership
agreements with other Web portals. However, there can be no assurance that
an agreement will be reached with any other Web portal companies or that
the existing agreements (which have not yet generated revenues for us) will
generate significant revenues in the future.
PC Manufacturers. We are negotiating with PC manufacturers to market our
services to the manufacturers' customers, and we plan to expand our
marketing efforts to other top PC manufacturers during the Next Year. No
definitive agreements have yet been reached with any PC manufacturer, and
there can be no assurance that any such agreements can be reached on terms
favorable to us or at all.
OEMS. We are negotiating with companies which integrate PCs with Internet
access and other related services and sell them to PC end-users via a
monthly payment schedule over a number of years, typically three, to
include our services.
Computer Service Companies. There are several international companies which
provide a comprehensive range of computer services that permit large
corporations to out-source some or all of their PC support requirements.
Our services complement and extend the range of such support services. In
April 1999 we entered into an agreement with Unisys, an international
computer service company, to private label Global Replace under the Unisys
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brand name for resale to Unisys' corporate customers. We intend to market
our services to other international service companies during the Next Year,
although there can be no assurance that we will be able to negotiate any
agreements with computer service companies.
ManagedStorage International. In 1998, we entered into a contract with
Storage Technologies Inc. ("StorageTek") in which we licensed StorageTek's
backup storage software, which we market under the name Global Replace.
StorageTek also agreed to market our hardware replacement services in
conjunction with its own backup software. In the fiscal year ending June
30, 1999, StorageTek did not secure any orders for our services, and no
orders have been secured to date during the current fiscal year. StorageTek
has recently spun off its backup storage division into ManagedStorage
International Inc.; as a result, ManagedStorage International is the
successor-in-interest to StorageTek under StorageTek's contract with us.
During the Next Year, we intend to expand our training and co-selling
activities with ManagedStorage International.
Direct Sales. We are marketing to a small number of large and small
corporations on a direct basis. Although no contracts have been secured to
date, we intend to expand our direct marketing efforts to a select number
of large corporations in the United States and Canada. There can be no
assurance that any contracts will be reached with any company on a direct
basis.
Research and Development
- ------------------------
Our primary research and development effort over the Next Year will be to
continue to add features to the PC Support Center (which we launched in October
1999) 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 in new
releases of the PC Support Center. An Education Center was added to the PC
Support Center in January, 2000, which provides self-administered tutorials for
PC users. A service called "FixMyPC" was also added to the PC Support Center in
January, 2000, which allows a technician to take control of the user's PC with
the user's permission and to perform preventive maintenance and solve technical
problems using an online chat session. We also entered into a partnership with
Micro Warranty Services which will enable us to offer extended warranty and
onsite service in the future.
Among the functions and services we expect to add to the PC Support Center
over the Next Year are: email notification of driver and other recommended
updates, virus scan, telephone support, PC performance enhancement, enhanced
platform maintenance, asset-tracking, anti-theft deterrent, theft and damage
insurance, and repair co-ordination. There can be no assurance, however, that
all or any of these features will be added. We expect to incur costs of between
$1,500,000 and $2,000,000 over the Next Year in order to develop and implement
these additional functions of the PC Support Center.
Operations
- ----------
We expect the number of subscribers to the PC Support Center and branded
portals to increase rapidly over the Next Year. To deliver the services in
support of the PC Support Center, we plan to rapidly expand the number of
technicians we employ directly and also expect to enter into one or more
outsourcing agreements with third parties to provide technical support. In
addition, we plan to hire employees in other departments as well, as discussed
below under "Employees." We anticipate that there will be a significant lag
between incurring the expenses to support the PC Support Center and generating
revenues from these expenditures because the PC Support Center's basic services
are currently offered free of charge.
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To support the Global Replace program, we will expand our capability to
restore full image backups onto replacement notebooks. During the Next Year, we
plan to develop infrastructure internally to provide the capacity to restore
three to five notebooks per working day. To increase capacity beyond this level
to meet future demand, we will contract the restoration process to an external
computer services firm.
Employees
- ---------
During the Next Year, we plan to hire additional employees in every
department, including senior management employees in sales and marketing, as
well as additional technical, operations, sales and marketing, and
administrative staff as required to expand its service offerings, sales and
marketing efforts, and to maintain service levels to its then existing and new
subscribers. The number and skill sets of individual employees will be primarily
dependent on the relative rates of growth of its different services, and the
extent to which sales and marketing, operations, and development are executed
internally or contracted to outside parties. Subject to the availability of
sufficient working capital and assuming significant customer acceptance of our
products, we currently plan to increase staffing to approximately 130 people
during the Next Year, although there can be no assurance that such hiring will
take place or will be adequate to execute the growth plans as described herein.
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.
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 30, 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.
30
<PAGE>
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 35, 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.
David W. Rowat, age 44, has been our Vice President, Finance and Business
Development 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
speciality 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.
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.
Denise Holleran-Boswell, age 40, was appointed our Vice President, Client
Services on April 7, 2000. During the four years prior to joining us, Ms.
Holleran-Boswell held several positions with Pricewaterhouse Coopers LLP
("PwC"), a large globally integrated professional services organization. Most
recently, Ms. Holleran-Boswell was PwC's Technology Solution's Practice Leader
in their Consumer and Industrial Products Practice, responsible for business
development of the technology solutions services in Western Canada and ensuring
client satisfaction of services. Before PwC, from August of 1993 to March 1996,
Ms. Holleran-Boswell was a Project Director with SHL Systemhouse Inc., another
international professional services organization specializing in systems
integration. She was responsible for defining and delivering innovative system
solutions to complex business problems, while reducing the risks to the
business. Prior to this Ms. Holleran-Boswell was the Director of Business
Systems for Bear Creek Corporation, an international direct marketing retailer,
where she was responsible for ensuring the selection and implementation of
appropriate technology to satisfy the business' current and future requirements.
During the twelve years prior to her work at Bear Creek, Ms. Holleran-Boswell
has experience in progressively more
31
<PAGE>
senior information systems management positions ranging from services,
operations, development to implementations, servicing a variety of industries
for both private industry and vendors.
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 April 30, 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 Stock & Approximate Percent
Nature of Beneficial of Ownership of
Name & Address/(1)/ Ownership/(2)/ Common Stock
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Advanced Financial Services Inc./(3)/ 576,029 5.5%
- ------------------------------------------------------------------------------------------------------
The Dromond Technologies Group, Inc./(4)/ 553,440 5.3%
- ------------------------------------------------------------------------------------------------------
CGTF, LLC/(5)/ 590,000/(6)/ 5.5%
- ------------------------------------------------------------------------------------------------------
Richard and Laurie Kraniak JTWROS/(7)/ 600,000/(8)/ 5.4%
- ------------------------------------------------------------------------------------------------------
M & J Investment Trust/(9)/ 600,000/(8)/ 5.4%
- ------------------------------------------------------------------------------------------------------
Michael G. McLean 643,276/(10)/ 6.1%
- ------------------------------------------------------------------------------------------------------
Steven W. Macbeth 649,776/(10)/ 6.2%
- ------------------------------------------------------------------------------------------------------
W. Benjamin Catalano 65,587/(11)/ *
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
All executive officers and Directors as a group (4 persons) 1,633,639/(12)/ 15.4%
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Less than one percent.
(1) Unless otherwise indicated, the address of each person is c/o the Company
at Suite 280, 4400 Dominion Street, Burnaby, British Columbia, Canada V5G
4G3.
(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 of April 30, 2000, 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) Advanced Financial Services Inc. is located at P.O. Box 3340 Road Town,
Tortola, British Virgin Islands.
32
<PAGE>
(4) The Dromond Technologies Group, Inc. ("Dromond") is located at Suite 305,
2692 Clearbrook Road, Abbotsford, British Columbia, Canada V2T 2Y8.
Dromond is owned 50% by Michael McLean and 50% by Steven Macbeth.
(5) CGTF, LLC is located at 200 North Westlake Blvd., Suite 205, Westlake
Village, California 91362.
(6) Includes 240,000 shares issuable upon exercise of warrants.
(7) The address of Mr. and Ms. Kraniak is 3260 Wellington Court, West
Bloomfield, Michigan 48324.
(8) Consists of shares issuable upon exercise of warrants.
(9) The address of M & J Investment Trust is 14 Woodbridge Road, Hingham,
Massachusetts 02043.
(10) 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 18,056 shares of common stock issuable pursuant to options
that are currently exercisable, or exercisable within 60 days of April 30,
2000.
(11) Includes 10,833 shares of common stock issuable pursuant to options that
are currently exercisable, or exercisable within 60 days of April 30, 2000.
(12) Includes 121,945 shares of common stock issuable pursuant to options that
are currently exercisable, or exercisable within 60 days of April 30, 2000.
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.
Changes in Control
- ------------------
We are aware of no arrangements that could result in a change of control of
our ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationships Between the Company and Certain Directors and Officers
- --------------------------------------------------------------------
Employment Agreements
We have entered into employment contracts with Messrs. McLean, Macbeth,
Rowat and McDonald and Ms. Holleran-Boswell as described below under "Executive
Compensation - Employment Contracts."
Private Placement of Common Shares
The following current and former Directors and officers of PCSupport.com
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 Directors and officers above 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.
33
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Name of Director or Officer Number of PCS 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.
Such 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 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 133,334 66,666 66,666
</TABLE>
Transactions Involving Promoters
- --------------------------------
As the founding shareholders of RTI, Dromond and Advanced were our original
promoters. Advanced initially acquired 510,000 common shares of RTI at a price
of $0.13 per share. Dromond was initially issued 489,800 common shares of RTI,
at a price of $0.01 per share, in consideration for services rendered by Dromond
in connection with the establishment of the business of RTI. Advanced also
provided RTI with a non-interest bearing loan facility. An aggregate of
$110,043 was drawn against such loan and such loan was converted to 66,029
common shares of RTI at the rate of one common share for each $1.67 principal
amount of such loan. In addition, Advanced provided a bridge loan facility to
RTI in the amount of $34,200. The bridge loan was repaid in full from the
proceeds of a private placement completed by RTI on January 26, 1999. In
consideration for making such bridge
34
<PAGE>
loan, Advanced received warrants to purchase 20,000 common shares of RTI for a
period of one year expiring January 26, 2000, at a price of $0.85 per share;
such warrants expired unexercised. Additionally, Dromond was issued 63,440
common shares of RTI in consideration for services rendered by Dromond in
connection with the establishment of our business.
All of the shares issued by RTI to Dromond and Advanced were exchanged for
shares of our common stock in connection with the Merger on the basis of five
RTI shares for each share of our common stock. The share numbers and prices set
forth in the previous paragraph reflect this exchange ratio. The warrants held
by Advanced were exchanged for warrants to purchase 20,000 shares of our common
stock at a price of $0.85 per share, exercisable until January 26, 2000. Any
shares issued upon exercise will be subject to the pooling arrangements set
forth in "Certain Relationships and Related Transactions - Stock Pooling and
Escrow Agreement."
EXECUTIVE COMPENSATION
Persons Covered
- ---------------
The following table sets forth the compensation which we paid to our Chief
Executive Officer for the fiscal years ended June 30, 1998 and 1999. No other
officer received a combined salary and bonus in excess of $100,000 during the
last fiscal year. As we completed the Merger 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 Annual All Other
Name & Principal Position Year/(1)/ Salary Bonus Compensation
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael G. McLean 1999 $45,565/(2)/ $-0- $151,274/(3)/
CEO & President 1998 $26,176/(2)/ $-0- $ 29,388/(4)/
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) For 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 $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 $42,639
for fiscal 1999 and $15,388 for fiscal 1998. See "Certain Relationships
and Related Transactions."
(3) Includes the difference between the price paid by Mr. McLean in April, 1999
for shares of common stock of PCS 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).
(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
- -------------------------
There are no standard arrangements by which our Directors are compensated
for their services as Directors, except for the grant of stock options, and none
of the Directors received compensation for their services as Directors during
the most recently completed financial year. We compensate certain of our
Directors for their services as consultants. See "Certain Relationships and
Related Transactions - Management Contracts."
35
<PAGE>
Stock Option Plan
- -----------------
We adopted a stock option plan on July 2, 1999 (the "Plan"). The 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:
1. the number of shares reserved for issuance pursuant to stock options
granted to insiders exceeding 15% of our issued and outstanding
shares;
2. this 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
3. the issuance to any one individual, within a one year period, of a
number of shares exceeding 15% of our issued and outstanding shares.
The Plan provides that the exercise price of options granted under the Plan
shall be the average market price for the twenty trading days immediately prior
to the date of grant. The term of any option may not exceed five years from the
date of grant. In certain cases, a change of control would accelerate the
exercisability of options granted under the Plan.
The Plan provides that the options vest monthly over a certain number of
years, typically three. If the person to whom options were granted leaves his
or her employment or directorship before the options have vested, then the
unvested portion will be forfeited. Such person also must exercise the vested
options within 30 days of leaving his or her employment or directorship, or else
such vested options will be forfeited.
The Plan was amended on November 30, 1999 to provide that, in the event of
a change of control of our ownership, all unvested options will immediately
vest. The optionee must elect to exercise the accelerated options at that time,
or allow them to continue to vest according to the Plan.
Option Grants
- -------------
From July, 1999 through April, 2000, our Board approved the granting of the
following options to purchase shares of common stock to Directors, officers, and
significant employees, with the options vesting monthly over a three-year period
following the date of grant:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Number of Shares Exercise Grant Expiration
Name Under Options Price Date Date
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael G. McLean 50,000 $1.00 July 2, 1999 July 2, 2004
- ------------------------------------------------------------------------------------------------------------
Steven W. Macbeth 50,000 $1.00 July 2, 1999 July 2, 2004
- ------------------------------------------------------------------------------------------------------------
David W. Rowat 150,000 $1.00 July 2, 1999 July 2, 2004
- ------------------------------------------------------------------------------------------------------------
Clifford Rowlands (1) 150,000 $1.00 July 7, 1999 July 7, 2004
- ------------------------------------------------------------------------------------------------------------
Ben Catalano 30,000 $1.00 July 2, 1999 July 2, 2004
- ------------------------------------------------------------------------------------------------------------
Bruce McDonald 75,000 $1.00 November 30, 1999 November 30, 2004
- ------------------------------------------------------------------------------------------------------------
Denise Holleran-Boswell 60,000 $5.50 April 7, 2000 April 7, 2005
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Rowlands' employment with us ended in May 2000. His options will
continue to vest until August 31, 2000, at which point he will hold options to
purchase 62,500 shares of our common stock. The balance of his options will
terminate at that time.
36
<PAGE>
Employment Agreements
- ---------------------
We have entered into employment agreements with Messrs. McLean, Macbeth,
Rowat and McDonald and Ms. Holleran-Boswell. The respective agreements provide
that Messrs. McLean, Macbeth, Rowat and McDonald will each be paid (Cdn)$8,300
per month, and an annual cash bonus of 0-60% of their annual salary, subject to
their performance against mutually agreed objectives. Effective April 1, 2000,
Mr. McLean's salary was increased to (Cdn)$12,500 per month, and the salaries of
Messrs. Macbeth, Rowat and McDonald was increased to (Cdn)$10,417 per month.
Ms. Holleran-Boswell is paid a salary of (Cdn)$10,417 per month, and an annual
cash bonus of 0-60% of her annual salary, subject to her performance against
mutually agreed objectives. The agreements also provide that all unvested shares
or options held by Messrs. McLean, Macbeth, Rowat, McDonald and Ms. Holleran-
Boswell will vest upon any change in control of the ownership of PCSupport.com.
All of the employment agreements described above may be terminated by us or
by the respective employee at any time, with or without cause.
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 obligations of PCSupport.com, Inc. or for any duties or obligations
arising out of any acts or conduct of said officer or Director performed for or
on behalf of PCSupport.com, Inc. Our by-laws also provide that we will
indemnify and hold harmless each person who serves at any time as a Director or
officer of PCSupport.com, Inc., 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
of PCSupport.com, Inc., 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.
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. As of
May 15, 2000, there were 10,477,662 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.
37
<PAGE>
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.
Quarter Ended High Low
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
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.
As of May 15, 2000, we had warrants outstanding to purchase an aggregate of
82,838 shares of common stock at a price per share of $2.00. The 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 our common
stock, at a price of $2.00 per share. If, at any time prior to the expiration
of these warrants, we complete 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.
As of May 15, 2000, the Company also had warrants outstanding to purchase
240,000 shares of common stock at $1.40 per share, exercisable on or before
January 11, 2002; warrants outstanding to purchase 333,000 shares of common
stock at $2.00 per share, exercisable on or before March 7, 2001; warrants
outstanding to purchase 1,000,000 shares of common stock, exercisable at a price
of $1.25 from March 7, 2000 to March 7, 2001 and $1.75 from March 8, 2001 to
March 10, 2002; warrants outstanding to purchase 500,000 shares of common stock,
exercisable at a price of $2.00 from March 8, 2000 to March 8, 2001 and $2.50
from March 9, 2001 to March 10, 2002; warrants to purchase 10,000 shares of
common stock, exercisable at a price of $1.05 from January 11, 2000 to January
11, 2003; warrants to purchase 50,000 shares of common stock, exercisable at a
price of $5.47 from April 21, 2000 to April 21, 2003; and a commitment to issue
warrants to purchase 500,000 shares of common stock, exercisable at a price of
$2.00 from March 24, 2000 to March 24, 2001.
38
<PAGE>
As of May 15, 2000, an aggregate of 848,750 shares of common stock were
issuable upon exercise of outstanding stock options.
Holders
- -------
As of May 15, 2000, we had 138 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 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.
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 on May 15, 2000. 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 Inc. 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 Ltd. 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 2.2% 230,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Capilano West Capital Ventures I 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) 5.5% 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
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 De Luccio 112,500(10) 1.1% 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. Popers 442 (f) 125,000 1.2% 125,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Grant Ferguson 8,000(13) * 8,000(13) 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Eileen Finnigen 4,000 * 4,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
FMWP (BVI) 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) 1.4% 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 Gmb H (k) 300,000 2.9% 300,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
ICE Holdings North America, LLC (l) 45,000 * 45,000 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) 5.4% 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 (m) 40,000(22) * 40,000(22) 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Lloyds TSB Bank plc 145,000 1.4% 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 1.2% 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
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dorothy Mae McKim 4,000(23) * 4,000(23) 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Brett McLean (n) 4,000 * 4,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Don and Barb McLean (o) 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 (p) 600,000(24) 5.4% 600,000(24) 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Anthony Murray 25,000 * 25,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
National Bank Financial 34,000 * 34,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Mike Newman 4,000 * 4,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Aaron Nielsen (q) 7,500(25) * 7,500(25) 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Kerry Noon (r) 2,000 * 2,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Odulm Brown Ltd. (s) 2,000 * 2,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Irwin Olian (t) 385,000(26) 3.6% 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
- ----------------------------------------------------------------------------------------------------------------------------------
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 51,000(29) * 51,000(29) 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Wayne Leslie Saxby 6,000 * 6,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Ken H. Schaeffers 38,000 * 38,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Edwin B. Shaw and Felicia P. Shaw
Jt. Tenants 25,417 * 25,417 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Edwin B. Shaw, Robert B. Nelson & Dawn
E. Kidd, TTEES 25,417 * 25,417 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Lyle H. Shuert
Revocable Living Trust 25,417 * 25,417 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Matthew Charles Shuert and Kelly Rosa
Shuert 12,708 * 12,708 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Mark R. Siewert 112,500(30) 1.1% 112,500(30) 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Sitrick and Company (u) 34,000 * 34,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Andrew P. Smith (v) 25,000 * 25,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Edyta Smith (w) 25,000 * 25,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Robert A. Spence 4,000 * 4,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Paul Stanley 127,083 1.2% 127,083 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Roma Stewart 35,000 * 35,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
William Trimble 34,000 * 34,000 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Troy & Gould Profit Sharing Plan FBO
William D. Gould (x) 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 (y) 160,000(32) 1.5% 150,000(32) 10,000 *
- ----------------------------------------------------------------------------------------------------------------------------------
Wolverton Securities Ltd. (z) 504,000(33) 4.6% 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 7,291,331(34)
-----------------------------------
</TABLE>
_________________________
* Indicates less than 1% beneficial ownership.
41
<PAGE>
(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 has served as a financial consultant for us since August 1999.
(c) Bill Catalano is the father of Ben Catalano, who is one of our Directors.
(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. Popers 442 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 as Investor Relations Coordinator since January
2000.
(k) ICE Consult Gmb H 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) Mr. Levy has served as a financial consultant for us since August 1999.
(n) Brett McLean is a cousin of Michael McLean, who is our President and CEO.
(o) Don and Barb McLean are an uncle and aunt, respectively, of Michael McLean,
who is our President and CEO.
(p) 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.
(q) We have employed Mr. Nielsen as Manager, Finance and Investor Relations
since May 1999.
(r) Ms. Noon has served as our Controller since our inception in December 1997.
(s) Odulm Brown provided us with financial consulting services in connection
with our private offering of common stock in April 1999.
(t) Mr. Olian has served as a financial consultant for us since June 1999.
(u) Sitrick and Company provided us with investor relations services from
October 2000 to May 2000.
(v) Mr. Smith is a managing director of ICE Holdings North America LLC, which
has provided us with investment banking services since December 1999.
(w) 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.
(x) 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.
(y) Mr. Wohlberg 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.
(z) 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 warrants.
(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.
42
<PAGE>
(22) Consists of shares issuable upon exercise of warrants.
(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 shares issuable upon exercise of warrants.
(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 2,820,838 shares issuable upon exercise of warrants.
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:
43
<PAGE>
. 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;
. 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 year ended 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.
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. Certain members of Troy & Gould Professional
Corporation 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.
44
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Audited Annual Financial Statements
- -----------------------------------
<S> <C>
Independent Auditors' Report to Annual Financial Statements................................................................ F-2
Balance Sheets as of June 30, 1999 and 1998................................................................................ F-3
Statements of Operations for the Year Ended June 30, 1999, the Period from December 10, 1997 (inception) to June 30, 1998
and the Period from December 10, 1997 (inception) to June 30, 1999........................................................ F-4
Statements of Stockholders' Equity for the Year Ended June 30, 1999 and the Period from
December 10, 1997 (inception) to June 30, 1998............................................................................. F-5
Statements of Cash Flows for the Year Ended June 30, 1999, the Period from December 10, 1997 (inception) to June 30, 1998
and the Period from December 10, 1997 (inception) to June 30, 1999........................................................ F-6
Notes to Annual Financial Statements....................................................................................... F-7
Unaudited Interim Financial Statements
- --------------------------------------
Balance Sheets as of March 31, 2000 and June 30, 1999...................................................................... F-17
Statements of Operations for the Nine Months Ended March 31, 2000 and 1999, the Three Months Ended March 31, 2000 and 1999
and the Period from December 10, 1997 (inception) to March 31, 2000....................................................... F-18
Statements of Stockholders' Equity for the Nine Months Ended March 31, 2000 and the Period from December 10, 1997
(inception) to March 31, 2000............................................................................................. F-19
Statements of Cash Flows for the Nine Months Ended March 31, 2000 and 1999 and the Period from December 10, 1997
(inception) to March 31, 2000............................................................................................. F-20
Notes to Interim Financial Statements...................................................................................... F-21
</TABLE>
F-1
<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, 1999 and 1998 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the year ended June 30, 1999, the period from December 10,
1997 (inception) to June 30, 1998 and for the period from December 10,1997
(inception) to June 30, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. 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
(a Development Stage Enterprise) as of June 30, 1999 and 1998, and the results
of their operations and their cash flows for the year ended June 30, 1999, the
period from December 10, 1997 (inception) to June 30, 1998 and for the period
from December 10, 1997 (inception) to June 30, 1999, in conformity with United
States generally accepted accounting principles.
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.
Signed "KPMG LLP"
Chartered Accountants
Vancouver, Canada
August 20, 1999
F-2
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 795,809 $ -
Accounts receivable 14,728 -
Prepaid expenses 33,950 -
Other current assets 49,256 242
---------- ---------
Total current assets 893,743 242
Property and equipment (note 4) 11,210 2,702
Intangible asset (note 5) 2,697 -
---------- ---------
$ 907,650 $ 2,944
========== =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 68,266 $ 3,710
Convertible debt (note 6(a)) - 47,729
---------- ---------
Total current liabilities 68,266 51,439
Stockholders' equity (deficit) (note 6):
Common stock, $0.001 par value, authorized 100,000,000 shares;
issued 6,007,169 shares in 1999 and 1,000,000
shares in 1998 6,007 1,000
Additional paid-in capital 1,981,782 132,799
Deferred stock compensation (198,909) -
Deficit accumulated during the development stage (949,496) (182,294)
Treasury stock, 285,000 shares in 1999 - -
---------- ---------
Total stockholders' equity (deficit) 839,384 (48,495)
---------- ---------
Commitments and contingencies (note 7)
Subsequent events (note 12)
$ 907,650 $ 2,944
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Operations
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from Period from
December 10, December 10,
1997 1997
Year ended (inception) to (inception) to
June 30, 1999 June 30, 1998 June 30, 1999
------------- -------------- --------------
<S> <C> <C> <C>
Revenue $ 99 $ - $ 99
Cost of services 86 - 86
---------- --------- ---------
Gross profit 13 - 13
---------- --------- ---------
Operating expenses:
Research and development 17,646 2,814 20,460
Marketing and promotion 477,103 120,918 598,021
General and administrative 265,953 58,562 324,515
---------- --------- ---------
760,702 182,294 942,996
---------- --------- ---------
Loss from operations (760,689) (182,294) (942,983)
Interest expense, net 6,513 - 6,513
---------- --------- ---------
Loss for the period $ (767,202) $(182,294) $(949,496)
========== ========= =========
Net loss per common share, basic and diluted $ (.46) $ (.22)
========== =========
Weighted average common shares outstanding,
basic and diluted 1,659,455 857,171
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (Deficit)
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
<TABLE>
<CAPTION>
Common Shares Additional Deferred
------------------- Paid-in Stock
Shares Amount Capital Compensation
------ ------ ---------- ------------
<S> <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 -
Sale of common stock in
January, $.13 per share 510,000 510 67,642 -
Net loss - - - -
--------- --------- ---------- ------------
Balance, June 30, 1998 1,000,000 1,000 132,799 -
Fair value of common stock
purchase warrants
granted to creditor - - 8,407 -
Sale of common stock in
January, approximately
$.85 per share, net of
issuance costs of
$131,708 291,838 292 116,062 -
Issuance of common stock
for services in January
and May, valued at
approximately $.85 per
share 52,848 53 45,101 -
Conversion of note payable
to common stock
(note 6(a)) 66,029 66 109,977 -
Issuance of common stock
for services in January 63,440 63 53,861 -
Issuance of common stock
for services in April 1,500,000 1,500 777,620 (392,356)
Amortization of deferred
stock compensation - - - 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 -
Treasury stock repurchased
by Company in June - - (148,200) 148,200
Net loss - - - -
--------- --------- ---------- ------------
Balance, June 30, 1999 6,007,169 $ 6,007 $1,981,782 $ (198,909)
========= ========= ========== ============
<CAPTION>
Deficit
Accumulated
During Treasury Stock Total
Development ------------------ Stockholders'
Stage Shares Amount Equity (Deficit)
----------- ------ ------ ----------------
<S> <C> <C> <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, $.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
issuance costs of
$131,708 - - - 116,354
Issuance of common stock
for services in January
and May, valued at
approximately $.85 per
share - - - 45,154
Conversion of note payable
to common stock
(note 6(a)) - - - 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 $46,753 (note
3) - - - 889,188
Treasury stock repurchased
by Company in June - (285,000) - -
Net loss (767,202) - - (767,202)
---------- ----------- ------ ----------
Balance, June 30, 1999 $ (949,496) (285,000) $ - $ (839,384)
========== =========== ====== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period from Period from
December 10, December 10,
1997 1997
Year ended (inception) to (inception) to
June 30, 1999 June 30, 1998 June 30, 1999
-------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss for the period $ (767,202) $ (182,294) $ (949,496)
Items not affecting cash:
Depreciation and amortization 5,336 620 5,956
Common stock issued in exchange
for services 486,191 65,647 551,838
Discount on notes payable 8,407 - 8,407
Changes in operating assets and liabilities:
Accounts receivable (14,728) - (14,728)
Prepaid expenses (33,950) - (33,950)
Other current assets (49,014) (242) (49,256)
Accounts payable and accrued liabilities 64,556 3,710 68,266
---------- ----------- ----------
Net cash used in operating activities (300,404) (112,559) (412,963)
---------- ----------- ----------
Cash flows from investing activities:
Purchase of property and equipment (13,055) (3,322) (16,377)
Purchase of intangible asset (3,486) - (3,486)
---------- ----------- ----------
Net cash used in investing activities (16,541) (3,322) (19,863)
---------- ----------- ----------
Cash flows from financing activities:
Proceeds from issuance of notes payable 62,314 47,729 110,043
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
Net proceeds from sale of common stock 161,508 68,152 229,660
---------- ----------- ----------
Net cash provided by financing activities 1,112,754 115,881 1,228,635
---------- ----------- ----------
Net increase in cash and cash equivalents 795,809 - 795,809
Cash and cash equivalents at beginning of period - - -
---------- ----------- ----------
Cash and cash equivalents at end of period $ 795,809 $ - $ 795,809
========== =========== ==========
Supplemental disclosure of non-cash financing activities:
Notes payable converted into common stock $ 110,043 $ - $ 110,043
Deferred stock compensation 198,909 - 198,909
Income taxes paid - - -
Interest paid - - -
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
_______________________________________________________________________________
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 has no substantive operations. In
June 1999, PCS merged with Reconnaissance, with PCsupport.com, Inc. (the
"Company") being the surviving corporation (note 2(a)). The Company is
currently in the business of developing and commercializing support
services for the personal computer market. The Company believes that its
first commercial applications will be 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 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, 1999, 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. The Company does not have sufficient working
capital to sustain operations until the end of the year ended June 30,
2000. It is management's plan to raise additional debt or equity financing,
but such financing 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, PCSupport.Com, Inc. Accordingly, Reconnaissance is deemed the
accounting acquiror for financial statement purposes.
F-7
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
_______________________________________________________________________________
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 financial position, results of operations and cash flows of
Reconnaissance from the date of its incorporation on December 10, 1997
under the Company Act (British Columbia). On June 20, 1999,
Reconnaissance continued its incorporation into Wyoming. The historical
stockholders' equity gives effect to the shares issued to the
stockholders of Reconnaissance. The 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
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.
(d) Contract revenue recognition:
Earned revenue from support service contracts is recognized on the
percentage-of-completion method of accounting. Contract revenues earned
are recorded using the percentage of contract costs incurred to date to
total estimated contract costs.
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-8
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
_______________________________________________________________________________
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) Property and equipment:
Property and equipment are stated at cost and are depreciated using the
straight-line method over their estimated useful lives ranging from two
to seven years.
(h) Major customers:
All of the Company's revenues were from one Canadian customer for the
year ended June 30, 1999.
(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.
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.
F-9
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
_______________________________________________________________________________
2. Significant accounting policies (continued):
(j) Research and development:
Research and development costs are expensed when incurred.
(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 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, 1999 are warrants to purchase 311,838 shares of common
stock because their effects would be anti-dilutive. Also excluded from
the computation of diluted earnings per share for the period from
December 10, 1997 (inception) to June 30, 1998 are 40,528 shares of
potential common stock resulting from the assumed conversion of the
convertible notes payable 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 fair 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).
SFAS No. 123, Accounting for Stock Based Compensation, required
entities that continue to apply the provision 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.
F-10
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
________________________________________________________________________________
3. Acquisitions:
In June, 1999, PCS merged with Reconnaissance. The acquisition was a
reverse take-over with Reconnaissance being the deemed accounting acquiror
for financial statements purposes.
The acquisition was recorded using the purchase method. Net assets acquired
through the issuance of common stock consisted of cash and cash equivalents
with a fair value of $935,685. Cash and cash equivalents held by PCS were
obtained through a private placement which was contingent on this
acquisition being completed. 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 proforma information which combines
the operations 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 proforma adjustments required in combining this information of
these two entities. This proforma information does not reflect any non-
recurring charges or credits directly attributable to the transaction. This
proforma 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.
________________________________________________________________________________
Period from
December 10,
1997
Year ended (inception) to
June 30, June 30,
1999 1998
________________________________________________________________________________
Revenue $ 99 $ -
Cost of service 86 -
________________________________________________________________________________
Gross profit 13 -
Expenses
Research and development 17,646 2,814
Marketing and promotion 477,103 120,918
General and administrative 317,685 63,562
Interest, net 6,513 -
________________________________________________________________________________
Net loss for the period $ (818,947) $ (187,294)
________________________________________________________________________________
Net loss per share $ (0.14) $ (0.04)
________________________________________________________________________________
F-11
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
________________________________________________________________________________
4. Property and equipment:
Property and equipment consists of the following:
June 30,
------------------
1999 1998
---- ----
Computer equipment $ 14,173 $ 2,295
Furniture and office equipment 1,584 1,027
------ -----
15,757 3,322
Less accumulated depreciation 4,547 620
------ -----
$ 11,210 $ 2,702
====== =====
5. Intangible asset:
Intangible assets includes the cost of acquiring the Company's World Wide
Web domain name and is amortized straight line over a three year period.
6. Stockholders' equity:
(a) Convertible notes payable:
The Company had outstanding a $47,729 convertible note payable to a
shareholder at June 30, 1998 and was advanced an additional $62,314
between July, 1998 and January, 1999. The notes were non-interest
bearing and were converted into 66,029 shares of common stock in
January, 1999.
(b) Stock options, stock-based compensation and share-purchase warrants:
i) Stock options
In 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. As of June 30, 1999, no
options have been granted under the plan.
F-12
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 7
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
_______________________________________________________________________________
6. Stockholders' equity (continued):
(b) Stock options, stock-based compensation and share-purchase warrants
(continued):
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
$.01 per share to certain stockholders and officers of the
Company. The fair value of the common shares was estimated at $.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 are exerciseable immediately
at an exercise price of $.85 per share and expire in January,
2000. The fair value of the warrants granted is estimated using
the Black-Scholes option pricing model with the following
assumptions: Expected volatility of 70%, risk-free interest rate
of 4.8%, expected life of 3 years, and a 0% dividend yield.
In January, 1999, the Company issued 52,848 shares of common stock
in exchange for services relating to share issuance. The fair
value of these services was estimated based upon the estimated
fair value of the shares at $.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.
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 $.85 per share at
the time of the transaction.
In April, 1999, the Company recorded non-cash compensation expense
and deferred compensation expense of $631,800 related to the
issuance of 1,500,000 shares of common stock at no cost certain
officers and stockholders. The value of the shares was estimated
at $.52 per share. A certain portion of these shares are subject
to vesting over a period of time. Compensation expense 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.
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.
F-13
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 8
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
________________________________________________________________________________
6. Stockholders' equity (continued):
iii) Share purchase warrants:
<TABLE>
<CAPTION>
Outstanding warrants
----------------------------
Expiry dates Exercise price per share June 30, 1999 June 30, 1998
------------ ------------------------ ------------- -------------
<S> <C> <C> <C>
January, 2000 (6ii) $ 0.85 20,000 -
various (a) $ 0.85 291,838 -
------- -------------
311,838 -
======= =============
</TABLE>
(a) 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. If the Company completes a
financing of common shares for gross proceeds in excess of
$400,000 Cdn. prior to the expiry of the warrants and the
common shares are sold in excess of the exercise price, the
warrant exercise price will increase to the offering price
per share if the warrants are exercised within 10 days.
(c) Reverse stock split:
In June 1999, the Company authorized a 1-for-5 reverse stock split of
the Company's common stock. All share and per share information has
been adjusted for all periods presented to reflect the reverse stock
split.
7. Operating leases:
The Company leases office facilities in British Columbia under an operating
lease agreement that expires November, 2002. Rent under the agreement
increases 20% and 8.3% after the first and second years, respectively.
Minimum lease payments under operating leases are as follows:
2000 $ 178,278
2001 351,732
2002 381,039
2003 158,766
Rent expense totalled $9,587 and $7,273 for the year ended June 30, 1999
and the period from December 10, 1997 (inception) to June 30, 1998,
respectively.
F-14
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 9
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
________________________________________________________________________________
8. Deferred tax assets and liabilities:
<TABLE>
<CAPTION>
June 30,
------------------------
1999 1998
--------- --------
<S> <C> <C>
Deferred tax assets:
Operating loss carry forward $ 228,000 $ 56,000
Share issue costs and other 46,500 300
--------- --------
Total deferred tax assets before valuation allowance 274,500 56,300
Valuation allowance (274,500) (56,300)
--------- --------
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 carryforwards for income tax purposes at
June 30, 1999 of approximately $530,000 (1998 - $123,000). Operating losses
begin to expire in fiscal year 2002.
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.
F-15
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 10
(Expressed in U.S. Dollars)
Year ended June 30, 1999
Period from December 10, 1997 (inception) to June 30, 1998
________________________________________________________________________________
10. Related party transactions:
In December, 1997, the Company entered into a contract with stockholders to
provide the duties of President and of Chief Technical Officer. This
contract was subsequently amended and restated on June 23, 1999. The
contract expires in December 1999, with a twelve month renewal option. The
Company incurred cash compensation expense of $88,204 and $41,564 and non-
cash compensation expense of $302,548 and $58,776 during the year ended
June 30, 1999, and the period from December 10, 1997 (inception), to June
30, 1998, respectively.
In 1999, the Company has entered into a contract with a consulting company
owned by a stockholder to provide the duties of Chief Financial Officer.
The Company incurred cash compensation expense of $19,686 and non-cash
compensation expense of $32,987 during the year ended June 30, 1999.
11. Uncertainty due to the Year 2000 Issue:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. The Company is currently
working on their Year 2000 preparations. However, it is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
12. Subsequent events
Subsequent to year-end, the Company granted 430,750 stock options to
officers, directors and employees with an exercise price of $1.00 per
share.
F-16
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Interim Consolidated Balance Sheets
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
----------- ----------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 6,016,277 $ 795,809
Accounts receivable 30,731 14,728
Prepaid expenses - 33,950
Deposits and advances 36,783 49,256
----------- ----------
Total current assets 6,083,791 893,743
Property and equipment 195,248 11,210
Intangible asset 1,643 2,697
----------- ----------
$ 6,280,682 $ 907,650
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 152,355 $ 68,266
Convertible promissory notes of $1,000,000, less
unamortized deemed discount of $500,000 (note 3(b)) 500,000 -
----------- ----------
Total current liabilities 652,355 68,266
Stockholders' equity (note 4):
Common stock, $0.001 par value, authorized 100,000,000 shares;
issued 6,429,729 shares at March 31, 2000 and 6,007,169
shares at June 30, 1999 6,430 6,007
fully paid share subscriptions for 2,812,600 shares at
March 31, 2000 (notes 4(c)(i) and (ii), 4(d)) and nil shares
at June 30, 1999 5,487,005 -
Additional paid-in capital 5,567,897 1,981,782
Deferred stock compensation (980,265) (198,909)
Treasury stock, 285,000 shares at March 31, 2000 and
June 30, 1999 - -
Deficit accumulated during the development stage (4,452,740) (949,496)
----------- ----------
Total stockholders' equity 5,628,327 839,384
----------- ----------
$ 6,280,682 $ 907,650
=========== ==========
</TABLE>
Commitments and contingencies (note 5)
Subsequent events (note 4(c)(i), 5(a) and 6)
See accompanying notes to interim consolidated financial statements.
F-17
<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,
Nine months ended Three months ended 1997
March 31, March 31, (inception) to
---------------------------- --------------------------- March 31,
2000 1999 2000 1999 2000
----------- ---------- ----------- ---------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenue $ 7,358 $ - $ 5,038 $ - $ 7,457
Cost of services 51,942 - 49,810 - 52,028
----------- ---------- ----------- ---------- -----------
Gross profit (loss) (44,584) - (44,772) - (44,571)
----------- ---------- ----------- ---------- -----------
Operating expenses:
Research and development 556,719 11,505 173,570 4,963 577,179
Marketing and promotion 624,655 24,954 261,621 18,129 1,222,676
General and administrative 879,349 124,951 253,122 59,261 1,203,864
----------- ---------- ----------- ---------- -----------
2,060,723 161,410 688,613 82,353 3,003,719
----------- ---------- ----------- ---------- -----------
Loss from operations (2,105,307) (161,410) (733,385) (82,353) (3,048,290)
Interest income (expense), net
(note 3(b)) (1,397,937) 571 (1,405,921) 544 (1,404,450)
----------- ---------- ----------- ---------- -----------
Loss for the period $(3,503,244) $ (160,839) $(2,139,306) $ (81,809) $(4,452,740)
=========== ========== =========== ========== ===========
Net loss per common share,
basic and diluted $ (0.57) $ (0.15) $ (0.33) $ (0.06) $ (1.51)
=========== ========== =========== ========== ===========
Weighted average common
shares outstanding, basic
and diluted 6,175,408 1,106,407 6,390,810 1,323,950 2,952,290
=========== ========== =========== ========== ===========
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-18
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Interim Consolidated Statements of Stockholders' Equity
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
<TABLE>
<CAPTION>
Common Shares Additional
---------------------------- Share Paid-in
Shares Amount Subscriptions Capital
------ ------ ------------- -------------
<S> <C> <C> <C> <C>
Balance, December 10, 1997
(inception) 200 $ - $ - $ -
Issuance of common stock for
compensation in January,
valued at $0.13 per share 489,800 490 - 65,157
Sale of common stock in January,
$0.13 per share 510,000 510 - 67,642
Net loss - - - -
--------- ----------- -------------- -------------
Balance, June 30, 1998 1,000,000 1,000 - 132,799
Fair value of common stock
purchase warrants granted
to creditor - - - 8,407
Sale of common stock in January,
$0.85 per share, net of
issuance costs of $131,708 291,838 292 - 116,062
Issuance of common stock for
services in January and May,
valued at approximately $0.85
per share 52,848 53 - 45,101
Conversion of note payable to
common stock 66,029 66 - 109,977
Issuance of common stock for
services in January 63,440 63 - 53,861
Issuance of common stock for
services in April 1,500,000 1,500 - 777,620
Amortization of deferred stock
compensation - - - -
Issuance of common stock for
acquisition in June, net
of acquisition costs of
$46,753 3,033,014 3,033 - 886,155
Treasury stock repurchased by
Company in June, not cancelled (285,000) - - ( 148,200)
Net loss - - - -
--------- ----------- -------------- -------------
Balance, June 30, 1999 5,722,169 6,007 - 1,981,782
Exercise of warrants in July 68,400 69 - 58,197
Shares issued to consultant in
settlement of accrued liability 4,160 4 - 6,504
Fair value of options issued to
employees and consultants - - - 226,864
Conversion of notes payable in
January 350,000 350 - 500,550
Fully paid warrants to be issued
as financing compensation cost
(note 3(b)) - - - 1,794,000
Beneficial conversion feature of
notes payable issued
in February (note 3(b)) - - - 1,000,000
Amortization of deferred stock
compensation - - - -
Fully paid unit subscription in
March, net of $20,399 in
cash financing costs (note 4
(c)(i)) - - 1,215,601 -
Fully paid share subscription in
March, net of $25,000
in cash financing costs
(note 4(c)(ii)) - - 4,083,000 -
Fully paid exercise of warrants,
shares unissued (note 4(d)) - - 188,404 -
Net loss - - - -
--------- ----------- -------------- -------------
Balance, March 31, 2000 6,144,729 $ 6,430 $ 5,487,005 $ 5,567,897
========= =========== ============== =============
<CAPTION>
Deficit
Accumulated
Deferred During Total
Stock Development Stockholders'
Compensation Stage Equity
-------------- -------------- --------------
<S> <C> <C> <C>
Balance, December 10, 1997
(inception) $ - $ - $ -
Issuance of common stock for
compensation in January,
valued at $0.13 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,
$0.85 per share, net of
issuance costs of $131,708 - - 116,354
Issuance of common stock for
services in January and May,
valued at approximately $0.85
per share - - 45,154
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 (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 - - 889,188
Treasury stock repurchased by
Company in June, not cancelled 148,200 - -
Net loss - (767,202) (767,202)
------------- -------------- --------------
Balance, June 30, 1999 (198,909) (949,496) 839,384
Exercise of warrants in July - - 58,266
Shares issued to consultant in
settlement of accrued liability - - 6,508
Fair value of options issued to
employees and consultants - - 226,864
Conversion of notes payable in
January - - 500,900
Fully paid warrants to be issued
as financing compensation cost
(note 3(b)) (1,794,000) - -
Beneficial conversion feature of
notes payable issued
in February (note 3(b)) - - 1,000,000
Amortization of deferred stock
compensation 1,012,644 - 1,012,644
Fully paid unit subscription in
March, net of $20,399 in
cash financing costs (note 4
(c)(i)) - - 1,215,601
Fully paid share subscription in
March, net of $25,000
in cash financing costs
(note 4(c)(ii)) - - 4,083,000
Fully paid exercise of warrants,
shares unissued (note 4(d)) - - 188,404
Net loss - (3,503,244) (3,503,244)
-------------- -------------- --------------
Balance, March 31, 2000 $ (980,265) $ (4,452,740) $ 5,628,327
============== ============== ==============
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-19
<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
Nine months ended (inception) to
March 31, March 31,
2000 1999 2000
--------------------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Loss for the period $ (3,503,244) $ (160,839) $ (4,452,740)
Items not affecting cash:
Depreciation and amortization 43,824 2,113 49,780
Stock options issued to employees and contractors 232,437 - 232,437
Common stock issued in exchange for services - 71,330 551,838
Warrants issued for services 6,088 - 6,088
Deemed discount amortization on promissory note 500,000 - 500,000
Amortization of deferred stock compensation 1,012,644 - 1,012,644
Discount on notes payable - 8,407 8,407
Loss on debt extinguishment and other (4,323) - (4,323)
Changes in operating assets and liabilities:
Accounts receivable (16,003) (7,363) (30,731)
Prepaid expenses 33,950 - -
Deposits and advances 12,473 242 (36,783)
Accounts payable and accrued liabilities 84,089 14,885 152,355
------------- ---------- ----------------
Net cash used in operating activities (1,598,065) (71,225) (2,011,028)
------------- ---------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (226,808) (11,907) (243,185)
Purchase of intangible asset - - (3,486)
------------- ---------- ----------------
Net cash used in investing activities (226,808) (11,907) (246,671)
------------- ---------- ----------------
Cash flows from financing activities:
Proceeds from issuance of notes payable - 62,314 110,043
Proceeds from issuance of bridge loan - - 17,088
Repayment of bridge loan - - (17,088)
Cash acquired in acquisition - - 888,932
Proceeds from promissory notes 1,500,000 - 1,500,000
Proceeds from exercise of share purchase warrants 246,740 - 246,740
Net proceeds from sale of common stock 5,298,601 116,354 5,528,261
------------- ---------- ----------------
Net cash provided by financing activities 7,045,341 178,668 8,273,976
------------- ---------- ----------------
Net increase in cash and cash equivalents 5,220,468 95,536 6,016,277
Cash and cash equivalents at beginning of period 795,809 - -
------------- ---------- ----------------
Cash and cash equivalents at end of period $ 6,016,277 $ 95,536 $ 6,016,277
============= ========== ================
Supplemental disclosure of non-cash financing activities:
Notes payable converted into common stock and
warrants $ 500,000 $ 110,043 $ 610,043
Deferred stock compensation 1,794,000 - 1,992,909
Common stock issued to settle accrued liability 6,508 - 6,508
Income taxes paid - - -
Interest paid 2,584 - 2,584
============= ========== ================
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-20
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 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 March 31, 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 March
31, 2001. Additional debt or equity financing will be required to fund
operations and may not be available on reasonable terms or on any terms at
all.
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's
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-SB filed with the Securities
and Exchange Commission for the year ended June 30, 1999, and should
be read in conjunction therewith. Certain comparative figures have
been reclassified to conform to the presentation adopted in the
current period.
F-21
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 2
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
________________________________________________________________________________
2. Basis of presentation (continued):
(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.
(c) Net loss per share:
Basic loss 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 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 March 31, 2000 are warrants to purchase 2,141,838 (March
31, 1999 -311,838) shares of common stock, options to purchase 819,750
(March 31, 1999 - nil) shares of common stock and fully paid share
subscriptions for 2,812,600 shares of common stock (March 31, 1999 -
nil), because their effects would be anti-dilutive.
Also excluded from the computation of diluted loss per share for the
periods ended March 31, 2000 are 500,000 (March 31, 1999 - nil) shares
of potential common stock resulting from the assumed conversion of
convertible notes payable because their effects would be anti-
dilutive.
3. Debt financings:
(a) Revolving debt facility:
On January 11, 2000, the Company negotiated a $1,000,000 revolving
debt facility. No funds were drawn against this facility before it was
rescinded by mutual consent of the Company and the lender prior to
March 31, 2000.
F-22
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 3
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
________________________________________________________________________________
3. Debt financings (continued):
(b) 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 bear interest at
an annual rate of 10% and are payable monthly. The notes are
convertible, together with accrued interest, any time by the holders
and are convertible by the Company 60 days after their issuance date.
The promissory notes mature 120 days after their issuance and may be
secured by a General Security Agreement covering all assets of the
Company.
These notes carry a beneficial conversion feature valued at
$1,225,000, 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 is being
amortized to interest expense over the period to the earliest
conversion date. Interest expense recognized upon amortization totaled
$500,000 during the period ended March 31, 2000 and the remaining
unamortized balance of the conversion feature of $500,000 is recorded
as a discount on the convertible promissory notes.
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 in
the first year and $1.75 in the second year. Each "B" warrant entitles
the holder to acquire one common share at an exercise price of $2.00
per share in the first year and $2.50 in the second year. The
estimated fair value of the warrants of $1,794,000 was recorded as
deferred finance costs and is being amortized to interest expense over
the period to the earliest conversion date.
The Company has committed to register with the United States
Securities and Exchange Commissions ("SEC") all shares issuable upon
exercise of the "A" and "B" warrants and all shares issuable upon
conversion of this debt facility (note 5(c)).
F-23
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 4
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
________________________________________________________________________________
4. Stockholders' equity:
(a) Stock options and stock-based compensation:
During the three months ended March 31, 2000, the Company recorded
non-cash compensation expense of approximately $51,000 (March 31,
1999 -nil) related to the issuance of options to purchase shares of
common stock to employees and consultants. The options have exercise
prices ranging from $1.00 to $6.06 and have a vesting period ranging
from immediate up to 36 months.
(b) Conversion of notes payable into equity:
On January 11, 2000, the Company agreed to convert outstanding
promissory notes totaling $500,000 into 350,000 common shares and
warrants to purchase 240,000 common shares at a price of $1.40 per
share. The warrants expire January 2002. The loss on extinguishment of
debt was approximately $900. The Company has committed to register
these common shares and common shares issuable upon exercise of the
warrants with the SEC (note 5(c)).
(c) Subscriptions:
(i) Shares and warrants:
In March 2000, the Company completed a private placement issuing
618,000 units to investors for proceeds of $1,215,601, net of
$20,399 of cash financing costs. Each unit consists of one common
share of the Company and one warrant to purchase an additional
one-half of one common share at an exercise price of $1.00 per
one-half share. As at March 31, 2000, the 618,000 common shares
were fully paid for, but were not issued. The warrants expire
March, 2001.
Subsequent to March 31, 2000, the Company sold an additional
48,000 units to investors for net proceeds of $96,000.
F-24
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 5
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
________________________________________________________________________________
4. Stockholders' equity (continued):
(c) Subscriptions (continued):
(ii) Shares:
Also in March 2000, the Company completed a private placement
relating to the subscription for 2,054,000 common shares of the
Company for proceeds of $4,083,000, net of $25,000 of cash
financing costs. As at March 31, 2000, the 2,054,000 common
shares were fully paid for, but were not issued. The Company
agreed to issue warrants to purchase 500,000 common shares at
$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 cost of the
private placement as a charge to additional paid-in capital.
The Company has committed to issue and register these common
shares and also register any common shares issuable upon the
exercise of the warrants with the SEC (note 5(c)).
(d) Warrants exercised:
In March, 2000, investors exercised warrants to purchase 140,600
shares of the Company's common stock for proceeds of $188,404. As at
March 31, 2000, these shares were not issued.
5. Commitments:
(a) Internet portal advertising agreement:
Subsequent to March 31, 2000, 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 Web site for a one year
term. Also, the Company has agreed to create a co-branded Web site to
provide its services to the Internet service company's customers for a
two year term. The Company is committed to paying $570,000 under the
agreement for the remainder of fiscal year 2000, $2,460,000 in fiscal
year 2001, and $2,250,000 in fiscal year 2002.
F-25
<PAGE>
PCsupport.com, inc. and subsidiary
(A Development Stage Enterprise)
Notes to Interim Consolidated Financial Statements, page 6
(Unaudited)
(Expressed in U.S. Dollars)
Nine months ended March 31, 2000
Period from December 10, 1997 (inception) to March 31, 2000
________________________________________________________________________________
5. Commitments (continued):
(b) 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 SEC (note 5(c)) 1,000,000 warrants as consideration
for their services. As at March 31, 2000 no warrants were earned.
(c) Registration of shares:
The Company has committed to file with the SEC a registration
statement to register all common shares or common shares issuable upon
the exercise of warrants and all other shares issuable upon conversion
of Convertible Promissory Notes issued or committed to be issued
during the three months ended March 31, 2000.
6. Subsequent events:
(a) Subsequent to March 31, 2000, the Company completed a private
placement for the subscription of 645,000 common shares at a price per
share of $2.125. The gross proceeds of $1,370,625 were received by the
Company on closing.
(b) Subsequent to March 2000, the Company entered into an operating lease
for office space. The lease has a 5 year term commencing September 1,
2000 and requires annual non-cancellable lease payments of $595,000.
The Company is in the process of negotiating the cancellation or sub-
lease of its existing premise agreement.
F-26
<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>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 2
Use of Proceeds............................................. 12
Our Business................................................ 12
Plan of Operation........................................... 27
Directors, Executive Officers, Promoters and
Control Persons............................................. 30
Security Ownership of Certain Beneficial
Owners and Management....................................... 32
Certain Relationships and Related
Transactions................................................ 33
Executive Compensation...................................... 35
Disclosure of Commission Position of
Indemnification for Securities Act
Liabilities................................................. 37
Description of Securities................................... 37
Market For Common Equity and Related
Stockholder Matters......................................... 38
Selling Securityholders..................................... 39
Plan of Distribution........................................ 43
Experts..................................................... 44
Legal Matters............................................... 44
Changes In and Disagreements With
Accountants on Accounting and Financial
Disclosure.................................................. 44
Where You Can Find More Information......................... 44
Financial Statements........................................ F-1
</TABLE>
7,291,331 Shares of Common Stock
PCSUPPORT.COM, INC.
_________________________
PROSPECTUS
_________________________
____________, 2000
===============================================================================
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-Laws provide that no officer or Director shall be
personally liable for any obligations of the Company or for any duties or
obligations arising out of any acts or conduct of said officer or Director
performed for or on behalf of the Company. The Company indemnifies and hold
harmless each person who serves at any time as a Director or officer of the
Company, 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 of the Company, 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. The
company also has 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 the Company's By-laws do not
exclude any other right to which he may lawfully be entitled, and the Company
may indemnify or reimburse such person in any proper case, even though not
specifically provided for by the by-laws. The Company, its Directors, officers,
employees and agents 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.
Insurance. The Company may purchase and maintain insurance on behalf of any
person who is or was a Director, officer or employee of the Company, or is or
was serving at the request of the Company 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 Company would have the
power to indemnify him against liability under the provisions of this section.
The Company currently does not maintain any such insurance.
Settlement by the Company. The right of any person to be indemnified is
subject always to the right of the Company by its Board of Directors, in lieu of
such indemnity, to settle any such claim, action, suit or proceeding at the
expense of the Company 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
The Company estimates 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 by the Company,
and such amounts, with the exception of the Securities and Exchange Commission
registration fee, are estimates.
SEC registration fee......................... $ 6,145
Accounting fees and expenses................. 10,000
Legal fees and expenses...................... 40,000
Printing expenses............................ 10,000
Miscellaneous................................ -
-------
Total...................................... $66,145
=======
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
a. On February 17, 1997, PCS (then Mex Trans) issued 600,940 shares of common
stock for aggregate gross proceeds of $89,381 to 17 investors. This
offering was made without registration under the Securities Act of 1933, as
amended (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 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.
c. 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), (b), and (c)
has been adjusted to reflect PCS's one-for-fifteen reverse split in connection
with the Merger.
d. 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
II-2
<PAGE>
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.
(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 17/th/ 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.
e. 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.
II-3
<PAGE>
f. 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.
g. 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.
h. 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.
i. 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.
j. 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.
k. 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
II-4
<PAGE>
from registration afforded by Section 4(2) of the Act and Rule 506 of
Regulation D promulgated thereunder.
l. 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.
m. 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.
n. 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.
o. 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.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
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.**
4.1 Form of Warrants issued on January 11, 2000 to Irwin Olian and Stanley
Elbaum.***
4.2 Form of Warrants issued to Purchasers in February, 2000 Unit Offering.***
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
4.3 Form of Convertible Notes issued on February 29, 2000.***
4.4 Form of "A" Warrant issued on March, 10, 2000 to Mike Lee & Associates.***
4.5 Form of "B" Warrant issued on March, 10, 2000 to Mike Lee & Associates.***
5.1 Opinion of Counsel as to the legality of securities being registered.
10.1 Plan of Reorganization and Merger dated as of May 5, 1999 between the
Company and RTI.*
10.2 Contract for Services dated as of June 23, 1999 between the Company and The
Dromond Technologies Group.*
10.3 Notice of Termination dated as of March 31, 2000 from the Company to The
Dromond Technologies Group, Inc.***
10.4 Consulting Contract dated as of April 1, 1999 between RTI and Strategic
Catalysts Inc.*
10.5 Termination Letter dated as of December 31, 1999 from the Company to SCI.**
10.6 Employment Agreement dated as of March 1, 2000 between the Company and
Michael McLean.***
10.7 Employment Agreement effective January 1, 2000 between the Company and
Steve Macbeth.**
10.8 Employment Agreement effective January 1, 2000 between the Company and
David Rowat.**
10.9 Employment Agreement dated as of November 17, 1999 between the Company
and Bruce McDonald.**
10.10 Employment Agreement dated as of April 6, 2000 between the Company and
Denise Holleran-Boswell.
10.11 Employment Agreement dated as of April 25, 2000 between the Company and
Bruna Martinuzzi.
10.12 Directors, Officers and Employee Stock Option Plan, as amended by the
Company's Board of Directors on November 30, 1999.***
10.13 Standard Form of Stock Option Agreement, as amended by the Company's
Board of Directors on November 30, 1999.***
10.14 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.*
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C>
10.15 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.***
10.16 Offer to Sub-Lease dated as of April 22, 1999 among Electronic Arts (Canada),
Inc., RTI, and Beutel Goodman Real Estate Group.*
10.17 Lease dated as of March, 26, 1992 between The Canada Life Assurance
Company and Osiware Inc.*
10.18 Assignment Agreement dated as of July 29, 1997 among Infonet Software
Solutions Inc., Electronic Arts (Canada), Inc., and 547495 Ontario Limited.*
10.19 Service Supply Agreement dated as of June 8, 1998 between RTI and StorageTek
Canada Inc.*
10.20 Service Contract dated as of April 1, 1999 between the Company and Unisys of
Canada Inc.*
10.21 Letter of Intent dated as of October 6, 1999 between the Company and Go Figure
Technology Inc.*
10.22 Consulting Contract dated as of August 6, 1999 between the Company and M.A.
Levy & Assoc.*
10.23 Consulting Agreement dated as of September 1, 1999 between the Company and
Irwin Olian.*
10.24 Engagement Letter dated as of October 6, 1999 between the Company and
Sitrick and Company.**
10.25 Service Agreement dated as of January 7, 2000 between the Company and Go
Figure Technology, Inc.**
10.26 Agreement to Convert Notes Into Stock and Warrants dated as of January 11,
2000 between the Company and CGTF, LLC.**
10.27 Term Sheet dated as of February 24, 2000 between the Company and Mike Lee
& Associates.***
10.28 Purchasing Schedule No. 2 dated as of March 13, 2000 between the Company
and Motive Communications, Inc.***
10.29 Engagement Letter dated as of March 21, 2000 between the Company and ICE
Holdings North America, L.L.C.
10.30 Content License Agreement, dated as of April 4, 2000, between the Company
and AltaVista Company.+
10.31 Advertising Agreement, dated as of April 7, 2000, between the Company and
AltaVista Company.+
</TABLE>
II-7
<PAGE>
23.1 Consent of Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24 Power of Attorney (see page II-10).
27 Financial Data Schedule.***
* 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.
+ 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.
(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
II-8
<PAGE>
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-9
<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 authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Barnaby,
British Columbia, Canada, on May 24, 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 of PCSupport.com, Inc. on Form SB-2. 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 May 24, 2000
- ------------------------------
Michael G. McLean Chairman (Principal Executive Officer)
/s/ David W. Rowat Vice President, Finance and May 24, 2000
- ------------------------------
David W. Rowat Business Development (Principal
Financial and Accounting Officer)
/s/ Steven W. Macbeth Director May 24, 2000
- ------------------------------
Steven W. Macbeth
/s/ W. Benjamin Catalano Director May 24, 2000
- ------------------------------
W. Benjamin Catalano
</TABLE>
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
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.**
4.1 Form of Warrants issued on January 11, 2000 to Irwin Olian and Stanley
Elbaum.***
4.2 Form of Warrants issued to Purchasers in February, 2000 Unit Offering.***
4.3 Form of Convertible Notes issued on February 29, 2000.***
4.4 Form of "A" Warrant issued on March, 10, 2000 to Mike Lee & Associates.***
4.5 Form of "B" Warrant issued on March, 10, 2000 to Mike Lee & Associates.***
5.1 Opinion of Counsel as to the legality of securities being registered.
10.1 Plan of Reorganization and Merger dated as of May 5, 1999 between the
Company and RTI.*
10.2 Contract for Services dated as of June 23, 1999 between the Company and
The Dromond Technologies Group.*
10.3 Notice of Termination dated as of March 31, 2000 from the Company to The
Dromond Technologies Group, Inc.***
10.4 Consulting Contract dated as of April 1, 1999 between RTI and Strategic
Catalysts Inc.*
10.5 Termination Letter dated as of December 31, 1999 from the Company to
SCI.**
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.6 Employment Agreement dated as of March 1, 2000 between the Company and
Michael McLean.***
10.7 Employment Agreement effective January 1, 2000 between the Company and
Steve Macbeth.**
10.8 Employment Agreement effective January 1, 2000 between the Company and
David Rowat.**
10.9 Employment Agreement dated as of November 17, 1999 between the Company and
Bruce McDonald.**
10.10 Employment Agreement dated as of April 6, 2000 between the Company and
Denise Holleran-Boswell.
10.11 Employment Agreement dated as of April 25, 2000 between the Company and
Bruna Martinuzzi.
10.12 Directors, Officers and Employee Stock Option Plan, as amended by the
Company's Board of Directors on November 30, 1999.***
10.13 Standard Form of Stock Option Agreement, as amended by the Company's
Board of Directors on November 30, 1999.***
10.14 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.*
10.15 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.***
10.16 Offer to Sub-Lease dated as of April 22, 1999 among Electronic Arts
(Canada), Inc., RTI, and Beutel Goodman Real Estate Group.*
10.17 Lease dated as of March, 26, 1992 between The Canada Life Assurance
Company and Osiware Inc.*
10.18 Assignment Agreement dated as of July 29, 1997 among Infonet Software
Solutions Inc., Electronic Arts (Canada), Inc., and 547495
Ontario Limited.*
10.19 Service Supply Agreement dated as of June 8, 1998 between RTI and
StorageTek Canada Inc.*
10.20 Service Contract dated as of April 1, 1999 between the Company and Unisys
of Canada Inc.*
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.21 Letter of Intent dated as of October 6, 1999 between the Company and Go
Figure Technology Inc.*
10.22 Consulting Contract dated as of August 6, 1999 between the Company and
M.A. Levy & Assoc.*
10.23 Consulting Agreement dated as of September 1, 1999 between the Company
and Irwin Olian.*
10.24 Engagement Letter dated as of October 6, 1999 between the Company and
Sitrick and Company.**
10.25 Service Agreement dated as of January 7, 2000 between the Company and Go
Figure Technology, Inc.**
10.26 Agreement to Convert Notes Into Stock and Warrants dated as of January
11, 2000 between the Company and CGTF, LLC.**
10.27 Term Sheet dated as of February 24, 2000 between the Company and Mike Lee
& Associates.***
10.28 Purchasing Schedule No. 2 dated as of March 13, 2000 between the Company
and Motive Communications, Inc.***
10.29 Engagement Letter dated as of March 21, 2000 between the Company and ICE
Holdings North America, L.L.C.
10.30 Content License Agreement, dated as of April 4, 2000, between the Company
and AltaVista Company.+
10.31 Advertising Agreement, dated as of April 7, 2000, between the Company and
AltaVista Company.+
23.1 Consent of Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24 Power of Attorney (see page II-10).
27 Financial Data Schedule.***
</TABLE>
* 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.
<PAGE>
+ 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.
<PAGE>
EXHIBIT 4.1
Number Shares
------------- ------------
PCSP
[logo]
pcsupport.com
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
CUSIP 69325X 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT:
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $0.001 PAR VALUE PER SHARE,
OF
PCSupport.com, Inc.
transferable only on the books of the Corporation by the holder
thereof in person or by duly authorized Attorney upon surrender of
this certificate properly endorsed. This certificate is not valid
until countersigned by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
U.S. STOCK TRANSFER CORPORATION
TRANSFER AGENT AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
SECRETARY [CORPORATE SEAL] PRESIDENT
<PAGE>
[Back of Certificate]
PCsupport.com, Inc.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS. SUCH REQUESTS MUST BE MADE TO THE CORPORATION'S SECRETARY AT THE
PRINCIPAL EXECUTIVE OFFICE OF THE CORPORATION.
Keep this Certificate in a safe place. If it is lost, stolen or destroyed,
the Corporation will require a bond of indemnity as a condition to the issuance
of a replacement certificate.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _________Custodian __________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as Act____________________________________
tenants in common (State)
UNIF TRF MIN ACT - _________Custodian (until age __________)
______________under Uniform Transfers to
(Minor)
Minors Act_____________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, ___________________________________________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE(S)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint__________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Date: __________________ ___________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
In the presence of MUST CORRESPOND WITH THE NAME AS WRITTEN
_______________________________ UPON THE FACE OF THE CERTIFICATE IN EVERY
_______________________________ PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By:__________________________________________________________
THE SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-
15.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF TROY & GOULD PROFESSIONAL CORPORATION]
May 24, 000
PCSupport.com, Inc.
Suite 280, 4400 Dominion Street
Burnaby, British Columbia, Canada V5G 4G3
Re: Registration Statement on Form SB-2
-----------------------------------
At your request, we have examined the Registration Statement on Form SB-2
(the "Registration Statement") of PCSupport.com, Inc. (the "Company"), which has
been prepared for filing with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"). The Registration Statement
relates to 4,470,493 issued and outstanding shares of Common Stock of the
Company (the "Issued Shares") and 2,820,838 shares of Common Stock of the
Company (the "Underlying Shares") issuable upon the exercise of certain
warrants, as described in the Registration Statement. The Issued Shares and the
Underlying Shares (collectively, the "Shares") are to be offered for resale by
certain selling securityholders as described therein. Capitalized terms not
defined herein shall have the definitions ascribed to them in the Registration
Statement.
We are familiar with the corporate proceedings heretofore taken or proposed
to be taken by the Company in connection with the issuance, or authorization for
issuance, of the Shares. In addition, we have examined such records of the
Company as in our judgment were necessary or appropriate to enable us to render
the opinions expressed herein.
Based on the foregoing, it is our opinion that (i) the Issued Shares have
been duly and validly authorized and issued, are fully paid and nonassessable
and (ii) the Underlying Shares have been duly and validly authorized and, when
issued as provided in the warrants relating thereto, will be duly and validly
issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement. By giving you this opinion and consent, we do not admit that we are
experts with respect to any part of the Registration Statement or Prospectus
within the meaning of the term "expert" as used in Section 11 of the Act, or the
rules and regulations promulgated thereunder, nor do we admit that we are in the
category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Troy & Gould Professional Corporation
-----------------------------------------
Troy & Gould Professional Corporation
<PAGE>
Exhibit 10.10
[PCSupport.com letterhead]
April 6, 2000
Denise Holleran-Boswell
Subject: Offer of employment
Dear Denise:
This letter is to confirm our offer of employment to you as Vice President,
Client Services at PCsupport.com, reporting to Mike McLean, President and CEO.
We are very excited about the opportunity to have you join our organization and
look forward to you starting at the earliest convenient time. This offer is
open until April 13, 2000.
The base salary for this position will be Cdn $125,000 per annum. Your
compensation will also include our standard bonus program with your target bonus
being 40% of salary. As an employee of PCsupport.com and under the terms of our
employee Stock Option Plan, you will also be granted an option to purchase
60,000 shares of the company. These options will vest monthly for 36 months.
The vesting period will commence upon the successful completion of your
probation period. The strike price of the options will be the average stock
price of the previous 20 days from the day you accept this offer.
The first 3 months of your employment will be a probation period. In the event
your position is not confirmed at the conclusion of this period, PCsupport.com
will not be liable to you for any severance payment, nor for any options. Your
compensation plan will be reviewed after the completion of 6 months and future
compensation reviews will occur annually.
You will be entitled to our standard benefits package. If you are interested in
the details of this, please contact Janis Sekora at the office. You will be
entitled to 20 vacation days per annum that will be accrued monthly.
This position will be based in Vancouver, Canada. Your responsibilities will
include but not be limited to the management of the team responsible for the
implementation of the PC Support Center eSupport product for our clients. As a
member of the senior management team, you will also be jointly responsible for
the development and execution of our business strategy. PCsupport.com is an
international business and travel will be a requirement for this role. You will
be reimbursed for any reasonable expenses that are submitted in the form of
standard expense reports.
Start date will be May 8, 2000 or earlier if possible.
If you have any questions about this offer, please do not hesitate to contact me
at 258-8450.
Sincerely,
/s/ Mike McLean
- ---------------
Mike McLean
President & CEO
I accept this offer of employment: /s/ Denise Holleran-Boswell August 7, 2000
--------------------------- ---------
Denise Holleran-Boswell Date
<PAGE>
Exhibit 10.11
[PCSupport.com letterhead]
April 25, 2000
Bruna Martinuzzi
933 Kennedy Avenue
North Vancouver, BC
V7R 1L4
Subject: Offer of employment
Dear Bruna:
This letter is to confirm our offer of employment to you as Vice President,
Human Resources and Administration, reporting to Mike McLean, President and CEO.
We are very excited about the opportunity to have you join our organization and
look forward to you starting at the earliest convenient time. This offer is
open until April 28, 2000.
The base salary for this position will be Cdn $90,000 per annum. Your
compensation will also include our standard bonus program with your target bonus
being 30% of salary. As an employee of PCsupport.com and under the terms of our
employee Stock Option Plan, you will also be granted an option to purchase
30,000 shares of the company. These options will vest monthly for 36 months.
The vesting period will commence upon the successful completion of your
probation period. The strike price of the options will be the average stock
price of the previous 20 days from the day you accept this offer.
The first 3 months of your employment will be a probation period. In the event
your position is not confirmed at the conclusion of this period, PCsupport.com
will not be liable to you for any severance payment, nor for any options. Your
compensation plan will be reviewed after the completion of 6 months and future
compensation reviews will occur annually.
You will be entitled to our standard benefits package. If you are interested in
the details of this, please contact Janis Sekora at the office. You will be
entitled to 20 vacation days per annum that will be accrued monthly.
This position will be based in Vancouver, Canada. Your responsibilities will
include but not be limited to the management of the administration team within
Pcsupport.com as well as the establishment of best in class human resource
practices, focused on both attracting and hiring world class employees and the
retention of employees in an exciting, vibrant organization. As a member of the
senior management team, you will also be jointly responsible for the development
and execution of our business strategy. PCsupport.com is an international
business and travel will be a requirement for this role. You will be reimbursed
for any reasonable expenses that are submitted in the form of standard expense
reports.
Start date will be May 8, 2000 or earlier if possible.
If you have any questions about this offer, please do not hesitate to contact me
at 258-8460.
Sincerely,
/s/ Mike McLean
- ---------------
Mike McLean
President & CEO
I accept this offer of employment: /s/ Bruna Martinuzzi
-------------------- ______________
Bruna Martinuzzi Date
<PAGE>
EXHIBIT 10.29
[PCsupport.com letterhead]
March 21, 2000
Andrew Smith,
ICE Holdings North America, LLC,
645 Madison Ave, 13th Floor,
New York, NY, 10022
Dear Andrew:
Re: New Engagement Letter with Pcsupport.com
We are pleased that we have renewed our partnership in which you will
arrange financing and provide financial advice as we take our company to a full
NASDAQ listing. The following terms will capture the spirit of the new
financial partnership between PCsupport.com and ICE Holdings and its various
affiliates (collectively, "ICE"), with PCsupport.com and ICE being referred to
herein as the "Parties":
A. Prior Agreement
1. The Engagement Letter entered into by the parties on or about January
11, 2000 and any other prior agreements or understandings between the Parties
are rescinded.
2. The Revolving Credit Agreement, Security Agreement, Secured Revolving
Note, and the "A" Warrants, and "B" Warrants, entered into or proposed to be
issued pursuant to the Engagement Letter are rescinded.
3. ICE will remove the security interest it has placed on PCsupport.com's
assets.
4. PCsupport.com will immediately pay $40,000, representing payment in
full for all legal fees and personal expenses relating to the previous
agreements, and ICE will sign a full release.
B. Direct Investment by Ice
1. ICE will arrange for the purchase of 600,000 common shares of
PCsupport.com from the treasury of PCsupport.com (the "Treasury"). The price per
share will be $2.125. The purchase of these shares will be completed within 15
business days from the date of this
<PAGE>
Agreement. If ICE does not complete this purchase by the required date,
PCsupport.com shall have the right to terminate all of the provisions of
paragraphs B through F of this Agreement, without any liability to ICE.
2. The commission paid to ICE on this investment will be 7.5%.
3. The shares will be registered in the registration statement currently
in preparation by the Company (which the Company will use its best efforts to
file with the SEC by April 15, 2000) for the shares issued in its March 2000
private placements, but will be subject to the same holdback agreements as
agreed to by the investors in the institutional round described in paragraph C
below.
C. Institutional Round
1. ICE will arrange on a best efforts basis for a syndicate of
institutional investors, reasonably acceptable to PCsupport.com, to purchase
pursuant to Regulation S (the "Institutional Round") between 1,000,000 and
1,500,000 shares of PCsupport.com from Treasury at a price per share based on a
10-15% discount to the average closing price of PCSP shares over the previous 10
trading days ("Institutional Price"). Closing will be within 60-90 days from the
date of this Agreement. PCsupport.com reserves the right to refuse this
investment if the price per share is less than $ 6.00. ICE's rights and
obligations under this paragraph C are subject to due diligence and the signing
of agreements by PCsupport.com with either Toshiba or Alta Vista, the
requirement for which may be waived by ICE in its sole discretion.
2. ICE will use its best efforts to arrange for the same or other
institutional investors to coincidentally offer to purchase from investors in
the private placements which closed in early March, 2000, an additional number
of shares representing 50% of the 2,500,000 shares of Pcsupport.com sold in such
private placements. Such purchase will be made in consultation with
PCsupport.com and its other financial partners.
3. In the event that the Institutional Round cannot be completed because
the proposed institutional investors require holdback agreements with existing
PCsupport.com shareholders in a form that cannot be secured, PCsupport.com will
not owe to ICE any commissions or warrants with respect to this Institutional
Round as described in E1 below.
4. ICE will earn a fee of 7.5% for arranging the Treasury portion of this
financing, to be paid at the closing of the Institutional Round in either cash
or common shares of PCsupport.com (valued at the Institutional Price) at ICE's
option. PCsupport.com will pay no fee on the purchase from existing investors.
There will be no retainer paid. The portion of ICE's legal expenses paid by
PCsupport.com for the Institutional Round will be capped at $15,000, will be
paid only if the Institutional Round closes, and will be in addition to
Regulation S filing fees and expenses incurred and borne by PCsupport.com in
connection with this offering.
D. NASDAQ Listing
1. ICE will arrange on a best efforts basis a syndicate including at least
one of the ten largest, nationally recognized U.S. investment bankers
("Banker"), reasonably acceptable to PCsupport.com, to sponsor PCsupport.com for
a listing on the NASDAQ Small Cap or National
<PAGE>
Markets and to arrange a further investment of at least $20,000,000 in
PCsupport.com common shares in a public offering ("NASDAQ Financing") that shall
close within 120 days from the date of closing of the Institutional Round and in
no event later than October 30, 2000 on terms reasonably acceptable to
PCsupport.com. ICE's rights and obligations under this paragraph D are subject
to final compliance with the SEC's filing requirements and audited financial
statements consistent with PCsupport.com's annual financial statements for its
fiscal years ended June 30, 1998 and June 30, 1999. PCsupport.com also
acknowledges that ICE's ability to arrange the foregoing financing will be
subject to Pcsupport.com having projected revenues for calendar year 2001 that
are comparable to those of other similar companies that are being financed for
similar amounts. If PCsupport is unable to project the foregoing level of
revenues on a timely basis to enable the NASDAQ Financing to close by October
30, 2000, this deadline will be extended until December 31, 2000 (or such later
date as the Parties in their sole discretion shall agree to)
2. ICE will use its best efforts to arrange for institutional investors to
offer to purchase from investors in the private placements which closed in early
March, 2000, an additional number of shares representing 50 % of the number sold
from Treasury in the NASDAQ Financing. Such secondary purchase will be made in
consultation with PCsupport.com and its other financial partners.
3. PCsupport.com will enter into an engagement with the Banker under terms
common to such engagements.
4. ICE will be co-lead on the NASDAQ Financing with the reasonable
approval of the Banker.
5. ICE will earn a fee by participating as a member of the syndicate, and
no other fees or retainers will be paid by PCsupport.com to ICE for such
engagement.
6. ICE will have 90 days from the date of this Agreement to obtain a
binding best efforts commitment from the Banker on terms reasonably acceptable
to PCsupport.com. If ICE does not complete the Institutional Round within 90
days from the date of this Agreement, PCsupport.com may terminate the Agreement,
including ICE's rights under this paragraph D.
E. ICE Warrants
1. For arranging the Direct Investment, the Institutional Round, and the
NASDAQ Listing, PCsupport.com will agree to issue two year warrants to ICE to
purchase PCsupport.com common shares ("ICE Warrants") as follows:
i. 500,000 "A" warrants with an exercise price equal to the
Institutional Price.
ii. 250,000 "B" warrants with an exercise price equal to a 25%
discount from the Institutional Price.
iii. 250,000 "C" warrants with an exercise price equal to a 50%
discount from the Institutional Price.
<PAGE>
2. Subject to paragraph F.7, the "A", "B". and "C" Warrants will vest and
be issued as follows:
i. 50% on closing of the Institutional Round.
ii. 50% on signing of a binding engagement letter with the Banker.
3. The ICE Warrants will be exercisable into registered shares, subject
to effectiveness of a registration statement covering these shares, which will
be filed with the SEC at the time of the Nasdaq listing.
F. Other Terms
1. PCsupport.com will engage ICE as its exclusive investment banker for
the period ending on the earlier of June 30, 2000 or the signing of a binding
engagement letter with the Banker (the retention of ICE as an investment banker
after June 30, 2000 or after completion of the Nasdaq Financing if ICE secures
the Banker and serves as a co-lead for the Nasdaq Financing being at the sole
discretion of PCsupport.com). ICE agrees to work with PCsupport.com's other
financial partners in all aspects of this engagement. Such activities will
include:
a. Advise, negotiate and otherwise assist PCsupport.com regarding
strategies for obtaining capital, as well as about possible structure and terms.
b. Advise, negotiate and otherwise assist PCsupport.com in preparing
presentation materials and financial analysis concerning PCsupport.com, as well
as advising and making presentations to potential sources of capital and/or
financing.
2. PCsupport.com will pay reasonable out-of-pocket expenses according to
PCsupport.com's travel policy. PCsupport.com must give prior approval for any
single expense in excess of $1,000.00.
3. In the event that PCsupport.com enters into one or more transactions
with any entity introduced to PCsupport.com by ICE and with whom PCsupport.com
has had direct contact pursuant to such introduction during the period when ICE
is retained by PCsupport.com or within 12 months after termination of this
Agreement, PCsupport.com will pay ICE a fee of 7 /1/2/% of the transaction
value, provided that ICE has purchased the 600,000 common shares pursuant to
paragraph B.1.
4. Andrew Smith will be responsible for and will undertake to fulfill this
engagement on behalf of ICE.
5. Each party will pay its own expenses in connection with finalizing this
Agreement.
6. All dollar amounts stated in this Agreement are expressed in U.S.
dollars.
<PAGE>
7. If ICE does not within 90 days from the date of this Agreement present
a binding best efforts engagement letter with a Banker that meets all of the
conditions of paragraph D, ICE will forfeit all of the A, B and C Warrants
described in paragraph E.2(ii), irrespective of whether PCsupport.com ever
completes a Nasdaq Financing using another investment banker or otherwise. If
ICE does within 90 days from the date of this Agreement present a binding
engagement letter with a Banker that meets all of the conditions of paragraph D,
PCsupport.com may, in its sole discretion, elect to utilize another nationally
recognized investment banker to underwrite the Nasdaq Financing, in which case
the A, B and C Warrants described in paragraph E.2(ii) will be deemed earned by
ICE, which will not co-lead the Nasdaq Financing.
Andrew, if you agree with these terms, please counter-sign below where
indicated and return to me at your earliest opportunity. This offer is open
until Noon EST, Wednesday, March 22, 2000, after which it becomes null and void.
Upon your acceptance of this Agreement in compliance with its terms, the date of
this Agreement shall be deemed to be March 21, 2000.
Sincerely,
PCsupport.com, Inc.
/s/ Michael G. McLean
----------------------------------------
Michael G. McLean
President and Chief Executive Officer
Agreed:
/s/ Andrew P. Smith
- -----------------------------------
Andrew P. Smith
<PAGE>
ALTAVISTA CONTENT LICENSE AGREEMENT
EXHIBIT 10.30
This AltaVista Content License Agreement is entered into as of the Effective
Date in the signature block below, by and between the company set forth in the
signature block below ("Company") and AltaVista Company, a Delaware corporation
-------
with its principal address at 529 Bryant Street, Palo Alto, CA 94301
(collectively with any company controlled by, controlling or under common
control with AltaVista Company, "AV"). For good and valuable consideration, the
--
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
WHEREAS, Company is in the business of providing certain Web-based information
and/or services, as defined with greater particularity in Exhibit A ("Content"),
--------- -------
on Company's Web site at the URL set forth in Exhibit A ("Company Site"); and
--------- ------------
WHEREAS, AV maintains and/or displays certain Web pages that are accessible to
users worldwide via Internet or wireless technologies (whether now known or
hereafter developed), which pages incorporate content and services developed by
AV and/or supplied to AV by third parties, and may be generic or customized;
such Web pages may contain an Internet index, a search tool, advertising,
shopping services or any other feature now existing or hereafter developed that
might be desirable, or any subset of the foregoing; such collections of the Web
pages include but are not limited to those located in the following domains:
AltaVista.com, MyAltaVista, AV.com, Microav.com, the AV channels and
Shopping.com (collectively, the "AV Platform"); such AV Platform may be branded
-----------
by AV, a third party, or co-branded by AV and any such third party; and
WHEREAS, AV desires to license the Content from Company for display on the AV
Platform and Company agrees to grant AV such a license, all on the terms and
conditions set forth below.
1. GRANT OF LICENSE
a. Content License. Subject to the terms and conditions of this Agreement,
Company hereby grants to AV a non-exclusive, worldwide, royalty-free (subject to
Section 3 below) right and license under Company's intellectual property rights
to (i) publicly perform, publicly display and distribute the Content on the AV
Platform on the "Help Desk Sub-Channel" located as a tab on the "Technology
Channel" of the AV Platform, and in other areas of the AV Platform as determined
by AV, (ii) copy the Content as necessary for such performance, display and
distribution, (iii) modify the Content as necessary to conform to the AV
standards for Content as set forth in Section 2b., (iv) create summaries of the
Content for display throughout the AV Platform to encourage users of the AV
Platform ("Users") to access and display the Content, (v) combine the Content
-----
with other AV and third party content on the AV Platform ("AV Content") as AV
----------
determines in its sole discretion, (vi) co-brand the Web pages on the AV
Platform that contain both the Content supplied by Company and also AV Content
("Co-Branded Pages") with the Company Marks, as discussed in Section 1b. below,
----------------
and (vii) archive/store the Content on the AV Platform.
b. Marks License. Subject to the terms of this Agreement, Company hereby
grants to AV a non-exclusive, worldwide, royalty-free (subject to Section 3
below) right and license to use any of Company's trademarks, trade names,
service marks, logos or other identifying or distinctive marks ("Company
-------
Marks"), provided that AV complies at all times with any trademark usage
guidelines provided by Company to AV in relation thereto. In the event that
Company reasonably believes that AV's use of the Company Marks is not in
compliance with Company's then-current standards, the parties agree to work
together in good faith to remedy any such non-conforming use on a timely basis.
All use by AV of the Company Marks, including any goodwill generated thereby,
will inure to the benefit of and be on behalf of Company.
c. Linking. Subject to the terms of this Agreement, Company grants to AV the
right to link the AV Platform and/or the Co-Branded Pages to the Company Site,
and AV grants to Company the right to link from the Company Site to the AV
Platform, in accordance with the terms of Exhibit A. Company will not restrict
---------
or disable a User's ability to return to the AV Platform or the Co-Branded Pages
utilizing the web browser's normal "back" navigation functionality.
d. Users. The parties acknowledge that Users will be subject to the terms of
use as set forth at the URL: http://doc.altavista.com/legal/termsofuse.shtml in
-----------------------------------------------
relation to the Content. AV agrees to notify Company in writing of any known or
suspected violation by a User of such terms of use in relation to the Content,
and assist Company in its efforts to minimize the adverse effects of any such
violation.
e. Restrictions. The parties acknowledge that the licenses granted herein are
non-exclusive, and do not prevent (i) Company from licensing the Content to any
third party, or (ii) AV from licensing content similar to the Content from any
third party for use on the AV Platform. Except for the licenses set forth
herein, Company reserves all other rights in and to the Content and the Company
Site, and AV reserves all right in and to the AV Content and the AV Platform.
2. CONTENT
a. Subject Matter. Company represents to AV that the Content delivered
hereunder is of high quality in the Internet industry, and that the subject
matter and focus of the Content as of the Effective Date will remain materially
consistent throughout the term of this Agreement.
b. Transmission by Company. Company will deliver the Content to AV as set
forth in Exhibit A, on the schedule set forth therein, for the fees set forth in
---------
Section 3 below. Content received by AV that is not in the then-current AV-
specified format or that does not comply with the terms of Section 5b. below may
be rejected by providing written notice to Company (including by means of an
electronic mail to Company). Company will, during the term of this Agreement,
ensure that the Content, as well as its delivery and maintenance, conforms to
the services level standards set forth in Schedule 1 to this Agreement, as such
----------
standards may be amended from time to time during the term of this Agreement.
3. FEES
a. Fees. The fees for obligations to be performed by either party to or for
the other party hereunder, if any, are as set forth in Exhibit B. Except as set
---------
forth in Exhibit B, all revenue of any nature generated by the AV Platform or
---------
the Co-Branded Pages, including without limitation all advertising, sponsorship
or other impressions-based revenue, will accrue to and belong solely to AV.
b. Payment. Payment terms are specified in Exhibit B to this Agreement.
---------
c. Taxes; Costs. All charges and fees provided for in this Agreement include
any applicable taxes, fees or duties. Each party will be responsible for all
costs associated with the setup, maintenance and other performance obligations
assigned to such party under this Agreement, and will have no right to obtain
reimbursement or other payment from the other therefor, except as may be
provided in Exhibit B.
---------
d. Record Keeping; Audits. Each party will keep accurate books and records
showing all financial transactions and traffic information that are the subject
of this Agreement. To the extent one party is hosting the Content, the other
party will have the right no more than once per twelve (12) month period, at all
reasonable times and upon advance reasonable written notice, to inspect the
relevant books and records (wherever located) and create summaries related to
any financial transactions that are the subject of this Agreement. All such
audits will be performed by a nationally-recognized auditor reasonably
acceptable to the party being audited, which auditor has agreed in writing to
1
<PAGE>
maintain the strict confidentiality of the books and records audited. Such
books and records, and any results of an audit, will be deemed to be the
Confidential Information (as defined below) of the party audited. If both
parties are hosting the Content, either party will have the right to audit the
other party's books and records in the manner set forth above. Neither party's
receipt of any statement or payment from the other in connection therewith will
preclude it from challenging the correctness of that statement or payment. If
any inspection reveals an error in the calculation of amounts owing to either
party, the other party will promptly pay the difference. If any error is ten
percent (10%) or more of the amount owed to either party, the other party will
pay the inspecting party's reasonable out-of-pocket costs with respect to that
examination and the next subsequent re-examination.
4. TERM; TERMINATION
a. Initial Term and Renewals. The initial term of this Agreement will commence
on the Effective Date and will continue for a period of two (2) years after the
date that the Content is first displayed on the AV Platform or the Co-Branded
Pages, unless earlier terminated as set forth below. The parties may negotiate a
renewal term of one year in a signed addendum to this Agreement; provided such
renewal term is mutually agreed upon no later than sixty (60) days prior to the
expiration date, and, in the event that the parties are unable to reach mutual
written agreement on any renewal to the Term by such date, this Agreement will
terminate as of the Agreement expiration date.
b. Default. If either party defaults in the performance of or compliance with
any provision contained in this Agreement, and such default is not cured within
thirty (30) days after receipt of written notice of such breach, then the non-
defaulting party may elect immediately to terminate this Agreement upon written
notice. In such event, the non-defaulting party giving notice of termination
will do so without liability to the defaulting party, except for any accrued
obligations. For the purposes of this section, the term "default" will include
the other party's insolvency, general assignment for the benefit of creditors,
filing of a voluntary petition of bankruptcy, suffering or permitting the
appointment of a receiver for its business or assets, or becoming subject to any
proceedings under any bankruptcy or insolvency law, whether domestic or foreign,
or liquidating, whether voluntarily or otherwise.
c. Change of Control. Company will provide written notice of any Change of
Control (as defined below) of Company to AV within ten (10) days of such change.
Within thirty (30) days of receipt of a notice of Change of Control, AV may
terminate this Agreement by providing written notice of termination to Company.
A "Change of Control" will be deemed to have occurred if: (i) any person or
entity becomes the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of securities
representing fifty percent (50%) or more of the combined voting power of
Company's outstanding securities; or (ii) a merger or consolidation of Company
with any other entity is approved, unless the voting securities of the party
outstanding immediately prior thereto continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the
outstanding securities of the surviving entity immediately after such merger or
consolidation.
d. Termination for Convenience. During the thirty (30) day period following the
end of the fifth month of the first year of this Agreement, AV may elect to
terminate this Agreement for its convenience by giving Company thirty (30)
days' prior written notice. Thereafter, AV will have no right to terminate
this Agreement for its convenience until the beginning of the second year of
the Agreement, at which time AV may terminate this Agreement for its
convenience at any time by providing thirty (30) days' prior written notice
to Company.
During the sixty (60) day period following the end of the eleventh month of
the first year of this Agreement, Company may elect to terminate this
Agreement for its convenience upon ninety (90) days prior written notice to
AV.
e. Effects of Termination. Upon termination of this Agreement, the licenses
granted hereunder will terminate immediately, except that AV may continue to use
previously-delivered Content for internal purposes only, including but not
limited to archival purposes, and AV and Company will work to ensure that Users
who may attempt to access previously delivered or produced Content are properly
referred to a non-expired Web page for such content. All outstanding payment
obligations not disputed in good faith will become immediately due and payable,
and no new payment obligations will accrue. The terms of Sections 3, 4e., 5, 6,
7, 8 and 10 will survive any termination of this Agreement.
5. REPRESENTATIONS AND WARRANTIES
a. Warranties. Each party represents and warrants to the other party that it
has the power and authority to enter into this Agreement, to grant the licenses
contained herein, and to otherwise perform its obligations hereunder.
b. Company Warranties. In connection with the delivery of the Content
hereunder, Company warrants to AV that: (i) it has sufficient rights in and to
all copyrights, patents and other proprietary rights associated with the Content
and its exploitation worldwide in particular, and the Company Site in general,
to grant the licenses granted to AV hereunder and deliver the Content as
specified herein; (ii) the Content and the Company Site (and their use and
contemplated herein) will not violate any governmental export control regimes,
and will contain no material or information constituting libel, slander or
defamation, or that otherwise invades the rights of any third party, (iii) the
services and Content provided by Company in connection with this Agreement will
be rendered by qualified personnel and consistent with commercial practices
standard in the industry; (iv) the Content being delivered by Company hereunder
and the general content on the Company Site are at all times true, accurate,
updated and timely; and (v) the Content and the Company Site will be free of any
viruses, Trojan horses, trap doors, back doors, Easter eggs, worms, time bombs,
cancelbots or other computer programming routines that are intended to damage,
interfere with, intercept, or expropriate any system data or personal
information.
c. Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY
MAKES, AND EACH PARTY SPECIFICALLY DISCLAIMS, ANY REPRESENTATIONS OR WARRANTIES,
WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING BUT NOT LIMITED TO
THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT OF THIRD PARTY RIGHTS.
6. LIMITATION OF LIABILITY
a. Limitation. WITH THE EXCEPTION OF LIABILITY ARISING UNDER SECTIONS 7 OR 8
BELOW, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES, lost profits, lost use
of equipment, loss of stored memory, cost of substitute equipment or other
downtime costs (regardless of THE FORM OF ACTION, whether such liability is
based on breach of contract, tort, strict liability, breach of warranties,
failure of essential purpose or otherwise), EVEN IF THAT PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
b. Liability Cap. AV'S ENTIRE LIABILITY AND Company's SOLE AND EXCLUSIVE REMEDY
from any cause OF ACTION whatsoever (regardless of the form of action, WHETHER
IN CONTRACT, TORT OR ANY OTHER LEGAL THEORY) WILL NOT EXCEED THE AGGREGATE
AMOUNTS PAID UNDER THIS AGREEMENT IN
2
<PAGE>
THE TWELVE MONTH PERIOD IMMEDIATELY PRECEDING THE EVENT THAT GAVE RISE TO
DAMAGES.
7. INDEMNITY
Each party ("Indemnifying Party") agrees to defend, indemnify and hold the other
party ("Indemnified Party") and its directors, officers, shareholders, employees
and agents harmless from and against any and all penalties, damages, costs,
judgments and any other expenses including, but not limited to, reasonable
attorneys' fees (including but not limited to in-house counsel costs and
appellate fees) incurred in connection with any breach by Indemnifying Party of
the representations and/or warranties expressly set forth in this Agreement,
provided that the Indemnified Party: (i) provides the Indemnifying Party with
prompt written notice of any claim for which indemnification is sought; (ii)
cooperates fully with the Indemnifying Party (at the Indemnifying Party's
expense); and (iii) allows the Indemnifying Party to control the defense and
settlement of such claim. Nothing herein will prevent the Indemnified Party
from procuring separate counsel for its defense, and the Indemnifying Party
agrees to work with any Indemnified Party-retained counsel in good faith and
cooperation.
8. CONFIDENTIALITY
a. General. The parties acknowledge that, in the course of their dealings
hereunder, each may acquire information about the other, its business activities
and operations, its technical information and its trade secrets, all of which
are proprietary and confidential (the "Confidential Information"). Each party
agrees that the terms of this Agreement will be deemed the Confidential
Information of each party. For a period of two (2) years after the termination
of this Agreement, each party hereby agrees that: (i) it will maintain, and will
use prudent methods to cause its employees and its agents to maintain, the
confidentiality and secrecy of the Confidential Information; (ii) it will use
prudent methods to ensure that its employees and agents do not copy, publish,
disclose to others or use (other than pursuant to the terms hereof) the
Confidential Information.
b. Exclusions. Confidential Information will not include any information to
the extent that it: (a) is or becomes a part of the public domain through no act
or omission on the part of the receiving party; (b) is disclosed to third
parties by the disclosing party without similar restriction on such third
parties; (c) is in the receiving party's possession without the receiving
party's actual or constructive knowledge of an obligation of confidentiality
with respect thereto, at or prior to the time of disclosure under this
Agreement; (d) is disclosed to the receiving party by a third party having no
obligation of confidentiality with respect thereto; (e) is independently
developed by the receiving party without reference to the disclosing party's
Confidential Information; or (f) is released from confidential treatment by
written consent of the disclosing party.
c. Public Disclosures. The parties acknowledge and agree that neither party
may, at any time, issue any press release or make any other disclosure about
this Agreement, its term or its existence, including but not limited to any
disclosure to its shareholders or otherwise, without the prior written approval
of the other party. If, however, a party determines, upon the opinion of
counsel, that disclosure regarding the other party, this Agreement and/or the
relationship created hereby is required by law, then disclosure will be
permitted, but only after the other party is given the opportunity to review and
reasonably revise all such written disclosure. Under such circumstances, a copy
of any such written documentation will be provided to the other party at least
three (3) business days prior to its expected disclosure.
9. REPORTING REQUIREMENTS
Company agrees to provide traffic reports for the Co-Branded Pages to AV within
two (2) weeks following the end of each month. A description of the contents of
each such report is set forth in Exhibit A.
----------
10. GENERAL PROVISIONS
a. Notices. All notices, requests and other communications hereunder will be
in writing and will be delivered in person, or sent by certified mail, return
receipt requested, overnight courier service, or by facsimile to the address or
facsimile number of the parties set forth below, or to such other addresses or
numbers as may be stipulated in writing by the parties pursuant hereto. Unless
otherwise provided, notice will be effective on the date it is officially
recorded as delivered by return receipt or equivalent or by facsimile
confirmation date.
AV
Attn: General Counsel
529 Bryant Street, Palo Alto, CA 94301
Fax: 650.617.3526
With a copy to:
Attn: Director of Strategic Alliances
Phone: 650.320.7754
Fax: 650.320.7722
E-Mail: [email protected]
Company
Attn: Chief Financial Officer
Phone: 604.419.5651
Fax: 604.419.4490
E-Mail: [email protected]
b. Assignment. Neither party may assign this Agreement, or sublicense, assign
or delegate any right or duty hereunder, without the prior written consent of
the other, which consent will not be unreasonably withheld; except that AV may
assign its rights and obligations under this Agreement to any third party in
connection with any merger, sale of assets or other reorganization or
consolidation transaction involving AV.
c. Force Majeure. In no event shall either party be liable to the other for
any delay or failure to perform hereunder, which delay or failure to perform is
due to causes beyond the control of said party including, but not limited to,
government restrictions, exchange or market rulings, labor strike, war, act of
civil or military authority, sabotage, epidemic, flood, earthquake, fire, other
natural disaster, or any other event, condition or occurrence beyond the
reasonable control of such party. In the event that any such force majeure
event continues unabated for a period of ninety (90) days, the unaffected party
may terminate this Agreement on written notice to the affected party.
d. Free Access; Search. During the term of this Agreement, if Company elects to
provide a Web search technology to users of its Company Site, Company agrees to
provide AV with a thirty (30) day right of first refusal to supply the AV search
technology on competitive terms and pricingas Company's default and/or premiere
search source within the Company Site,. In the event AV is unable to make the AV
search technology available to Company on standards, terms and conditions
reasonably acceptable to Company commencing on or before the end of the thirty
(30) day period, Company may obtain such Web search technology from a third
party, and thereafter (i) AV will have no further right to provide the AV search
technology requested during the notice period, and (ii) Company will have no
further obligation to AV with respect to such requested search technology. In
any event, Company will and permit AV agents to index the Web pages of Company's
Site for display of AV Platform search results pages In addition, Company and AV
will discuss the possibility of Company's distribution of AV's nationwide free
dial up Internet service ("Free Access"). In the event that, at any time during
the Term, Company proposes to market, bundle, or proposes to enter into an
agreement with, or solicit, a third party with respect to the marketing of a
U.S.-based Internet service provider (including both narrow and broadband
providers) through CD-ROM distribution, software download, or otherwise, then
Company shall notify AV and offer AV the right of first
3
<PAGE>
negotiation for Company to market Free Access, upon terms to be mutually agreed
to by the parties after good faith negotiations. In the event that AV fails to
accept the offer to exercise such right of first negotiation within thirty (30)
days after Company makes such offer, then Company may offer such rights to a
third party on the written terms described in the preceding sentence.
e. Waiver. The failure of either party at any time to require performance by
the other party of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the waiver by either
party of a breach of any provision hereof be taken or held to be a waiver of any
succeeding breach of such provision or as a waiver of the provision itself.
f. Severability. If any provision of this Agreement or the application thereof
to any person or circumstances shall to any extent be held to be invalid or
unenforceable, the remainder of this Agreement, or the application of such
provisions to persons or circumstances as to which it is not held to be invalid
or unenforceable, shall not be affected thereby, and each provision shall be
valid and be enforced to the fullest extent permitted by law.
g. Parties' Relationship. This Agreement does not and shall not be deemed to
constitute a partnership or joint venture between the parties and neither party
nor any of their respective directors, officers, employees or agents shall, by
virtue of the performance of their obligations under this Agreement, be deemed
to be an agent or employee of the other.
h. Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of California without regard to its
conflict of laws principles.
i. Entire Agreement. This Agreement, together with any attachments hereto,
sets forth the entire understanding between the parties, and supersedes any and
all prior or contemporaneous agreements or understandings between the parties,
whether oral or written, as to the subject matter of this Agreement. This
Agreement may be modified only in a document signed by both parties. In the
event of a conflict between any of the terms contained in this Agreement and
those contained in any attachments made part of this Agreement, the order of
precedence shall be as follows: (i) the schedules, (ii) the exhibits, (iii) the
Agreement.
IN WITNESS WHEREOF, authorized representatives of the parties have executed this
Agreement as of the Effective Date set forth above.
<TABLE>
<CAPTION>
AV: AltaVista Company Company: PC Support.Com
<S> <C>
Signature /s/ David Karnstedt Signature /s/ David W. Rowat
-------------------------------------------------- ------------------------------------------------------
Name David Karnstedt Name David W. Rowat
------------------------------------------------------ -------------------------------------------------
Title VP Sales Title Chief Financial Officer
------------------------------------------------------ -----------------------------------------------
Effective Date Address #200 - 4400 Dominion Street
---------------------------------------------- ---------------------------------------------
Burnaby, BC V5G 4G3
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
4
<PAGE>
EXHIBIT A
CONTENT
Description of Content:
- ----------------------
Company will provide to AV the following computer support services that Company
offers its users on the Company Site, and any other services that the parties
may mutually agree to incorporate into the Co-Branded Pages. In the event that
Company changes its service offering by discontinuing any of the services
described below, or offers additional services that AV may desire to include on
the Co-Branded Pages or the AV Platform, the parties will use good faith efforts
to negotiate an amendment to this Agreement to modify the provision of services
provided hereunder by Company on mutually acceptable terms and conditions;
provided that, Company will continue to provide services to existing users of
the Basic Services or Premium Services (as defined below) until such time as the
parties can implement an exit strategy for such users.
A. Company will provide the following free services to Users of the Co-Branded
Pages ("Basic Services"). Except as otherwise set forth below, Company will also
provide Users the ability to upgrade such Basic Services, at the Users election
in accordance with Section 2.5.2 below, and may charge a fee to Users for such
upgrade ("Premium Services"), pursuant to the terms of Section B of Exhibit B:
. Initial system scan services (Premium Services upgrade not available for
this service)
. System maintenance (Premium Services upgrade not available for this
service)
. "Fix My PC" services
. "Live Assist" service
. "Email Assist" service
. "Self Assist" service
B. The following services will be made available by Company to Users of the Co-
Branded Pages for the fees described in Section B of Exhibit B. These services
will not be available from Company free of charge as Basic Services and are
considered "Premium Services."
. "Phone Assist" services
. "Onsite Assist" service
The Basic Services and Premium Services together will be considered the
"Content." In the event that Company provides more comprehensive services to any
of its direct customers, Company agrees to provide equivalent services to Users
on identical terms.
Company Site URL:
- ----------------
http://www.pcsupport.com
Traffic Attribution: The parties agree that all User traffic from the AV
- -------------------
Platform to the Company Site will be designed (or masked) so as to guarantee
that AV receive all credit for such traffic.
1. General Obligations
1.1. Company.
-------
1.1.1. Company shall provide, deliver or produce the Content to AV
for its use in the development, production and utilization of
the AV Platform. Company will provide AV with a File Transfer
Protocol ("FTP") account allowing AV access to a secure
database containing all Content listed above. Company shall
perform, at its expense, all technical development and support
work as described in the service level standards set forth in
Schedule 1 hereto, as necessary to meet its obligation to
----------
create the Content and FTP Directories for AV as required
hereunder.
5
<PAGE>
1.1.2. Company will provide Content that is timely, reliable and
scalable to AV's needs. Company warrants that all Content it
delivers, serves or produces to or for AV on the AV Platform
and/or Co-Branded Pages will be the most current version made
available by Company to any of its customers. AV may regularly
evaluate the quality of Content delivered, served or produced
by Company, to ensure that the Company meets or exceeds AV's
general acceptability levels. The Company shall provide, at no
expense to AV, a satisfactory level of back-up support twenty-
four (24) hours per day, three hundred and sixty-five (365)
days per year for questions regarding the Content and the
services provided by Company hereunder. Said support shall
include, but not be limited to, providing a technically
capable person from Company specifically designated to respond
to AV inquiries, and who shall be identified to AV in writing.
1.1.3. Company will provide traffic reports to AV in accordance with
Section 9 of this Agreement. Basic traffic reports must
include, minimally, the following information: (i) page views
per day and per week, (ii) unique visitors per day and per
week, (iii) time spent per unique visitor per day, and (iv)
page views per page title or description. Company shall also
supply to AV log files via FTP.The address of the FTP site
shall be mutually agreed upon by the parties, which agreement
will not be unreasonably withheld or delayed. The log files
must be provided in AV's then-current standard log format,
shall be provided at least as often and frequently as Company
provides the log files to any other third party, and must
include the following information: (v) timestamp, (w) unique
site identifier per AV affiliate (if and when applicable), (x)
page identification number or description, (y) user
identification (passed to Company from AV), and (z) traffic
source (passed to Company from AV). Company agrees to log each
page separately for these log files and to work with AV's
technical staff to enable the integration of the log file data
into AV's Web-based interactive reporting platform.
1.2. AV.
---
1.2.1 AV will identify which of the Content specified above it
wishes to use, format and post on its site as part of the Help
Desk Sub Channel on the AV Platform. On a quarterly basis, the
parties will meet to discuss the quality, performance, support
response times and competitiveness of the Company Content and
services as well as the components of the advertising provided
by AV hereunder. The parties will work together to resolve any
issues or problems identified during such quarterly meeting
within thirty (30) days of any quarterly meeting.
1.2.2 AV will consult and work with Company with regard to Content
on the AV Platform and/or the Co-Branded Pages; provided,
however AV will retain final approval of theplacement, design
and implementation of the Content on the AV Platform and the
Co-Branded Pages.
1.2.3 [***Confidential Treatment Requested***]
1.2.4 AV will provide banner and search tile advertising to Company
under the terms of an advertising insertion order to be signed
by the parties no later than the Effective Date (the
"Insertion Order"). Consideration for such advertising is set
forth in Section D of Exhibit B hereto.
1.25 AV shall work with Company in producing a press release
announcing the relationship between the parties, the details,
contents and timing of which shall be determined by mutual
written agreement.
2. Deliverables
2.1 Co-branding. During the term of this Agreement, the parties
-----------
will jointly design the visual appearance of the Co-Branded
Pages; provided, however, that the design of the Co-Branded
Pages is subject to final approval by AV. All Co-Branded Pages
will include the AV "look and feel," which will include the
distinctive and particular elements of graphics, design,
organization, presentation, layout, user interface,
navigation, trade dress and stylistic convention (including
the digital implementations thereof) within the AV Platform
and the total appearance and impression substantially formed
by the combination, coordination and interaction of these
elements, and includes the AV Marks and other components as
required by AV. AV will host and serve the first page of the
Co-Branded Pages and the first page of the Company services,
and will pay all costs associated with doing so. Company will
host and serve all other pages of the Co-Branded Pages, and
pay all costs associated with doing so. The parties may
mutually agree at a later date that AV will host and serve the
other pages of the Co-Branded Pages, in which case the parties
will negotiate a mutually acceptable amendment to this
Agreement, which will set forth the additional terms for AV's
hosting of the Co-Branded Pages.
2.2 Traffic and Reach. In the event that Company hosts the Content
-----------------
and the Co-Branded Pages, Company will create IP masking to
ensure that AV receives traffic attribution for all traffic to
the Co-Branded Pages.
6
<PAGE>
2.3 Launch Schedule. AV and Company will commence work on the
---------------
development of co-branded pages to be completed within sixty
(60) days after the Effective Date.
2.4 Support Responsibilities. Company will have sole
------------------------
responsibility for customer service (including, without
limitation, order processing, billing, shipping, etc.) and AV
will have no responsibility with respect thereto. Company will
comply with all applicable requirements of any federal, state
or local consumer protection or disclosure law.
2.5 Registration.
------------
[***Confidential Treatment Requested***]
7
<PAGE>
EXHIBIT B
FEES
[***Confidential Treatment Requested***]
8
<PAGE>
EXHIBIT C
AV Competitors
[***Confidential Treatment Requested***]
9
<PAGE>
SCHEDULE 1
SERVICE LEVELS AGREEMENT
[***Confidential Treatment Requested***]
10
<PAGE>
[LOGO OF ALTA VISTA] EXHIBIT 10.31
Insertion Order # MA-PCSupport-0317
<TABLE>
<CAPTION>
Advertising Agreement
<S> <C>
Page 1 of 1
===============================================================================================================================
Advertiser Information Contract Information
Advertiser Name PC Support Today's Date 5/18/00
Contact Cliff Rowlands Client Ref No.
Title Type CPM
Address Suite 280-4400 Dominion St Classification Standard
Burnaby, BC, Canada V5G 4G3 Category Content Partner
Phone 604-419-5655 ----------------------------------------------------------------
Fax AltaVista Information
Email Account Manager Susan Hahn
- -------------------------------------------------------------- Email [email protected]
Agency Information Phone 650-320-7341
Agency Name n/a Fax 650-320-7722
Contact
Title Sales Contact Anne Frisbie
Address Email [email protected]
Phone Phone 650-320-7754
Email Fax 650-320-7722
Fax --------------------------------------------------------------------
- -------------------------------------------------------------- Contract Details
Billing Information Campaign Name
Method [***Confidential Treatment Requested***] Calendar Weeks 52
Contract Estimate [***Confidential Treatment Requested***]
Contact David Rowat Click Basis n/a
Address Suite 280-4400 Dominion St Rev Share n/a
Burnaby, BC, Canada V5G 4G3 Pricing CPM
Email [email protected] Gross Buy n/a
Phone 604-419-5651 Frequency Discount n/a
Fax 604-419-4490 CMGI Discount n/a
Total Est. Net Revenue [***Confidential Treatment Requested***]
- ------------------------------------------------------------- ---------------------------------------------------------------------
Scheduling Details
- ------------------------------------------------------------- ---------------------------------------------------------------------
--------------------
--------------------
[***Confidential Treatment Requested***]
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
--------------------
- ------------------------------------------------------------- --------------------------------------------------===================
TOTAL
--------------------
Campaign Summary ----------------------------- --------------------
--------------------
[X] New Order TOTAL COST
[ ] Revised Order ====================
[ ] Cancellation Order Notes/Special Instructions -----------------------------------
Start Date 4/3/00
-----------------------------
End Date 3/2/01
-----------------------------
Total # of days 365
-----------------------------
Total # of Imps [***Confidential
-----------------------------
Treatment Requested***]
-----------------------------
Total Cost
-----------------------------
- ------------------------------------------------------------- ----------------------------------------------------------------
I have read and understood the attached terms and conditions of this advertising agreement.
Client Signature: /s/ David W. Rowat Account Manager /s/ David Karnstedt
------------------------------------------------------ ------------------------------------
Title: VP & CFO Director: VP Sales
------------------------------------------------------ ------------------------------------
Date: 4-Apr-00 Date: 4/7/00
------------------------------------------------------ ------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.31
PC Support Keywords for Search Tiles
[***Confidential Treatment Requested***]
<PAGE>
[LETTERHEAD OF ALTA VISTA]
Standard Terms and Conditions
THIS IS A CONTRACT. BY SIGNING THE INSERTION ORDER TO WHICH THESE TERMS ARE
ATTACHED, YOU ("ADVERTISER") EXPRESSLY ACCEPT ALL OF THE FOLLOWING TERMS AND
CONDITIONS:
1. This Agreement constitutes the entire agreement between Advertiser and
AltaVista Company (collectively with any company controlled by, controlling or
under common control with AltaVista Company, "AltaVista") as to its subject
matter and supersedes all prior or collateral understandings, oral or written,
and may not be modified, except by a written document that is duly signed by
each party's authorized representative. AltaVista hereby rejects any provisions
contained in communications from Advertiser which are in addition to or which
conflict with the terms set forth herein, and AltaVista's failure to object to
any such additional or inconsistent terms will not be deemed a waiver of its
objections to such provisions.
2. Definitions
-----------
a. "AV Platform" means a generic or customized set of Web pages that may
operate together as a Web site, and which may contain any or all of the
following: an internet index, a search tool, advertising, or any other feature
that might be desirable on a Web site, and may be branded using third parties'
names or any combination of AltaVista's and third parties' brand features.
b. "Insertion Order" means the AltaVista standard form that specifically
describes the Advertisements, their placement on the AV Platform, and the fees
to be paid by Advertiser to AltaVista therefor.
3. License. Advertiser hereby grants to AltaVista, under all of Advertiser's
-------
intellectual property rights, a worldwide, non-transferable, non-exclusive
license, during the term of this Agreement, to transmit, publicly display,
publicly perform, store, copy and distribute the advertisements described in the
Insertion Order (the "Advertisements") on the AV Platform, including but not
limited to any of Advertiser's trademarks and logos that are contained in the
Advertisements.
4. Delivery. Advertiser will deliver all Advertisements to AltaVista no less
--------
than five (5) days prior to the first scheduled appearance of the Advertisements
on the AV Platform. AltaVista reserves the right to reject in good faith any
Advertisements that do not conform to AltaVista's current standards for
advertising on the AV Platform.
5. Positioning. The position, placement and description of the Advertisements
-----------
on the AV Platform will be as set forth in the Insertion Order.
6. Payment. Advertiser agrees to pay all fees, agency commissions and taxes
-------
related to the placement of the Advertisements on the AV Platform on the date
the order is placed, unless credit terms are extended as set forth in the
Insertion Order; payments not made within the time period specified will accrue
interest at the highest rate permitted by law. AltaVista reserves the right to
suspend the placement of any Advertisement on the AV Platform or terminate this
Agreement in the even that a payment due hereunder remains unpaid 3 business
days after a reminder notice is provided to Advertiser. If an agent acts on
Advertiser's behalf in connection with this Agreement, Advertiser acknowledges
that it remains responsible for payments and other obligations, and will be
deemed to receive any refunds, notices and other documents or information from
AltaVista when received by Advertiser's agent.
7. Taxes. Advertiser is solely liable for any tax, levy or other fee relating
-----
to the placement of the Advertisements on the AV Platform.
8. Representations and Warranties. Advertiser represents and warrants that (i)
------------------------------
it has obtained all necessary consents and licenses, and has full authority to
grant the licenses contained in this Agreement, (ii) the Advertisements do not,
and their placement on the AV Platform in accordance with this Agreement and the
Insertion Order will not: (a) violate any international, federal, state or local
law or regulation; (b) infringe any copyright, trademark, trade secret or other
intellectual property rights of any third party; (c) in any way misappropriate
any party's name or likeness, or violate any party's right of privacy,
publicity, or any other right of any third party; or (d) contain any material
which is unlawful, harmful, abusive, hateful, obscene, threatening, libelous or
defamatory.
9. Placement; Reservation of Right. AltaVista will use diligent efforts to
-------------------------------
place the Advertisements on the AV Platform as specified in the Insertion Order.
In the event that AltaVista is unable to place the Advertisements as set forth
in the Insertion Order (as measured by AltaVista's or its third party designee's
measurement systems), then AltaVista will provide Advertiser with comparable
placement within the AV Platform within 30 days thereafter. Nevertheless,
AltaVista, in its sole discretion, reserves the right to reject, revise or
remove, or to require Advertiser to correct or revise any or all of the
Advertisements, if AltaVista reasonably believes that such Advertisements might
violate any of Advertiser's representations under this Agreement, or might fail
to conform to the operating policy of AltaVista.
10. Indemnity. Advertiser agrees to indemnify, defend and hold harmless
---------
AltaVista and each of its respective shareholders, officers, directors,
employees and agents, from and against any and all losses, liabilities,
injuries, damages, attorneys' fees and other costs and expenses incurred in
connection with any breach of Advertiser's representations under this Agreement.
11. Limitation of Liability. AltaVista`s liability in connection with this
-----------------------
Agreement, the Insertion Order and the publication of Advertisements by or on
behalf of AltaVista will be limited to the fees paid by Advertiser under this
Agreement. AltaVista`s inability to perform any of its obligations under this
Agreement due to any cause beyond AltaVista`s control will not constitute a
breach of this Agreement, and AltaVista's obligations hereunder will be
suspended during the time period during which any such force majeure event
occurs. If AltaVista is unable to place the Advertisements in accordance with
the agreed description in the Insertion Order because of any act or omission by
Advertiser or Advertiser's agents, AltaVista will still be entitled to full and
timely payment of all fees relating to such Advertisements. IN NO EVENT WILL
ALTAVISTA BE LIABLE TO ADVERTISER FOR ANY LOST REVENUES OR PROFITS, OR ANY
INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES ARISING OUT OF THIS
AGREEMENT OR ITS TERMINATION.
12. Term; Termination. This Agreement will continue in effect for the term
-----------------
defined in the Insertion Order, unless earlier terminated by AltaVista by giving
Advertiser thirty (30) day's written notice of its intent to terminate. Further,
AltaVista may immediately terminate this Agreement and remove the Advertisements
from the AV Platform if AltaVista reasonably believes that such Advertisements
violate any of Advertiser's representations under this Agreement. All fees and
other charges for Advertisements placed through the date of termination will be
due upon termination.
13. Publicity. Neither party will make any public statement, press release, or
----------
other announcement relating to the terms of, or existence of this Agreement
without the prior written approval of the other. In the event that Advertiser,
on advice of counsel, determines it is required to disclose the terms of this
Agreement to any governmental entity, it will provide AltaVista with a copy of
the intended disclosure no less than 3 business days prior to any such
disclosure.
14. Miscellaneous. This Agreement will be governed by the laws of the State of
-------------
California, without regard to its conflicts of laws provisions. If any term of
this Agreement is found to be void or unenforceable to any extent for any
reason, all remaining terms and provisions of this Agreement will remain in full
force and effect. Advertiser may not assign this Agreement and/or any of its
rights and/or obligations hereunder without the prior written consent of
AltaVista (which will not be unreasonably withheld) and any such attempted
assignment will be void, except that Advertiser may assign this Agreement and
any of its rights or obligations to its subsidiaries or other Affiliates (which
means any person or entity directly or indirectly controlling, controlled by or
under common control with Advertiser) or, in connection with any merger, sale of
assets or other reorganization transaction, to any other third party without the
consent of the other party. This Agreement will be binding upon the parties'
respective successors and permitted assigns.
Page 1
<PAGE>
Exhibit 23.1
The Board of Directors
PCsupport.com, Inc.
We consent to the inclusion in the Registration Statement on Form SB-2 of
PCsupport.com, Inc. of our report dated August 20, 1999 relating to the
consolidated balance sheets of PCsupport.com, Inc. and subsidiary as of June
30, 1999 and 1998, and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for the year ended June 30, 1999,
the period from December 10, 1997 ( inception) to June 30, 1998 and the period
from December 10, 1997 (inception) to June 30, 1999. We also consent to the
reference to our firm under the heading "EXPERTS" in the Form SB-2.
KPMG LLP
Chartered Accountants
Vancouver, Canada
May 24, 2000
