<PAGE> 1
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 2000
REGISTRATION NO. 333-30364
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 4 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
I.T. TECHNOLOGY, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 5961 98-0200077
<S> <C> <C>
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
34-36 PUNT ROAD
WINDSOR 3181
MELBOURNE, VICTORIA AUSTRALIA
(011) 613 9533-7800
(ADDRESS AND TELEPHONE NUMBER OF
PRINCIPAL EXECUTIVE OFFICES
AND PRINCIPAL PLACE OF BUSINESS)
LEVI MOCHKIN, CHIEF EXECUTIVE OFFICER
I.T. TECHNOLOGY, INC.
34-36 PUNT ROAD
WINDSOR 3181
MELBOURNE, VICTORIA
AUSTRALIA
(011) 613 9533-7800
245 PARK AVENUE, 39TH FLOOR
NEW YORK, NY 10167
(212) 792-4047
(NAME, ADDRESS AND TELEPHONE NUMBER
OF AGENT FOR SERVICE)
COPIES TO:
BARRY L. BURTEN, ESQ.
ROBERT E. BRAUN, ESQ.
JEFFER, MANGELS, BUTLER & MARMARO LLP
2121 AVENUE OF THE STARS, 10TH FLOOR
LOS ANGELES, CALIFORNIA 90067
(310) 203-8080
FAX (310) 203-0567
<PAGE> 2
APPROXIMATE DATE OF COMMENCEMENT 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, 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM AGGREGATE
OFFERING MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
- --------------------------- ------------ --------- ----------- ----------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share.................. 5,000,000(2) $ 5.00 $25,000,000 $ 6,600.00(3)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes the reoffer and resale of 500,000 shares of Common Stock held by
Instanz Nominees Pty. Ltd.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
<PAGE> 3
I.T. TECHNOLOGY, INC.
CROSS REFERENCE SHEET FOR PROSPECTUS UNDER FORM SB-2
<TABLE>
<CAPTION>
FORM SB-2 ITEM NO. AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
------------------------------ ---------------------------------
<S> <C>
1. Front of Registration Statement and Outside Front Cover of Prospectus Outside Front Cover Page; Cross Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus Inside front and Outside Back Cover Pages
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page; Risk Factors; Underwriting
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Inside Front Cover Page; Underwriting
9. Legal Proceedings Business -- Legal Proceedings
10. Directors, Executive Officers Promoters and Control Person Management
11. Security Ownership of Certain Beneficial Owners and Management Principal Shareholders; Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on Management -- Limitation of Liability;
Indemnification for Securities Act Liabilities Underwriting; Management -- Indemnification of
Officers and Directors
15. Organization within Last Five Years Business
16. Description of Business Business
17. Certain Relationships and Related Transactions Certain Relationships and Related Transactions
18. Market for Common Equity and Related Shareholder Matters Risk Factors; Dividend Policy; Description of
Securities; Shares Eligible for Future Sale
19. Executive Compensation Management -- Executive Compensation
20. Financial Statements Financial Statements
21. Changes in and Disagreements with Accountants on Not Applicable
Accounting and Financial Disclosure
</TABLE>
<PAGE> 4
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 9, 2000
I.T. TECHNOLOGY, INC.
COMMON STOCK
Up to 4,500,000 Shares
500,000 Shares by a Selling Shareholder
This is our initial public offering. No public market currently exists
for our shares of common stock.
THE INITIAL OFFERING PRICE IS $5.00. WE HAVE APPLIED FOR LISTING ON THE
NASDAQ SMALLCAP MARKET UNDER THE SYMBOL "ITTE."
We are offering the shares on a best-efforts, minimum-maximum basis.
Unless at least 1,000,000 shares are sold, we will not sell any shares. All
proceeds received for the offering will be deposited in an escrow account with
Comerica Bank, and will not be released unless at least 1,000,000 shares are
sold on or before August __, 2000 (which may be extended to September __, 2000
at our option). If we do not sell at least 1,000,000 shares by that time, we
will return the investment, with interest, but less those costs associated with
the escrow account. After the 1,000,000 shares are sold, a selling shareholder
will offer and sell 500,000 shares in this offering at $5.00 a share. Until such
time as the selling shareholder has completed the sale of its 500,000 shares
pursuant to this offering, we will refrain from selling the remainder of our
shares being offered in this offering.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM PROCEEDS TO PROCEEDS TO
SHARES SHARES PRICE TO SELLING COMMISSIONS SELLERS SELLERS
OFFERED OFFERED PUBLIC MINIMUM MAXIMUM (MINIMUM) (MAXIMUM)
--------- --------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
I.T. Technology, Inc. 1,000,000 4,500,000 $ 5.00 $ 650,000 $ 2,500,000 $ 4,350,000 $ 20,000,000
--------- --------- -------------- -------------- -------------- -------------- --------------
Instanz Nominees Pty. Ltd. 0 500,000 $ 5.00 $ 0 $ 0 $ 0 $ 2,500,000
--------- --------- -------------- -------------- -------------- -------------- --------------
Combined 1,000,000 5,000,000 $ 25,000,000 $ 650,000 $ 2,500,000 $ 4,350,000 $ 22,500,000
--------- --------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE "RISK FACTORS" ON PAGES 3 TO 4 FOR FACTORS THAT YOU SHOULD CONSIDER
BEFORE INVESTING IN THE SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY
OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
We have engaged Kensington Capital Corp. as underwriter to assist in the
distribution of the shares, on a best efforts basis. If necessary, Kensington
Capital Corp. will manage the selected broker-dealers to assist in selling the
shares.
<PAGE> 5
KENSINGTON CAPITAL CORP.
May __, 2000.
PROSPECTUS SUMMARY
THE COMPANY
I.T. Technology, Inc. is a Delaware corporation formed on February 2,
1999 for the purpose of engaging in businesses related to the Internet,
e-commerce and technology, both directly and through acquiring a majority
interest in Internet related and other technology companies. Our principal
executive offices are located at 34-36 Punt Road, Windsor 3181 Melbourne,
Victoria, Australia, (011) 613-9533-7800 and 245 Park Avenue, 39th Floor, New
York, NY 10167, (212) 792-4047. To date, the company has acquired interests in
Stampville.Com Inc., a New York corporation, and through its wholly-owned
subsidiary, Bickhams Capital, Inc., a 5% equity interest and an option to
acquire an additional 45.1% equity interest in VideoDome.Com Networks, Inc., a
California corporation. Stampville, incorporated in 1999, is in the process of
developing its web-site at www.stampville.com and intends to specialize in the
wholesale and Internet sale of philatelic memorabilia, including stamps and
other collectibles, which may include coins and sports memorabilia. Stampville's
main executive offices are located at 456 Fifth Avenue, Brooklyn, NY 11215,
(718) 369-8881. VideoDome provides a range of Internet video services, including
but not limited to management services, registration of video content and
delivery of the video stream via Internet and operates primarily through an
Internet web site located at www.videodome.com.
THE OFFERING
<TABLE>
<S> <C>
SHARES OF COMMON STOCK
OFFERED IN THIS PROSPECTUS
MINIMUM...................................................... 1,000,000 shares
MAXIMUM...................................................... 4,500,000 shares
SELLING SHAREHOLDER.......................................... 500,000 shares
TOTAL SHARES OF COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING MINIMUM................................... 17,500,000 shares
TOTAL SHARES OF COMMON STOCK TO BE OUTSTANDING
AFTER THE MAXIMUM OFFERING................................... 21,350,000 shares
USE OF PROCEEDS BY THE COMPANY............................... $6,250,000 to finance acquisition of a majority interest
in Stampville; $150,000 to finance acquisition of an
additional 5% interest in VideoDome; approximately
$3,000,000 for working capital and other general purposes;
approximately $456,000 as of December 31, 1999 will be
used to pay off the balance due on the building housing
the company's executive offices located in Melbourne,
Australia; and the remaining proceeds to finance other
Internet or e-commerce acquisitions or ventures by the
company, including additional investments in VideoDome.
PROPOSED NASDAQ SMALLCAP SYMBOL.............................. ITTE
</TABLE>
1
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL, PRO FORMA
AND OPERATING DATA
The summary information set forth below is derived from and should be
read in conjunction with the financial statements of the company, including the
notes thereto, appearing elsewhere in this prospectus. The following table gives
effect to the sale of the common stock offered hereby and the application of the
estimated net proceeds therefrom.
<TABLE>
<CAPTION>
FEBRUARY 2, 1999 (INCEPTION)
THROUGH DECEMBER 31, 1999
-------------------------------------------------------------
PRO FORMA PRO FORMA
HISTORICAL MINIMUM MAXIMUM
------------- ------------- -------------
<S> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS DATA:
Revenues ........................................... $ -- $ -- $ --
Net loss ........................................... $ (419,443) $ (944,760) $ (3,424,214)
Net loss per share ................................. $ (0.04) $ (0.05) $ (0.16)
Weighted average number of shares outstanding ...... 11,222,139 17,500,000 21,350,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------------------------
PRO FORMA PRO FORMA
HISTORICAL MINIMUM MAXIMUM
------------ ------------ ------------
<S> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Working capital ...................... $ 686,158 $ 3,345,348 $ 20,825,946
Total assets ......................... 5,186,623 6,926,746 26,105,384
Total liabilities .................... 2,534,057 524,180 98,781
Accumulated deficit .................. (419,443) (419,443) (2,169,443)
Stockholders' equity ................. $ 2,652,566 $ 6,402,566 $ 22,324,566
</TABLE>
2
<PAGE> 7
RISK FACTORS
WE HAVE NO OPERATING HISTORY AND THEREFORE WE CANNOT ENSURE THE
SUCCESSFUL OPERATION OF OUR PROPOSED BUSINESS OR THE EXECUTION OF OUR BUSINESS
PLAN.
We are recently formed and we have no operating history. In addition,
both Stampville and VideoDome are also recently formed entities and have limited
operating histories. We do not know if we will be able to successfully operate
our proposed business, or that either Stampville or VideoDome will be able to
execute its business plan.
BECAUSE OF OUR DEPENDENCE ON THE NET PROCEEDS OF THIS OFFERING, IN WHICH
THERE IS NO FIRM COMMITMENT BY ANY UNDERWRITER TO PURCHASE SHARES, AND BECAUSE
THERE CAN BE NO GUARANTEE THAT OTHER FUTURE FINANCING WILL BE AVAILABLE TO US,
WE CANNOT ENSURE THAT WE WILL BE ABLE TO OBTAIN THE CAPITAL NECESSARY TO
IMPLEMENT OUR PLAN OF OPERATION.
We have limited resources and we will be dependent on the net proceeds
of this offering to implement our plan of operation, including the funding of
our acquisition of further interests in Stampville and Videodome, as well as
other potential investments and acquisitions in the United States and Australia.
Unless we raise at least $12,400,000 in this offering, which includes the
$2,500,000 from the sale of shares by the selling shareholder, we may not be
able to fully finance our business plans as described in this prospectus, and
Stampville may have to curtail aspects of its operations. If we raise only the
minimum being offered by this prospectus and neither we nor Stampville can
obtain additional financing from other sources, Stampville would reduce its
workforce to three employees, limit its activities to establishing and operating
its web site, and curtail research and development activities, cataloging
efforts and expansion plans, and instead focus on the sale of stamps. The shares
in this offering are being offered on a "best efforts, all or none" basis in a
minimum offering of 1,000,000 shares and an additional 4,000,000 shares on a
"best efforts basis." Therefore, because there is no commitment to purchase all
or any part of the shares we are offering, we cannot guarantee that this
offering will raise sufficient capital to enable us to finance and implement our
plan of operation. Consequently, we may need to seek additional financing.
Furthermore, even if we raise the maximum amount of proceeds in this offering,
we may still need to seek future additional financing if our assumptions prove
inaccurate or if or our capital requirements vary from those currently planned,
or to further fund potential ongoing operating expenses such as the enhancement
of our services and products, the development of strategic marketing alliances
and/or the acquisition of complementary businesses, technologies, content or
products.
We cannot guarantee that we will be able to obtain any additional
financing or that such additional financing, if available, will be on terms and
conditions acceptable to us.
OUR MANAGEMENT OWNS A MAJORITY OF OUR OUTSTANDING VOTING SHARES AND WE
RELY ON OUR MANAGEMENT FOR ALL BUSINESS DECISIONS, AND CONSEQUENTLY YOUR
INVESTMENT IN US WILL NOT GIVE YOU THE RIGHT TO TAKE PART IN THE DAY-TO-DAY
MANAGEMENT OF OUR OPERATIONS.
Our management, including Henry Herzog, Levi Mochkin and Jonathan
Herzog, and affiliates of our management currently own all of our outstanding
stock and voting rights. Even if we sell the maximum number of shares in this
offering, out management and their affiliates will still collectively own
approximately 75% of our outstanding shares. In addition, we rely on our
management to make all of our business decisions. Consequently, your ownership
of our common stock will not give you the right to take part in the day-to-day
management of our operations, and you should not participate in this offering
unless you are willing to entrust all aspects of our business and operations to
our board of directors and management.
Furthermore, we cannot guarantee that our board of directors and
officers will be able to operate or manage our business successfully or that we
will be able to achieve profitable operations. We would be seriously affected if
Henry Herzog, Levi Mochkin or Jonathan Herzog becomes unable to perform for any
reason. We do not have key man or other insurance to protect against the death
or disability of our key
3
<PAGE> 8
executives. In addition, our management and directors have limited prior
experience in operating Internet or e-commerce companies.
AFTER THIS OFFERING, A LARGE NUMBER OF OUR OUTSTANDING SHARES OF COMMON
STOCK MAY BE FREELY TRADEABLE AND ELIGIBLE FOR SALE, AND THIS COULD ADVERSELY
EFFECT THE PRICE OF OUR COMMON STOCK.
The market price of our common stock could drop due to the sales of a
large number of shares of our common stock or the perception that such sales
could occur. These factors could also make it more difficult to raise funds
through future offerings of our common stock.
After this offering, if all the 5,000,000 shares are sold, 21,350,000
shares of our common stock will be outstanding, or 17,500,000 if the minimum of
1,000,000 shares are sold. Of these shares, the 5,000,000 shares sold in this
offering, or 1,000,000 shares if only the minimum is sold, will be freely
tradeable without restrictions under the Securities Act, except for any shares
purchased by our "affiliates," as defined in Rule 144 under the Securities Act.
Our officers and directors and all stockholders have entered into lock-up
agreements pursuant to which they have agreed not to offer or sell any shares of
our common stock for a period which terminates 90 days after the termination of
this offering, without the prior written consent of Kensington Capital Corp.
These individuals or entities may request that Kensington Capital Corp. consider
an early release from their lock-up agreement. Kensington Capital Corp. may, at
any time and without notice, grant an early release for shares subject to these
lock-up agreements. Upon expiration of this lock-up period, the shares owned by
these persons prior to completion of this offering may be sold into the public
market without registration under the Securities Act in compliance with the
volume limitations and other applicable restrictions of Rule 144 under the
Securities Act. In addition, the holders of 99.1% of our currently outstanding
shares have agreed not to sell any of their shares, other than the sale of
500,000 shares by Instanz Nominees Pty. Ltd., in this offering or through a
registration statement, without the consent of each of the other current
shareholders. In addition, during a period commencing 180 days after the
effective date of this offering and ending no later than three years after the
effective date of this offering, Instanz Nominees Pty. Ltd. shall have the right
to demand that we file a registration statement covering the reoffer and resale
by it of any of its 500,000 shares which are not sold in this offering. This
shareholder agreement will lapse upon the sale of the 500,000 shares in this
offering or the termination of Instanz Nominees Pty. Ltd.'s registration rights.
After the date of this prospectus, we intend to file a registration statement
under the Securities Act to register all shares of common stock issuable upon
the exercise of outstanding stock options and reserved for issuance under our
stock option plans. This registration statement is expected to become effective
immediately upon filing, and subject to the vesting requirements and exercise of
the related options, as well as the terms of the lock-up agreements, shares
covered by this registration statement will be eligible for sale in the public
markets.
OUR BUSINESS MAY BE HARMED BECAUSE WE HAVE NOT COMPLETED THE FILING OF
OUR TRADEMARK AND PATENT APPLICATIONS AND WE DO NOT HAVE ANY REGISTERED
COPYRIGHTS.
All of our and Stampville's software was acquired from third parties.
Neither we nor Stampville have registered copyrights on any software. We rely
upon confidentiality agreements signed by our employees. Stampville applied on
August 13, 1999 with the United States Patent & Trademark Office for
registration of "Stampville.Com" and three designs, combined with words, letters
and/or numbers as trade and service marks. Stampville has received preliminary
comments from the United States Patent and Trademark Office regarding the
application and is in the process of responding to those comments. VideoDome has
indicated that it intends to file several patent claims addressing, among other
things, scalable video conversion processes, dynamic directories, cataloging and
administration. There is no guarantee that either Stampville or VideoDome will
successfully complete their respective trademark and patent applications. In the
event Stampville or VideoDome fails to complete their respective trademark or
patent applications, the companies may suffer the risk of having competing
companies making use of their respective marks and technology. In such a case,
both Stampville and VideoDome would lose the exclusive use of their respective
marks and technology, thereby losing a significant portion of their respective
business ground.
4
<PAGE> 9
USE OF PROCEEDS
We estimate that the maximum net proceeds to us from the sale of the
5,000,000 shares of common stock offered by this prospectus, excluding the
shares being sold on the account of Instanz Nominees Pty. Ltd., will be
approximately $19,400,000, and the minimum net proceeds to be approximately
$3,750,000. This estimate is based on an assumed initial public offering price
of $5.00 per share, and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses. Pursuant to an agreement with
Instanz Nominees Pty. Ltd., the initial $5,000,000 of gross proceeds from the
sale of common stock in this offering will be allocated to us, the next
$2,500,000 of gross proceeds to Instanz Nominees Pty. Ltd., and the remaining
proceeds of up to $17,500,000 of gross proceeds to us. The following table sets
forth the manner in which the proceeds will be allocated, presented in order of
priority, in the event we achieve either a maximum or minimum sales of the
shares being offered in this prospectus.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
USE OF PROCEEDS SUBSCRIPTION SUBSCRIPTION
- --------------- ------------ ------------
<S> <C> <C>
Additional investment in Stampville ............................................... $1,250,000 $6,250,000
Additional investment in VideoDome ................................................ $ 150,000 $ 150,000
Working capital ................................................................... $1,500,000 $3,000,000
Payment of the balance due as of December 31, 1999 on the
building housing our executive offices
located in Melbourne, Australia ................................................... None $ 456,000
Finance additional e-commerce or Internet acquisitions or
ventures or further investments in Stampville ..................................... $ 850,000 $4,544,000
Additional investment in VideoDome subject to completion to our
satisfaction of the due diligence review .......................................... None $5,000,000
</TABLE>
The proceeds allocated to finance working capital will be used to pay
such items, including but not limited to, wages, rent, insurance, interest,
utilities, traveling expenditures, consulting services, professional fees,
office supplies and maintenance.
If we receive at least $10,000,000 from the sale of common stock in this
offering, we have agreed to go forward with an investment in Stampville of
$5,000,000 within thirty (30) days of receipt of the funds from this offering,
and an investment of an additional $1,250,000 on or before December 8, 2001.
Depending on how much additional proceeds we receive from this offering, we will
retain at least $1,500,000 for working capital purposes and invest the remainder
in Stampville, and possibly VideoDome and/or other Internet companies. At this
time, there are no plans, proposals, arrangements or understandings for the
acquisition of other companies. Additional investments in VideoDome are not
mandatory and will be subject to the completion to our satisfaction of our due
diligence review of VideoDome and the availability of additional funding to
complete our entire investment in VideoDome. Pending use, the net proceeds will
be invested in short-term investment-grade instruments, certificates of deposit
or direct or guaranteed obligations of the United States government.
If we sell only the minimum number of shares, the initial $1,250,000 of
proceeds will be invested in Stampville, an additional $150,000 will be invested
in VideoDome, the next $1,500,000 will be utilized to fund working capital
requirements and the remaining balance may be used to finance other e-commerce
or Internet acquisitions or ventures and/or additional investments in Stampville
and/or VideoDome. If we sell the maximum number of shares, $150,000 will be used
to acquire an additional 5% equity interest in VideoDome and $5,000,000 of the
proceeds may be used to fund the remainder of our investment in VideoDome in
exchange for up to and additional 40.1% equity interest.
5
<PAGE> 10
DIVIDEND POLICY
We have never paid cash dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future. We intend to
retain any future earnings, if any, to repay existing debt, if any, and to
finance the growth and expansion of our business.
CAPITALIZATION AND STOCK OWNERSHIP
Our board of directors has authorized the issuance of up to 125,000,000
shares of capital stock, of which 25,000,000 shares are preferred stock and
100,000,000 shares are common stock. In connection with this offering, the board
of directors has authorized the issuance of up to 4,500,000 shares to be issued
to investors.
The following table sets forth as of December 31, 1999 the following
information:
- the actual capitalization of the company,
- the pro forma capitalization of the company adjusted to give
effect to the sale of the minimum offering of 1,000,000 shares
and maximum offering of 4,500,000 shares of common stock offered
by us herein at the initial public offering price of $5.00 per
share and the application of the estimated proceeds therefrom,
and
- if the maximum number of shares are sold, options to purchase
1,600,000 shares of our stock which were granted to Jonathan Y.
Malamud as partial consideration for our 50.1% interest in
Stampville will become exercisable upon the occurrence of both
(a) December 8, 2001 and (b) we make the additional payment of
$5,000,000 to Stampville above the initial aggregate $500,000
investment in Stampville, or raise at least $10,000,000 in this
offering, and then only in increments of 20% per annum.
If only the minimum number of shares are sold, the pro forma adjustments
will exclude the 1,600,000 stock options granted to Jonathan Y. Malumud as
partial consideration for our 50.1% equity interest in Stampville.
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, 1999
--------------------------------------------
ACTUAL MINIMUM MAXIMUM
------------ ------------ ------------
<S> <C> <C> <C>
Payables due to Stampville.Com ................................................. $ 2,009,877 $ --(1) $ --
============ ============ ============
Notes payable -- long term ..................................................... 455,848 455,848 --
Stockholders' equity
Preferred stock, par value $.001; authorized 25,000,000 shares; no shares
issued and outstanding actual and pro forma minimum
and maximum ............................................................... -- -- --
Common stock, par value $.001; authorized 100,000,000 shares, issued and
outstanding 16,500,000 shares actual; 17,500,000 minimum shares outstanding
pro forma and 21,350,000 maximum
shares outstanding pro forma .............................................. 16,500 17,500 21,350
Additional paid-in capital ................................................ 3,055,509 6,804,509 24,472,659
Deficit accumulated during the development stage .......................... (419,443) (419,443) (2,169,443)
------------ ------------ ------------
Total stockholders' equity ............................................ $ 2,652,566 $ 6,402,566 $ 22,324,566
============ ============ ============
Total capitalization.................................................. $ 5,118,291 $ 6,858,414 $ 22,324,566
============ ============ ============
</TABLE>
(1) Reflects the payment of additional $1,000,000 investment in Stampville made
subsequent to December 31, 1999.
6
<PAGE> 11
PRO FORMA FINANCIAL STATEMENTS
The following unaudited Pro Forma Balance Sheets as of December 31, 1999
and unaudited Pro Forma Statements of Operations from February 2, 1999, our date
of inception, through December 31, 1999, give effect to the acquisition of
equity interests in Stampville and VideoDome assuming that the minimum or
maximum subscriptions are sold. In the event the minimum subscription is sold,
the Pro Forma Financial Statements assume that the company's ownership is
reduced to 27.5% of the outstanding shares of Stampville. The pro forma
information is based on the historical consolidated financial statements of the
company giving effect to the transaction using the purchase method of accounting
and the assumptions and adjustments described in the accompanying notes to the
unaudited Pro Forma Financial Statements. The unaudited Pro Forma Statement of
Operations gives effect to the acquisition as if it occurred at the beginning of
the period, or February 2, 1999, our date of inception. The unaudited Pro Forma
Balance Sheet gives effect to the acquisition as of December 31, 1999.
The unaudited pro forma statements have been prepared by our management
based upon audited financial statements of the company and Stampville, which are
included elsewhere herein. These pro forma statements may not be indicative of
the results that actually would have occurred if the acquisition was completed
on February 2, 1999, or December 31, 1999. The unaudited pro forma statements
should be read in conjunction with the audited financial statements and related
notes of the company and Stampville.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(ASSUMES MINIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------
INCOME AND (EXPENSES)
<S> <C> <C> <C>
Foreign currency transaction gain ..................... 17,033 -- 17,033
Interest, net ......................................... 9,174 -- 9,174
Legal and professional fees ........................... $ (125,687) -- $ (125,687)
Salaries .............................................. (66,618) -- (66,618)
Travel and entertainment .............................. (33,675) -- (33,675)
Equity in net loss of Stampville ...................... (185,955) 83,884(1) (102,071)
Other ................................................. (33,715) -- (33,715)
Amortization of excess purchase price over equity
Interest in Stampville .............................. -- (609,201)(2) (609,201)
------------ ------------ ------------
Net loss ..................................... $ (419,443) $ (525,317) $ (944,760)
============ ============ ============
Basic loss per common share ............... $ (0.04) $ (0.05)
============ ============
Diluted loss per common share ............. $ (0.04) $ (0.05)
============ ============
Weighted average shares outstanding ....... 11,222,139 17,500,000(3)
============ ============
</TABLE>
NOTES TO PRO FORMA STATEMENT OF OPERATIONS (MINIMUM SUBSCRIPTION)
(1) To reduce the company's equity interest in Stampville's loss from
operations from 50.1% to 27.5% (as described in the amended stock
purchase agreement).
(2) The adjustment represents the amortization of the difference between the
company's proportionate share (27.5%) of the total of the underlying
equity in the net assets of Stampville of $1,128,832 plus the $1,250,000
additional investment to be made from the proceeds of this offering (or
$654,179), and the company's total investment in Stampville of
$2,750,000, less the recorded equity investment and net
7
<PAGE> 12
loss of Stampville of $102,071. The excess purchase price of $1,993,750
is being amortized on a straight-line basis over a useful life of 36
months.
(3) Assumes that all shares have been outstanding since the beginning of the
period.
8
<PAGE> 13
UNAUDITED PRO FORMA BALANCE SHEET
(ASSUMES MINIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------- -----------
<S> <C> <C> <C>
CURRENT ASSET
Cash ............................................... $ 2,179,998 $ 3,783,682(1) $ 3,413,680
(1,000,000)(2)
(1,250,000)(3)
(300,000)(4)
----------- ----------- -----------
Total current asset ....................... 2,179,998 1,233,682 3,413,680
Property and equipment, net ............................... 649,021 -- 649,021
Investment in Stampville .................................. 2,323,922 240,123(3) 570,295
(1,993,750)(3)
Investment in VideoDome ................................... -- 300,000(4) 300,000
Deferred offering costs ................................... 33,682 (33,682)(1) --
Excess purchase price over
equity interest in Stampville ........................ -- 1,993,750(3) 1,993,750
----------- ----------- -----------
Total assets .............................. $ 5,186,623 $ 1,740,123 $ 6,926,746
=========== =========== ===========
CURRENT LIABILITIES
Accounts payable ................................... $ 28,001 $ -- $ 28,001
Accrued expenses ................................... 40,331 -- 40,331
Payable to Stampville.Com Inc. ..................... 1,425,508 (1,000,000)(2) --
(425,508)(3)
----------- ----------- -----------
Total current liabilities ................. 1,493,840 (1,425,508) 68,332
Payable to Stampville.Com Inc. ............................ 584,369 (584,369)(3) --
Notes payable -- long term ................................ 455,848 -- 455,848
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001, 25,000,000 shares
Authorized, no shares issued and
Outstanding actual and pro forma ................ -- -- --
Common stock, par value $.001;
100,000,000 shares authorized, 16,500,000
Shares issued and outstanding actual and
17,500,000 shares issued and outstanding proforma 16,500 1,000(1) 17,500
Additional paid-in-capital ......................... 3,055,509 3,749,000(1) 6,804,509
Deficit accumulated during the development stage ... (419,443) -- (419,443)
----------- ----------- -----------
Total stockholders' equity ................ 2,652,566 3,750,000 6,402,566
----------- ----------- -----------
Total liabilities and stockholders' equity $ 5,186,623 $ 1,740,123 $ 6,926,746
=========== =========== ===========
</TABLE>
(See Accompanying Notes to Pro Forma Balance Sheet).
9
<PAGE> 14
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET (MINIMUM SUBSCRIPTION)
(1) Raising of the minimum subscription of 1,000,000 shares of common stock
and effected through this offering at $5.00 per share, less commissions
of $400,000, dealer discounts of $250,000 and estimated offering costs
of $600,000.
(2) To record the February 2000 payment to Stampville.
(3) To record the company's 27.5% equity interest in Stampville and the
excess purchase price over the company's proportionate share of
Stampville's net assets. The excess purchase price is determined by
taking the difference between the company's proportionate share (27.5%)
of the total of the underlying equity in the net assets of Stampville of
$1,128,832 plus the $1,250,000 additional investment to be made from the
proceeds of this offering (or $654,179) and the company's total
investment in Stampville of $2,750,000 less the equity investment and
net loss of Stampville of $102,071.
(4) To record the company's initial 5% equity interest in VideoDome of
$150,000 made subsequent to December 31, 1999, plus the additional 5%
equity interest for $150,000 to be made from the proceeds of this
offering.
10
<PAGE> 15
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(ASSUMES MAXIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
IT TECHNOLOGY STAMPVILLE.COM PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INCOME AND (EXPENSES)
Revenue ............................ $ -- $ 5,119 $ -- $ 5,119
Cost of goods sold ................. -- (2,482) -- (2,482)
Foreign currency transaction gain .. 17,033 -- -- 17,033
Interest net ....................... 9,174 -- -- 9,174
Legal and professional fees ........ (125,687) (35,755) (1,750,000)(1) (1,911,442)
Salaries ........................... (66,618) (115,384) -- (182,002)
Travel and entertainment ........... (33,675) (23,328) -- (57,003)
Rent ............................... -- (11,000) -- (11,000)
Other .............................. (33,715) (86,642) -- (120,357)
Equity in the net loss of Stampville (185,955) -- 185,955(2) --
Technology expense ................. -- (101,696) -- (101,696)
Amortization of excess purchase
price over assets
acquired ........................... -- -- (1,264,771)(3) (1,264,771)
Minority interest in Stampville .... -- -- 185,213(2) 185,213
------------ ------------ ------------ ------------
Net Loss ........................... $ (419,443) $ (371,168) $ (2,643,603) $ (3,434,214)
============ ============ ============ ============
Basic loss per common share ........ $ (0.04) $ (0.16)
============ ============
Diluted loss per common share ...... $ (0.04) $ (0.16)
============ ============
Weighted average shares outstanding 11,222,139 21,350,000(4)
============ ============
</TABLE>
11
<PAGE> 16
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (MAXIMUM
SUBSCRIPTION)
(1) Recognition of compensation expense of $1,750,000 related to the
issuance of 350,000 shares of restricted common stock to Mendel Mochkin
for consulting services rendered. Mendel Mochkin's consulting services
include the development of the company's operations and other business
infrastructure matters. The restricted shares were valued using the
initial public offering price of $5.00 per share.
(2) Adjustment to remove the company's share of Stampville's loss from
operations recorded while under the equity method of accounting. The
adjustment of $185,213 represents the 49.9% minority interest share in
the net loss of Stampville.
(3) Amortization of goodwill of $4,139,250, which is being amortized on a
straight-line basis over a useful life of 36 months.
(4) Assumes that all shares have been outstanding since the beginning of the
period.
12
<PAGE> 17
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(ASSUMES MAXIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
IT TECHNOLOGY STAMPVILLE.COM PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash ............................................ $ 2,179,998 $ 47,066 $ 19,433,682(1) $ 20,904,898
(455,848)(2)
(300,000)(7)
Accounts receivable ............................. -- 1,370 -- 1,370
Receivable due from shareholder ................. -- 1,000,000 (1,000,000)(4) --
Inventory ....................................... -- 18,459 -- 18,459
------------ ------------ ------------ ------------
Total current assets ............................ 2,179,998 1,066,895 17,677,834 20,924,727
Property and equipment, net ..................... 649,021 74,739 -- 723,760
Investment in Stampville ........................ 2,323,922 -- 272,000 --
(2,595,922)(6)
Investment in VideoDome ......................... -- -- 300,000(7) 300,000
Deposits ........................................ -- 6,160 -- 6,160
Deferred offering costs ......................... 33,682 -- (33,682)(1) --
Technology costs ................................ -- 11,487 -- 11,487
Excess purchase price over net -- -- 4,139,250 (6) 4,139,250
assets acquired ................................
------------ ------------ ------------ ------------
Total assets .................................... $ 5,186,623 $ 1,159,281 $ 19,759,480 $ 26,105,384
============ ============ ============ ============
CURRENT LIABILITIES
Accounts payable ................................ $ 28,001 $ 29,273 -- $ 57,274
Accrued expenses ................................ 40,331 1,176 -- 41,507
Payable to Stampville ........................... (1,000,000)(4)
1,425,508 -- (425,508)(6) --
------------ ------------ ------------ ------------
Total current liabilities ....................... 1,493,840 30,449 (1,425,508) 98,781
Notes payable - long term ....................... 455,848 -- (455,848)(2) --
Payable to Stampville, less current portion ..... 584,369 -- (584,369)(6) --
Minority interest in Stampville ................. -- -- 3,682,037(6) 3,682,037
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001,
25,000,000 shares authorized,
no shares issued and outstanding
actual and pro forma ....................... -- -- -- --
Common stock, par value $.001; 100,000,000 shares
authorized, 16,500,000 shares issued and
outstanding actual and 21,350,000
shares issued and outstanding proforma ..... 16,500 1,000 4,500 (1) 21,350
350 (3)
(1,000)(6)
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
IT TECHNOLOGY STAMPVILLE.COM PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Additional paid-in-capital ...................... 3,055,509 2,508,877 19,395,500 (1) 24,472,659
1,749,650 (3)
272,000 (5)
(2,508,877)(6)
Receivable due from shareholder ................. -- (1,009,877) 1,009,877 (6) --
Deficit accumulated during the
development stage ............................... (419,443) (371,168) (1,750,000)(3) (2,169,443)
371,168
------------ ------------ ------------ ------------
Total stockholders' equity ...................... 2,652,566 1,128,832 18,543,168 (6) 22,324,566
------------ ------------ ------------ ------------
Total liabilities and stock-
holders' equity ................................. $ 5,186,623 $ 1,159,281 $ 19,759,480 $ 26,105,384
============ ============ ============ ============
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (MAXIMUM SUBSCRIPTION)
(1) Raising of the maximum subscription of 4,500,000 shares of common stock
effected through this offering, excluding the shares being offered for
sale by Instanz Nominees Pty. Ltd., less commissions of $1,250,000,
estimated offering expenses of $600,000, and dealer discounts of
$1,250,000.
(2) Repayment of note from offering proceeds.
(3) Recognition of compensation expense related to the issuance of 350,000
shares of restricted common stock to Mendel Mochkin for consulting
services rendered. The restricted shares were valued using an initial
public offering price of $5.00 per share.
(4) To record February 2000 payment to Stampville.
(5) To record 1,600,000 stock options granted to the principal stockholder
of Stampville. The stock options were valued at a fair value of $0.17
per option, using the minimum value method.
(6) To eliminate investment account upon consolidation and record excess
purchase price over net assets acquired. The following table summarizes
the net assets acquired:
<TABLE>
<S> <C>
Cash consideration given:
Cash paid to Stampville as of December 31, 1999 $ 500,000
Cash paid subsequent to December 31, 1999 and
prior to this offering 1,000,000
Cash payable from this offering 6,250,000
----------
Total consideration given $7,750,000
==========
Company's share of the cash invested $3,867,250
Stock options granted 272,000
----------
Purchase price of 50.1% interest in Stampville $4,139,250
==========
</TABLE>
(7) To record the company's initial 5% equity interest in VideoDome of
$150,000 made subsequent to December 31, 1999, plus the additional 5%
equity interest for $150,000 to be made from the proceeds of this
offering.
14
<PAGE> 19
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of May 5, 2000, there were 16,500,000 shares of common stock which
are deemed to be beneficially owned and outstanding. These shares are set forth
in the following table. These 16,500,000 shares are restricted securities and
are subject to Rule 144 of the Securities Act. They will become eligible for
sale under Rule 144 following expiration of the applicable holding period.
Except for up to 3,400,000 shares which are subject to currently outstanding
agreements or options granted to Mendel Mochkin, Robert Petty and Jonathan Y.
Malamud, as further described below, the shares of common stock which are
currently deemed to be beneficially owned and the 4,500,000 shares which may be
issued in connection with this offering, the company does not have any
outstanding commitments to issue common stock.
<TABLE>
<CAPTION>
CURRENT BENEFICIAL ASSUMES MINIMUM ASSUMES MAXIMUM
OWNERSHIP SUBSCRIPTION SUBSCRIPTION
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Ledger Technologies Pty. Ltd.(2)
Levi Mochkin(2).................. 6,300,000 38.18% 6,300,000 36.00% 6,300,000 29.51%
Instanz Nominees Pty. Ltd(3)
Helen Abeles(3).................. 3,700,000 22.42% 3,700,000 21.14% 3,200,000 14.99%
Riccalo Pty. Ltd.(4)
Henry Herzog(4).................. 2,000,000 12.12% 2,000,000 11.43% 2,000,000 9.37%
Eurolink International Pty. Ltd.(5)
Jonathan Herzog(5)............... 2,000,000 12.12% 2,000,000 11.43% 2,000,000 9.37%
AtcorAus. Pty. Ltd.(6)
Farrel Meltzer(6)................ 750,000 4.55% 750,000 4.29% 750,000 3.51%
Tilbia Nominees Pty. Ltd.(7)
Anthony Davis(7)................. 1,600,000 9.70% 1,600,000 9.14% 1,600,000 7.49%
Mendel Mochkin(8)......................... 150,000 0.91% 150,000 0.86% 500,000 2.34%
All Directors and Officers
as a Group (6 Persons)........... 16,350,000 99.09% 16,350,000 93.43% 15,850,000 74.24%
</TABLE>
(1) Pursuant to the rules promulgated by the SEC, all shares underlying
options which were exercisable on May 5, 2000 or which become
exercisable within 60 days, held by a described person are deemed to be
"beneficially" owned. The SEC rules further require that every person
who has or shares the power to vote or to dispose of shares of common
stock are deemed to be the "beneficial" owner of all of the shares of
common stock over which any such sole or shared power exists.
(2) Lisa Mochkin, spouse of Levi Mochkin, a director and Chief Executive
Officer of the company, is a director of Ledger Technologies Pty. Ltd.
Levi Mochkin is an affiliate of Ledger Technologies Pty. Ltd. and may be
deemed to be a beneficial owner of the shares held by Ledger
Technologies Pty. Ltd. Lisa Mochkin is the daughter of Henry Herzog and
the sister of Jonathan Herzog.
(3) Helen Abeles, a director, is an affiliate of Instanz Nominees Pty. Ltd.
Ms. Abeles exercises shared investment and voting power over these
shares and may be deemed to be a beneficial owner thereof.
(4) Henry Herzog, a director and President of the company and father of
Jonathan Herzog and father-in-law of Levi Mochkin, is a director of
Riccalo Pty. Ltd. Mr. Herzog exercises shared investment and voting
power over these shares and may be deemed to be a beneficial owner
thereof.
(5) Jonathan Herzog, a director, Secretary and Chief Financial Officer of
the company and son of Henry Herzog, is a director of Eurolink
International Pty. Ltd. Mr. Herzog exercises shared investment and
voting power over these shares and may be deemed to be a beneficial
owner thereof.
(6) Wendy Meltzer, spouse of Farrel Meltzer, a director of the company, is a
director of Atcor Aus. Pty. Ltd. Mr. Meltzer is an affiliate of Atcor
Aus. Pty. Ltd. and may be deemed to be a beneficial owner of the shares
held by Atcor Aus. Pty. Ltd.
15
<PAGE> 20
(7) Tilbia Nominees Pty. Ltd. holds shares of common stock for Anthony Davis
and his affiliates. Mr. Davis exercises shared investment and voting
power over these shares and may be deemed to be the beneficial owner
thereof.
(8) Mendel Mochkin is the brother of Levi Mochkin. Mendel Mochkin will
receive an additional 350,000 shares of common stock which is contingent
on the company investing an additional $1,000,000 in Stampville in order
to retain no less than 25% of the outstanding shares of common stock.
The preceding table of beneficial ownership does not include options to
purchase 1,600,000 shares of common stock which have been granted to Jonathan Y.
Malamud. These shares will only become exercisable only after December 8, 2001
and after the company makes an additional payment of $5,000,000 to Stampville
above the initial investment of an aggregate amount of $500,000 in Stampville,
or raises at least $10,000,000 in this offering, and then only in installments
of 20% per annum. The beneficial ownership table also does not include 1,450,000
shares subject to options granted to Robert Petty. Mr. Petty's options
representing an aggregate of 950,000 shares of common stock will be exercisable
at $1.00 per share and Mr. Petty's options representing 500,000 shares will be
exercisable at $2.00 per share. Mr. Petty's options shall become vested and
exercisable upon the company reaching certain levels of market capitalization
and the occurrence of certain other events.
DILUTION
Purchasers of common stock in this offering will experience immediate
and substantial dilution in the net tangible book value of the common stock from
the initial public offering price. Net tangible book value per share represents
the amount of our total tangible assets and is reduced by the amount of our
total liabilities, divided by the number of shares of common stock outstanding.
As of December 31, 1999, the net tangible book value of the company was
approximately $2,652,566, or $0.16 per share.
As of December 31, 1999, our pro forma net tangible book value, as
adjusted for the sale of the minimum and maximum shares offered in this offering
and the application of the net proceeds (at the initial public offering price of
$5.00 per share, less the estimated Offering expenses) was $0.25 and $0.85,
respectively. For the maximum subscription, this represents an immediate
increase of $.69 per share to existing stockholders and an immediate and
substantial dilution of $4.15 per share to new investors purchasing common stock
in this offering. If only the minimum subscription is sold, new investors
purchasing common stock in this offering would experience an immediate and
substantial dilution of $4.75 per share, while existing stockholders would have
an immediate increase of $0.09 per share. The following tables illustrate this
per share dilution:
<TABLE>
<S> <C> <C>
ASSUMES MINIMUM SUBSCRIPTION
Initial public offering price ..................................... $ 5.00
Net tangible book value as of December 31, 1999 ................... $ 0.16
Increase attributable to new investors ............................ $ 0.09
------
Pro forma net tangible book value after the Offering .............. $ 0.25
------
Dilution in net tangible book value to new investors .............. $ 4.75
======
Percentage dilution to new investors .............................. 95.0%
ASSUMES MAXIMUM SUBSCRIPTION
Initial public offering price ..................................... $ 5.00
Net tangible book value as of December 31, 1999 ................... $ 0.16
Increase attributable to new investors ............................ $ 0.69
------
Pro forma net tangible book value after the Offering .............. $ 0.85
------
Dilution in net tangible book value to new investors(1) ........... $ 4.15
======
Percentage dilution to new investors .............................. 83.0%
</TABLE>
16
<PAGE> 21
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
------------------------------ ------------------------------ AVERAGE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders ......... 16,500,000 78.6% $ 3,158,750 13.6% $ 0.19
New investors ................. 4,500,000 21.4% $20,125,000 86.4% $ 4.47
----------- ----------- ----------- ----------- --------
Total ................ 21,000,000 100% $23,283,750 100% $ 1.11
=========== =========== =========== =========== ========
</TABLE>
(1) Excludes the 350,000 shares issuable to Mendel Mochkin for consulting
services upon the completion of our investment of an additional $1,000,000 in
Stampville.
The foregoing table is based on the sale of the maximum 5,000,000
shares. If only the minimum 1,000,000 shares were sold, the table would read as
follows:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------------ ------------------------------ AVERAGE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders ......... 16,500,000 94.3% $ 3,158,750 42.1% $ 0.19
New investors ................. 1,000,000 5.7% $ 4,350,000 52.9% $ 4.35
----------- ----------- ----------- ----------- --------
Total ................ 17,500,000 100% $ 7,508,750 100% $ 0.43
=========== =========== =========== =========== ========
</TABLE>
The above tables do not include options to purchase a total of 3,050,000
shares of common stock at a weighted average exercise price of approximately
$1.30 per share. None of these options are currently exercisable. These options
include options to purchase 1,600,000 shares of the company's common stock which
have been granted to Jonathan Y. Malamud. The remaining options consist of Mr.
Petty's options to purchase 1,450,000 shares.
If these options are exercised in the future it will be further dilutive
to investors who purchase shares at the initial public offering price. Options
available for grant under our stock option plans may be granted at exercise
prices less than the market value of common stock on the grant date. If we grant
options below fair market value it could be dilutive to investors who purchase
shares at the initial public offering price.
17
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW AND PLAN OF OPERATIONS
The company was formed in February 1999 and is in the early stage of
development. We are engaged in Internet, e-commerce and other technology
businesses. We expect to add value to operating companies by providing active
and ongoing management infrastructure, support, funding, and expertise.
Our goal is to identify entities that have high growth potential and can
benefit from the commercial and financial expertise of our personnel. We assist
in the development and recruitment of key management to support accelerated
financial and operational growth and enhanced efficiency. Our practice is to
emphasize relationships in which our resources can enhance the creative and
technological skills of our partners.
In mid-1999, we signed an agreement with Stampville.Com Inc., a
newly-formed company. Stampville is being developed to become a global center
for stamp products and services and potentially other collectibles such as coins
and sports memorabilia. We have assisted the founders of Stampville in
developing this enterprise, recruiting key management and implementing systems
to advance its development and prepare it for its full launch later this year.
In December 1999, Stampville became a 50.1% owned subsidiary of ours. Pursuant
to the terms of our agreement with Stampville, as amended, our 50.1% interest
may be reduced in the event we do not complete our funding of up to $7,750,000
in Stampville. Our ownership interest in Stampville may also be reduced in the
event we arrange for third party financing in lieu of our direct investment in
Stampville. To date, we have invested $1,500,000 in Stampville and at this
stage, upon our raising a minimum of $10,000,000 through this offering, we
anticipate contributing up to an additional $6,250,000 million to Stampville.
Stampville plans to use the portion of the offering proceeds which it
will receive from us to continue to develop a portal community Web site for the
collectable postage stamp community that will service a wide range of areas
surrounding the stamp market and possibly other areas of interest, which may
include coins and sports memorabilia. Stampville expects to expand beyond
hobbyists and collectors to the art, entertainment and other targeted specialty
markets and to develop a wholesale distribution channel for sale of its products
as well.
As of March 24, 2000, we entered into an agreement through our
wholly-owned subsidiary, Bickhams Capital, Inc., which agreement granted us an
option to acquire up to a 50.1% equity interest in VideoDome.Com Networks, Inc.,
a provider of streaming video services on the Internet to consumer and corporate
clients. Our option to purchase up to a 50.1% equity interest in VideoDome is
exercisable in three tranches. On April 10, 2000, we exercised the initial
tranche to purchase 5% of the equity interest in VideoDome through the payment
of $150,000. We also intend to invest an additional $150,000 from the proceeds
of this Offering through the exercise of the second tranche to acquire an
additional 5% equity interest in VideoDome. Our exercise of the final tranche
for 40.1% of the equity interest in VideoDome is contingent upon completion to
our satisfaction of complete due diligence regarding VideoDome, receipt from
VideoDome of audited financial statements, and our acquisition through this
offering or through other sources of sufficient funds to complete the potential
investment in VideoDome, to complete our intended investment in Stampville and
to finance our other operations and/or other potential investments. We are under
no obligation to exercise the options to purchase the VideoDome interest.
Therefore, we can offer no guarantee that our potential acquisition of a
majority interest in VideoDome will be realized.
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Beyond the development of Stampville and potential further investments
in VideoDome, we are continually reviewing and considering e-commerce and other
related enterprises and ventures, but have not made any commitments at this
stage. At this time, there are no plans, proposals, arrangements or
understandings for the acquisition of other companies.
We do not have any meaningful revenues, and will not generate any
meaningful revenues until after we implement our strategic plan and attract and
retain a significant number of e-commerce and related businesses. We do not
anticipate generating any meaningful revenue until at least several months
following the consummation of this offering, if at all. For the period from
February 2, 1999, our date of inception, to December 31, 1999, we incurred a
cumulative net loss of $419,443. We anticipate that we will continue to incur
significant losses until, at the earliest, we generate sufficient revenues to
offset the substantial up-front expenditures and operating costs associated with
establishing, attracting and retaining a significant business base. There can be
no assurance that we will be able to attract and retain a sufficient number of
e-commerce businesses to generate meaningful revenues or achieve profitable
operations.
Depending upon the level of our business activity, we anticipate that we
will use a portion of the proceeds of this offering to hire several additional
employees over the next twelve months to market our services to potential
businesses and develop the infrastructure of Stampville and potentially
VideoDome.
LIQUIDITY AND CAPITAL RESOURCES
Our primary capital requirements have been to fund our initial
investment in Stampville and VideoDome. Additional capital will be needed to
complete the purchase of Stampville, acquire an additional 45.1% equity interest
in VideoDome, if we so choose, and to pursue other business opportunities, as
well as to fund our working capital requirements, including legal and
professional expenses. To date, we have financed our capital requirements
through the issuance of equity securities and the issuance of long-term debt.
At December 31, 1999, we had working capital of $686,158. Prior to
December 31, 1999, we issued 16,500,000 shares of common stock to various
entities that are affiliates of certain officers and/or directors of the company
and received cash proceeds of $3,151,250 and services of $7,500.
In July 1999, we entered into an agreement to purchase a building in
exchange for cash and a note payable in Australian dollars which as of December
31, 1999 equaled to approximately $456,000 USD. Such indebtedness bears interest
at the rate of 7.25% per annum and is repayable in July 2001. We will use a
portion of the proceeds of the maximum offering to repay such indebtedness.
The capital requirements relating to implementation of our business plan
will be significant. During the twelve months following the consummation of this
offering, we intend to finance the acquisition of a majority interest in
Stampville, possibly increase our interest in VideoDome, finance or acquire
interests in other Internet or e-commerce enterprises, and meet our own working
capital needs. Other than as described above, as of the date of this prospectus,
we have no material commitments for capital expenditures.
We are dependent on the proceeds of this offering or other financing in
order to fully implement our proposed plan of operation. Based on currently
proposed plans and assumptions relating to the implementation of our business
plans in the event we sell all of the shares offered in this offering, we will
retain approximately $3,000,000, which should be sufficient to satisfy our
contemplated working capital requirements for approximately two years following
the consummation of this offering. In addition, we would retain approximately
$4,544,000 for potential investment, acquisition and development of Internet and
e-commerce ventures. If we raise approximately $10,000,000 in this offering, we
would retain approximately $1,500,000, which would be sufficient to fund our
working capital requirements for approximately one year following this offering.
In such event, we would have sufficient funds to complete our contemplated
investment in Stampville but would need to raise additional capital to invest
in, acquire and develop other Internet or e-commerce ventures. If we raise only
the minimum subscription, the initial $1,250,000 of proceeds would be invested
in Stampville, an additional $150,000 would be invested in VideoDome, the next
$1,500,000 would be utilized to fund our working capital requirements, and the
remaining $850,000 would be used to finance other e-commerce or Internet
acquisitions or ventures
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and/or additional investments in Stampville or VideoDome. If we raise less than
$10,000,000, but at least the minimum requested to complete the offering, we
will invest $1,250,000 with Stampville. This investment will be adequate to
allow Stampville to launch and operate its website prior to the end of the
second quarter of 2000 with an initial launch marketing campaign thereafter.
Thereafter, if we or Stampville have not obtained additional financing,
Stampville will reduce its work force to three employees, curtail research and
development activities, cataloging efforts and expansion plans, and instead will
focus its operations principally on the sale of stamps. We will also, if and to
the extent necessary, contribute up to an additional $250,000 from the
unallocated proceeds of the offering to Stampville. Accordingly, we believe that
the proceeds contributed to Stampville, together with Stampville's significant
reduction in activities and operating expenses discussed above, Stampville will
have sufficient funds to operate for at least twelve months, even if Stampville
does not generate material revenues from the sale of stamps.
As previously noted, we have retained $1,500,000 for working capital,
which we believe to be sufficient to support operations for at least twelve
months. In the event that our plans change, our assumptions change or prove to
be inaccurate, or if the proceeds of this offering prove to be insufficient to
implement our business plans, we would be required to seek additional financing
sooner than currently anticipated. There can be no assurance that the proceeds
of this offering will be sufficient to permit us to implement our proposed
business plan or that any assumptions relating to the implementation of such
plan will prove to be accurate. To the extent that the proceeds of this offering
are not sufficient to enable us to generate meaningful revenues or achieve
profitable operations, the inability to obtain additional financing will have a
material adverse effect on us. There can be no assurance that any such financing
will be available to us on commercially reasonable terms, or at all.
RECENT DEVELOPMENTS
Subsequent to December 31, 1999, a number of developments occurred which
have had a significant impact on our business, operations and results,
principally the continued expansion of Stampville's developmental activities. In
addition, as of March 24, 2000, we entered into an agreement giving us an option
to acquire up to a 50.1% equity interest in VideoDome.Com Networks, Inc. Our
option to purchase this 50.1% equity interest in VideoDome is exercisable in
three tranches. On April 10, 2000, we invested an initial $150,000 and purchased
a 5% equity interest in VideoDome. We also intend to invest an additional
$150,000 from the proceeds of this offering through the exercise of the second
tranche to acquire an additional 5% equity interest in VideoDome. Our exercise
of the final tranche for an additional 40.1% equity interest in VideoDome is
contingent upon completion to our satisfaction of complete due diligence
regarding VideoDome, receipt from VideoDome of audited financial statements, and
our acquisition through this offering or through other sources of sufficient
funds to complete the potential investment in VideoDome, to complete our
intended investment in Stampville and to finance our other operations and/or
other potential investments. We are under no obligation to exercise the options
to purchase the equity interest in VideoDome. Therefore, we can offer no
guarantee that our potential acquisition of a majority interest in VideoDome
will be realized.
INFLATION
We have not been materially affected by inflation in the United States.
While we do not anticipate inflation affecting our operations, increases in
labor and supplies could impact our ability to compete.
YEAR 2000 COMPLIANCE AND COSTS
As has been widely reported, there has been worldwide concern that Year
2000 technology problems would materially and adversely impact a variety of
businesses and local, national and global economies. While relatively few
disruptions were reported on and after December 31, 1999, concerns remain that
there will be a delayed effect to computer users. As a newly formed entity, we
have acquired computer hardware and software which has been represented to us as
Year 2000 compliant, and we do not expect future expenses associated with
ongoing compliance to be material to our financial position or future results of
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operations, although there can be no assurance that as a result of presently
unforeseen computer programming or future dealing with our vendors or other
parties difficulties will not arise.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, as amended, "Accounting
for Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards requiring that all derivative instruments,
including certain derivative instruments embedded in other contracts, be
recorded in the balance sheet as either an asset or liability measured at its
fair value. This statement will become applicable to us in January 2001.
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BUSINESS
THE COMPANY
We are a Delaware corporation created for the purpose of engaging in
Internet, e-commerce and technology businesses, directly and through
acquisitions of equity in Internet related and other technology companies. Our
wholly-owned subsidiary, I.T. Technology Pty. Ltd., furthers our operations in
Australia and owns our executive offices located in Melbourne, Australia.
We actively seek investments in and acquisitions of entities with unique
opportunities in the Internet, e-commerce and technology-related areas. Through
our executive officers and directors, we identify companies which have high
growth potential and which can benefit from the commercial and financial
expertise of our personnel. We emphasize relationships in which our resources
can enhance the creative and technological skills of our partners, and we are
open to a variety of potential relationships, including joint ventures and
strategic alliances.
Pursuant to an agreement entered into in June 1999 and amended in
December 1999, we have acquired 50.1% of the equity of Stampville.Com Inc., a
corporation specializing in the business of selling collectible stamps and other
memorabilia through the Internet on a retail basis to the general public and
collectors. Stampville also intends to sell collectible stamps and other
memorabilia through standard business channels on a wholesale basis. Our 50.1%
equity interest may be reduced in the event that we do not complete the funding
of up to $7,750,000 in Stampville. Our ownership interest in Stampville may also
be reduced in the event we arrange for third party financing in lieu of direct
investment in Stampville. As of March 31, 2000, we have invested $1,500,000 in
Stampville.
As of March 24, 2000, we entered into an agreement through our
wholly-owned subsidiary, Bickhams Capital, Inc., which agreement granted us an
option to acquire up to a 50.1% equity interest in VideoDome.Com Networks, Inc.
Our option to purchase this 50.1% equity interest in VideoDome is exercisable in
three tranches. On April 10, 2000 we exercised one of our tranches to purchase
equity in VideoDome by investing $150,000 in exchange for 5% equity interest in
VideoDome. We also intend to invest an additional $150,000 from the proceeds of
this Offering through the exercise of the second tranche to acquire an
additional 5% equity interest in VideoDome. Our exercise of the final tranche
for 40.1% of equity interest in VideoDome is contingent upon completion to our
satisfaction of complete due diligence regarding VideoDome, receipt from
VideoDome of audited financial statements, and our acquisition through this
offering or through other sources of sufficient funds to complete the potential
investment in VideoDome, to complete our intended investment in Stampville and
to finance our other operations and/or other potential investments. We are under
no obligation to exercise the option to purchase the VideoDome interest.
Therefore, we can offer no guarantee that our potential acquisition of a
majority interest in VideoDome will be realized.
We intend to identify other potential Internet or e-commerce businesses
to acquire or in which to invest, in addition to Stampville and VideoDome.
However, we have not at this time entered into substantive negotiations with any
such potential targets and there can be no assurance that we will be able to
successfully locate other investment or acquisition candidates or ventures, or
if located successfully, negotiate a transaction with such targeted entities.
We currently maintain executive offices in Melbourne, Australia and New
York, New York. It is anticipated that Henry Herzog, our President, will be
relocating to our New York offices on a temporary basis during the third
quarter of this year.
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INDUSTRY BACKGROUND
The Internet
The Internet is a global web of over 50,000 computer networks, the first
of which were developed over 25 years ago. The Internet was originally installed
using UNIX-based computers, a development of AT&T, a telephone company, which
had very sophisticated communications capabilities for its time. At first,
although the Internet served the objectives of the United States Department of
Defense, it was looked upon by others as awkward due to its arcane commands and
inaccessibility to persons without specific technical training. This hampered
its growth for a considerable period of time.
A key breakthrough to the accessibility of the Internet occurred with
the development of the communications transport protocol "TCP/IP," which made it
possible for each Internet computer to pass on packets of information to
different types of computers without using a switchboard. Using TCP/IP, any
computer can link onto the Internet and its conglomeration of networks for a
cost that is fundamentally lower than, and structured differently from, the cost
of linking onto stand-alone networks.
Communication on the Internet occurs primarily between a client and a
server, or so-called host computers. The client computer initiates a request for
information or other activity and the server computer responds to, or serves,
that request. Furthermore, server computers run specialized software
specifically designed to provide a variety of services to client computers.
Notably, many host computers operate as mail servers or file servers that enable
the downloading or transferring of files. The Internet has historically been
used by academic institutions, defense contractors and government agencies
primarily for remote access to host computers and for sending and receiving
electronic-mail and has traditionally been subsidized by the United States
Federal Government. As an increasing number of commercial entities have come to
rely on the Internet for business communications and commerce, the level of
federal subsidies has significantly diminished and funding for the Internet
infrastructure and backbone operations has shifted primarily to the private
sector and end users. In addition, according to industry market research, as far
back as October 1994 the number of commercial domains on the Internet surpassed
the number of educational domains.
World Wide Web
Much of the recent growth in Internet use by businesses and individuals
has been driven by the emergence of a network of servers and information
available on the Internet called the World Wide Web. The Web, based on a
client/server model and a set of standards for information access and
navigation, can be accessed using software that allows non-technical users to
exploit the capabilities of the Internet. The Web enables users to find,
retrieve and link information on the Internet in a consistent manner which
renders the underlying complexities irrelevant to the lay user. Electronic
documents are published on Web servers in a common format described by Hyper
Text Mark-up Language, or HTML, which is a series of tags or codes added to a
text document to format a document or add links to other documents. Web client
software can retrieve these documents across the Internet by making requests
using a standard protocol called HyperText Transfer Protocol, or HTTP. Browsers
and HTML are an essential part of the success of the Internet and the continuing
growth in the number of users. Browsers allow a user to wander around the
Internet with relative ease while HTML allows the exhibitor of a Web page to
navigate to either some other page at that particular Web site or to a relevant
page at another Web site. The introduction of commercial Web pages introduced a
new and substantial opportunity for users of the Internet.
The proliferation of Web users has created significant demand for
software to enable Internet servers and private servers on corporate networks to
function as Web sites, which are used by content providers to offer their
products and services on the Internet and to publish confidential company
information to employees inside the enterprise.
E-commerce
E-commerce provides companies with the opportunity to serve a rapidly
growing market as consumers increasingly accept the Internet as an alternative
shopping vehicle. Growth in Internet usage has been
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fueled by a number of factors, including the large and growing number of
personal computers in the workplace and home, advances in the performance and
speed of personal computers and modems, improvements in network infrastructure,
easier and cheaper access to the Internet and increased awareness of the
Internet among businesses and consumers. The increasing functionality,
accessibility and overall usage of the Internet and online services have made
the Internet an attractive commercial medium. The Internet and other online
services are evolving into a unique sales and marketing channel, just as retail
stores, mail-order catalogues and television shopping evolved. Companies
operating online can interact directly with customers by frequently adjusting
their featured selections, editorial insights, shopping interfaces, pricing and
visual presentations. The minimal cost to publish on the Web, the ability to
reach and serve a large and global group of customers electronically from a
central location and the potential for personalized low-cost customer
interaction provide additional economic benefits for online operators.
The Internet also provides e-commerce companies with an opportunity to
serve a global market. Online operators have the potential to build large common
global customer bases quickly and to achieve superior economic returns over the
long term. International Data Corporation, also known as IDC, an information
technology market research and consulting firm, estimated that the number of
people accessing the Internet had reached approximately 100 million by the end
of 1998 and predicted that this number will reach 320 million by 2002. According
to IDC, revenues through the purchase of goods and services over the Internet in
the United States will reach approximately $250 billion in 2002. IDC has also
reported that approximately 13% of all United States households were online in
1996, which figure increased to 20% by early 1998. IDC estimates that the number
of Internet users buying goods and services on the Internet worldwide will
exceed 128 million by 2002, as compared to 18 million in 1997, with the amount
of commerce conducted over the Internet exceeding $400 billion by 2002. In
addition, IDC estimates that worldwide Internet services revenues increased by
71% in 1998 to reach $7.8 billion and has forecasted that such revenues will
surpass $78 billion by 2003. IDC has also reported that the United States
accounted for more than 50% of worldwide Internet services spending at $4.6
billion in 1998. IDC has also estimated that corporate spending in the United
States in the area of Internet-based products and services will increase from
$85 billion in 1999 to over $203 billion by 2002.
BUSINESS STRATEGY
THE COMPANY -- OPERATIONAL STRATEGY
In addition to our investments in Stampville and VideoDome and potential
further investments in these companies, we intend to utilize the remaining
proceeds from this offering, future income received from such companies and
proceeds from other debt or equity financings to acquire other Internet or
e-commerce related businesses or to invest in Internet related projects or
ventures that appear to have viable commercial prospects. By investing funds in
exchange for equity in Internet-related businesses, we will in most cases seek
to either acquire a majority of the capital stock of such targets or in certain
circumstances to control the targets from the management level. We may also make
small investments in entities without seeking a majority interest, where this
may be either of strategic significance to us or circumstances warrant a
relatively smaller involvement.
STAMPVILLE -- OPERATIONAL STRATEGY
Stampville plans to develop a "portal community" Web site for the
collectible postage stamps community and for hosting philatelic services to
dealers, collectors, and hobbyists. Stampville believes that doing so would fill
a gap in the stamp-collecting marketplace by establishing an online stamp
network for stamp collectors. Stampville intends to design its services to
satisfy a wide variety of consumers ranging from the casual collector to the
dedicated stamp connoisseur through a comprehensive Web site. The Web site will
merge the traditional hobby of stamp collecting with the technological
advantages of the Internet. Stampville's online stamp community will provide
information, both directly and through links, and make it possible to assemble
an entire stamp collection online. In addition, Stampville plans to make
available philatelists through its Web site to afford personal attention to
customers through e-mail or telephone. Stampville also intends to expand its
business to potentially include other collectibles such as coins and sports
memorabilia.
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Following the general formats of a number of commercial Web sites,
Stampville anticipates that its Web site will produce revenue through sales,
advertising, and services to the philatelic community. Strategic alliances with
established philatelic businesses will provide initial merchandise, content and
subject matter support. The Web site will establish additional business links
with dealers, buyers, sellers, philatelic service providers, and other
electronic commerce entities. Initial traffic to the Web site will be generated
both through on-line and traditional advertising.
We believe the Internet is an ideal medium for selling thematic and
non-thematic collectibles. The natural and worldwide appeal of stamp collecting
and stamp art is particularly conducive to electronic commerce. By offering high
resolution graphic images of products with completely searchable databases and
expert staff assistance, Stampville hopes to become a preeminent portal Web
site.
Investors should note that Stampville has not taken any steps to protect
the technology or other intellectual property it uses and is developing, and
does not know if such technology or intellectual property can, in fact, be
protected from use by others. It is possible that competitors may use
Stampville's technology to compete with it, or develop other types of technology
which allow them to compete effectively with Stampville.
Stampville also plans to engage in wholesale and bulk sales of framed
stamp art in support of Stampville's Internet operations. Stampville believes
there is significant opportunity to generate sales through bulk and wholesale
sales to both national department and specialty stores, as well as gift shops ,
including sundry shops located at hotels, small vendors, and other potential
online vendors.
Stampville has entered into a three year supplier's agreement with
Inter-Governmental Philatelic Corporation, also known as IGPC, one of the
world's largest suppliers and dealers of philatelic stamps. IGPC represents
approximately seventy postal administrations throughout the world in matters
relating to the design, production and marketing of their postage stamps. IGPC
also markets their stamps to collectors. Pursuant to its agreement with
Stampville, IGPC has agreed to supply Stampville with stamps that IGPC has made
available for public sale at the lowest pricing structure available to other
dealers. In addition, IGPC has agreed to extend a $2 million line of credit to
Stampville for the purchase of its stamps. The agreement with IGPC also provides
that IGPC will provide content for Stampville's Web site. Unless terminated at
the end of the initial term by either party, the agreement with IGPC will
automatically extend for an additional two year period. IGPC's President is Sam
Malamud, the father of Jonathan Y. Malamud, a director, President and Vice
President of Marketing of Stampville, and the father-in-law of David Eli Popack,
director, Secretary and Director of Dealer Relations of Stampville. Stampville's
agreement with IGPC will allow Stampville to purchase stamp sheets directly from
IGPC. Stampville anticipates that IGPC will be a significant supplier of stamps
to it and will allow Stampville to offer a wide array of stamps at competitive
prices. Stampville is also in the process of seeking to establish an on-demand
purchase system with IGPC, which, if implemented, will reduce Stampville's need
to maintain substantial inventory of the products offered by IGPC, expedite
fulfillment of orders and reduce Stampville's costs of sale.
Currently, Stampville is pursuing business relationships with various
other worldwide philatelic dealers.
PROSPECTS OF STAMPVILLE
Stampville has chosen to engage in the Internet sale and distribution of
stamps and collectibles because of its belief that the worldwide, multi-million
dollar stamp industry is fragmented and highly inefficient. Stampville believes
there are few worldwide dealers of any size and that most such dealers
specialize in a narrow segment of the stamp collecting business. Stampville has
also observed that individual valuable items and entire collections are
generally sold at auctions, and that retail prices vary from area to area, which
inconsistency, Stampville believes, is due to lack of information and supply
dislocation.
Linns Stamp News, the largest publication in the industry, has done
annual market surveys since 1992. The latest survey for 1998 indicates the
following:
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- The total United States market for stamps is $791 million.
- Numbers for the rest of the world are elusive. Nevertheless it
is known that in countries such as Germany, the United Kingdom,
China and Japan, stamp collecting is much more popular than in
the United States.
- Of Linn's readers, 43% had Internet access and 23% had made
purchases of stamps via the Internet.
- 33% of the collectors responding to the survey had a net worth
of $500,000 or more and 34% had household incomes of $75,000 or
more.
Furthermore, in the March 13, 2000 publication of Linns Stamp News, it
was indicated that there were $42 million in online auction sales and $15
million in online stamp sales.
Stampville believes that these conditions make it possible for a firm
providing sales and information through the Internet to provide a valuable
service with meaningful results.
VIDEODOME - OPERATIONAL STRATEGY
VideoDome provides streaming Internet video solutions for consumer and
corporate markets. VideoDome focuses its efforts on providing accessible
technologies that enable users to incorporate video components into Web sites or
promote their video products through VideoDome's services. VideoDome offers a
complete solution, combining the processes of encoding, delivery, hosting and
promotion of video over the Internet. VideoDome uses VideoDome InstaStream, a
system that automates the process of placing orders, tracking, processing and
customer notification of the final version of a video product. VideoDome's
products are compatible with existing streaming media platforms, which
facilitate transmission of videos over the Internet. VideoDome was founded in
1999. Its founders, Daniel Aharonoff and Vardit Cohen, had been involved in the
business of integrating the different facets of the video streaming technology
for several years prior to its founding. VideoDome is based in Burbank,
California. VideoDome currently has two employees. Although the company has been
advised that VideoDome is currently generating some revenues, it understands
that these revenues are insufficient to fund VideoDome's research and
development and expansion plans. In addition, we cannot state when, if ever,
VideoDome will be able to operate profitably.
VideoDome's services and technology address several markets: video
streaming, encoding, communities and desktop video hardware & software.
Video Streaming - Video streaming is an emerging segment of the Internet
market. Internet video is typically comprised of several distinct
application segments, including video mail, corporate training,
executive messaging, distance learning, live on-demand news,
entertainment and more. These applications are typically provided as
separate products within corporate environments. More recently, video
streaming has emerged as a cost effective means of bringing video to an
individual corporate or consumer user using the Internet as a network
transmission medium.
Encoding - Until recently, the process of encoding and transferring of
audio or visual material between platforms was dedicated to converting
analog audio or video materials into digital formats such as MPEG,
CDROM, DAT and other archival methods. Driven by the emergence of
streaming video over the Internet and the increasing availability of
bandwidth in both Intranet and Internet environments, new lower-cost
desktop personal computers and video players have emerged as growth
drivers in the market. The encoding process is an initial step to cross
from analog video to Internet streaming video.
Community - Building an environment, or community, where users can share
ideas, ask questions and correspond with each other and with experts is
an increasingly important facet of creating brand awareness for Internet
based companies. A number of companies, such as The Globe, GeoCities &
Xoom, have built business models around the concept of building Internet
communities. VideoDome
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believes that combining streaming video combined with an active
community model can become a key factor to the overall experience of
video over the Internet.
Desktop Video Hardware & Software - VideoDome believes the market for
computer-based videos is a precursor to the streaming video market. This
market is currently expanding at a rate of greater than 40% per year
with over 100 capture board and 30 desktop video editing software
vendors in the market, the streaming market experiences a synergistic
boost. VideoDome's solutions and technology can be combined with an
expanding market including significant entries into compatible computer
hardware will be help build distribution channels.
VIDEODOME - TECHNOLOGY
VideoDome has pioneered the development of a completely automated video
conversion process, known as InstaStream, which allows for enhanced conversions
into streaming formats, as well as a video management system referred to as the
Media Manager, which serves to organize and simplify the process of publishing
video into the Internet, compared to the products offered by VideoDome's
competitors. Media Manager technology is being successfully licensed by
television broadcast companies, direct response companies and other large scale
corporations:
Network Management and Intergration - VideoDome's management "hooks"
allow for performance tracking of video over networks, remote management
of video database, logging of usage parameters, smart routing, fault
tolerance and guaranteed quality of service.
System Scalability - InstaStream allows for seamless processing of raw
video files into encoded files which are then moved to a video delivery
server and automatically notify customers of their newly available
streaming video available online.
Standard, Format & Platform Interoperability - the company's solutions
will support various emerging multimedia standards and compression
formats, and are portable between Windows, MAC and UNIX platforms.
Intellectual Property - VideoDome has indicated that it intends to file
several patent claims addressing, among other things, scalable video
conversion processes, dynamic directories, cataloging & administration.
While VideoDome faces competition in the streaming video services area
from companies such as Loudeye.com, InterVu and others, VideoDome believes it
has an advantage in its ability to deliver scalability across its InstaStream
network, which allows for a fully automated level of order conversion, combined
with a comprehensive package of services which provides encoding, delivery and
marketing of streaming video content at the same time and from the same company.
VideoDome also can provide Media Manager technology which simplifies the process
of publishing video over the Internet.
VideoDome has not taken any steps to perfect its ownership of the
technology and other proprietary information it has developed, and may not do so
in the future. Whether or not it undertakes to obtain patents or otherwise
protect its technology and proprietary information, VideoDome cannot be sure
that it will be able to prevent others from using the technology, or other
technology which can produce substantially the same results, all to the
detriment of VideoDome.
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VIDEODOME - PRODUCTS
Personal OnDemand - This product allows consumers to incorporate
personal, typically non-commercial, video modules in an existing web
site. Personal OnDemand allows for a cost-effective and easy bridge for
converting raw or digitized video into Internet streaming video. Once a
customer order is placed, the InstaStream network automatically notifies
the customer by email when the streaming online version of their video
is available, which can then easily be added to the customer's existing
web site.
Business OnDemand - Business OnDemand allows VideoDome's customers to
use InstaStream for business oriented videos such as infomercials,
company overviews, news releases and similar cases, with additional
support for bit rates and promotion via the VideoDome OnDemand Directory
and Guide newsletter. This business listing, which is similar to a
traditional search portal, offers visitors to VideoDome's website the
ability to search and watch video instead of reading static web pages.
It also provides Business OnDemand customers with instant promotion of
their video to over 200,000 OnDemand Guide readers and over 10,000 new
page impressions every day.
Media Manager - This product, which was developed by VideoDome, allows
VideoDome, through a simple web interface, to build global channels and
individual content channels which are then tailored for individual need.
It allows for management of the media and provides flexibility by
enabling functions such as powerful video search, filtering,
customization, interstitial ad placement and more.
VideoDome's Media Manager is customizable and can support a variety of
page layout, look and feel on the front end with a feature set on the interface.
The video can also be customized to display at various sizes and quality of
transmission.
ACQUISITIONS OF ADDITIONAL BUSINESSES OR ESTABLISHMENT OF VENTURES.
In addition to the operations of Stampville and our investments in
VideoDome, we plan to seek, investigate, and if such investigation warrants,
consummate an acquisition with one or more targets or establish or develop
e-commerce, Internet or other ventures. At this time, we have no definitive
plan, proposal, agreement, understanding, or arrangement to acquire any specific
business or company other than our arrangements with Stampville and VideoDome.
While we primarily seek opportunities in Internet, e-commerce and technology
based businesses, we will not restrict our search to any specific business,
industry, or geographical location, and may participate in business ventures of
virtually any kind or nature. Any discussion of our proposed plan of operation
and acquisitions in this section and throughout this prospectus is purposefully
general and is not meant to restrict our virtually unlimited discretion to
search for and enter into potential business opportunities.
We may seek an acquisition with an entity which only recently commenced
operations, or a developing company in need of additional funds to expand into
new products or markets or seeking to develop a new product or service, or an
established business which may be experiencing financial or operating
difficulties and needs additional capital which is perceived to be easier to
raise by a public company. In some instances, an acquisition may involve
acquiring a corporation which does not need substantial additional cash but
which desires to establish a public trading market for its common stock. We may
purchase assets and establish wholly-owned subsidiaries in various businesses or
purchase existing businesses as subsidiaries.
Selecting a target is complex and extremely risky. Because of general
economic conditions, increasing public interest and demand, rapid technological
advances being made in the Internet and e-commerce area, our management believes
that there are numerous entities seeking the benefits of a publicly-traded
corporation. Such perceived benefits of a publicly traded corporation may
include facilitating or improving the terms on which additional equity financing
may be sought, providing liquidity for the principals of a business, creating a
means for providing incentive stock options or similar benefits to key
employees, providing liquidity for stockholders, and other items. Potential
targets may exist in many different
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businesses or market niches and at various stages of development, all of which
will make the task of comparative investigation and analysis of such targets
extremely difficult and complex.
We may not have sufficient capital with which to provide the owners of
targets significant cash or other assets. Our management believes that we may
offer owners of targets the opportunity to acquire an ownership interest in a
public company at substantially less cost than is required to conduct an initial
public offering. Nevertheless, we have not conducted market research and are not
aware of statistical data that would support the perceived benefits of an
acquisition transaction for the owners of a target.
We will not restrict our search to any specific kind of target and may
acquire an entity which is in its preliminary or developmental stage, which is
already in operation, or in essentially any stage of its corporate life. It is
impossible to predict at this time the status of any business in which we may
become engaged, in that such business may need to seek additional capital, may
desire to have its shares publicly traded, or may seek other perceived
advantages which we may offer.
Selection and Evaluation of Targets
Our management will have complete discretion and flexibility in
identifying and selecting a prospective target. In connection with its
evaluation of a prospective target, our management anticipates that it will
conduct a due diligence review which will encompass, among other things, meeting
with incumbent management and inspection of facilities, as well as a review of
financial, legal and other information which will be made available to us.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, we will only be able to effect an acquisition
with a prospective target that has available audited financial statements or has
financial statements which can be audited.
The time and costs required to select and evaluate a target, including
conducting a due diligence review, and to structure and consummate the
acquisition, including negotiating relevant agreements and preparing requisite
documents for filing pursuant to applicable securities laws and corporation
laws, cannot presently be ascertained with any degree of certainty. While no
current steps have been taken nor agreements reached, we may engage consultants
and other third parties providing goods and services, including assistance in
the identification and evaluation of potential targets. These consultants or
third parties may be paid in cash, stock, options or other of our securities,
and the consultants or third parties may be placement agents or their
affiliates.
We will seek potential targets from all known sources and we anticipate
that various prospective targets will be brought to our attention from various
non-affiliated sources, including securities broker-dealers, investment bankers,
venture capitalists, bankers, other members of the financial community and
affiliated sources, including, possibly, our executive officers, directors and
their affiliates. While we have not yet ascertained how, if at all, we will
advertise and promote our company, we may elect to publish advertisements in
financial or trade publications seeking potential business acquisitions. While
we do not presently anticipate engaging the services of professional firms that
specialize in finding business acquisitions on any formal basis, we may engage
such firms in the future, in which event we may pay a finder's fee or other
compensation.
In analyzing prospective targets, we may consider, among other factors,
such matters as:
- the extent to which the targets provide complementary services
or technology or are otherwise synergistic with our operations;
- the available technical, financial and managerial resources;
- working capital and other financial requirements;
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- history of operation, if any;
- prospects for the future;
- present and expected competition;
- the quality and experience of management services which may be
available and the depth of that management;
- the potential for further research, development or exploration;
- specific risk factors not now foreseeable but which may then be
anticipated to impact our proposed activities;
- the potential for growth or expansion;
- the potential for profit;
- the perceived public recognition or acceptance of products,
services or trades; and/or
- name identification.
Acquisition opportunities in which we may participate will present
certain risks, many of which cannot be adequately identified prior to selecting
a specific opportunity. Our stockholders must, therefore, depend on our
management to identify and evaluate such risks. The investigation of specific
acquisition opportunities and the negotiation, drafting and execution of
relevant agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for accountants,
attorneys and others. If a decision is made not to participate in a specific
acquisition opportunity, the cost therefore incurred in the related
investigation would not be recoverable. Furthermore, even if an agreement is
reached for the participation in a specific acquisition opportunity, the failure
to consummate that transaction may result in the loss of the related costs
incurred.
We cannot be sure that we will find any suitable targets or ventures.
Structuring and Financing of an Acquisition
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of acquisitions. We will evaluate the
possible tax consequences of any prospective acquisition and will endeavor to
structure an acquisition so as to achieve the most favorable tax treatment for
us, the target and our respective stockholders, while still accomplishing our
strategic objectives. There can be no assurance that the Internal Revenue
Service or relevant state tax authorities will ultimately assent to our tax
treatment of a particular consummated acquisition. To the extent the Internal
Revenue Service or any relevant state tax authorities ultimately prevail in
recharacterizing the tax treatment of an acquisition, there may be adverse tax
consequences to us, the target and our respective stockholders. Tax
considerations as well as other relevant factors will be evaluated in
determining the precise structure of a particular acquisition.
We may utilize available cash and equity securities in effecting an
acquisition. We may have to effect reverse stock splits prior to certain
potential acquisitions. To the extent that such additional shares are issued,
dilution to the interests of our stockholders will occur. Additionally, a change
in control may occur which may affect, among other things, our ability to
utilize net operating loss, if any.
There currently are no limitations on our ability to borrow funds to
effect an acquisition from institutional lenders. However, our limited resources
and lack of operating history may make it difficult to borrow funds. The amount
and nature of any borrowings by us will depend on numerous considerations,
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including our capital requirements, potential lenders' evaluation of our ability
to meet debt service on borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. We have no
arrangements with any bank or financial institution to secure additional
financing, and there can be no assurance that such arrangements, if required or
otherwise sought, would be available on terms commercially acceptable or
otherwise in our best interests. Any inability to borrow funds required to
effect or facilitate an acquisition, or to provide funds for an additional
infusion of capital into a target, may have a material adverse effect on our
financial condition and future prospects, including the ability to effect any
future acquisition. To the extent that debt financing ultimately proves to be
available, any borrowings may subject us to various risks traditionally
associated with indebtedness, including the risks of interest rate fluctuations
and insufficiency of cash flow to pay principal and interest. Furthermore, a
target may have already incurred debt financing and, therefore, all the risks
inherent thereto.
ACQUISITION OF EQUITY INTEREST IN STAMPVILLE
We hold approximately 50.1% equity interest in Stampville, pursuant to
our stock purchase agreement with Stampville.
Under the stock purchase agreement, Stampville agreed to issue to us an
equity interest of 25% in exchange for payment by us of up to $5,000,000,
payable in installments. Pursuant to the amended stock purchase agreement, we
accelerated and increased the payment of the consideration to up to $7,750,000
in exchange for an immediate 50.1% equity interest in Stampville. As of March
31, 2000, we have invested $1,500,000 in Stampville.
We have agreed that if we raise $10,000,000 in this offering, we will
complete the purchase of our 50.1% interest in Stampville through the payment to
Stampville of $5,000,000 within 30 days of our receipt of the funds from this
offering, and an additional $1,250,000 on or before December 8, 2001. If we do
not raise $10,000,000 in this offering, we will consider other alternatives for
the funding of Stampville. If we fail to make or arrange for the $5,000,000
payment or the $1,250,000 payment in full, we have agreed to surrender such
number of shares of common stock of Stampville so that, upon such surrender, we
shall hold a percentage of the outstanding shares of common stock of Stampville
equal to the lesser of 27.5% of the outstanding shares of common stock of
Stampville, or the total amount invested by us divided by 100,000. Thus, if we
invest an aggregate of $2,500,000 in Stampville and do not make or arrange for
the additional payments, our percentage investment in Stampville shall be 25%.
If we arrange for the $5,000,000 payment from some other source, rather than
provide the $5,000,000 ourself, our equity interest in Stampville shall be
reduced by the amount required by the party providing the $5,000,000; provided,
however, that our equity interest shall not be reduced below 27.5%, without a
pro rata reduction in the ownership interest of all the other shareholders of
Stampville other than us.
In connection with our investment in Stampville, we and all of the other
shareholders of Stampville entered into a shareholders agreement. This
shareholders agreement, among other things, restricts the ability of the
shareholders of Stampville to transfer their interests in Stampville, grants
Stampville and each shareholder of Stampville a right of first refusal with
respect to any potential sale of shares of Stampville, provides that each
shareholder's interest in Stampville shall be subject to purchase by us and/or
the shareholders of Stampville upon the occurrence of certain events, and grants
to each shareholder a right of co-sale upon a proposed transfer of shares. In
addition, we are entitled to appoint to the board of directors of Stampville
such additional nominees selected by us so that at all times half of the members
of the board of directors of Stampville shall consist of individuals nominated
by us. Our nominees serving on the Stampville board of directors are Levi
Mochkin and Mendel Mochkin. We are also entitled to designate an individual to
serve as the chief operating officer, or such other position as the board of
directors of Stampville may designate. We have designated Robert Petty as
Stampville's Acting Chief Executive and Financial Officer. Our arrangement with
Stampville provides that Mr. Petty shall work predominantly for Stampville out
of Stampville's offices, but may retain a title with and serve in a concurrent
position with us as Vice President -- Business Development. If we fail to make
or arrange for the $5,000,000 payment or the $1,250,000 payment, our management
rights shall be limited to designating one individual to the board of directors
of Stampville. The approval of our designee shall be required for certain
significant corporate
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transactions. Under any circumstances, our right to any preferential board and
management representation will terminate by no later than June 18, 2002.
ACQUISITION OF EQUITY INTEREST IN VIDEODOME
Through our wholly-owned subsidiary, Bickhams Capital, Inc., as of March
24, 2000, we entered into a stock option agreement which allows us to acquire up
to a 50.1% equity interest in VideoDome. The stock option agreement provides
that we may exercise our interest in VideoDome in three steps:
- As of April 10, 2000, we acquired 5% of the capital stock of
VideoDome for a price of $150,000.
- We can acquire an additional 5% of the capital stock of
VideoDome for a price of $150,000 between June 1, 2000 and July
31, 2000.
- We can acquire an additional 40.1% of the capital stock of
VideoDome for an exercise price of $5,000,000 after the exercise
of the second step and between August 1, 2000 and October 31,
2000.
The option is structured as a purchase of series A preferred stock which
is convertible into common stock and is senior to all other classes of VideoDome
stock. The preferred stock has voting rights along with VideoDome's common
stock, a liquidation preference of $2.12 per share which is equal to our average
per share exercise price under the option agreement, includes anti-dilution
protection and other protections. The option is also subject to a number of
conditions, including the completion, to our satisfaction, of business,
financial and other due diligence which we believe necessary and appropriate,
and the preparation of audited financial statements for VideoDome. Consequently,
we are not under any legal obligation under the option agreement to complete the
second and final stages of the acquisition of VideoDome's capital stock.
COMPETITION
I.T. TECHNOLOGY
We are, and will continue for the indeterminate future to be, an
insignificant participant in the Internet and e-commerce business. We expect to
encounter intense competition from other entities having business objectives
similar to ours with respect to the acquisition of additional targets. Many of
these entities, including venture capital partnerships and corporations, blind
pool companies, large industrial and financial institutions, small business
investment companies, "incubators" and wealthy individuals, are well-established
and have extensive experience in identifying and effecting acquisitions directly
or through affiliates. Many of these competitors, such as the Internet Capital
Group Inc., VerticalNet, Comcast Corporation and Safeguard Scientifics, Inc.,
possess far greater financial, technical, human and other resources than we do,
and there can be no assurance that we will have the ability to compete
successfully. Our financial resources will be limited in comparison to those of
many of our competitors. This inherent competitive limitation may compel us to
select certain less attractive prospects. There can be no assurance that such
prospects will permit us to achieve our stated business objectives.
STAMPVILLE
All aspects of the Internet market are new, rapidly evolving and
intensely competitive, and we expect competition to intensify in the future.
Barriers to entry are low, and current and new competitors can easily launch new
Web sites, e-commerce concerns, portals and other competitive alternatives at a
relatively low cost using commercially available software. Stampville's present
competitors include companies that have equal access to expertise in computer
and Internet technology such as "Stampfinder.com" and other online stamp
collecting and gift art Internet sites, as well as Internet directories, search
engine providers, shareware archives, content sites and entities that attempt to
establish online communities. Stampville also will compete with a number of
other traditional companies, such as stamp, gift and hobby shops. Other major
companies have the financial and technical ability to compete aggressively in
the stamp collecting market on the Internet. Many, if not all, of these
companies have longer operating histories, larger customer
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bases, greater brand name recognition in other businesses and Internet markets
and significantly greater financial, marketing, technical and other resources
than we or Stampville have. Competitive pressures created by any one of these
companies, or by Stampville's competitors collectively, could have a material
adverse effect on Stampville's and our business, results of operations and
financial condition, and we can give no assurance that either we or Stampville
will be able to compete successfully against current and future competitors.
In addition, other major nationally-known companies have the capability
to include stamp-collecting content on their existing well known Web sites, to
market stamp-collecting Web sites through strong distribution channels and to
package their stamp-collecting Web site with other popular Web sites. To the
extent that a significant online market develops for stamp collecting, we
anticipate that both traditional companies and Internet companies will develop
competitive Web sites. All such companies would likely be better known than
Stampville, and would have significantly greater resources. In addition,
competitive services in the stamp collecting marketplace may be under
development by major Internet companies of which we are unaware.
We believe that the market for consumers made available through the
Internet is growing due to an increasing use of the Internet as a venue for sale
and purchase of, among other things, consumer goods. Stampville's products would
clearly fall under the consumer goods category. Stampville believes that its
business strategy sets it apart from most Internet companies which target
consumer users. Stampville also believes that the ease of use, speed,
reliability and scalability of its Web site will attract users worldwide.
VIDEODOME
Like other internet-related businesses, VideoDome faces competition from
a variety of sources, ranging from small companies like VideoDome to large,
well-established companies. Because the barriers to entry are low and potential
competitors can establish competing businesses at relatively low cost, VideoDome
expects to face strong competition, both from individuals and entities
comparable in size to VideoDome as well as large, well-established and
well-funded competitors. Because of the size of the potential market which
VideoDome hopes to serve, VideoDome expects that as it becomes a more visible
and important provider, it will face additional competition.
INTELLECTUAL PROPERTY
All of our and Stampville's software was acquired from third parties.
Neither we nor Stampville have registered copyrights on any software. We rely
upon confidentiality agreements signed by our employees. Stampville applied on
August 13, 1999 with the United States Patent & Trademark Office for
registration of "Stampville.Com" and three designs, combined with words, letters
and/or numbers as trade and service marks. Stampville has received preliminary
comments from the United States Patent and Trademark Office regarding the
application and is in the process of responding to those comments. VideoDome has
indicated that it intends to file several patent claims addressing, among other
things, scalable video conversion processes, dynamic directories, cataloging &
administration.
ENVIRONMENTAL MATTERS
We believe we are in material compliance with all relevant federal,
state, and local environmental regulations and do not expect to incur any
significant costs to maintain compliance with such regulations in the
foreseeable future.
EMPLOYEES AND LABOR RELATIONS
As of March 31, 2000, we employed one full-time employee, and one
consultant through our offices located in New York. As of the same date, through
our Australian subsidiary, I.T. Technology Pty. Ltd., we employed one full-time
employee, who is an officer and two part time employees. As of the same date,
Stampville employed 21 full-time employees, including consultants working for
one Stampville, also including four executive officers, one part-time employee
and one temporary employee. In addition,
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Stampville has entered into a one-year consulting agreement with Petty
Consulting, Inc. for the services of Robert Petty as Acting Chief Executive and
Financial Officer and initially for the services of Jennifer Christopher as Vice
President -- Human Resources. None of our nor Stampville's employees are
represented by a labor union, and we believe that relations with our and
Stampville's employees are good. As of March 31, 2000, VideoDome had two
full-time employees, one part-time employee and five independent contractors.
VideoDome believes its employee relations are good. If we raise at least
$10,000,000 in the offering, we intend to hire additional executives on a full
time basis.
PROPERTIES
We have entered into an agreement to purchase our executive offices,
located at 34-36 Punt Road, Windsor 3181, Melbourne, Victoria, Australia,
through our wholly-owned subsidiary, I.T. Technology Pty. Ltd. The office
consists of a newly-built stand-alone office and showroom with on-site parking
and approximately 540 square meters of office and showroom space. The purchase
price of these premises was approximately $595,000, of which $132,000 was paid
in cash and the remainder was financed through a loan payable in Australian
dollars with the seller secured by the property, bearing interest at the rate of
7.25% per annum, with interest only payments due monthly and a single balloon
payment of $455,848 as of December 31, 1999, is due on July 9, 2001. Pursuant to
the terms of the purchase agreement the owner will register the title to the
property in I.T. Technology Pty. Ltd. upon payment in full of the balance due on
the loan. If we raise $22,500,000 through the sale of all of the shares offered
in this offering, we will pay off this loan. We also have an office located in
245 Park Avenue, 39th Floor, New York, NY 10167, which we rent on a month to
month basis from Regus Business Centre. Stampville's offices are located at 456
Fifth Avenue, Suite 200, Brooklyn, N.Y. 11215. Stampville's telephone and
facsimile numbers are (718) 369-8881 and (718) 369-6270, respectively.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims
arising out of our operations in the normal course of business. At this time, we
are not party to any legal proceeding.
RESEARCH AND DEVELOPMENT
STAMPVILLE - CURRENT DEVELOPMENT STATUS
As of May 1, 2000, Stampville has launched six separate "micro" Web
sites, www.beegeesstamps.com, www.sheldonstamps.com., www.elvisstamps.com,
www.rockystamps.com, www.titanicstamps.com and www.monroestamps.com. Each of the
sites allow a user to view and purchase stamp-related products which relate to
the subject matter of the Web site.
Stampville is currently finalizing the development of its core Web site
and additional "micro" Web sites which it expects to launch during the first
half of 2000. Stampville plans the following key components to the core Web
site:
- a display of 10,000 stamps available for sale, together with
detailed descriptions of each stamp;
- a news and events section displaying current information, news
and stories relating to stamps and philatelic-related matters;
- a specialty page displaying new issues of stamps released
globally by country postal services; and
- a calendar of events which will publicize events of interest to
stamp collectors.
In addition, Stampville is considering the following enhancements for future
versions of its core Web site:
- an auction room;
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- increasing the number of images and adding to the descriptions
displayed on the site;
- classified advertisements; and
- additional "micro" sites dedicated to specific topics, themes
and stamp issues.
GOVERNMENTAL MATTERS
Except for usual and customary business and tax licenses and permits,
and the licenses and permits described elsewhere herein, no governmental
approval is required for our principal products/services, nor do we know of any
existing or probable governmental regulations affecting our activities.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our board of directors consists of six directors, and Stampville's board
of directors consists of four directors, all of whom are elected for one-year
terms at each annual meeting of stockholders. The executive officers are elected
annually by the board of directors. However, they may be removed from office at
any time by our board of directors.
I.T. TECHNOLOGY, INC.
On October 26, 1999, in connection with Instanz's purchase of 3,700,000
shares of the company's common stock, the board of directors of the company
increased its size from 5 to 6 and added Helen Abeles, an affiliate of Instanz,
to the board. At the same time it passed resolutions stating that the principal
business objectives of the company were to engage in the business of e-commerce
and on the Internet directly or through investment in other entities satisfying
these criteria and required a unanimous vote of all the directors to change
these business objectives, invest in other types of businesses or increase the
number of directors. The board also passed a resolution requiring the
affirmative vote of no less than 5 directors to authorize any investment by the
company in furtherance of these principal business objectives.
The following table sets forth, as of March 31, 2000, the name, age and
position of each of our executive officers and directors. The background of each
of the individuals identified in the table is described following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Levi Mochkin................. 38 Chairman of the Board, Chief Executive Officer and Director
Henry Herzog................. 58 President and Director
Farrel Meltzer............... 35 Director
Jonathan Herzog.............. 28 Secretary, Chief Financial Officer and Director
Anthony Davis................ 40 Director
Helen Abeles................. 45 Director
Robert Petty................. 35 Vice President -- Business Development of the company and
Acting Chief Executive and Financial Officer of Stampville
</TABLE>
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HENRY HERZOG
Mr. Henry Herzog headed up a restructuring and reorganization of Bayou
International, a publicly listed company, and served as President and Chief
Executive Officer of that company from May 1986 to March 1988. From March 1988
through June 1999, he served as Vice President of Bayou International, now
Baynet Ltd. He has over thirty-five years of business experience. He was
responsible for the reorganization of the Kingsway Group, which became known as
Australia Wide Industries Ltd. From 1983 to 1988, Mr. Herzog served as a
director of Australia Wide, which has recently been renamed Autogen Limited, a
company listed on the Australian Stock Exchange under the symbol "AGT," and also
served as a director of numerous other publicly listed companies during this
period. Over the past five years he has been employed as a consultant by Sujol
Nominees Pty. Ltd., which is involved in hotel management, consulting and
investment. Mr. Henry Herzog is the father of Jonathan Herzog and father-in-law
of Levi Mochkin.
FARREL A. MELTZER
From 1997 to the present, Mr. Farrel Meltzer has been and is a Senior
Executive with the ANZ Banking Group. ANZ is one of Australia's four major banks
with assets in excess of approximately U.S. $90 billion. Mr. Meltzer is
currently the head of its private banking operations throughout Australia. ANZ
Private Bank is Australia's leading private bank. Prior to joining ANZ, from
1996 to 1997, Mr. Meltzer served as acting Chief Executive Officer of Atcor
S.A., a South African education and training group, which is now a member of the
publicly listed Acumen Holdings Group on the Johannesburg Stock Exchange.
Between 1994 and 1996, Mr. Meltzer was an Assistant General Manager of
the Mercantile Lisbon Banking Group in South Africa, prior to which he spent a
number of years in Audit, Tax & Corporate Advisory positions with Grant Thornton
and Pannell Kerr Forster in Johannesburg, South Africa.
Mr. Meltzer is a chartered accountant. He has a Bachelor of Commerce and
a Bachelor of Accounting, cum laude, from the University of the Witwaterstand,
Johannesburg, and a Diploma in Advanced Banking, cum laude, from Rand Afrikaans
University, Johannesburg.
Mr. Meltzer was one of a team of five individuals who established one of
South Africa's first private university campuses, where he was Finance Director
and Dean of the Faculty of Commerce. This is now part of the publicly listed
EDUCOR Group. In December 1998, Mr. Meltzer was selected by the Business Review
Weekly as one of Australia's future business leaders.
LEVI MOCHKIN
Mr. Levi Mochkin is known in both the Australian stock brokerage
industry and in the wider business community. Mr. Mochkin has thirteen years of
business experience. For over ten years, Mr. Mochkin has been an executive
director and key leader of the Ledger Holdings Pty. Ltd. Group, located in
Melbourne, Australia. During this period, the Ledger Holdings Pty. Ltd. Group
has been engaged in equity and capital market activities, including many highly
complex corporate transactions and fund raisings. From 1995 to 1999, Ledger was
contracted with Bell Securities Limited and was instrumental in the development
of Bell's stock brokerage business. In late 1997, Bell, through Mr. Mochkin and
his Ledger Group, acted on behalf of one of Australia's largest gold mining
companies, Great Central Mines Limited, and carried out two simultaneous
on-market takeover bids on the Australian Stock Exchange, worth a combined total
value of $330 million in Australian dollars. As of December 1999, Mr. Mochkin
has joined Barton Capital Securities as a securities dealer. Mr. Levi Mochkin is
the son-in-law of Mr. Henry Herzog, the brother-in-law of Jonathan Herzog and
the brother of Mr. Mendel Mochkin, who has been engaged by us to provide certain
services relating to our operations.
JONATHAN HERZOG
Mr. Jonathan Herzog is a founding director of the Company and has served
as our Chief Financial Officer since February 1999. Between 1995 and 1999, Mr.
Herzog was a securities dealer and consultant with the Ledger Holdings Group at
Bell Securities Limited, a member of the Australian Stock Exchange.
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He has been actively involved in the Australian financial markets for over ten
years. He attended the Rothberg School at Hebrew University in Jerusalem in
1991. Mr. Herzog is a Fellow of the Australian Institute of Company Directors
since 1993, and holds a Bachelor of Economics Degree from Monash University in
Melbourne, Australia. Mr. Jonathan Herzog is the son of Henry Herzog and the
brother-in-law of Levi Mochkin.
ANTHONY L. DAVIS
Mr. Anthony Davis has occupied senior roles in institutional equity
sales for nearly 15 years, covering all major international financial centers.
Mr. Davis is one of the largest shareholders and was a significant seed
capitalist in Neighborhood Cable Limited, a start-up company providing a
broadband network in regional Australia, which recently listed on the Australian
Stock Exchange under the symbol "NCA." Since February 1998, he has been an
institutional dealer with Burdett, Buckeridge and Young in Melbourne, Australia
and prior to this, he occupied a similar position at ABN AMRO. From 1985 to
1989, Mr. Davis served as a director of Institutional Equity Sales at McIntosh
Securities both in London and Australia. From 1989 through September 1996, he
was a director of Prudential Bache Securities in Australia and was the Global
Manager of Australian equity sales, managing the institutional desks of
Melbourne, Sydney, London, New York and Paris. During this time he also served
as a member of Prudential's Executive Management Committee. Between September
1996 and 1997, Mr. Davis was the joint head of Prudential's Equity Capital
Markets Division in Melbourne. Mr. Davis holds a Bachelor of Commerce Degree
from the University of Canterbury, New Zealand and a Graduate Diploma in Applied
Finance from the Securities Institute of Australia.
HELEN ABELES
For more than five years, Ms. Abeles has been a private investor. She is
currently a major shareholder in JGL Investments Pty., one of Australia's
largest private companies. She actively participates in the management of a
number of subsidiary companies of JGL Investments Pty. Ms. Abeles is a director,
major shareholder and board member in a number of other private companies, which
include Seek Communications Ltd. and the Lounge.com.au Pty. Ltd. She invests in
both domestic and offshore equity markets. She also provides venture capital
funding for small to medium size enterprises. Ms. Abeles holds a Bachelor of
Science Degree from Melbourne University, Australia.
ROBERT PETTY
Robert Petty has an extensive background in management and operations
across the manufacturing, retail, and Internet e-commerce industries. Since
October 1999, he has been engaged by us and our subsidiaries as a consultant in
various capacities. He has served as our Vice President -- Business Development
since January 2000, and has been the Acting Chief Executive and Chief Financial
Officer of Stampville since January 2000. Prior to consulting for us, Mr. Petty,
from December 1997 to March 1999, was engaged in a number of capacities by
Telstra Corp., one of the world's largest telecommunications companies, where he
was the senior Business Development Manager responsible for the company's
electronic business solution products as well as the Manager of Electronic
Business Services on a global scale, responsible for marketing and strategizing
Telstra Corp.'s global product roll out of e-commerce products. In the role of
Manager of Electronic Business Services, Mr. Petty worked with some of the
world's leading technology and Internet e-commerce companies, such as IBM,
Hewlett Packard, Intelilsys, Web Methods, Motorola and many others. Previously,
from 1995 through 1998, Mr. Petty was employed with Brashs Pty. Ltd., a large
Australian consumer electronics and music retailer, in a number of capacities,
most recently as the national Product Merchandiser, responsible for product
selection and purchasing, marketing, merchandising, budgeting and general
business planning for the departments of computers, home office and mobile phone
departments nationally.
Mr. Petty holds a CBS in Accounting from Swinburne University of
Technology.
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<PAGE> 42
BOARD COMMITTEES
Our board of directors met or acted through unanimous written consent 13
times during fiscal 1999. All members attended at least 75% of the board of
director meetings during 1999. On the effective date of this offering, the board
of directors will have a compensation committee and an audit committee. The
audit committee will consist of two members, Anthony Davis and Farrel Meltzer.
The compensation committee will consist of three members, Anthony Davis, Farrel
Meltzer and Levi Mochkin, our chief executive officer, who shall serve in an ex
officio capacity. Since both committees will be established during our fiscal
year ended December 31, 2000, they did not meet in our fiscal year ended
December 31, 1999.
STAMPVILLE
The following table sets forth, as of March 31, 2000, the name, age and
position within Stampville of each of its executive officers and directors. The
background of each of the individuals identified in the table is described
following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jonathan Y. Malamud......................... 26 Director, President and Vice President of Marketing
David Eli Popack............................ 24 Director and Director of Dealer Relations
Levi Mochkin................................ 38 Director and Chairman of the Board
Mendel Mochkin.............................. 26 Director
Robert Petty................................ 35 Acting Chief Executive and Financial Officer
Jennifer Christopher........................ 29 Vice President of Human Resources
</TABLE>
JONATHAN MALAMUD
Mr. Malamud is the founder of Stampville and has served as its President
since June 1999. Since December 1999 he has also served as Stampville's Vice
President of Marketing. Previously, from July 1998 to April 1999, he was Manager
of the Telemarketing Division of Sports Stamps Collectible Association located
in New York, New York. From May 1995 to February 1998, he was Philatellic Show
and Exhibit Coordinator for IGPC. Prior to joining IGPC, he served as Campaign
Manager for a mayoral candidate of the City of Beverly Hills, California. Mr.
Malamud also worked briefly in 1998 as a securities trader for Precision Edge
Securities Company located in New York, New York. Mr. Jonathan Malamud is the
son of Sam Malamud, the President and a major shareholder of IGPC and the
brother-in-law of David Eli Popack.
DAVID ELI POPACK
Mr. Popack has served as director, Secretary and Director of Dealer
Relations at Stampville since June 1999. Prior to co-founding Stampville in June
1999, Mr. Popack was the personal assistant to the President of
Inter-Continental Trade and Finance Corporation, Toronto, Canada from September
1997 to May 1998. Previously, he studied Philosophy and Judaic Law at Rabbinical
College in Sydney Australia and completed his Rabbinical studies receiving a
Masters and Rabbinical ordination at the Rabbinical College of Canada in
September 1997. Mr. Popack also served in the summer Peace Corps in Shanghai,
China in 1996. Mr. Popack is the son-in-law of Sam Malamud the President and a
major shareholder of IGPC and the brother-in-law of Jonathan Y. Malamud.
MENDEL MOCHKIN
Since June 1999, Mr. Mochkin has served in various capacities at
Stampville, such as the Director of Marketing Sales. Presently, he serves as
manager of Internet development in our New York offices. Mr. Mochkin was
instrumental in the establishment of and the development of the business
relationship
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<PAGE> 43
between us and Stampville. From August 1998 through April 1999, Mr. Mochkin was
a Sales Manager for D&M Furnitures Distributors Inc. In February 2000, Mr.
Mochkin was appointed a director of Stampville. Mr. Mochkin is also the brother
of Levi Mochkin. Prior to 1998, Mr. Mochkin was a student.
ROBERT PETTY
Robert Petty has an extensive background in management and operations
across the manufacturing, retail, and Internet e-commerce industries. Since
October 1999, he has been engaged by us and our subsidiaries as a consultant in
various capacities. He has served as our Vice President -- Business Development
since January 2000, and has been the Acting Chief Executive and Chief Financial
Officer of Stampville since January 2000. Prior to consulting for us, Mr. Petty,
from December 1997 to March 1999, was engaged in a number of capacities by
Telstra Corp., one of the world's largest telecommunications companies, where he
was the senior Business Development Manager responsible for the company's
electronic business solution products as well as the Manager of Electronic
Business Services on a global scale, responsible for marketing and strategizing
Telstra Corp.'s global product roll out of e-commerce products. In the role of
Manager of Electronic Business Services, Mr. Petty worked with some of the
world's leading technology and Internet e-commerce companies, such as IBM,
Hewlett Packard, Intelilsys, Web Methods, Motorola and many others. Previously,
from 1995 through 1998, Mr. Petty was employed with Brashs Pty. Ltd., a large
Australian consumer electronics and music retailer, in a number of capacities,
most recently as the national Product Merchandiser, responsible for product
selection and purchasing, marketing, merchandising, budgeting and general
business planning for the departments of computers, home office and mobile phone
departments nationally.
Mr. Petty holds a CBS in Accounting from Swinburne University of
Technology.
JENNIFER CHRISTOPHER
Ms. Christopher joined Stampville as Vice President -- Human Resources
in January 2000. Previously, from March 1999 to January 2000, she was an
Executive Recruiter at Olsten Corporation, a New York based executive search
firm. Ms. Christopher was an Account Executive at Schenker International,
Italian Division, from June 1997 to August 1998, where she managed all ocean and
air traffic from Italy to the United States. From August 1998 to March 1999, she
was an Account Executive at Volt Services Group, a division of Volt Information
Services where she was responsible for generating new clients for their
temporary staffing division. Previously, from 1995 to 1997, Ms. Christopher was
Business Manager at Chanel, Inc., Cosmetic Division. She was also Sales Manager
at Limited, Inc. where she trained and developed over 100 employees and managed
over $10 million in sales from 1993 to 1995.
COMPENSATION OF DIRECTORS AND OFFICERS
Effective as of December 6, 1999, we agreed to pay Jonathan Herzog, our
Chief Financial Officer and Secretary, an annual salary of $80,000 retroactive
to November 1, 1999, and also agreed to pay to Robert Petty's consulting
company, Petty Consulting, Inc., $12,000 per annum for the services of Robert
Petty as our Vice President -- Business Development. In addition, Mr. Petty was
granted options to purchase up to 1,450,000 shares of our common stock. 950,000
of Mr. Petty's options will become exercisable at $1.00 per share, and the
remaining 500,000 options will be exercisable at $2.00 per share. Portions of
Mr. Petty's options vest and become exercisable upon our reaching certain levels
of market capitalization or the occurrence of certain other events. Except as
set forth above, we have not made any payments to our officers or directors,
other than reimbursing an aggregate of approximately $65,000 of loans from an
affiliate of Levi Mochkin and business expenses primarily incurred after
September 30, 1999, which have not exceeded $100,000. Further, as of the
effective date of this offering, we have agreed to pay Levi Mochkin, our Chief
Executive Officer, an amount of $35,000 for past services rendered, subject to
the Company raising at least the minimum offering pursuant to this prospectus.
The board and Henry Herzog, our President, have agreed that Mr. Herzog should
relocate to New York for up to twelve months. Mr. Herzog anticipates relocating
during the third quarter of this year. We intend providing Mr. Herzog with a
compensation package (including salary and a housing allowance) of approximately
$150,000 per year and reimbursing Mr. Herzog's travel expenses equivalent to the
value of four round trip business class tickets to
39
<PAGE> 44
New York. We may, subject to our financial condition and resources, compensate
our other senior officers or directors.
During the period ended December 31, 1999, other than as stated above,
none of our other executive officers or directors received a salary.
Stampville has entered into a one year consulting agreement with Petty
Consulting Inc. for the services of Robert Petty as Acting Chief Executive and
Financial Officer and initially for the services of Jennifer Christopher as Vice
President --Human Resources. The consulting agreement provides for the payment
of an aggregate amount of approximately $14,000 per month by Stampville to Petty
Consulting, Inc. for the services of Mr. Petty and Ms. Christopher. Under the
consulting agreement, Stampville has agreed to reimburse Mr. Petty for certain
relocation and legal expenses in connection with his move from Australia to New
York. These expenses are currently estimated to be approximately $30,000.
Stampville has employed Jonathan Y. Malamud, a director and Vice President --
Marketing, at an annual salary of $38,000. Mr. Malamud is also the beneficial
owner of 33.26% of Stampville's common stock. Stampville has employed David Eli
Popack, a director of Stampville and its Director of Dealer Relations, at an
annual salary of $38,000. Mr. Popack is also the beneficial owner of 16.64% of
Stampville's common stock.
Mendel Mochkin, who was previously employed by Stampville at an annual
salary of approximately $31,200.00, is currently on the board of directors of
Stampville and is employed by us under the same terms of his previous employment
arrangement with Stampville.
CERTAIN TRANSACTIONS
On October 26, 1999, we raised $2,500,000 in a private placement through
the sale of 2,500,000 shares of our common stock to Instanz Nominees Pty. Ltd.
At the same time, Instanz Nominees Pty. Ltd. acquired an additional 1,200,000
shares of common stock from Ledger Technologies Pty. Ltd. for an aggregate
amount of $12,000. Helen Abeles, who was subsequently named to our board of
directors, is an affiliate of Instanz Nominees Pty. Ltd. In connection with its
purchase of shares of our common stock, we agreed to allow Instanz Nominees Pty.
Ltd. to offer to sell 500,000 shares in this offering, provided that such shares
are offered and sold only after we have received proceeds of $5,000,000. In
addition, to the extent that Instanz Nominees Pty. Ltd. is unable to receive a
total of $2,500,000 from the sale of shares in this offering, we agreed to grant
it registration rights to sell a sufficient amount of additional shares to make
up the difference. If applicable, the registration period shall commence 120
days after the effective date of this registration statement and will expire on
the first to occur of three years from the effective date or the date when
Instanz Nominees Pty. Ltd. is able to otherwise sell such amount of shares under
Rule 144 promulgated under the Securities Act. Until such registration right
period terminates, Instanz Nominees Pty. Ltd. and all of the other 10% or
greater holders of our common stock and our directors have agreed not to sell
any of their shares without the consent of the other 10% holders and directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not Applicable.
OPTION GRANTS IN LAST FISCAL YEAR
The company was formed in 1999 and consequently we did not grant any
options prior to our most recently concluded fiscal year. The following table
sets forth certain information with respect to stock options granted to each of
the named executive officers in the fiscal year ended December 31, 1999. The
figures representing percentages of total options granted to employees in the
last fiscal year are based on an aggregate of 1,600,000 options granted during
the fiscal year ended December 31, 1999, to our employees, including the named
executive officers.
Also shown below is the potential realizable value over the term of the
option. In accordance with the rules of the SEC, we have based our calculation
of the potential realizable value on the term of the option at its time of
grant, and we have assumed that:
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<PAGE> 45
- the value of our stock at the assumed initial public offering
price appreciates at the indicated annual rate compounded
annually for the entire term of the option; and
- the option is exercised and sold on the last day of its term for
the appreciated stock price.
These amounts are based on 5% and 10% assumed rates of appreciation, as
established by the SEC and are not intended to forecast future appreciation, if
any, of our common stock. Actual gains, if any, on stock option exercises will
be dependent on the future performance of the common stock.
Pursuant to the stock purchase agreement, as amended, between us and
Stampville, Jonathan Y. Malamud was granted 1,600,000 options to purchase shares
of our common stock, as indicated on the table below. These options shall only
become exercisable upon the occurrence of both of:
- December 8, 2001; and
- our raising at least $10,000,000 in this offering or investing
an additional $5,000,000 in Stampville above the initial
investment of an aggregate of $500,000.
The options will be exercisable in increments of 20% per annum
commencing two years after they initially become exercisable. Mr. Malamud's
options will have a five year term commencing on the date the initial
installment becomes exercisable.
<TABLE>
<CAPTION>
APPRECIATED APPRECIATED
OPTIONEE DATE OF GRANT NUMBER OF SHARES EXERCISE PRICE VALUE AT 5% VALUE AT 10%
-------- ------------- ---------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Jonathan Y. Malamud ........... 12/8/99 1,600,000 $ 1.25 $ 8,210,252 $10,884,080
</TABLE>
EMPLOYMENT AGREEMENTS
CONSULTING AGREEMENT WITH MENDEL MOCHKIN
We have entered into a consulting agreement dated as of June 18, 1999,
amended as of February 24, 2000, with Mendel Mochkin, pursuant to which we have
agreed to compensate Mendel Mochkin with shares of our common stock, in part
subject to the completion of all stages of our investment in Stampville. Upon
execution of his consulting agreement, we issued 150,000 shares of our common
stock to Mendel Mochkin and we have agreed to issue up to an additional 350,000
shares if we raise at least $10 million in this offering or invest in or arrange
for additional financing in Stampville in an amount such that we retain no less
than 25% of the equity of Stampville. Pursuant to Mr. Mochkin's consulting
agreement, as amended, so long as Mr. Mochkin remains an employee or consultant
to us or Stampville and we continue to own at least ten (10%) of Stampville's
outstanding common stock, Mr. Mochkin is entitled to additional distributions
from us equal to 1% of distributions or payments to Stampville's shareholders by
way of cash or property distributions, other than by way of stock splits, stock
dividends or similar distributions, or in the event of the sale or other
disposition of the Stampville stock as a result of certain business combinations
or transactions by its shareholders. These bonus payments to Mr. Mochkin shall
be of the same kind and shall occur at the same time as the distributions to
Stampville shareholders and shall be subject to adjustment to reflect certain
prior distribution to Stampville's shareholders.
Mendel Mochkin is the brother of Levi Mochkin, a director and our Chief
Executive Officer.
CONSULTING AGREEMENT WITH PETTY CONSULTING, INC. FOR THE SERVICES OF
ROBERT PETTY
On January 17, 2000, we entered into a one-year consulting agreement
with Petty Consulting, Inc., pursuant to which Robert Petty agreed to provide
consulting services with annual compensation payable to
41
<PAGE> 46
his consulting corporation in the amount of $12,000, to be paid in accordance
with our general compensation practices.
Robert Petty was granted options to purchase up to a total of 1,450,000
shares of our common stock as of the date of the execution of the consulting
agreement. These options vest upon the occurrence of the following events;
provided, however, that none of Mr. Petty's options may vest after the
termination of Mr. Petty's employment or consulting arrangement with us:
- 250,000 of Mr. Petty's options shall vest upon our reaching a
market capitalization of $150,000,000 for thirty consecutive
business days within three years of the date of grant;
- 350,000 of Mr. Petty's options shall vest upon our reaching a
market capitalization of $300,000,000 for sixty consecutive
business days within three years of the date of grant;
- 175,000 of Mr. Petty's options shall vest upon the successful
sale of equity securities of one of our subsidiaries (other than
Stampville) in an initial public offering through the means of a
registration statement which has been declared effective by the
SEC within three years of the date of grant, or the sale of all
or any portion of the shares or assets of such subsidiary for no
less than $50,000,000;
- 175,000 of Mr. Petty's options shall vest upon the successful
sale of equity securities of Stampville in an initial public
offering through the means of a registration statement which has
been declared effective by the SEC within three years of the
date of grant; and
- 500,000 of Mr. Petty's options shall vest upon our reaching a
market capitalization of $700,000,000 for sixty consecutive
business days within three years of the date of grant.
The term of Mr. Petty's options is the lesser of (i) two years from the
date the options vest, (ii) five years from the date of grant, or (iii) 30 days
after the termination of Mr. Petty's employment or consulting arrangement with
us. The options described in items 1 to 4 above each have an exercise price of
$1.00 per option share. The options described in item 5 above have an exercise
price of $2.00 per option share.
2000 STOCK OPTION PLAN
Our board of directors has authorized the issuance of up to 1,650,000
shares of common stock in connection with the grant of options pursuant to our
2000 stock option plan. The 2000 stock option plan shall become effective on the
effective date of the registration statement with respect to this offering.
Options may be granted under the stock option plan to officers, directors,
employees and consultants of ours and our subsidiaries. To date we have not
granted any options under the 2000 stock option plan.
1999 PRIVATE PLACEMENTS
On October 26, 1999, we consummated the sale, in a private placement, of
2,500,000 shares of our common stock for $1.00 per share to Instanz Nominees
Pty. Ltd., for which we received proceeds of $2,500,000. A portion of the
proceeds from this sale was used to complete a portion of our investment in
Stampville.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the
beneficial ownership of our common stock as of May 5, 2000, and as adjusted to
reflect the sale of the shares of common stock offered under this prospectus, by
the following:
- each person who we know owns beneficially more than 5% of our
common stock;
- each of our directors individually;
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<PAGE> 47
- each of our executive officers individually; and
- all of our executive officers and directors as a group.
Unless otherwise indicated, to our knowledge, all persons listed below
have sole voting and investment power with respect to their shares of common
stock. Shares of common stock that an individual or group has the right to
acquire within 60 days of May 5, 2000 pursuant to the exercise of options are
deemed to be outstanding for the purpose of computing the percentage ownership
of such person or group, but are not deemed outstanding for the purpose of
calculating the percentage owned by any other person listed.
BENEFICIAL OWNERSHIP OF COMMON STOCK
<TABLE>
<CAPTION>
ASSUMES MINIMUM ASSUMES MAXIMUM
SUBSCRIPTION SUBSCRIPTION
--------------------------- --------------------------
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
SHARES(1) OF CLASS SHARES(1) OF CLASS
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Ledger Technologies Pty. Ltd.(2)
Levi Mochkin(2) ............................. 6,300,000 36.00% 6,300,000 29.51%
Instanz Nominees Pty. Ltd(3)
Helen Abeles(3) ............................. 3,700,000 21.14% 3,200,00 14.99%
Riccalo Pty. Ltd.(4)
Henry Herzog(4) ............................. 2,000,000 11.43% 2,000,000 9.37%
Eurolink International Pty. Ltd.(5)
Jonathan Herzog(5) .......................... 2,000,000 11.43% 2,000,000 9.37%
AtcorAus. Pty. Ltd.(6)
Farrel Meltzer(6) ........................... 750,000 4.29% 750,000 3.51%
Tilbia Nominees Pty. Ltd.(7)
Anthony Davis(7) ............................ 1,600,000 9.14% 1,600,000 7.49%
All Directors and Officers as a
Group (6 Persons) ........................... 16,350,000 93.43% 15,850,000 74.24%
</TABLE>
(1) Pursuant to the rules promulgated by the SEC, all shares underlying
options which were exercisable on May 5, 2000 or which become
exercisable within 60 days, held by a described person are deemed to be
"beneficially" owned. The SEC rules further require that every person
who has or shares the power to vote or to dispose of shares of common
stock are deemed to be the "beneficial" owner of all of the shares of
common stock over which any such sole or shared power exists.
(2) Lisa Mochkin, spouse of Levi Mochkin, a director and our Chief Executive
Officer, is a director of Ledger Technologies Pty. Ltd. Levi Mochkin is
an affiliate of Ledger Technologies Pty. Ltd. and may be deemed to be a
beneficial owner of the shares held by Ledger Technologies Pty. Ltd.
Lisa Mochkin is the daughter of Henry Herzog and the sister of Jonathan
Herzog.
(3) Helen Abeles, a director, is an affiliate of Instanz Nominees Pty. Ltd.
Ms. Abeles exercises shared investment and voting power over these
shares and may be deemed to be a beneficial owner thereof.
(4) Henry Herzog, a director and our President and father of Jonathan Herzog
and father-in-law of Levi Mochkin, is a director of Riccalo Pty. Ltd.
Mr. Herzog exercises shared investment and voting power over these
shares and may be deemed to be a beneficial owner thereof.
(5) Jonathan Herzog, a director and our Secretary and Chief Financial
Officer and son of Henry Herzog, is a director of Eurolink International
Pty. Ltd. Mr. Herzog exercises shared investment and voting power over
these shares and may be deemed to be a beneficial owner thereof.
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<PAGE> 48
(6) Wendy Meltzer, spouse of Farrel Meltzer, a director, is a director of
Atcor Aus. Pty. Ltd. Mr. Meltzer is an affiliate of Atcor Aus. Pty. Ltd.
and may be deemed to be a beneficial owner of the shares held by Atcor
Aus. Pty. Ltd.
(7) Tilbia Nominees Pty. Ltd. holds shares of common stock for Anthony Davis
and his affiliates. Mr. Davis exercises shared investment and voting
power over these shares and may be deemed to be the beneficial owner
thereof.
(8) Does not include 1,450,000 shares subject to options granted to Robert
Petty.
The preceding table of beneficial ownership also does not include
options to purchase 1,600,000 shares of our common stock which have been granted
to Jonathan Y. Malamud. These shares will only become exercisable only after
December 8, 2001 and only if we make the additional payment of $5,000,000 to
Stampville above the initial aggregate $500,000 investment in Stampville, or
raise at least $10,000,000 in this offering, and then only in increments of 20%
per annum.
DESCRIPTION OF CAPITAL STOCK
I.T. TECHNOLOGY
GENERAL
Our certificate of incorporation authorizes our board of directors to
issue up to one hundred million (100,000,000) shares of common stock and
twenty-five million (25,000,000) shares of preferred stock. The board of
directors has the authority to divide the preferred stock into one or more
series and has broad authority to determine the relative rights and preferences
of the shares within each series, including voting rights. Prior to this
offering, the board of directors has authorized the issuance of up to 16,500,000
shares of common stock. The board of directors has also authorized the issuance
of the following number of shares of common stock:
- up to 350,000 shares of common stock to Mendel Mochkin, which is
contingent on the company raising at least $10,000,000 in this
offering or investing an additional $1,000,000 in Stampville in
order to retain no less than 25% of the outstanding shares of
common stock;
- up to 1,600,000 shares relating to options granted to Jonathan
Y. Malamud;
- up to 1,450,000 shares relating to options granted to Petty
Consulting Inc.;
- up to 4,500,000 shares pursuant to this offering; and
- up to 1,650,000 shares pursuant to the 2000 stock option plan;
and
- 750,000 shares of common stock in connection with the exercise
of warrants which may be issued to underwriters and dealers in
connection with this offering.
No other shares of common stock will be issued prior to the issuance of
the common stock in connection with this offering.
DIVIDENDS
Holders of common stock will be entitled to receive, when, as and if
declared by the board of directors out of legally available funds, cash
dividends. The common stock will not have priority as to dividends over any
other series or class of our stock that ranks senior as to dividends to the
common stock.
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<PAGE> 49
VOTING RIGHTS
Holders of common stock shall have the right to one vote per share upon
all matters presented for the vote of holders of the common stock.
STAMPVILLE
As of the date of this prospectus, the capitalization of Stampville
consists of 100,000 common shares, each with a par value of $0.01. 50,100 common
shares are held by us, 16,634 shares are beneficially held by David Eli Popack
and 33,266 shares are beneficially held by Jonathan Y. Malamud. Our interest in
Stampville is subject to reduction if we do not complete our planned investment
in Stampville.
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Upon the closing of this offering, we will be subject to the provisions
of Section 203 of the Delaware General Corporation Law. Subject to specific
exceptions, Section 203 prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless:
- the transaction in which such stockholder became an "interested
stockholder" is approved by the board of directors prior to the
date the "interested stockholder" attained that status;
- upon consummation of the transaction that resulted in the
stockholder becoming an "interested stockholder," the
"interested stockholder" owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction
commenced, excluding those shares owned by persons who are
directors and also officers; or
- on or subsequent to the date, the "business combination" is
approved by the board of directors and authorized at an annual
or special meeting of stockholders by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not
owned by the "interested stockholder."
"Business combinations" include mergers, acquisitions, asset sales and
other transactions resulting in a financial benefit to the "interested
stockholder." Subject to various exceptions, an "interested stockholder" is a
person who, together with his or her affiliates and associates, owns, or within
three years did own, 15% or more of the corporation's voting stock. The
restrictions in this statute could prohibit or delay the accomplishment of
mergers or other takeover or change-in-control attempts with respect to us and,
therefore, may discourage attempts to acquire us.
In addition, various provisions of our certificate of incorporation and
bylaws, which are summarized in the following paragraphs, may be deemed to have
an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
CUMULATIVE VOTING
Our certificate of incorporation expressly denies stockholders the right
to cumulate votes in the election of directors.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our certificate of incorporation limits stockholder actions to
resolutions passed at annual or special meetings of stockholders, and it
prohibits stockholders from acting by written consent. Additionally, our bylaws
provide that special meetings of our stockholders may be called only by the
board of directors or a
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<PAGE> 50
committee of the board of directors which has been duly designated and
authorized by the board of directors.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breaches of directors' applicable duties.
Our certificate of incorporation includes a provision that eliminates the
personal liability of our directors for monetary damages for actions taken as a
director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law
regarding unlawful dividends and stock purchases; and
- for any transaction from which the director derived an improper
personal benefit.
Our certificate of incorporation also includes the following provisions
regarding indemnification of our directors and officers:
- we must indemnify our directors and officers to the fullest
extent permitted by Delaware law, subject to very limited
exceptions;
- we may indemnify our other employees and agents to the same
extent that we indemnify our directors and officers; and
- we must advance expenses, as incurred, to our directors and
officers in connection with legal proceedings to the fullest
extent permitted by Delaware law, subject to very limited
exceptions.
Prior to the closing of this offering, we intend to supplement our
existing directors' and officers' insurance to provide indemnification for
certain securities matters. We believe that these indemnification provisions in
our certificate of incorporation and insurance are necessary to attract and
retain qualified directors and executive officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation may discourage stockholders from bringing a lawsuit
against directors for breach of their fiduciary duty. These provisions may also
have the effect of reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. Furthermore, a stockholder's
investment may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers pursuant to these
indemnification provisions.
At present, there is no pending litigation or proceeding involving any
of our directors, officers or employees for which indemnification is sought. We
are unaware of any threatened litigation that may result in claims for
indemnification.
AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of common stock and preferred stock
are available for future issuance without stockholder approval. We may use these
additional shares for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
benefit plans. The existence of authorized but unissued shares of common stock
and preferred stock could render more difficult or discourage an attempt to
obtain control of us by means of a proxy contest, tender offer, merger or
otherwise.
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<PAGE> 51
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority interest of the shares entitled to vote on any
matter is required to amend a corporation's certificate of incorporation or
bylaws, unless a corporation's certificate of incorporation or bylaws, as the
case may be, requires a greater percentage. Following this offering, our
executive officers and directors on their own, as the beneficial owners of at
least 75% of the voting power of the outstanding common stock on a fully-diluted
basis, will be able to cause us to amend our certificate of incorporation and
bylaws.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is American Stock
Transfer and Trust Company. Its address is 40 Wall, New York, NY 10005, and its
telephone number at that location is (212) 936-5100.
NASDAQ STOCK MARKET LISTING
We have applied to have our Common Stock quoted on the NASDAQ SmallCap
Market under the trading symbol "ITTE."
SELLING SHAREHOLDER
An aggregate of 500,000 shares of common stock may be offered for resale
by the following selling shareholder. These shares of common stock include
shares issued to the selling shareholder pursuant to a private placement of
shares consummated on October 26, 1999.
Except for the sale of 1,200,000 shares of common stock transferred by
Ledger to Instanz Nominees Pty. Ltd. in connection with its purchase of
2,500,000 shares of common stock from us on October 26, 1999, in a private
placement and as set forth below, there are no material relationships between
any of the selling shareholders and us or any of our predecessors or affiliates,
nor have any such material relationships existed within the past three years.
Helen Abeles, a director, is an affiliate of Instanz Nominees Pty. Ltd. Ms.
Abeles exercises shared investment and voting power over these shares and may be
deemed to be a beneficial owner thereof.
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF AMOUNT OF
SHARES OF SHARES OF SHARES OF
NUMBER OF SHARES OF COMMON STOCK COMMON STOCK COMMON STOCK
SELLING COMMON STOCK COVERED BY THIS AFTER OFFERING (MAXIMUM
SHAREHOLDER BENEFICIALLY OWNED PROSPECTUS (MINIMUM SOLD) SOLD)
----------- ------------------- --------------- -------------- ------------
<S> <C> <C> <C> <C>
Instanz Nominee Pty. Ltd. 3,700,000 500,000 3,700,000 3,200,000
</TABLE>
REGISTRATION RIGHTS
After this offering, Instanz Nominees Pty. Ltd., currently the holder of
3,700,000 shares of our common stock, will be entitled to registration rights to
the extent that it is unable to receive at least $2,500,000 from the sale of its
shares in this offering. In such event, we have agreed to grant to Instanz
Nominees Pty. Ltd. registration rights to sell a sufficient amount of shares to
cover such shortfall. In addition, Instanz Nominees Pty. Ltd. may also require
us to "piggy-back" or include its unsold shares in future registration
statements that we file. Upon registration, such unsold shares will be freely
tradable in the public market without restriction.
If applicable, the registration period shall commence 180 days after the
date the registration statement relating to this prospectus becomes effective
and will expire on the first to occur of three years from the
47
<PAGE> 52
effective date of this offering or when Instanz Nominees Pty. Ltd. is able to
otherwise sell such amount of shares under Rule 144 promulgated under the
Securities Act. Except for such unsold shares, until such registration right
period terminates, Instanz nominees Pty. Ltd. and all of the other 10% or
greater holders of our common stock and our directors have agreed not to sell
any other shares without the consent of the other 10% holders and directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 21,350,000 shares of
common stock outstanding, assuming no exercise of the underwriters'
over-allotment option or outstanding options. Of this amount, the 5,000,000
shares offered by this prospectus will be available for immediate sale in the
public market as of the date of this prospectus. Assuming all of the 500,000
shares being offered for sale by Instanz Nominees Pty. Ltd. in the offering are
sold, approximately 12,800,000 additional shares will be available for sale in
the public market following the expiration of the lock-up agreements with the
representatives of our underwriters. All of such shares will be subject to
compliance with the volume and other limitations of Rule 144.
<TABLE>
<CAPTION>
APPROXIMATE SHARES
ELIGIBLE FOR APPROXIMATE SHARES
DAYS AFTER THE DATE FUTURE SALE ELIGIBLE FOR FUTURE
OF THIS PROSPECTUS (MINIMUM SOLD) SALES (MAXIMUM SOLD) COMMENT
------------------ ------------------- -------------------- -------
<S> <C> <C> <C>
Upon Effectiveness......................... 1,000,000 5,000,000 Freely tradable shares sold
in Offering
90 days beginning after the
termination of this Offering............... 12,800,000 12,800,000 Lock-up released; shares
saleable under Rule 144
October 26, 2000........................... 3,700,000 3,200,000 Shares saleable under Rule 144
</TABLE>
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year is entitled to sell within any
three-month period commencing 90 days after the date of this prospectus a number
of shares that does not exceed the greater of (a) 1% of the then outstanding
shares of common stock (approximately 210,000 shares immediately after the
offering) or (b) the average weekly trading volume during the four calendar
weeks preceding the sale, subject to the filing of a Form 144 with respect to
the sale. A person who is not deemed to have been an affiliate of the company at
any time during the 90 days immediately preceding the sale and who has
beneficially owned his or her shares for at least two years is entitled to sell
these shares under Rule 144(k) without regard to the limitations described
above. Persons deemed to be affiliates must always sell under Rule 144, even
after the applicable holding periods have been satisfied.
We are unable to estimate the number of shares that will be sold under
Rule 144, since this will depend on the market price for our common stock, the
personal circumstances of the sellers and other factors. Prior to this offering,
there has been no public market for the common stock, and there can be no
assurance that a significant public market for the common stock will develop or
be sustained after the offering. Any future sale of substantial amounts of the
common stock in the open market may adversely affect the market price of the
common stock offered by this prospectus.
All of our shareholders have agreed that they will not sell any common
stock without the prior written consent of Kensington Capital Corp. for a period
terminating 90 days after the termination of this offering. We will file a
"sticker amendment" to this prospectus if five percent (5%) of the shares
subject to the foregoing restrictions are released prior to the expiration of
the lock up period. In addition, we shall file a post-effective amendment to
this prospectus if more than ten percent (10%) of the shares subject to the
foregoing restrictions are released prior to the expiration of the lock up
period.
As of the effective date of this offering, we have agreed to grant
options to purchase an aggregate of 3,050,000 shares of common stock to Jonathan
Y. Malamud and Robert Petty. The board of directors has also approved the 2000
stock option plan which provides for the issuance of options to purchase up to
1,650,000 shares of our common stock. We intend to file a registration statement
on Form S-8 under the
48
<PAGE> 53
Securities Act shortly after the completion of this offering to register
2,700,000 shares which are issuable upon the exercise of options by Messrs.
Malamud and Petty, plus 1,650,000 shares issuable under the 2000 stock option
plan, which will permit the resale of these shares in the public market without
restriction after the lock-up period expires.
In addition, Instanz Nominees Pty. Ltd. has both 'demand' and
'piggyback' registration rights, to the extent that the sale of the shares
offered by it in this offering does not generate proceeds to it of $2,500,000.
Registration of these securities under the Securities Act would result in the
shares being registered becoming freely tradable without restriction under the
Securities Act unless the shares were purchased by any of our affiliates, in
which case they would be subject to certain restrictions under Rule 144 of the
Act.
49
<PAGE> 54
UNDERWRITING
The underwriter named below, Kensington Capital Corp., has agreed with
us, subject to the terms and conditions of the underwriting agreement, to sell
on our behalf on a 'best effort basis' the number of shares of common stock
indicated opposite their names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Kensington Capital Corp. ......... 5,000,000
Total ............................ 5,000,000
=========
</TABLE>
We have been advised that the underwriter will offer the shares of
common stock to the public at the public offering price located on the cover
page of this prospectus.
The initial 1,000,000 shares sold in this offering will be sold on
behalf of the Company. The next 500,000 shares sold will be on behalf of the
selling shareholder, Instanz Nominees Pty. Ltd., and the remaining 3,000,000
shares will be sold on behalf of the Company.
The following table shows the per share and total underwriting discounts
and commissions to be paid by us to the underwriters. The percentage of the
proceeds raised designated as the Underwriters' commission set forth opposite
the various amounts of proceeds set forth below shall be payable on the entire
amount of proceeds raised in the offering. Therefore, if $20,000,000 is raised
the Underwriters' commission shall be $1,200,000 and if $25,000,000 is raised
the Underwriters' commission shall be $1,250,000.
<TABLE>
<CAPTION>
UNDERWRITERS
PROCEEDS FROM THE OFFERING COMMISSION
-------------------------- ------------
<S> <C>
At least $5,000,000 but less than $6,000,000 8.0%
At least $6,000,000 but less than $7,000,000 7.9%
At least $7,000,000 but less than $8,000,000 7.8%
At least $8,000,000 but less than $9,000,000 7.7%
At least $9,000,000 but less than $10,000,000 7.6%
At least $10,000,000 but less than $11,000,000 7.5%
At least $11,000,000 but less than $12,000,000 7.4%
At least $12,000,000 but less than $13,000,000 7.3%
At least $13,000,000 but less than $14,000,000 7.2%
At least $14,000,000 but less than $15,000,000 7.1%
At least $15,000,000 but less than $16,000,000 7.0%
At least $16,000,000 but less than $17,000,000 6.8%
At least $17,000,000 but less than $18,000,000 6.6%
At least $18,000,000 but less than $19,000,000 6.4%
At least $19,000,000 but less than $20,000,000 6.2%
At least $20,000,000 but less than $21,000,000 6.0%
At least $21,000,000 but less than $22,000,000 5.8%
At least $22,000,000 but less than $23,000,000 5.6%
At least $23,000,000 but less than $24,000,000 5.4%
At least $24,000,000 but less than $25,000,000 5.2%
$25,000,000 or more 5.0%
</TABLE>
The price will not change for any of the 5,000,000 shares being offered
by this prospectus. All of the up to 5,000,000 shares sold in this offering will
be sold for $5.00 per share. The expenses of this offering are estimated at
$600,000 and are payable entirely by us. Subject to the sale of the minimum
subscription, in addition to the Underwriters' commission, dealers shall receive
a commission of $.25 per share from us, of which $.15 per share may be
re-allowed to other dealers. Instanz will not pay the foregoing commission,
which will instead be paid by the Company. The total commission paid to dealers
by the Company with respect to shares sold by Instanz in this offering could
total up to $125,000. The Underwriter shall not receive any discount on shares
purchased by it for its account holders. Kensington Capital Corp. expects to
deliver the shares of common stock to purchasers as soon as practicable after
the sale to the purchaser occurs and once $5,000,000 has been raised in the
offering.
50
<PAGE> 55
THE OFFERING
We must receive your executed stock order form together with your
payment of $5.00 per share for each share which you wish to purchased by 5:00
p.m., Los Angeles time, on, 2000. These funds will be placed in an escrow
account with Comerica Bank-California and will earn interest from the date of
their receipt until completion or termination of this offering. In the event
that the minimum number of shares required to be sold for the closing of this
offering, or 1,000,000 shares at $5.00 per share, are not sold on or before 120
days after the effective date of this offering (which may be extended until 150
days after the effective date of this offering at our sole discretion), this
offering will be terminated and all of your funds held in the escrow account
will be returned to you along with interest, thereon less your pro-rata share of
the costs of the escrow account.
WARRANTS TO UNDERWRITERS
Upon completion of the minimum offering, we are obligated to issue to
the underwriter warrants to purchase 250,000 shares of the company's common
stock at exercise prices of $6 per share during the first year, $7 per share
during the second year and $8 per share during the third year. Such warrants
have a term of three years from the date of grant. In addition, upon completion
of the minimum offering, we may, in our sole discretion, issue to dealers (other
than the underwriter) warrants to purchase up to 500,000 shares of our common
stock on the same terms and conditions. The Underwriter has also been granted
"piggyback" registration rights with respect to shares issued to it pursuant to
the exercise of the warrants granted to it. These registration rights are
subordinate to the registration rights granted to Instanz Nominees Pty. Ltd.,
and may not be exercised until Instanz has exercised or waived its registration
rights.
INDEMNITY
The underwriting agreement contains covenants of indemnity among the
underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of representation
and warranties contained in the underwriting agreement.
FUTURE SALES
Each of our executive officers, directors and other significant
stockholders of record has agreed with the underwriter, for a period terminating
90 days after the termination of this offering, not to offer to sell, contract
to sell or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of common stock, any options or warrants to purchase any
shares of common stock, or any securities convertible into or exchangeable for
shares of common stock owned as of the date of this prospectus or acquired
directly from us by these holders or with respect to which they have or may
acquire the power of disposition, without the prior written consent of
Kensington Capital, Corp. However, Kensington Capital, Corp. may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to lock-up agreements. There are no agreements between the
representatives and any of our stockholders providing consent by the
representatives to the sale of shares prior to the expiration of the lock-up
period. In addition, we have generally agreed that, during the lock-up period,
we will not, without the prior written consent of Kensington Capital Corp., take
the following actions:
- consent to the disposition of any shares held by stockholders
prior to the expiration of the lock-up period; or
- issue, sell, contract to sell or otherwise dispose of, any
shares of common stock, any options or warrants to purchase any
shares of common stock, or any securities convertible into,
exercisable for or exchangeable for shares of common stock,
other than our sale of shares in the offering, our issuance of
common stock upon the exercise of currently outstanding options
and warrants, and our issuance of incentive awards under our
stock incentive plans.
51
<PAGE> 56
The underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
NO PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price for the common stock
offered by this prospectus has been determined through negotiations between us
and the representatives. Among the factors considered in these negotiations were
prevailing market conditions, our financial information, market valuations of
other companies that we and the representatives believe to be relevant to us,
estimates of our business potential, the present state of our development and
other factors deemed relevant.
STABILIZATION
The representatives have advised us that, under Regulation M under the
Securities Exchange Act, some participants in the offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of the common stock on behalf of the underwriters for the purpose
of fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by the underwriter or syndicate member is purchased by the
representatives in a syndicate covering transaction and has therefore not been
effectively placed by the underwriter or syndicate member. The representatives
have advised us that these transactions may be effected on the Nasdaq SmallCap
Market or otherwise and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Jeffer, Mangels, Butler & Marmaro LLP, Los Angeles,
California.
EXPERTS
The financial statements of I.T. Technology, Inc. as of December 31, 1999,
and for the period from February 2, 1999, date of inception, through December
31, 1999 and the financial statements of Stampville as of December 31, 1999 and
for the period from April 14, 1999, date of inception, through December 31,
1999, have been included herein and in the registration statement in reliance
upon the reports of Grant Thornton LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2, including exhibits, schedules and amendments to that
registration statement, under the Securities Act with respect to the shares of
common stock to be sold in this offering. This prospectus does not contain all
the information included in our registration statement. For further information
with respect to us and the shares of common stock to be sold in this offering,
we refer you to the registration statement. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and in each instance we refer you to
the copy of that contract, agreement or other document to the extent filed as an
exhibit to the registration statement.
52
<PAGE> 57
You may read and copy all or any portion of the registration statement
or any other information we file at the Securities and Exchange Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the operation
of the public reference room. Our Securities and Exchange Commission filings,
including the registration statement, are also available to you over the
Internet on the Securities and Exchange Commission's web site located at
http://www.sec.gov. As a result of this offering, we will become subject to the
information and reporting requirements of the Exchange Act and, in accordance
with the Exchange Act, we will file periodic reports, proxy statements and other
information with the Securities and Exchange Commission. We intend to furnish
our stockholders with annual reports containing audited financial statements and
with quarterly reports for the first three quarters of each fiscal year
containing unaudited interim financial information.
No dealer, salesman or any other person has been authorized to give any
information which is not contained in this prospectus or to make any
representation in connection with this offering other than those which are
contained in the prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized by us.
This prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities which are offered hereby to any person
in any jurisdiction where such offer or solicitation would be unlawful. Neither
the delivery of this prospectus nor any sale hereunder shall under any
circumstances create any implications that there has been no change in our
affairs or the facts which are herein set forth since the date hereof.
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK, INCLUDING OVER ALLOTMENT, ENTERING STABILIZATION BIDS, EFFECTING
SYNDICATE COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE OTC BULLETIN BOARD
IN ACCORDANCE WITH RULE 103 OF REGULATION M OF THE SECURITIES ACT.
53
<PAGE> 58
I.T. TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
I.T. Technology, Inc.
Report of Independent Certified Public Accountants ................... F-2
Consolidated Balance Sheet ........................................... F-3
Consolidated Statement of Operations ................................. F-4
Consolidated Statement of Stockholders' Equity ....................... F-5
Consolidated Statement of Cash Flows ................................. F-6
Notes to Consolidated Financial Statements ........................... F-7
Stampville.Com Inc.
Report of Independent Certified Public Accountants ................... F-12
Balance Sheet ........................................................ F-13
Statement of Operations .............................................. F-14
Statement of Stockholders' Equity .................................... F-15
Statement of Cash Flows .............................................. F-16
Notes to Financial Statements ........................................ F-17
</TABLE>
F-1
<PAGE> 59
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
I.T. Technology, Inc.
We have audited the accompanying consolidated balance sheet of I.T. Technology,
Inc. (the "Company") (a development stage enterprise) as of December 31, 1999,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the period from February 2, 1999 (inception) through December 31,
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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of I.T.
Technology, Inc. as of December 31, 1999, and the consolidated results of its
operations and its consolidated cash flows for the period from February 2, 1999
(inception) through December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Grant Thornton LLP
Los Angeles, California
March 10, 2000
F-2
<PAGE> 60
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED BALANCE SHEET
December 31, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSET
Cash $ 2,179,998
PROPERTY AND EQUIPMENT, net 649,021
INVESTMENT IN STAMPVILLE.COM INC 2,323,922
DEFERRED OFFERING COSTS 33,682
-----------
Total assets $ 5,186,623
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 28,001
Accrued expenses 40,331
Payable due to Stampville.Com Inc. 1,425,508
-----------
Total current liabilities 1,493,840
PAYABLE TO STAMPVILLE.COM INC. - less current portion 584,369
NOTE PAYABLE 455,848
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001; authorized 25,000,000 shares,
no shares issued and outstanding -
Common stock, par value $.001; authorized 100,000,000 shares,
issued and outstanding 16,500,000 shares 16,500
Additional paid-in capital 3,055,509
Deficit accumulated during the development stage (419,443)
-----------
Total stockholders' equity 2,652,566
-----------
$ 5,186,623
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE> 61
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
Period from February 2, 1999 (inception) through December 31, 1999
<TABLE>
<S> <C>
Income and (expenses)
Foreign currency transaction gain $ 17,033
Interest, net 9,174
Legal and professional fees (125,687)
Salaries (66,618)
Travel and entertainment (33,675)
Equity in loss of Stampville.Com Inc. (185,955)
Other expense (33,715)
------------
NET LOSS $ (419,443)
============
Basic and diluted loss per common share $ (0.04)
============
Weighted average shares outstanding 11,222,139
============
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE> 62
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period from February 2, 1999 (inception) through December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock during the
-------------------------- ------------------------- Additional development
Shares Amount Shares Amount paid-in capital stage Total
------------ ----------- ----------- ---------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at (inception)
February 2, 1999 - $ - - $ - $ - $ - $ -
Issuance of shares to
founders for cash - - 4,000,000 4,000 16,000 - 20,000
Issuance of shares for cash, net
of $27,210 issuance costs - - 9,850,000 9,850 594,190 - 604,040
Issuance of shares for
services - - 150,000 150 7,350 - 7,500
Issuance of shares in a
private placement,
net of $59,531 issuance costs - - 2,500,000 2,500 2,437,969 - 2,440,469
Net loss for the period - - - - - (419,443) (419,443)
------------ ----------- ----------- ---------- ------------ ----------- ------------
Balance at December 31, 1999 - $ - 16,500,000 $ 16,500 $ 3,055,509 $ (419,443) $ 2,652,566
============ =========== =========== ========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 63
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
Period from February 2, 1999 (inception) through December 31, 1999
<TABLE>
<S> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss $ (419,443)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 14,852
Equity in losses of Stampville.Com Inc. 185,955
Increase in accounts payable 28,001
Increase in accrued expenses 40,331
Nonmonetary compensation 7,500
-----------
Net cash flows used in operating activities (142,804)
-----------
Cash flows from investing activities:
Investment in Stampville.Com Inc. (500,000)
Purchase of property and equipment (208,025)
-----------
Net cash flows used in investing activities (708,025)
-----------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,064,509
Increase in deferred offering costs (33,682)
-----------
Net cash flows provided by financing activities 3,030,827
-----------
Net increase in cash 2,179,998
Cash at beginning of period -
-----------
Cash at end of period $ 2,179,998
===========
Supplemental disclosures of noncash investing and financing activities:
Property acquired by issuance of note payable $ 455,848
===========
Investment in Stampville.Com Inc. acquired through a liability $ 2,009,877
===========
Issuance of Common Stock for Services $ 7,500
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE> 64
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE A - COMPANY BACKGROUND AND BUSINESS PLAN
I.T. Technology, Inc. (ITT) was incorporated on February 2, 1999 to engage in
businesses related to the internet, e-commerce and technology ventures,
directly and through the acquisition of equity ownership in internet related
and other technology companies. ITT has a wholly-owned subsidiary, I.T.
Technology Pty. Ltd. (collectively referred to as the "Company"), which
furthers its operations in Australia.
The Company is in the development stage, and its efforts through December 31,
1999 have been principally devoted to organizational activities, raising
capital, acquiring an equity interest in Stampville.Com Inc., and other
development efforts. Management anticipates incurring substantial additional
losses as it pursues its strategies. Additionally, the Company will require
substantial capital to fund further development and operations of
Stampville.Com Inc. (See Note D). The Company intends to meet further capital
funding requirements through an Initial Public Offering ("IPO"). On February
14, 2000, the Company filed a registration statement on Form SB-2 with the
Securities and Exchange Commission. The Company expects that the proceeds of
the IPO will be sufficient to fund its activities and investments over the
near term. There can be no assurance that the Company will be able to
complete the offering, or make further investments in Stampville.Com Inc. to
retain its 50.1 percent interest (See Note E).
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The consolidated financial statements include the accounts of ITT and its
wholly-owned subsidiary. All material intercompany accounts and transactions
have been eliminated.
2. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for using
the straight-line method of accounting over the estimated useful lives
ranging from 5 to 25 years.
4. Investment in Stampville.Com Inc.
The investment in Stampville.Com Inc. consists of a 50.1 percent equity
interest and is accounted for using the equity method because of the
remaining contingent payment of $5,000,000. If this payment is not completed,
the Company's interest will be reduced. (Note E).
5. Income Taxes
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for when there is a temporary difference in recording such items for
financial reporting and income tax reporting. The temporary differences that
give rise to deferred tax assets primarily are depreciation and accrual to
cash adjustments which were reduced by a like amount because of the
uncertainty that the deferred tax assets will not be realized.
F-7
<PAGE> 65
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. Foreign Currency
The functional currency of the subsidiary, which has no ongoing revenue
producing operations and is entirely dependent on the Company for its
financing, is considered to be the U.S. dollar. Transaction gains and losses
arise primarily from cash maintained in an Australian bank and a note payable
that will be settled in Australian dollars. Accordingly, transaction gains
and losses are included in the determination of net loss for the period.
7. Year End
The Company's fiscal year ends on December 31.
8. Deferred Offering Costs
Deferring offering costs include expenses incurred in connection with the
Company's registration statement on Form SB-2, filed on February 14, 2000.
These costs will be charged against stockholders' equity upon successful
completion of the respective offering. If the offering is not consummated,
the deferred offering costs will be charged to expense.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31, 1999:
<TABLE>
<S> <C>
Land $ 150,000
Building 451,630
Office equipment 62,243
---------
663,873
Less accumulated depreciation (14,852)
---------
$ 649,021
=========
</TABLE>
NOTE D - CAPITALIZATION
1. Preferred Stock
The Company has authorized the issuance of 25,000,000 shares of preferred
stock, par value $.001 per share. The Board of Directors of the Company has
the right to create one or more series of preferred stock and to determine
the rights, preferences and privileges of any such series.
2. Common Stock
The Company issued 4,000,000 shares of common stock to the founders through
controlled companies at a purchase price of $0.005 per share (aggregate of
$20,000).
The Company issued 10,000,000 shares of common stock to various companies
that are affiliates of certain officers of the Company at purchase prices
between $0.05 and $0.125 per share (aggregate of $631,250), excluding
offering costs of $27,120.
On October 26, 1999, the Company issued 2,500,000 shares of common stock at a
purchase price of $1.00 per share, excluding offering costs of $59,531.
F-8
<PAGE> 66
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE E - INVESTMENT IN STAMPVILLE.COM INC.
Pursuant to the terms of a Stock Purchase Agreement dated June 18, 1999, the
Company acquired a 6% equity interest in the common stock of Stampville.Com
Inc., an unrelated party, and had an option to acquire additional shares
representing up to 19% (for a total of 25%) of Stampville.Com Inc. common
stock at its sole discretion in various amounts up to an aggregate of
$5,000,000 over the next three years. Stampville.Com Inc. is newly formed
(April 14, 1999) to engage in the business of selling collectible stamps and
other memorabilia on the Internet and on a wholesale basis to chain stores
and small businesses, and on a retail basis to the general public.
Stampville.Com Inc. is a development stage enterprise and its activities
through December 31, 1999 have been principally devoted to organizational and
development activities.
On December 8, 1999, the Stock Purchase Agreement was amended to accelerate
the payment terms contained in the original Stock Purchase Agreement, which
would allow the Company to own an immediate 50.1 percent of Stampville.Com
Inc.'s common stock. The amended agreement includes payments terms as
follows:
1. Cash payment of $500,000.
2. Cash payment of $1,000,000 payable within 60 days from the date of the
amended agreement.
3. Eight equal quarterly installments of $156,250 ($1,250,000) payable
commencing upon the execution of the amended agreement. (First quarterly
payment due no later than May 8, 2000). The installment payable was
discounted $240,123 using a discount rate of 20%. The discount is being
amortized over the term of the payable using the effective interest
method.
4. The Company agrees to use commercially reasonable efforts to make a
further payment, or otherwise cause a party or parties designated by the
Company to invest an additional $5,000,000 in Stampville.Com Inc. The
additional payment is payable no later than twelve (12) months from the
date of the amended agreement; or alternatively within 30 days following
the closing of the Company's IPO that raises a minimum amount of
$10,000,000.
If the Company fails to make or have a third party make the further payment
of $5,000,000 (as noted in point 4 above), its ownership percentage would be
reduced to the lesser of 1) 27.5% of Stampville's common stock or 2)
the total invested by the Company pursuant to the purchase agreement divided
by $100,000.
The following summarizes the investment in Stampville.Com Inc. for the period
ended December 31, 1999.
<TABLE>
<S> <C>
Cash payment of $250,000 (paid under original agreement) $ 250,000
Cash payment of $250,000 (paid prior to December 31, 1999) 250,000
Cash payment of $1,000,000 (paid on or about February 14, 2000) 1,000,000
Installment payable, less discount of $240,123 1,009,877
Equity in losses in Stampville.Com Inc. (185,955)
-----------
$ 2,323,922
===========
</TABLE>
In connection with the amended Stock Purchase Agreement, the Company granted
to individuals nominated by the current shareholders of Stampville.Com Inc.,
other than the Company, options to purchase 1,600,000 shares of the Company's
common stock at an exercise price equal to $1.25 per share. Upon completion
of the additional $5,000,000 payment mentioned above, the options become
exercisable commencing two years from the date of grant in increments of 20
percent per year.
F-9
<PAGE> 67
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE E - INVESTMENT IN STAMPVILLE.COM INC. - Continued
In addition, the Company has entered into a shareholders agreement with
Stampville.Com Inc. and its shareholders that, among other things, restricts
the ability of the shareholders of Stampville.Com Inc. to transfer their
interests; provides that at least one board of director of Stampville.Com
Inc. be designated by the Company and requires that the Company-designated
director approve of certain significant corporate transactions; and provides
that at least one of the executive officers of Stampville.Com Inc. be an
individual selected by the Company and that the Company representative have
the right to approve certain corporate transactions. The Company's right to
any preferential board and management representation will terminate at the
earlier of the cancellation of the Stock Purchase Agreement or on June 18,
2002. Stampville.Com Inc.'s continuance is dependent on its ability to obtain
funds from the Company pursuant to the Stock Purchase Agreement and its
continued agreement with IGPC. There can be no assurance that the Company or
Stampville.Com Inc. will obtain the financing to develop or to sustain the
operations of Stampville.Com Inc.
Stampville.Com Inc. entered into an agreement dated December 1, 1999, with
the Inter-Governmental Philatelic Corporation (IGPC), of which the president
is a related party to certain officers of Stampville.Com Inc., whereby IGPC
will provide stamp sheets as well as additional services, including website
content, to Stampville.Com Inc.
The agreement with IGPC has a term of three years with an automatic renewal
to extend for an additional two years, unless terminated at the end of the
initial term by either party. In addition, IGPC extended a line of credit not
to exceed $2,000,000 to Stampville.Com Inc. for the purchase and shipping of
stamps from IGPC. Amounts outstanding under the credit line are payable
within 120 days from the date of such credit.
Should Stampville.Com Inc. not be able to renew its contract with IGPC on
favorable terms, or require a change in stamp providers, this could cause
significant service disruptions, which may have an adverse affect on the
Company.
The Company has entered into a consulting agreement with an individual
affiliated with the Company, who has provided services to the Company in
connection with its investment in Stampville.Com Inc. Pursuant to the
agreement, the Company issued 150,000 shares of its common stock to the
individual. As a result, the Company recorded compensation expense of $7,500.
The Company will issue up to an additional 350,000 shares of Common Stock if
it raises at least $10,000,000 through an initial public offering or invests
additional funds in Stampville.Com, Inc. in an amount such that it retains a
minimum of no less than a 25% equity interest in Stampville.Com, Inc.
Pursuant to an amended agreement, the individual is further entitled to
payments of 1% of cash distributions (i.e. initial public offering or sale)
made to Stampville's shareholders.
NOTE F - NOTES PAYABLE
Long-term debt at December 31, 1999 consists of a loan to purchase property
on 34-36 Punt Road in Melbourne Australia, collateralized by the building and
bearing interest at a rate of 7.25% per annum. The loan requires monthly
payments of interest with the principal balance due in July 2001. The loan is
guaranteed by a shareholder of the Company. Pursuant to the terms of the
purchase agreement, title to the property will transfer when the principal
balance is paid in full.
F-10
<PAGE> 68
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE G - LOSS PER COMMON SHARE
Basic loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding. Common stock equivalents were
excluded from the diluted calculation, as they were anti-dilutive.
<TABLE>
<CAPTION>
Period from February 2, 1999
(inception)
Through
December 31, 1999
--------------------------------------
Weighted-
Average Per share
Net loss Shares Amount
---------- ---------- ----------
<S> <C> <C> <C>
Basic loss per share
Net loss available to common
shareholders $ 419,443 11,222,139 $ 0.04
========== ========== ==========
Diluted loss per share
Net loss available to common
shareholders $ 419,443 11,222,139 $ 0.04
========== ========== ==========
</TABLE>
NOTE H - CONCENTRATION OF CREDIT RISK
At December 31, 1999, the Company's cash was held primarily by a financial
institution in the United States of America. The Company is exposed to credit
loss for the amount of cash equivalents in the event of nonperformance by the
financial institution, however; the Company has not experienced any losses in
these accounts and believes it is not exposed to any significant credit risk
on cash equivalents.
NOTE I - SUBSEQUENT EVENT
On January 17, 2000, the Company entered into a one-year Consulting Agreement
with Petty Consulting, Inc. pursuant to which Robert Petty agreed to provide
consulting services with annual compensation payable to his consulting
corporation in the amount of $12,000, to be paid in accordance with the
Company's general compensation practices.
Under the consulting agreement, the Company granted stock options to acquire
up to 1,450,000 shares of common stock at an exercise price ranging from $1
to $2. The stock options vest upon reaching certain market capitalization
objectives or selling equity securities of one or more of the Company's
subsidiaries in an initial public offering or through a third-party sale. The
stock option term is the lesser of (i) two years from the vesting date, (ii)
five years from the date of the consulting agreement, or (iii) 30 days after
the termination of Robert Petty's employment or consulting arrangement for
the Company.
In January 2000, the Company's board of directors authorized the issuance of
up to 1,650,000 shares of common stock in connection with the Company's 2000
Stock Option Plan). The 2000 Stock Option Plan will become effective in
connection with the registration statement filed on February 14, 2000. The
Company intends to grant options under the Stock Option Plan to officers,
directors, employees and consultants of the Company and its subsidiaries. The
Company has not granted any options under the 2000 Stock Option Plan.
F-11
<PAGE> 69
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Stampville.Com Inc.
We have audited the accompanying balance sheet of Stampville.Com Inc. (the
"Company") (a development stage enterprise) as of December 31, 1999, and the
related statements of operations, stockholders' equity, and cash flows for the
period from April 14, 1999 (inception) through December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly in
all material respects, the financial position of Stampville.Com Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
period from April 14, 1999 (inception) through December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
/s/ Grant Thornton LLP
Los Angeles, California
March 10, 2000
F-12
<PAGE> 70
Stampville.Com Inc.
(a development stage enterprise)
BALANCE SHEET
December 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $ 47,066
Accounts receivable 1,370
Receivable due from shareholder 1,000,000
Inventories 18,459
-----------
Total current assets 1,066,895
EQUIPMENT, net 74,739
DEPOSITS 6,160
TECHNOLOGY COSTS 11,487
-----------
$ 1,159,281
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable to IGPC $ 29,273
Accrued expenses 1,176
-----------
Total current liabilities 30,449
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 100,000 shares,
issued and outstanding 100,000 shares 1,000
Additional paid-in capital 2,508,877
Receivable due from shareholder (1,009,877)
Deficit accumulated during the development stage (371,168)
-----------
Total stockholders' equity 1,128,832
-----------
$ 1,159,281
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-13
<PAGE> 71
Stampville.Com Inc.
(a development stage enterprise)
STATEMENT OF OPERATIONS
Period from April 14, 1999 (inception) through December 31, 1999
<TABLE>
<S> <C>
Revenues $ 5,119
Cost of goods sold (2,482)
---------
Gross profit 2,637
General and administrative expenses
Salaries (115,384)
Legal and professional fees (35,755)
Rent (11,000)
Travel and entertainment (23,328)
Technology expense (101,696)
Other (86,642)
---------
NET LOSS $(371,168)
=========
</TABLE>
The accompanying notes are an integral part of this statement.
F-14
<PAGE> 72
Stampville.Com Inc.
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
Period from April 14, 1999 (inception) through December 31, 1999
<TABLE>
<CAPTION>
Deficit
accumulated
Common Stock Receivable during the
---------------------------- Additional due from development
Shares Amount paid-in capital shareholder stage Total
----------- ----------- --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at (inception)
April 14, 1999 - $ - $ - $ - $ - $ -
Issuance of shares to founders 49,900 - - - - -
Issuance of shares for cash
and receivables 50,100 1,000 2,508,877 $(1,009,877) - 1,500,000
Net loss for the period - - - - (371,168) (371,168)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 100,000 $ 1,000 $ 2,508,877 $(1,009,877) $ (371,168) $ 1,128,832
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-15
<PAGE> 73
Stampville.Com Inc.
(a development stage enterprise)
STATEMENT OF CASH FLOWS
Period from April 14, 1999 (inception) through December 31, 1999
<TABLE>
<S> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss $ (371,168)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 6,249
Increase in accounts receivable (1,370)
Increase in inventories (18,459)
Increase in deposits (6,160)
Increase in accounts payable and accrued expenses 30,449
-----------
Net cash flows used in operating activities (360,459)
-----------
Cash flows from investing activities:
Purchase of equipment (80,988)
Increase in technology costs (11,487)
-----------
Net cash flows used in investing activities (92,475)
-----------
Cash flows from financing activities:
Proceeds from issuance of common stock 500,000
-----------
Net increase in cash 47,066
Cash at beginning of period -
-----------
Cash at end of period $ 47,066
===========
Non cash financing activity:
Issuance of common stock for receivables due from shareholders
Amount classified as an asset $ 1,000,000
Amount classified as an offset to equity 1,009,877
-----------
$ 2,009,877
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-16
<PAGE> 74
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE A - DESCRIPTION OF BUSINESS
Stampville.Com Inc. (the "Company") was incorporated on April 14, 1999 to
engage in the business of selling collectible stamps and other memorabilia on
the Internet and on a wholesale basis to chain stores and small businesses,
and on a retail basis to the general public and collectors.
Pursuant to the terms of a Stock Purchase Agreement dated June 18, 1999, I.T.
Technology, Inc. ("ITT") acquired a 6% equity interest in the Company's
common stock and had an option to acquire additional shares representing up
to 19% (for a total of 25%) of the Company's common stock at ITT's sole
discretion in various amounts up to an aggregate of $5,000,000, over the next
three years.
On December 8, 1999, the Stock Purchase Agreement was amended to accelerate
the payment terms contained in the original Stock Purchase Agreement, which
would allow ITT to own an immediate 50.1 percent of the Company's common
stock. The amended agreement includes payment terms as follows:
1. Cash payment of $500,000.
2. Cash payment of $1,000,000 payable within 60 days from the date of the
amended agreement.
3. Eight equal quarterly installments of $156,250 ($1,250,000) payable
commencing upon the execution of the amended agreement. (First quarterly
payment due no later than May 8, 2000). The receivable was discounted
$240,123 using a discount rate of 20%. The discount is being amortized
over the term of the receivable using the effective interest method.
4. ITT agrees to use commercially reasonable efforts to make a further
payment, or otherwise cause a party or parties designated by ITT to invest
an additional $5,000,000 in the Company. The additional payment is payable
no later than twelve (12) months from the date of the amended agreement;
or alternatively within 30 days following the closing of ITT's initial
public offering that raises a minimum amount of $10,000,000.
If ITT fails to make or have a third party make the further payment of
$5,000,000 (as noted in point 4 above), its ownership percentage would be
reduced to the lesser of 1) 27.5% of the Company's common stock or 2) the
total invested by ITT pursuant to the purchase agreement divided by $100,000.
In addition, ITT has entered into a shareholders agreement with the Company
and its shareholders that, among other things, restricts the ability of the
Company's shareholders to transfer their interests; provides that at least
one board of director of the Company be designated by ITT and requires that
the ITT-designated director approve of certain significant corporate
transactions; and provides that at least one of the executive officers of the
Company be an individual selected by ITT and that the ITT representative have
the right to approve certain corporate transactions. ITT's right to any
preferential board and management representation will terminate at the
earlier of the cancellation of the Stock Purchase Agreement or on June 18,
2002. The Company's continuance is dependent on its ability to obtain funds
from ITT pursuant to the Stock Purchase Agreement.
The Company is in the development stage, and its efforts through December 31,
1999 have been principally devoted to the organizational activities. As a
result, the Company has experienced operating losses since its inception. To
finance its strategic plans and development, the Company is highly dependent
on ITT's ability to render the accelerated payment. Subsequent to December
31, 1999, in connection with the Stock Purchase Agreement, the Company
received an additional $1,000,000. ITT intends to raise the additional
required financing through an initial public offering. There can be no
assurance that ITT will be successful with its offering, or that the Company
or ITT will be able to obtain additional financing to develop or sustain
further investment or operations of the Company.
1. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-17
<PAGE> 75
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES - Continued
2. Income Taxes
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for when there is a temporary difference in recording such items for
financial reporting and income tax reporting. The temporary differences that
give rise to deferred tax assets primarily are depreciation and accrual to
cash adjustments which were reduced by a like amount because of the
uncertainty that the deferred tax asset will not be realized.
3. Year End
The Company's fiscal year ends on December 31.
4. Technology Costs
Technology costs are generally expensed as incurred, except for certain costs
relating to the development of internal-use software incurred during the
application stage that are capitalized and depreciated over the estimated
useful life of three years.
5. Equipment
Equipment is comprised primarily of computer equipment and is stated at cost.
Depreciation is provided for using the straight-line method of accounting
over the estimated useful lives ranging from 3 to 7 years.
NOTE C - CAPITALIZATION
The Company issued shares of common stock to the founders at a nominal
purchase price per share.
Through December 1999, the Company issued 50.1% of its shares of common stock
to ITT at an aggregate purchase price of up to $7,750,000, of which $500,000
was received by December 31, 1999 and another $1,000,000 was received in full
on or about February 14, 2000. The $1,000,000 was reflected as a receivable
from shareholder as of December 31, 1999. In addition, the Company recorded a
non-interest bearing receivable of $1,250,000 which is payable in eight equal
installments of $156,250. The first payment commences no later than 150 days
from the date of the agreement, which is May 8, 2000. The receivable was
recorded at its discounted value of $1,009,877 using a discount rate of 20%
and is reflected as a contra to equity.
The remaining payment of $5,000,000 is an optional payment and is payable
upon ITT closing an initial public offering and raising a minimum of
$10,000,000. If such payment is not rendered, ITT's ownership would be
reduced. A receivable was not recorded for this payment, as collectibility is
not reasonably assured as of December 31, 1999.
In January 2000, the Company modified its articles of incorporation to
increase the authorized shares of common stock to 100,000 shares at a par
value of $.01 per share. All references to number of shares have been
restated to reflect the change.
NOTE D - COMMITMENTS
The Company has entered into a supplier's agreement on December 1, 1999 with
the Inter-Governmental Philatelic Corporation ("IGPC"), of which the
president is a related party to certain officers of the Company. IGPC, one of
the world's largest suppliers and dealers of philatelic stamps, represents
approximately seventy postal administrations throughout the world in matters
relating to the design, production and marketing of their postage stamps.
Pursuant to its agreement with the Company, IGPC has agreed to supply the
Company with stamps at the lowest pricing structure available to other
dealers and that IGPC makes available for public sale.
F-18
<PAGE> 76
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE D - COMMITMENTS - Continued
The agreement with IGPC has a term of three years with an automatic renewal
to extend for an additional two years unless terminated at the end of the
initial term by either party. In addition, IGPC extended a line of credit not
to exceed $2,000,000 to the Company for the purchase and shipping of stamps
from IGPC. Amounts outstanding under the credit line are payable within 120
days from the date of such credit. On December 31, 1999, the Company had
$29,273 outstanding under this line of credit.
Should the Company not be able to renew its contract with IGPC on
favorable terms, or require a change in stamp providers, this could cause
significant service disruptions, which may have an adverse affect on the
Company.
The Company has also entered into an agreement with an unrelated party to
assist in the development of its website, including the implementation of an
electronic ordering system for the stamp market. A total of $180,000 is
committed for this project. As of December 31, 1999, no amount has been
expended on this project.
In addition, the Company entered into an agreement with an unrelated party in
connection with the scanning and cataloguing of stamp images. A total of
$114,000 was committed to this project. As of December 31, 1999, $22,800 has
been expended on this project.
NOTE E - LEASES
The Company leases office facilities and equipment under non-cancelable lease
arrangements that expire at various dates through November 2001. Rental
commitments for non-cancelable operating leases are payable as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
2000 $48,000
2001 44,000
-------
$92,000
=======
</TABLE>
F-19
<PAGE> 77
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER I.T. TECHNOLOGY, INC. NOR ANY UNDERWRITER HAS AUTHORIZED
ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF THESE SECURITIES.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE U.S. TO PERMIT A PUBLIC
OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN
ANY OF THESE JURISDICTIONS. PERSONS WHO COME INTO POSSESSION OF THIS PROSPECTUS
IN JURISDICTIONS OUTSIDE THE US AND CANADA ARE REQUIRED TO INFORM THEMSELVES
ABOUT AND TO OBSERVE THE RESTRICTIONS OF THAT JURISDICTION RELATED TO THIS
OFFERING AND THE DISTRIBUTION OF THIS PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary .................................................................. 1
Risk Factors ........................................................................ 3
Use of Proceeds ..................................................................... 6
Dividend Policy ..................................................................... 7
Capitalization and Stock Ownership .................................................. 7
Dilution ............................................................................ 17
Management's Discussion and Analysis of Financial Condition and Results of Operations 19
Business ............................................................................ 22
Management .......................................................................... 35
Principal Stockholders .............................................................. 42
Description of Capital Stock ........................................................ 44
Selling Shareholders ................................................................ 47
Registration Rights ................................................................. 47
Shares Eligible for Future Sale ..................................................... 47
Underwriting ........................................................................ 49
Legal Matters ....................................................................... 51
Experts ............................................................................. 51
Where You Can Find More Information ................................................. 51
Index to Financial Statements ....................................................... F-1
</TABLE>
Dealer Prospectus Delivery Obligations:
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY,
SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
I.T. TECHNOLOGY, INC
Common Stock
Up to 4,500,000 Shares
500,000 Shares by a Selling Shareholder
PROSPECTUS
May __ , 2000
<PAGE> 78
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses to be incurred in connection with the
Offering described in this Registration Statement, all of which will be paid by
the Company. All amounts are estimates, other than the Securities and Exchange
Commission registration fee, the National Association of Securities Dealers,
Inc. fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee ............. $ 6,600.00
National Association of Securities Dealers, Inc. fee ............ $ 3,000.00
Nasdaq listing fee .............................................. $ 10,000.00
Accounting fees and expenses .................................... $100,000.00
Legal fees and expenses ......................................... $230,000.00
Director and officer insurance expenses ......................... $120,000.00
Printing and engraving expenses ................................. $100,000.00
Transfer agent and registrar fees and expenses .................. $ 3,500.00
Blue Sky fees and expenses (including counsel fees) ............. $ 10,000.00
Miscellaneous expenses .......................................... $ 16,900.00
-----------
Total ....................................... $600,000.00
===========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Limitations on liability and indemnification of directors and officers. The
Delaware General Corporation Law authorizes corporations to limit or eliminate
the personal liability of directors to corporations and their stockholders for
monetary damages for breaches of directors' applicable duties. Our certificate
of incorporation includes a provision that eliminates the personal liability of
our directors for monetary damages for actions taken as a director, except for
liability:
- - for any breach of the director's duty of loyalty to us or our stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; and
- for any transaction from which the director derived an improper
personal benefit.
Our certificate of incorporation also includes the following provisions
regarding indemnification of our directors and officers:
- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law, subject to very limited exceptions;
- we may indemnify our other employees and agents to the same extent
that we indemnify our directors and officers; and
- we must advance expenses, as incurred, to our directors and officers
in connection with legal proceedings to the fullest extent permitted by
Delaware law, subject to very limited exceptions.
Prior to the closing of this Offering, the Company intends to amend its
existing directors' and officers' insurance to provide indemnification
to certain securities matters. We believe that these
II-1
<PAGE> 79
indemnification provisions in our certificate of incorporation and
insurance are necessary to attract and retain qualified directors and
executive officers.
The limitation of liability and indemnification provisions in our Certificate of
Incorporation may discourage stockholders from bringing a lawsuit against
directors for breach of their fiduciary duty. These provisions may also have the
effect of reducing the likelihood of derivative litigation against directors and
officers, even though such an action, if successful, might otherwise benefit us
and our stockholders. Furthermore, a stockholder's investment may be adversely
affected to the extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification provisions.
The Company's Certificate of Incorporation provides that the directors will not
be liable to the Company or to any Stockholder for monetary damages for breach
of fiduciary duty as a director, to the full extent that such limitation or
elimination of liability is permitted under Delaware law.
The Company's Bylaws provide that the Company will indemnify its directors and
officers to the fullest extent permitted under Delaware law. Pursuant to the
Bylaws and Delaware law, the Company will indemnify each director and officer
against any liability incurred in connection with any action, suit, proceeding
or investigation in which he or she may be involved by reason of serving in such
capacity at the request of the Company.
Each director and officer is also entitled to indemnification against costs and
expenses (including attorneys' fees) incurred in defending or investigating any
action, suit, proceeding or investigation in which he or she may be involved by
reason of serving in such capacity at the request of the Company. The Bylaws
authorize the Company to advance funds to a director or officer for such costs
and expenses (including attorneys' fees) upon receipt of an undertaking in
writing by such director or officer to repay such amounts if it is ultimately
determined that he or she is not entitled to be indemnified. Notwithstanding the
foregoing, no advance shall be made by the Company if a determination is
reasonably and promptly made by the Board by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs) by independent legal
counsel, that based upon the facts known to the Board or counsel at the time
such determination is made: (i) the director or officer acted in bad faith or
deliberately breached his duty to the Company or its stockholders; and (ii) as a
result of such actions by the director or officer, it is more likely than not
that it will ultimately be determined that such director or officer is not
entitled to indemnification.
The indemnification and advancement of expenses provided by the Bylaws are not
exclusive of any other rights to which a director or officer seeking
indemnification or advancement of expenses may be entitled under the Bylaws, any
agreement or any vote of stockholders or disinterested directors or otherwise.
The indemnification and advancement of expenses provided by the Bylaws continue
as to a person who has ceased to be a director or officer and inure to the
benefit of the heirs, executors and administrators of such a person.
The Company has purchased a directors' and officers' liability insurance policy
insuring directors and officers of the Company against any liability asserted
against such person and incurred by such person in any such capacity, whether or
not the Company would have the power to indemnify such person against such
liability under the Bylaws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1. Form of Underwriting Agreement.
2. None.
3.1 Certificate of Incorporation of the Company filed February 2,
1999.(*)
</TABLE>
II-2
<PAGE> 80
<TABLE>
<S> <C>
3.2 By-laws of the Company dated February 2, 1999.(*)
4.1 Stock Certificate specimen of the Company.
4.2 Form of Warrant Certificate.
4.3 Form of Subscription Document.
5. Opinion of Jeffer, Mangels, Butler & Marmaro LLP.
10.1(a) Stock Purchase Agreement between the Company and Stampville.Com
Inc. dated June 18, 1999.(*)
10.1(b) Amendment to Stock Purchase Agreement between the Company and
Stampville.Com Inc. dated December 8, 1999.(*)
10.2 Real Property Purchase Agreement between Rococo Holdings Pty.
Ltd. And I.T. Technology Pty. Ltd. Dated July 7, 1999.(*)
10.3(a) Lease Agreement between Stampville.Com Inc. and RDL Realty, LLC
dated June 18, 1999.(*)
10.3(b) Rider to Lease Agreement between Stampville.Com Inc. and RDL
Realty, LLC dated November 28, 1999.(*)
10.4 Suppliers' Agreement between Stampville.Com Inc. and Inter
Governmental Philatelic Corporation dated December 1, 1999.(*)
10.5(a) Consulting Agreement between Robert Petty and the Company dated
January 17, 2000.(*)
10.5(b) Consulting Agreement between Robert Petty and Stampville.Com
Inc. dated January 10, 2000.(*)
10.5(c) Consulting Agreement between Mendel Mochkin and the Company
dated June 18, 1999.(*)
10.5(d) Amendment No. 1 to the Consulting Agreement between Mendel
Mochkin the Company dated February 24, 2000.(*)
10.6(a) Option Agreement between Robert Petty and I.T. Technology, Inc.
dated January 17, 2000.(*)
10.6(b) Option Agreement between Jonathan Y. Malamud and the Company
dated December 8, 1999.(*)
10.7 Stock Option Agreement between Bickhams Capital, Inc. and
VideoDome.Com Networks, Inc. dated March 24, 2000.(*)
10.8 Registration Rights Agreement between the Company and Instanz
Nominees Pty. Ltd. dated October 26, 1999.(*)
10.9 Registration Rights Agreement between the Company and
Kensington Capital Corp. dated May 8, 2000.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Grant Thornton LLP.
23.3 Consent of Jeffer, Mangels, Butler & Marmaro LLP (included as
part of Exhibit 5).
24. Power of attorney.(*)
</TABLE>
(*) Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant 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
II-3
<PAGE> 81
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (230.424(b) of this Chapter) 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; and
(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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the Offering of such securities at that time shall
be deemed to be the initial bona fide Offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(4) To file a "sticker amendment" to this Prospectus if up to five
percent (5%) of the shares subject to lock up agreements are released
from the restriction relating to such agreements prior to the expiration
thereof, and to file a post-effective amendment to this Prospectus if
more than ten percent (10%) of the shares subject to such agreements are
released prior to the expiration thereof.
Insofar as indemnification for liabilities arising from the Securities
Act of 1933 (the "Act") may be permitted to directors, officers, and
controlling persons of the Registrant, the Registrant 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 Registrant of
expenses incurred or paid by a director, officer or controlling person
of the Registrant 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 Registrant 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.
For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the Offering of such securities at that time shall be deemed to be the
initial bona fide Offering thereof.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Since February 2, 1999, we issued the following securities without
registration under the Securities Act of 1933, as amended.
1. In February 1999, we issued 5,000,000 shares of common stock
to Ledger Technologies Pty. Ltd., 2,000,000 shares of common stock to
Riccalo Pty. Ltd., and 2,000,000 shares of common stock to Eurolink
International Pty. Ltd., both sophisticated investors,
II-4
<PAGE> 82
in connection with the formation of the Company. The consideration for
such shares was $.05 per share $.005 per share, respectively, and we
received an aggregate of $270,000 for this issuance. The issuance of
such shares was exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof. The purchaser is an
affiliate of a director of the Company.
2. In May 1999, we issued an additional 2,500,000 shares of
common stock to Ledger Technologies Pty. Ltd., a sophisticated investor,
for $.05 per share, receiving a total of $125,000 as the consideration
for such issuance. The issuance of such shares was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof. The purchaser is an affiliate of a director of the Company.
3. In June and August 1999, we issued 500,000 shares of common
stock for $.05 per share and 250,000 shares of common stock for $.125
per share to Atcor Aus. Pty. Ltd., a sophisticated investor, for an
aggregate amount of $56,250 as the consideration for such issuance. The
issuance of such shares was exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof. The purchaser is an
affiliate of a director of the Company.
4. In June 1999, we issued 150,000 shares of common stock to
Mendel Mochkin, the brother of Levi Mochkin our Chief Executive Officer,
as partial consideration for entering into a Consulting Agreement with
the Company, pursuant to which Mr. Mochkin would be involved in the
establishment of and the development of the business relationship
between Stampville and us. Pursuant to this Consulting Agreement, we
have agreed to issue an additional 350,000 shares of common stock to
Mendel Mochkin in the event certain conditions pertaining to this
Offering and the financing of Stampville are met. The issuance of such
shares was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof.
5. In August 1999, we issued 1,600,000 shares of common stock
for $.125 per share to Tilbia Nominees Pty. Ltd., a sophisticated
investor, for an aggregate amount of $200,000 as the consideration for
such issuance. The issuance of such shares was exempt from the
registration requirements of the Securities Act pursuant to Section
4(2). The purchaser is an affiliate of a director of the Company.
6. In October 1999, in connection with the private placement of
common stock, we issued 2,500,000 shares of common stock at $1.00 per
share. We raised $2,500,000 through the sale of all of the 2,500,000
shares of common stock to Instanz Nominees Pty. Ltd., an accredited
investor. The issuance of such shares was exempt from the registration
requirements of the Securities Act pursuant to Rule 506 of Regulation D
promulgated thereunder. The purchaser is an affiliate of a director of
the Company.
7. In December 1999, we granted certain executive officers
options to purchase 1,600,000 shares of common stock at an exercise
price of $1.25 per share. The grant of such option to purchase shares
was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof.
8. In January 2000, we granted Robert Petty options to purchase
up to a total of 1,450,000 shares of common stock as consideration for
entering into a Consulting Agreement between Petty Consulting, Inc. and
us. The options vest upon the occurrence of various conditions and each
have an exercise price of either $1.00 or $2.00. The grant of such
options to purchase shares of common stock was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof.
Except as otherwise set forth above, no underwriters were engaged in
connection with the foregoing sales of securities.
II-5
<PAGE> 83
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 4 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Melbourne,
Victoria, Australia, on May 9, 2000.
I.T. TECHNOLOGY, INC.
By: /s/ LEVI MOCHKIN
-------------------------------------
Levi Mochkin
Chairman of the Board,
Chief Executive Officer and Director
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons on behalf of the
Company in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ LEVI MOCHKIN Director May 9, 2000
- -------------------------------------
Henry Herzog
/s/ LEVI MOCHKIN Chief Executive Officer and May 9, 2000
- ------------------------------------- Director
Levi Mochkin
/s/ LEVI MOCHKIN Chief Financial Officer and May 9, 2000
- ------------------------------------- Director
Jonathan Herzog
/s/ LEVI MOCHKIN Director May 9, 2000
- -------------------------------------
Anthony Davis
/s/ LEVI MOCHKIN Director May 9, 2000
- -------------------------------------
Farrel Meltzer
/s/ LEVI MOCHKIN Director May 9, 2000
- -------------------------------------
Helen Abeles
</TABLE>
II-6
<PAGE> 1
EXHIBIT 1
5,000,000 Shares
I.T. TECHNOLOGY, INC.
Common Stock
UNDERWRITING AGREEMENT
May 4, 2000
Kensington Capital Corp.
4910 13th Avenue
Brooklyn, New York 11219
Attn: Abraham Silver
Dear Sirs:
The undersigned, I.T. Technology, Inc., a Delaware corporation
(the "Company"), and the undersigned stockholder of the Company, Instanz
Nominees Pty. Ltd., a corporation incorporated under the laws of the State of
Victoria, Australia (referred to herein as the "Selling Stockholder") hereby
confirm their agreement with you (the "Representative") and each of the other
underwriters, if any, named in Schedule A attached hereto (the "Underwriters"),
as follows:
1. The Offering.
(a) The Underwriters agree to sell a minimum of 1,000,000
shares (the "Minimum Subscription") and a maximum of 5,000,000 shares
(the "Maximum Subscription") of the Company's common stock, $.001 par
value per share ("Common Stock") to the public as exclusive agents for
the Company and with respect 500,000 shares of Common Stock, the Selling
Stockholder, on a "best efforts" only basis during the offering period
commencing as of the effective date of the Company's Registration
Statement on Form SB-2, filed with the Securities and Exchange
Commission (the "Commission") on February 14, 2000 (Commission File No.
333-30364) (the "Initial Registration Statement"), and terminating on
the first to occur of (i) the sale of the maximum subscription or (ii)
one hundred and twenty (120) days from the commencement date and an
additional thirty (30) days thereafter if extended by agreement between
the Underwriters and the Company (the "Offering Period"), plus an
additional three days to permit funds collected during the Offering
Period to clear (the "Offering").
(b) The Underwriters also agree to sell a maximum of
500,000 shares of Common Stock at $5.00 per share to the public as
exclusive agent for the Selling Stockholder on a "best efforts" only
basis during the Offering Period.
-1-
<PAGE> 2
(c) The sale of the Common Stock shall be allocated as
follows: (i) the first 1,000,000 shares of Common Stock sold shall be
allocated entirely to the Company; (ii) the next 500,000 shares of
Common Stock sold shall be allocated entirely to the Selling
Stockholder; and (iii) the remaining 3,500,000 shares shall be allocated
entirely to the Company.
(d) Pending the sale of at least the Minimum Subscription
on behalf of the Company, all funds received from investors shall be
deposited in an interest-bearing escrow account at Comerica Bank -
California, Los Angeles, California (the "Escrow Account"). All checks
for the purchase of Common Stock shall be made payable to Comerica Bank
- California, as Escrow Agent for the Company. If subscriptions for the
Minimum Subscription are not received within the Offering Period, all
funds received prior to the expiration of the Offering Period from
investors will be promptly returned to them with simple interest at
Comerica's then prevailing money-market rate, less the costs of the
Escrow Account. Upon the sale of at least the Minimum Subscription on
behalf of the Company, all funds in the Escrow Account, plus interest
thereon, less the costs of the Escrow Account will be released to the
Company at 10:00 a.m. Pacific Standard Time on the third business day
after the date on which the Escrow Agent notifies the Company or its
counsel that it has received funds equal to the Minimum Subscription at
the public offering price stated in paragraph (e) of this Section 1 (the
"Closing Date"). If at least the Minimum Subscription is sold on behalf
of the Company during the Offering Period, the Underwriters may use the
balance of such period to sell the remaining shares on a best efforts
basis, and none of the funds received from investors in payment for any
part of the balance of the shares nor interest thereon will be returned
to the investors.
(e) The public offering price of the Common Stock shall be
$5.00 per share. The Representative may from time to time increase, but
not decrease the public offering price with the consent of the Company,
by reason of changes in general market conditions or otherwise.
(f) Subject to the sale of at least the Minimum
Subscription, the Company shall pay you as Representative of the
Underwriters a sales commission as set forth in Exhibit "A" attached
hereto and made a part hereof all proceeds received from investors with
respect to the Offering.
(g) The Company has authorized the issuance of up to
750,000 shares of Common Stock in connection with the exercise of
non-transferable warrants, 250,000 of which the Company does grant
hereby to the Underwriters in connection with the Offering (the
"Underwriters' Warrants"), and 500,000 of which may be issued, at the
sole discretion of the Company, to certain other selected dealers in
connection with the Offering (the "Selected Dealers' Warrants")
(collectively, the "Warrants"). The Warrants will have a term of three
years and shall be exercisable at $6.00 per share during the first year,
$7.00 per share during the second year, and $8.00 per share during the
third year. In addition, the shares of Common Stock of the Company
underlying such Underwriters' Warrants shall be granted unlimited
"piggyback" registration rights, pursuant to the provisions of a
registration rights agreement substantially in the form of Exhibit B
hereto, which "piggyback" registration rights shall at all times remain
subject to the reasonable discretion by the underwriter of any
subsequent public
-2-
<PAGE> 3
offering of equity securities by the Company to reduce by any number of
shares underlying the Underwriters' Warrants the aggregate number of
shares being registered in such offering, for reasons relating to the
ability of the marketplace to absorb all of the shares of the Company's
Common Stock sought to be registered at such time. The "piggyback"
registration rights shall continue to apply to the Underwriters'
Warrants until the first to occur of:(i) the Underwriters no longer
holding any Underwriters' Warrants or shares of Common Stock of the
Company underlying such Underwriters' Warrants, (ii) all of the shares
of Common Stock of the Company underlying such Underwriters' Warrants
having been registered in a subsequent public offering of the Company's
equity securities; (iii) all of the shares held by the Underwriters upon
the exercise of the Warrants being eligible for sale pursuant to Rule
144; and (iv) five years passing from the date that the Offering has
been consummated.
2. Representations and Warranties of the Company and the Selling
Stockholders.
(a) The Company represents and warrants to, and agrees
with the Underwriters that:
(i) The Company has filed Amendment No. 1 to the Initial
Registration Statement on February 15, 2000, and will deliver to
you any further amendment(s) to the Registration Statement filed
with the Commission (the Initial Registration Statement and all
amendments thereto hereinafter collectively referred to as the
"Registration Statement"). The prospectus, in the form filed with
the Commission pursuant to Rule 424(b) of the General Rules and
Regulations (the "Regulations") of the Commission under the
Securities Act of 1933, as amended (the "Act") is herein referred
to as the "Prospectus."
(ii) When the Registration Statement becomes effective,
and at all times subsequent thereto and including the Closing
Date (as defined in Section 1(d) and during such longer period as
the Prospectus may be required to be delivered in connection with
sales by the Underwriter or a dealer, and during such longer
period until any post-effective amendment thereto shall become
effective, the Registration Statement (and any post-effective
amendment thereto) and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission
any amendment or supplement to the Registration Statement or the
Prospectus) will contain all statements which are required to be
stated therein in accordance with the Act and the Regulations,
will comply with the Act and the Regulations, and will not
contain any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading, and no event will
have occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus which
has not been set forth in such an amendment or supplement; except
that no representation or warranty is made in this Section
2(a)(ii) with respect to statements or omissions made in reliance
upon and in conformity with written information furnished to the
Company with respect to the Underwriter by or on behalf of the
Underwriter expressly for
-3-
<PAGE> 4
inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement
thereto.
(iii) Neither the Commission nor the "blue sky" or
securities authority of any jurisdiction have issued an order
("Stop Order") suspending the effectiveness of the Registration
Statement, preventing or suspending the use of any Preliminary
Prospectus, the Prospectus, the Registration Statement refusing
to permit the effectiveness of the Registration Statement, or
suspending the registration or qualification of the Common Stock,
nor has any of such authorities instituted or threatened to
institute any proceedings with respect to a Stop Order.
(iv) The only subsidiaries (as defined in the Regulations)
of the Company are I.T. Technology Pty. Ltd., an Australian
corporation, Bickhams, Inc., a Delaware corporation and
Stampville.Com, Inc., a Delaware corporation (the
"Subsidiaries"). The Company and the Subsidiaries are
corporations duly organized, validly existing, and in good
standing under the laws of their respective jurisdictions of
incorporation. The Company and the Subsidiaries are each duly
qualified to do business and are in good standing in every
jurisdiction in which their ownership, leasing, licensing, or use
of property and assets or the conduct of their business makes
such qualification necessary.
(v) The authorized capital stock of the Company consists
of 25,000,000 shares of $.001 par value Preferred Stock of which
no shares have been issued or are outstanding and 100,000,000
shares of Common Stock, of which 16,500,000 shares are
outstanding. Each outstanding share of Common Stock and to the
knowledge of the Company each outstanding share of capital stock
of the Subsidiaries is validly authorized, validly issued, fully
paid, and nonassessable, has not been issued and is not owned or
held in violation of any preemptive rights of stockholders, and
to the knowledge of the Company in the case of the Subsidiaries
are owned of record and beneficially by the Company or the other
shareholders as scheduled in the Prospectus free and clear of all
liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts, except as otherwise
disclosed in the Prospectus. There is currently no outstanding
option, warrant, or other right calling for the issuance of, any
share of capital stock of the Company or to the knowledge of the
Company of the Subsidiaries or any security or other instrument
which by its terms is convertible into, exercisable for, or
exchangeable for capital stock of the Company, except as may be
described in the Prospectus. There is outstanding no security or
other instrument, which by its terms is convertible into or
exchangeable for capital stock of the Company.
(vi) The consolidated financial statements of the Company
as of and for the period ended December 31, 2000 included in the
Registration Statement and the Prospectus fairly present with
respect to the Company and the Subsidiaries the consolidated
financial position, the consolidated results of operations, and
the other information purported to be shown therein at the
respective dates and for the respective periods to which they
apply. Such financial statements have been prepared in accordance
with generally accepted accounting principles consistently
applied
-4-
<PAGE> 5
throughout the periods involved, are correct and complete,
and are in accordance with the books and records of the Company
and the Subsidiaries. The accountants whose report on the audited
financial statements is filed with the Commission as a part of
the Registration Statement are, and during the periods covered by
their report(s) included in the Registration Statement and the
Prospectus were independent certified public accountants with
respect to the Company and the Subsidiaries within the meaning of
the Act and the Regulations. Except for the consolidated
financial statements of the Company no other financial statements
are required by Form SB-2 or otherwise to be included in the
Registration Statement or the Prospectus.
(vii) There is no litigation, arbitration or other
governmental proceeding (formal or informal), or investigation
pending, threatened in writing, with respect to the Company, the
Subsidiaries, or any of their respective operations, businesses,
properties, or assets except as may be properly described in the
Prospectus or which to the knowledge of the Company do not or
will not have a material adverse effect upon the operations,
business, properties, or assets of the Company and the
Subsidiaries taken as a whole. Neither the Company nor the
Subsidiaries is in violation of, or in default with respect to,
any law, rule, regulation, order, judgment, or decree except as
may be properly described in the Prospectus or such as in the
aggregate do not now have and to the knowledge of the Company and
the Subsidiaries will not in the future have a material adverse
effect upon the operations, business, properties, or assets of
the Company and the Subsidiaries taken as a whole; nor is the
Company or the Subsidiaries required to take any action in order
to avoid any such violation or default.
(viii) Neither the Company nor the Subsidiaries has
received any notice that the Company, the Subsidiaries or any
other party is in violation or breach of, or in default with
respect to, complying with any material provision of any
contract, agreement, instrument, lease, license, arrangement, or
understanding which is material to the Company and the
Subsidiaries taken as a whole, and each such contract, agreement,
instrument, lease, license, arrangement, and understanding is in
full force and is the legal, valid, and binding obligation of the
parties thereto and is enforceable as to them in accordance with
its terms. Neither the Company nor the Subsidiaries is in
violation or breach of, or in default with respect to, any
material term of its certificate of incorporation (or other
charter document) or by-laws.
(ix) Except as set forth in the Prospectus, all patents,
patent applications, trademarks, trademark applications, trade
names, service marks, copyrights, franchises, and other
intangible properties and assets (all of the foregoing herein
referred to as "Intangibles") that the Company or the
Subsidiaries owns or has pending, or under which it is licensed,
are in good standing and to the knowledge of the Company
uncontested. Neither the Company nor the Subsidiaries is aware
that they have infringed, are infringing, or have received notice
of infringement with respect to asserted Intangibles of others.
To the knowledge of the Company or the Subsidiaries there is no
infringement by others of Intangibles of the Company or of the
Subsidiaries.
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<PAGE> 6
(x) The Company has all requisite power and authority to
execute, deliver, and perform this underwriting agreement (the
"Agreement"). All necessary corporate proceedings of the Company
have been duly taken to authorize the execution, delivery, and
performance of this Agreement by the Company. This Agreement has
been duly authorized, executed, and delivered by the Company, is
the legal, valid, and binding obligation of the Company, and is
enforceable as to the Company in accordance with its terms. No
consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or
other tribunal is required by the Company for the execution,
delivery, or performance of this Agreement by the Company (except
filings under the Act which have been or will be made before the
Closing Date and such consents consisting only of consents under
"blue sky" or securities laws which have been obtained at or
prior to the date of this Agreement). Except where the failure
would not have a material adverse effect on the Company taken as
a whole: (a) no consent of any party to any contract, agreement,
instrument, lease, license, arrangement to which the Company is a
party, or to which any of its properties or assets are subject,
is required for the execution, delivery, or performance of this
Agreement and (b) the execution, delivery, and performance of
this Agreement will not violate, result in a breach of, conflict
with any material provision of or (with or without the giving of
notice or the passage of time or both), entitle any party to
terminate or call a default under any contract, agreement,
instrument, lease, license, arrangement, or understanding, or
violate or result in a breach of any term of the certificate of
incorporation (or other charter document) or by-laws of the
Company or violate, result in a breach of, or conflict with any
law, rule, regulation, order, judgment, or decree binding on the
Company or to which any of their respective operations,
businesses, properties, or assets are subject.
(xi) The Common Stock is validly authorized and, when
issued and delivered in accordance with this Agreement, will be
validly issued, fully paid, and nonassessable and will not be
issued in violation of any preemptive rights of stockholders. The
Common Stock conforms to all statements relating thereto
contained in the Registration Statement or the Prospectus.
(xii) Neither the Company nor any of its officers,
directors, or affiliates (as defined in the Regulations), has
taken or will take, directly or indirectly, any action designed
to stabilize or manipulate the price of any security of the
Company, or which has caused or resulted in, or which might in
the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the
Company, to facilitate the sale or resale of the Common Stock.
(xiii) The Company has obtained from each of its
directors, officers and stockholders a written agreement that for
a period terminating ninety (90) days after the termination of
the offering period, without your prior written consent, offer,
pledge, sell, contract to sell, grant any option for the sale of,
or otherwise dispose of, directly or indirectly, any shares of
Common Stock or any security or other instrument which by its
terms is convertible into, exercisable for, or exchangeable for
shares of Common Stock, except (a) as set forth in the Prospectus
or (b) the sale of Common
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<PAGE> 7
Stock in the Offering by the Selling Stockholder or (c) in a
private placement or other transaction with a non U.S. national
or resident, outside the U.S. or its territories.
(xiv) On the Effective Date the Company shall have
complied with the requirements of the NASD with respect to the
Offering.
(b) The Selling Stockholder represents and warrants to,
and agrees with, the Underwriters that:
(i) Such Selling Stockholder has (A) caused a certificate
or certificates for the number of shares of Common Stock to be
sold by such Selling Stockholder hereunder to be delivered to
Comerica Bank - California, Los Angeles, California (the "Custody
Agent"), duly endorsed in blank or together with blank stock
powers duly executed, with such Selling Stockholder's signature
appropriately guaranteed, such certificate or certificates to be
held in escrow by the Custody Agent pursuant to an escrow
agreement for delivery, pursuant to the provisions hereof, on the
Closing Date, and (B) granted an irrevocable power of attorney to
the Custody Agent to purchase all requisite stock transfer tax
stamps, to sign this Agreement (including agreeing on the price
at which the Common Stock is to be sold to the public) and
thereafter to modify and amend this Agreement, to settle any
dispute relating to the terms of this Agreement, to waive any
condition to the obligations of such Selling Stockholder, and to
execute all other instruments and documents and to perform all
other acts necessary to carry out the provisions of this
Agreement on behalf of such Selling Stockholder (such custody
agreement, together with such irrevocable powers of attorney, are
collectively referred to herein as the "Custody Agreement").
(ii) Such Selling Stockholder has all requisite power and
authority to execute, deliver, and perform this Agreement and the
Custody Agreement. All necessary corporate proceedings of each
corporate Selling Stockholder have been duly taken to authorize
the execution, delivery, and performance of this Agreement and
the Custody Agreement by such Selling Stockholder. This Agreement
and the Custody Agreement have been duly authorized by such
Selling Stockholder and delivered by such Selling Stockholder,
are the legal, valid, and binding obligations of such Selling
Stockholder, and are enforceable as to such Selling Stockholder
in accordance with their respective terms. No consent,
authorization, approval, order, license, certificate, or permit
of or from, or declaration or filing with, any federal, state,
local, or other governmental authority or any court or other
tribunal is required by such Selling Stockholder for the
execution, delivery, or performance of this Agreement (except
filings under the Act which have been or will be made before the
Closing Date and such consents consisting only of consents under
"blue sky" or securities laws which have been obtained at or
prior to the date of this Agreement) or the Custody Agreement by
such Selling Stockholder. No consent of any party to any
contract, agreement, instrument, lease, license, arrangement, or
understanding, to which such Selling Stockholder is a party, is
required for the execution, delivery, or performance of this
Agreement or the Custody Agreement.
-7-
<PAGE> 8
(iii) Such Selling Stockholder has good title to the
shares of Stock to be sold by such Selling Stockholder pursuant
to this Agreement, free and clear of all liens, security
interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts (except those created by this
Agreement and the Custody Agreement), and when delivered in
accordance with this Agreement, each new investor will receive
good title to the shares of Common Stock purchased by them from
such Selling Stockholder, free and clear of all liens, security
interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts.
(iv) Neither such Selling Stockholder nor any of such
Selling Stockholder's affiliates (as defined in the Regulations)
has taken or will take, directly or indirectly, any action
designed to stabilize or manipulate the price of any security of
the Company, or which has caused or resulted in, or which might
in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the
Company, to facilitate the sale or resale of any of the Common
Stock.
(v) All information furnished or to be furnished to the
Company by or on behalf of such Selling Stockholder for use in
connection with the preparation of the Registration Statement and
the Prospectus does not and will not include any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(vi) Except as may be set forth in the Prospectus, such
Selling Stockholder has not incurred any liability for a fee,
commission, or other compensation on account of the employment of
a broker or finder in connection with the transactions
contemplated by this Agreement.
(vii) Such Selling Stockholder has received a copy of and
read the Registration Statement and the Prospectus and to the
best of such Selling Stockholders knowledge and belief the
Registration Statement and the Prospectus do not contain any
untrue statements of material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading.
3. Covenants of the Company and the Selling Stockholders.
(a) The Company covenants that it will:
(i) Use its best efforts to cause the Registration
Statement to become effective as promptly as possible and notify
you immediately, and confirm such notice in writing, (A) when the
Registration Statement and any post-effective amendment thereto
become effective, (B) of the receipt of any comments from the
Commission or the "blue sky" or securities authority of any
jurisdiction regarding the Registration Statement, any
post-effective amendment thereto, the Prospectus, or any
amendment or supplement thereto, and (C) of the receipt of any
notification with respect to a Stop Order or the initiation or
threatening of any proceeding with respect to a Stop Order. The
Company will use its best efforts to prevent the issuance of any
Stop Order and, if any Stop Order is issued, to obtain the
lifting thereof as promptly as possible.
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<PAGE> 9
(ii) During the time when a prospectus relating to the
Common Stock is required to be delivered hereunder or under the
Act or the Regulations, the Company shall comply so far as it is
able with all requirements imposed upon it by the Act, as now
existing and as hereafter amended, and by the Regulations, as
from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Common Stock in
accordance with the provisions hereof and the Prospectus. If, at
any time when a prospectus relating to the Common Stock is
required to be delivered hereunder or under the Act or the
Regulations, any event shall have occurred as a result of which,
in the reasonable opinion of counsel for the Company, the
Registration Statement or the Prospectus as then amended or
supplemented contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or if,
in the opinion of such counsel, it is necessary at any time to
amend or supplement the Registration Statement or the Prospectus
to comply with the Act or the Regulations, the Company will
immediately notify the Representative and promptly prepare and
file with the Commission an appropriate amendment or supplement
(in form and substance satisfactory to the Representative) which
will correct such statement or omission or which will effect such
compliance and will use its best efforts to have any such
amendment declared effective as soon as possible.
(iii) Deliver without charge to the Representative such
number of copies of each Preliminary Prospectus as may reasonably
be requested by the Representative and, as soon as the
Registration Statement, or any amendment thereto, becomes
effective or a supplement is filed, deliver without charge to the
Representative two copies of the executed Registration Statement,
including exhibits, and any amendment thereto, as the case may
be, and two copies of any supplement thereto, and deliver without
charge to the Representative such number of copies of the
Prospectus, the Registration Statement, and amendments and
supplements thereto, if any, without exhibits as the Underwriter
may request for the purposes contemplated by the Act.
(iv) Endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Common Stock for
offering and sale under the "blue sky" or securities laws of such
jurisdictions as you may designate subject to the Company's prior
approval; provided, however, that no such qualification shall be
required in any jurisdiction where, as a result thereof, the
Company would be subject to service of general process or to
taxation as a foreign corporation doing business in such
jurisdiction to which it is not then subject. In each
jurisdiction where such qualification shall be effected, the
Company will, unless you agree in writing that such action is not
at the time necessary or advisable, file and make such statements
or reports at such times as are or may be required by the laws of
such jurisdiction.
(v) For a period terminating ninety (90) days after the
termination of the offering period, not, without the prior
written consent of the Representative, offer, issue, sell,
contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any shares of Common Stock
(or any security or other
-9-
<PAGE> 10
instrument which by its terms is convertible into, exercisable
for, or exchangeable for shares of Common Stock), except as
provided in Section 1.
(vi) File no amendment or supplement to the Registration
Statement or Prospectus at any time, whether before or after the
effective date of the Registration Statement, unless such filing
shall comply with the Act and the Regulations and unless the
Underwriter shall previously have been advised of such filing and
furnished with a copy thereof, and the Underwriter and its
counsel shall have approved such filing.
(vii) Comply with all registration, filing, and reporting
requirements of the Exchange Act, which may from time to time be
applicable to the Company.
(viii) Comply with all provisions of all undertakings
contained in the Registration Statement.
(ix) File timely and accurate reports on Form SR with the
commission in accordance with Rule 463 of the Regulations or any
successor provision.
(x) If the principal stockholders, officers, or directors
of the Company are required by the "blue sky" or securities
authority of any jurisdiction selected by the Underwriter
pursuant to Section 3(a)(iv) to escrow or agree to restrict the
sale of any security of the Company owned by them for the Company
to qualify or register the Common Stock for sale under the "blue
sky" or securities laws of any such jurisdiction, cause each such
person to escrow or restrict the sale of such security on the
terms and conditions and in the form specified by the securities
administrator of such jurisdiction.
(xi) Use its best efforts to cause the application for
quotation of the Common Stock on NASDAQ SmallCap Market to be
approved as soon as possible.
(b) The Selling Stockholder covenants and agrees that for
a period terminating ninety (90) days after the termination of the
offering period, such Selling Stockholder will not, without the prior
written consent of the Representative, offer, pledge, sell, contract to
sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or any security or
other instrument which by its terms is convertible into, exercisable
for, or exchangeable for shares of Common Stock, except as provided in
the Prospectus or Section 1 hereof.
4. Payment of Expenses. The Company agrees to pay all expenses in
connection with (a) the preparation, printing, filing, distribution, and mailing
of the Registration Statement and the Prospectus and the printing, filing,
distribution, and mailing of this Agreement and related documents, including the
cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments or supplements thereto supplied to the Underwriter
in quantities as hereinabove stated, (b) the issuance, sale, transfer, and
delivery of the Common Stock, including any transfer or other taxes payable
thereon, (c) subject to the Company's prior approval, the qualification of the
Common Stock under state or foreign "blue sky" or securities laws, including the
costs of printing and mailing the preliminary and final "Blue Sky Survey" and
the fees of counsel for the Underwriter and the disbursements in connection
therewith, (d) the filing fees payable to the
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<PAGE> 11
Commission, the National Association of Securities Dealers, Inc. (the "NASD"),
and the jurisdictions in which such qualification is sought, (e) the
disbursements in connection therewith relating to all filings with the NASD and
(f) the reasonable expenses and fees of counsel acceptable to the Company.
5. Conditions of the Underwriters' Obligations. The obligation of
the Underwriters to offer and sell the Common Stock as exclusive agents for the
Company and the Selling Stockholder on a best efforts basis, as provided herein,
shall be subject, in their discretion, to the continuing accuracy of the
representations and warranties of the Company and any Selling Stockholder
contained herein and in each certificate and document contemplated under this
Agreement to be delivered to the Representative, as of the date hereof and as of
the Closing Date, to the performance by the Company and the Selling Stockholders
of their respective obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective
not later than 6:00 P.M., New York City Time, on the date of this
Agreement or such later date and time as shall be consented to in
writing by the Underwriter.
(b) At the time this Agreement is executed and at the
Closing Date, you shall have received the favorable opinion of Messrs.
Jeffer Mangels Butler & Marmaro, LLP, counsel for the Company, dated the
date of delivery, addressed to the Representative, to the effect that:
(i) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware. The Company is duly qualified to do business and are in
good standing in every jurisdiction in which its ownership,
leasing, licensing, or use of property and assets or the conduct
of its business makes such qualification necessary;
(ii) The authorized capital stock of the Company consists
of 25,000,000 shares of Preferred Stock of which none are issued
or outstanding and 100,000,000 shares of Common Stock, of which
16,500,000 shares are issued and outstanding. Each outstanding
share of Common Stock is validly authorized, validly issued,
fully paid, and nonassessable, free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts, except as set forth in the
Prospectus. Except as disclosed in the Prospectus, to the
knowledge of such counsel, there is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or
other right calling for the issuance of, any share of capital
stock of the Company or any security or other instrument which by
its terms is convertible into, exercisable for, or exchangeable
for capital stock of the Company, except as may be properly
described in the Prospectus;
(iii) To the knowledge of counsel, the Company is not in
violation or breach of, or in default with respect to, any
material provision of its certificates of incorporation (or other
charter document) or by-laws;
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<PAGE> 12
(iv) The Company has all requisite power and authority to
execute, deliver, and perform this Agreement. All necessary
corporate proceedings of the Company have been taken to authorize
the execution, delivery, and performance of this Agreement by the
Company. This Agreement has been duly authorized, executed, and
delivered by the Company, is the legal, valid, and binding
obligation of the Company, and (subject to applicable bankruptcy,
insolvency, and other laws affecting the enforceability of
creditors' rights generally) is enforceable as to the Company in
accordance with its terms;
(v) The Common Stock sold by the Company in this Offering
will be validly authorized and, when issued and delivered in
accordance with this Agreement, will be validly issued, fully
paid, and nonassessable and will not be issued in violation of
any preemptive rights of stockholders; and
(vi) The Registration Statement has become effective under
the Act. To the knowledge of such counsel, no Stop Order has been
issued and no proceedings for that purpose have been instituted
or threatened in writing.
(c) At the time this Agreement is executed and at the
Closing Date, you shall have received the favorable opinion of David
Freeman, Esq., counsel for the Selling Stockholder, dated the date of
delivery, addressed to the Representative, to the effect that:
(i) The Selling Stockholder is a corporation duly
organized, validly existing, and in good standing under the laws
of Victoria, Australia. The Selling Stockholder is a company is
duly qualified to do business and are in good standing in every
jurisdiction in which its ownership, leasing, licensing, or use
of property and assets or the conduct of its business makes such
qualification necessary;
(ii) The Common Stock sold by the Selling Stockholder in
this Offering will be validly authorized and, when issued and
delivered in accordance with this Agreement, will be validly
issued, fully paid, and nonassessable and will not be issued in
violation of any preemptive rights of stockholders; nor will such
Common Stock be subject to any liens, charges, commitments or
encumbrances of any kind,
(iii) The Selling Stockholder has full power and authority
to execute, deliver, and perform this Agreement and the Custody
Agreement. This Agreement and the Custody Agreement have been
duly executed and delivered by the Selling Stockholder, are the
legal, valid, and binding obligations of the Selling Stockholder,
and (subject to applicable bankruptcy, insolvency, and other laws
affecting the enforceability of creditors' rights generally) are
enforceable as to them in accordance with their respective terms.
No consent, authorization, approval, order, license, certificate,
or permit of or from, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or
other tribunal is required by the Selling Stockholder for the
execution, delivery, or performance of this Agreement (except
filings under the Act and such consents consisting only of
consents under "blue sky" or securities laws) or the Custody
Agreement by the Selling Stockholder. No consent of any party to
any contract, agreement, instrument, lease, license,
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<PAGE> 13
arrangement, or understanding known to such counsel to which the
Selling Stockholder is a party, or to which such Selling
Stockholder's properties or assets are subject, is required for
the execution, delivery, or performance of this Agreement or the
Custody Agreement; and the execution, delivery, and performance
of this Agreement and the Custody Agreement will not violate,
result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any
party to terminate or call a default under any such contract,
agreement, instrument, lease, license, arrangement, or
understanding, or violate, result in a breach of, or conflict
with any law, rule, regulation, order, judgment, or decree
binding on the Selling Stockholder or to which such Selling
Stockholder's operations, business, properties, or assets are
subject.
Such opinions may contain such qualifications, exceptions,
and assumptions and may rely upon such matters or other opinions as may
be agreed upon by the Underwriters and the counsel rendering the
opinion.
(d) At the Closing Date, you shall have received a
certificate of the Chief Executive Officer and of the Chief Financial
Officer of the Company and Stampville, dated the Closing Date, to the
effect that as of the date of this Agreement and as of the Closing Date,
the representations and warranties of the Company and Stampville
contained herein were and are accurate, and that as of the Closing Date
the obligations to be performed by the Company hereunder on or prior
thereto have been fully performed. At the Closing Date, you shall have
received a certificate of the Selling Stockholder, dated the Closing
Date, to the effect that as of the date of this Agreement and as of the
Closing Date, the representations and warranties of such Selling
Stockholder contained herein were and are accurate, and that as of the
Closing Date, the obligations to be performed by such Selling
Stockholder hereunder on or prior thereto have been fully performed.
(e) All proceedings taken in connection with the issuance,
sale, transfer and delivery of the Common Stock shall be satisfactory in
form and substance to the Underwriter.
(f) The NASD, upon review of the terms of the public
offering of the Common Stock, shall not have objected to the
Underwriter's participation in such offering.
Any certificate or other document signed by any officer of
the Company and delivered to the Underwriter or its counsel shall be
deemed a representation and warranty by the Company hereunder to the
Underwriter as to the statements made therein. Any certificate or other
document signed by or on behalf of the Selling Stockholder and delivered
to the Representative or its counsel shall be deemed a representation
and warranty by such Selling Stockholder hereunder to the Representative
as to the statements made therein. If any condition to the Underwriters'
obligations hereunder to be fulfilled prior to or at the Closing Date is
not so fulfilled, the Representative may terminate this Agreement or, if
the Representative so elects, in writing waive any such conditions which
have not been fulfilled or extend the time for their fulfillment.
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<PAGE> 14
6. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless the Underwriters and their
respective officers, directors, partners, employee's, agents, and
counsel, and each person, if any, who controls the Underwriters within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against any and all loss, liability, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 6, but
not be limited to reasonable attorneys' fees and any and all reasonable
expense incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and
all amounts paid in settlement of any claim or litigation) as and when
incurred arising out of, based upon, or in connection with (i) any
untrue statement or alleged untrue statement of a material fact
contained (A) in the Registration Statement or the Prospectus (as
amended and supplemented from time to time), or any amendment or
supplement thereto or (B) in any application or other document or
communication (in this Section 6 collectively referred to as an
"application") executed by or on behalf of the Company or based upon
written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Common Stock under the "blue
sky" or securities laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon and in conformity with written information
furnished to the Company as stated in Section 6(b) with respect to you
expressly for inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or
in any application, as the case may be, or (ii) any breach of any
material representation, warranty, covenant, or agreement of the Company
contained in this Agreement. The foregoing agreement to indemnify shall
be in addition to any liability the Company may otherwise have,
including liabilities arising under this Agreement.
(b) The Underwriters agree to severally, but not jointly,
indemnify and hold harmless the Company, the Selling Stockholder, each
director of the Company or the Selling Stockholder, each officer of the
Company or the Selling Stockholder who shall have signed the
Registration Statement, and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, to the same extent as the foregoing indemnity from the
Company to the Underwriters in Section 6(a), but only with respect to
statements or omissions, if any, made in the Registration Statement, or
the Prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, or in any application in reliance upon
and in conformity with written information furnished to the Company as
stated in this Section 6(b) with respect to the Underwriters expressly
for inclusion in any Preliminary Prospectus, the Registration Statement,
or the Prospectus, or any amendment or supplement thereto, or in any
application, as the case may be; provided, however, that the obligation
of the Underwriters to provide indemnity under the provisions of this
Section 6(b) shall be limited to the amount which represents the product
of the number of shares of Common Stock sold by the Underwriters as
agent for the Company hereunder and the public offering price per share
set forth on the cover page of the Prospectus. For all purposes of this
Agreement, the amounts of the selling concession and re-allowance and
the information set forth under "Underwriting" and "Over-Attornment
Option" set forth in the Prospectus constitute the only information
furnished in
-14-
<PAGE> 15
writing by or on behalf of the Underwriters expressly for inclusion in
any Preliminary Prospectus, the Registration Statement, or the
Prospectus (as from time to time amended or supplemented), or any
amendment or supplement thereto, or in any application, as the case may
be.
(c) The Selling Stockholder agrees to indemnify and hold
harmless the Company, each director of the Company, each officer of the
Company who shall have signed the Registration Statement, the
Representative, the Underwriter, and each officer, director, partner,
employee, agent, and counsel of the Representative and the Underwriter,
and each other person, if any, who controls the Company, the
Representative or the Underwriters within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Representative and the
Underwriters in Section 6(a), but only with respect to (i) statements or
omissions, if any, made in any Preliminary Prospectus, the Registration
Statement, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any
application in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Selling Stockholder
expressly for inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or
in any application, as the case may be, or (ii) any breach of any
representation, warranty, covenant, or agreement of such Selling
Stockholder contained in this Agreement.
(d) If any action is brought against any Representative,
the Underwriter, the Company or the Selling Stockholder or any of their
officers, directors, partners, employees, agents, counsel, or
controlling persons (an "indemnified party") in respect of which
indemnity may be sought against any other party hereto pursuant to the
foregoing paragraphs, such indemnified party or parties shall promptly
notify all the parties (the "indemnifying parties") against whom
indemnification is to be sought in writing of the institution of such
action (but the failure so to notify shall not relieve the indemnifying
parties from any liability they may have other than pursuant to this
Section 6(d)) and the indemnifying parties shall promptly assume the
defense of such action, including the employment of counsel
(satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to
employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party or parties unless the employment of such counsel shall have been
authorized in writing by the indemnifying parties in connection with the
defense of such action or the indemnifying parties shall not have
promptly employed counsel satisfactory to such indemnified party or
parties to have charge of the defense of such action or such indemnified
party or parties shall have reasonably concluded that there may be one
or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to one
or more of the indemnifying parties, in any of which events such fees
and expenses shall be borne by the indemnifying parties and the
indemnifying parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties. Anything in
this paragraph to the contrary notwithstanding, no indemnifying party
shall be liable for any settlement of any such claim or action effected
without its written consent. In addition, the Company and the Selling
Stockholder agree promptly to notify the Underwriter of the commencement
of any litigation or proceedings
-15-
<PAGE> 16
against the Company or any of its officers or directors in connection
with the sale of the Common Stock, any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or
supplement thereto, or any application.
(e) To provide for just and equitable contribution, if (i)
an indemnified party makes a claim for indemnification pursuant to
Section 6(a), 6(b), or 6(c) (subject to the limitations thereof) but it
is found in a final judicial determination, not subject to further
appeal, that such indemnification may not be enforced in such case, even
though this Agreement expressly provides for indemnification in such
case or (ii) any indemnified or indemnifying party seeks contribution
under the Act, the Exchange Act, or otherwise, then the Company
(including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed the
Registration Statement, any controlling person of the Company as one
entity and the Underwriter, in the aggregate (including for this purpose
any contribution by or on behalf of an indemnified party) as a second
entity, shall contribute to the losses, liabilities, claims, damages,
and expenses whatsoever to which any of them may be subject, so that the
Underwriter is responsible for the proportion thereof equal to the
percentage which the underwriting discount per share set forth on the
cover page of the Prospectus represents of the public offering price per
share set forth on the cover page of the Prospectus and the Company is
responsible for the remaining portion based upon the proceeds received
or which may have been received by such parties as a result of this
Offering; provided, however, that if applicable law does not permit such
allocation, then other relevant equitable considerations such as the
relative fault of the Company and you in the aggregate in connection
with the facts which resulted in such losses, liabilities, claims,
damages, and expenses shall also be considered. The relative fault, in
the case of an untrue statement, alleged untrue statement, omission, or
alleged omission, shall be determined by, among other things, whether
such statement, alleged statement, omission, or alleged omission relates
to information supplied by the Company including the Selling
Stockholder, or by you, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such
statement, alleged statement, omission, or alleged omission. The Company
including the Selling Stockholder, and you agree that it would be unjust
and inequitable if the respective obligations of the Company and you for
contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses (even if
you and the other indemnified parties were treated as one entity for
such purpose) or by any other method of allocation that does not reflect
the equitable considerations referred to in this Section 6(e). No person
guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. For purposes of this
Section 6(e), each person, if any, who controls you within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act and each
officer, director, partner, employee, agent, and your counsel shall have
the same rights to contribution as you, each person, if any, who
controls a Selling Shareholder within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as such Selling Shareholder, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, each officer of the Company who shall
have signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the company, subject in
each case to the provisions of this Section 6(e). Anything in this
Section 6(e) to the contrary notwithstanding, no party shall
-16-
<PAGE> 17
be liable for contribution with respect to the settlement of any claim
or action effected without its written consent. This Section 6(e) is
intended to supersede any right to contribution under the Act, the
Exchange Act, or otherwise.
7. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date, and such representations, warranties. covenants,
and agreements of the Underwriter, the Company, and the Selling Stockholder,
including the indemnity and contribution agreements contained in Section 6,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter or any indemnified person,
or by or on behalf of the Company, the Selling Stockholders, or any person or
entity which is entitled to be indemnified under Section 6(b), and shall survive
termination of this Agreement or the delivery of the Common Stock to the new
investors.
8. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 10:00 A.M.,
New York City Time, on the first full business day following the day on
which the Registration Statement becomes effective. The Representative
or the Company may prevent this Agreement from becoming effective
without liability of any party to any other party, except as noted below
in this Section 8, by giving the notice indicated in Section 8(d) before
the time this Agreement becomes effective.
(b) If the public offering price of the Common Stock has
not been determined as provided for in Section 1 prior to 4:30 P.M., New
York City Time, on the third full business day after the effective date
of the Registration Statement, this Agreement may be terminated at any
time thereafter either by you or by the Company by giving notice to the
other unless before such termination the purchase price for the Common
Stock has been so determined.
(c) The Representative shall have the right to terminate
this Agreement at any time prior to the Closing Date by giving notice to
the Company if any domestic or international event, act, or occurrence
has materially in disrupted, or in the opinion of the Representative
will in the immediate future materially disrupt, the securities markets;
or if there shall have been a general suspension of, or a general
limitation on prices for, trading in securities on NASDAQ; or if there
shall have been an outbreak of major hostilities or other national or
international calamity; or if a banking moratorium has been declared by
a state or federal authority; or if a moratorium in foreign exchange
trading by major international banks or persons has been declared; or if
there shall have been a material interruption in the mail service or
other means of communication within the United States; or if the Company
or Stampville shall have sustained a material or substantial loss by
fire, flood, accident, hurricane, earthquake, theft, sabotage, or other
calamity or malicious act which, whether or not such loss shall have
been insured, will, in the opinion of the Representative, make it
inadvisable to proceed with the public offering; or if there shall have
been such change in the market for the Company's securities or
securities in general or in political, financial, or economic conditions
as in the judgment of the Representative makes it inadvisable to proceed
with the public offering on the terms contemplated by the Prospectus.
-17-
<PAGE> 18
(d) If the Representative elects to prevent this Agreement
from becoming effective, as provided in this Section 8, or to terminate
this Agreement, the Underwriter shall notify the Company promptly by
telephone, telex, or telegram, confirmed by letter. If, as so provided,
the Company elects to prevent this Agreement from becoming effective or
to terminate this Agreement, the Company shall notify the Representative
promptly by telephone, telex, or telegram, confirmed by letter.
9. Notices.
All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to you shall be
mailed, certified mail, return receipt requested, delivered personally or by
messenger, or via facsimile with fax confirmation of receipt or if by letter, to
Kensington Capital Corp., 4910 Thirteenth Avenue, Brooklyn, New York 11219,
Attention: Abraham Silver; with a copy to Heller, Horowitz & Feit, 292 Madison
Avenue, New York, New York 10017, Attention: Henry W. Hocherman, Esq., Facsimile
No.: (212) 696-9459; or if sent to the Company at 34-36 Punt Road, Windsor,
Victoria 3181, Melbourne, Australia, Attention: Secretary, and to the Selling
Stockholder at Level 9 South, 161 Collins Street, Melbourne, Victoria 3000,
Australia, with a copy to Jeffer, Mangels, Butler & Marmaro LLP, 2121 Avenue of
the Stars, 10th Floor, Los Angeles, California 90067, Attn: Barry L. Burten,
Esq.; or if sent to the Selling Stockholder at: Instanz Nominees Pty. Ltd.,
Level 9 South, 161 Collins Street, Melbourne, Victoria 3000, Australia, Attn.:
Helen Abeles, Facsimile 011-613-9650-3550, with a copy to David Freeman, Esq.,
Level 11, 350 Collins Street, Melbourne, Victoria 3000, Australia, Facsimile:
011-613-9606-0136. All notices hereunder shall be effective upon receipt by the
party to which it is addressed.
10. Construction. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to conflict of
laws. Time is of the essence in this Agreement.
11. Acknowledgments. The parties hereto acknowledge, understand
and accept that Jeffer Mangels Butler & Marmaro, Los Angeles, California, have
acted as counsel to the Company in connection with all legal matters relating to
the Offering described in Section 1 of this Agreement.
-18-
<PAGE> 19
If the foregoing correctly sets forth the understanding among
you, the Company, and the Selling Stockholder, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
The "Company"
I.T. Technology, Inc.
By
---------------------------------------
Levi Mochkin, Chief Executive Officer
"Selling Stockholder"
Instanz Nominees Pty. Ltd.
By
-------------------------------------
Helen Abeles,
--------------------
Accepted as of the date first above written.
, New York
- ------------
- ----------------------------
By:
-----------------------------------
,
-------------------- -------------
-19-
<PAGE> 20
EXHIBIT "A"
<TABLE>
<CAPTION>
Proceeds from the Offering Underwriters Commission*
-------------------------- ------------------------
<S> <C> <C>
At least $5,000,000 but less than $6,000,000 8.0%
At least $6,000,000 but less than $7,000,000 7.9%
At least $7,000,000 but less than $8,000,000 7.8%
At least $8,000,000 but less than $9,000,000 7.7%
At least $9,000,000 but less than $10,000,000 7.6%
At least $10,000,000 but less than $11,000,000 7.5%
At least $11,000,000 but less than $12,000,000 7.4%
At least $12,000,000 but less than $13,000,000 7.3%
At least $13,000,000 but less than $14,000,000 7.2%
At least $14,000,000 but less than $15,000,000 7.1%
At least $15,000,000 but less than $16,000,000 7.0%
At least $16,000,000 but less than $17,000,000 6.8%
At least $17,000,000 but less than $18,000,000 6.6%
At least $18,000,000 but less than $19,000,000 6.4%
At least $19,000,000 but less than $20,000,000 6.2%
At least $20,000,000 but less than $21,000,000 6.0%
At least $21,000,000 but less than $22,000,000 5.8%
At least $22,000,000 but less than $23,000,000 5.6%
At least $23,000,000 but less than $24,000,000 5.4%
At least $24,000,000 but less than $25,000,000 5.2%
$25,000,000 or more 5.0%
</TABLE>
- -------------------
* The percentage of the proceeds raised designated as the Underwriters
commission set forth opposite the various amounts of proceeds set forth below
shall be payable on the entire amount of proceeds raised in the Offering. So
that if $20,000,000 is raised the Underwriters commission shall be $1,200,000
and if $25,000,000 is raised the Underwriters commission shall be $1,250,000.
-20-
<PAGE> 1
EXHIBIT 4
I.T. TECHNOLOGY, INC.
COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 45069H 10 5
SEE REVERSE FOR
CERTAIN DEFINITIONS
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $0.01 EACH OF THE
COMMON STOCK OF I.T. TECHNOLOGY, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
and the shares represented hereby are issued and shall be held subject to all
of the provisions of the Certificate of Incorporation and of any amendments
thereto (copies of which are on file at the office of the Transfer Agent) to all
of which the holder by acceptance hereof, assents. This certificate is not
valid unless countersigned by the Transfer Agent and registered by the
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated
CHIEF EXECUTIVE OFFICER
SECRETARY
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NY) TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
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.
TEN COM-
TEN ENT-
JT TEN-
as tenants in common
as tenants by the entireties
as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT-...............Custodian................
(Cust) (Minor)
under Uniform Gifts to Minors
Act.............
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
PLEASE IDENTIFY SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
shares
of the capital stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT 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:
THE SIGNATURE(S) 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.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
-1-
<PAGE> 1
EXHIBIT 4.2
THE SALE OF THIS SECURITY HAS NOT BEEN REGISTERED PURSUANT TO THE FEDERAL
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS; ACCORDINGLY, THIS SECURITY
IS NOT FREELY TRANSFERABLE AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE, TRANSFER OR ASSIGNMENT.
Void after 5:00 p.m. New York Time, on May __, 2003
Non-Transferable Warrant to Purchase 250,000 Shares of Common Stock
--------------------------------
WARRANT TO PURCHASE 250,000 SHARES OF COMMON STOCK
OF
I.T. TECHNOLOGY, INC.
--------------------------------
This is to Certify That, FOR VALUE RECEIVED, KENSINGTON CAPITAL
CORP. ("Holder"), is entitled to purchase, subject to the provisions of this
Warrant, from I.T. TECHNOLOGY, INC., a Delaware corporation ("Company"), TWO
HUNDRED FIFTY THOUSAND SHARES (250,000) of the fully paid, validly issued and
nonassessable shares of Common Stock of the Company ("Common Stock") at any time
or from time to time during the period from the date hereof, through and
including May __, 2003, but not later than 5:00 p.m. New York Time, on May __,
2003 ("Exercise Period"). The price to be paid for each share of Common Stock
shall be $6.00 per share during the first (1st) year of the Exercise Period,
$7.00 per share during the second (2nd) year of the Exercise Period and $8.00
per share during the third (3rd) year of the Exercise Period. The shares of
Common Stock deliverable upon such exercise, and as adjusted from time to time,
are hereinafter sometimes referred to as "Warrant Shares" and the respective
exercise price of a share of Common Stock in effect at any time and as adjusted
from time to time is hereinafter sometimes referred to as the "Exercise Price."
1. Exercise of Warrant. Holder may exercise this Warrant in whole
or in part, at any time or from time to time on any Business Day on or prior to
the Expiration Date, by delivering to the Company a duly executed notice (a
"Notice of Exercise") in the form of Annex A hereto, by payment to the Company
of the Exercise Price per Warrant Share in an amount equal to the product of (i)
the Exercise Price times (ii) the number of Warrant Shares as to which this
Warrant is being exercised.
<PAGE> 2
As soon as practicable after the Company shall have received such
Notice of Exercise and the required payment, the Company shall execute and
deliver or cause to be executed and delivered, in accordance with such Notice of
Exercise, to Holder at the address set forth in such Notice of Exercise a
certificate or certificates representing the number of shares of Common Stock
specified in such Notice of Exercise. The Warrant shall be deemed to have been
exercised and such share certificate or certificates shall be deemed to have
been issued, and Holder shall be deemed for all purposes to have become a holder
of record of shares of Common Stock, as of the date that such Notice of Exercise
and any required payment shall have been received by the Company.
Holder shall surrender this Warrant certificate of the Company
when it delivers the Notice of Exercise, and in the event of a partial exercise
of the Warrant, the Company shall execute and deliver to Holder, at the time the
Company delivers the share certificate or certificates issued pursuant to such
Notice of Exercise, a new Warrant certificate for the unexercised portion of the
Warrant, but in all other respect identical to this Warrant certificate.
The Company shall not be require to issue fractional shares of
Common Stock upon an exercise of the Warrant. If any fraction of a share would,
but for this restriction, be issuable upon an exercise of the Warrant, in lieu
of delivering such fractional share, the Company shall pay to Holder, in cash,
an amount equal to the same fraction times the FMV for the Common Stock (which,
for the purposes of this Warrant, shall mean the average closing bid price of
the Common Stock on the principal market for the trading of the Common Stock for
the ten trading days prior to the date of the Notice of Exercise) immediately
prior to the date of such exercise.
The Company shall pay all expenses, taxes and other charges
payable in connection with the preparation, issuance and delivery of
certificates for the Warrant Shares and any new Warrant certificates.
1. Reservation of Shares. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrants.
2. Rights of Holder. Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of Holder are limited to those expressed in the Warrant and are
not enforceable against the Company except to the extent set forth herein.
3. Adjustment Provisions. The respective Exercise Price in effect
at any time and the number and kind of securities purchasable upon the exercise
of the Warrants shall be subject to adjustment from time to time upon the
happening of certain events as follows:
-2-
<PAGE> 3
3.1 In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
respective Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the respective Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
3.2 Whenever the respective Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to Subsection 4.1 above, the
number of Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the respective number of Shares initially issuable
upon exercise of this Warrant by the respective Exercise Price in effect on the
date hereof and dividing the product so obtained by the respective Exercise
Price, as adjusted.
3.3 No adjustment in the respective Exercise Price shall
be required unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any adjustment
which by reason of this Subsection 4.3 is not required to be made shall be
carried forward and taken into account in any subsequent adjustment required to
be made hereunder. All calculations under this Section 4 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 4 to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section 4, as it shall
determine, in its sole discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall not result in
any Federal Income tax liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).
3.4 In the event that at any time, as a result of an
adjustment made pursuant to Subsection 4.1 above, Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsections 4.1 to 4.3 inclusive above.
3.5 Irrespective of any adjustments in the respective
Exercise Price or the related number or kind of share purchasable upon exercise
of this Warrant, Warrants
-3-
<PAGE> 4
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
4. Officer's Certificate. Whenever the respective Exercise Price
shall be adjusted as required by the provisions of the foregoing Section 4, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office, an officer's certificate showing the adjusted
respective Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of related additional shares of Common Stock, if any, and such other
facts as shall be necessary to show the reason for and the manner of computing
such adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section 1 and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
Holder or any such holder.
5. Notices to Warrant Holder. So long as this Warrant shall be
outstanding, if there occurs a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to Holder, at least fifteen days prior the date
specified below, a notice containing a brief description of the proposed action
and stating the date on which such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed, as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not effect the action taken by the Company.
6. Reclassification, Reorganization or Merger. In case of
any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or merger
of the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon exercise of
this Warrant) or in case of any sale, lease or conveyance to another corporation
of the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such
-4-
<PAGE> 5
reclassification, change, consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section 7 shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection 4.1 hereof.
7. No Registration under Securities Act. Neither this Warrant nor
any shares issuable upon the exercise of this Warrant have been registered under
the Securities Act or under the securities laws of any state. In issuing this
Warrant the Company has relied upon the exemption from registration provided by
Section 4(2) of the Securities Act for transactions by an issuer not involving
any public offering. Holder has represented to the Company that it has not
acquired this Warrant with a view to distribution and that any shares issuable
upon exercise of this Warrant will not be acquired by it with a view to
distribution. Holder acknowledges by acceptance of the Warrant that the sale of
the Warrant or of any shares issuable upon exercise of this Warrant, under
certain circumstances may be deemed to constitute a distribution within the
meaning of, and require registration under the Securities Act.
8. Piggy-Back Registration.
8.6 Notice of Registration. If at any time the Company
shall determine to register any of its equity securities, either for its own
account or for the account of any holder of its Common Stock, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Rule 145 transaction, or (iii) a registration in which the
only equity security being registered is Common Stock issuable upon conversion
of convertible debt securities which are also being registered, the Company
will:
(a) promptly give to Holder written notice thereof,
and
(b) subject to the limitations set forth herein,
include in such registration (and any related qualifications including
compliance with Blue Sky laws), and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made
within ten days after the date of such written notice from the Company, by
Holder.
8.7 Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise Holder as a part of the written notice given pursuant to
this Section. In such event, the right of Holder to registration pursuant to
this Section shall be conditioned upon such Holder's
-5-
<PAGE> 6
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting shall be limited to the extent provided herein.
If Holder proposes to distribute their securities
through such underwriting, Holder shall (together with the Company and the other
holders distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the amount of all shares held by the existing shareholders
of the Company. The Company shall so advise Holder and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall, unless the Company has agreed otherwise with any shareholder, be
allocated among all the shareholders requesting to be included in the
registration and underwriting in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by them at the time of filing
the registration statement and among all other holders of registration rights
with the Company in accordance with their agreements. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares. If Holder disapproves of the terms of any such underwriting,
Holder may elect to withdraw therefrom by written notice to the Company.
8.8 Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
8.9 Subordination of Registration Rights. Notwithstanding
anything contained to the contrary in this Warrant, Holder's right to request
registration of Registrable Securities pursuant to this Warrant shall be subject
to the prior exercise or waiver of any and all registration rights granted to
Instanz Nominees Pty. Ltd. ("Instanz"). Holder recognizes that Holder shall not
be entitled to register any Registrable Securities pursuant to this Warrant
unless Instanz"s rights have lapsed, or been exercised, or have been waived, and
that Instanz is under no obligation whatsoever to exercise or waive any such
rights; consequently, the registration rights granted herein may be severely
limited.
8.10 Indemnification. The Company shall indemnify and hold
harmless Holder from and against any and all losses, claims, damages and
liabilities caused by any untrue statement of a material fact contained in any
registration statement filed by the Company under the Securities Act by reason
of Section 9 hereof, any post-effective amendment to such registration
statement, or any prospectus included therein, or caused by any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission based
upon information furnished or required to be furnished in writing to the Company
by Holder (or the
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<PAGE> 7
representatives or agents of Holder) expressly for use therein, which
indemnification shall include each person, if any, who controls Holder within
the meaning of the Securities Act and each officer, director, employee and agent
of Holder; provided, however, that the indemnification in this Section with
respect to any prospectus shall not inure to the benefit of Holder (or to the
benefit of any person controlling Holder) on account of any such loss, claim,
damage or liability arising from the sale of Registerable Securities by Holder,
if a copy of a subsequent prospectus correcting the untrue statement or omission
in such earlier prospectus was provided to Holder by the Company prior to the
subject sale and the subsequent prospectus was not delivered or sent by Holder
to the purchaser of such securities prior to such sale; and provided further,
that the Company shall not be obligated to so indemnify Holder or any other
person referred to above unless Holder or other person, as the case may be,
shall at the same time indemnify the Company, its directors, each officer
signing the registration statement and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any and all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement or any prospectus required
to be filed or furnished in connection with such public offering or caused any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or omission
based upon information furnished in writing to the Company by Holder expressly
for use therein.
If for any reason the indemnification provided for in the
preceding paragraph is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim, damage,
liability or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
8.11 Registration Expenses. All expenses, filing fees and
other costs incurred by the Company in connection with any registration of
securities pursuant to this Section 9 (exclusive of underwriting discounts,
selling commissions and non-accountable expense allowances applicable to any
sale of registered securities and any fees and costs of legal counsel engaged by
Holder) shall be borne by the Company.
8.12 Prospectus. In the case of each registration effected
by the Company pursuant to the provisions of Section 9 hereof, the Company will
(i) furnish to Holder such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as Holder may reasonably request in order to
facilitate the disposition of the Registerable Securities owned by Holder; and
(ii) notify Holder at any time when a prospectus relating thereto is required to
be delivered under the Securities Act of the happening of any event as a result
of
-7-
<PAGE> 8
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, in which case
the Company agrees to promptly amend and/or supplement, at the Company's cost
and expense, the prospectus and registration statement in order to correct any
such omission or untrue statement.
9. Registerable Securities. For purposes hereof, the term
"Registerable Securities" means the shares of Common Stock issued or issuable
upon exercise of the Warrants.
10. Venue. The terms of this Agreement shall be construed in
accordance with the laws of the State of New York. The exclusive venue with
respect to any claims or disputes under this Agreement shall be the appropriate
State or Federal Courts located in New York, New York.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be signed and attested by the Undersigned, each being duly authorized, as of the
date below.
I.T. TECHNOLOGY, INC.,
a Delaware corporation
By:
------------------------------------
Its:
-----------------------------------
Dated: May ____, 2000
ATTEST:
- ----------------------------------
, Secretary
- ----------------------
-8-
<PAGE> 9
EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing Shares of Common Stock of I.T. Technology,
Inc. at $____ per share.
--------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
----------------------------------------------------------------
(Please typewrite or print in block letters)
Address
--------------------------------------------------------------
Social Security of Federal I.D. Number:
------------------------------
THE UNDERSIGNED REPRESENTS AND WARRANTS TO I.T. TECHNOLOGY, INC. THAT THE
CONDITIONS FOR EXERCISE OF THE WITHIN WARRANT SET FORTH IN THE FIRST SENTENCE OF
THE FIRST PARAGRAPH ABOVE HAVE BEEN FULLY COMPLIED WITH.
CHECK APPROPRIATE BOX
[ ] Payment of $__________ enclosed
[ ] Cashless Exercise Option
Signature _____________________________________________
(Sign exactly as your name appears on the first page of this Warrant)
------------------------------------------------------
PRINT NAME
-1-
<PAGE> 1
EXHIBIT 4.3
SUBSCRIPTION AGREEMENT
FOR SHARES OF COMMON STOCK OF
I.T. TECHNOLOGY, INC.
This Subscription Agreement is made by and between I.T. Technology, Inc., a
Delaware corporation (the "Company") and the undersigned prospective purchaser
who is subscribing hereby for shares of the Company"s common stock (the
"Shares"), pursuant to the Prospectus of the Company dated May __, 2000 (the
"Prospectus," which term includes all exhibits and any amendments thereof and
supplements thereto), distributed pursuant to a Registration Statement on Form
SB-2, as amended, Registration No. 333-30364 and declared effective by the
United States Securities and Exchange Commission.
In consideration of the Company"s agreement to accept the undersigned as a
security holder of the Company upon the terms and conditions set forth herein
and as further set forth in the Prospectus, the undersigned agrees and
represents as follows:
A. SUBSCRIPTION
1. The undersigned hereby irrevocably subscribes to purchase Shares at
$5.00 per Share in the amount indicated on the signature page hereto.
Simultaneously with the execution of this Subscription Agreement, the
undersigned is paying and delivering to the Company, at the address set forth
below, the amount set forth on the signature page below, in the form of a check
or wire transfer (the "Payment") payable to "Comerica Bank, I.T. Technology
Escrow Account" to be deposited with the Comerica Bank (the "Escrow Agent").
THE UNDERSIGNED ACKNOWLEDGES AND AGREES THAT BY EXECUTING AND DELIVERING
THIS SUBSCRIPTION AGREEMENT ALONG WITH PAYMENT FOR THE AMOUNT OF SHARES
SUBSCRIBED FOR HEREUNDER, THE UNDERSIGNED IS MAKING AN IRREVOCABLE COMMITMENT TO
PURCHASE THE SHARES PURSUANT TO THE TERMS CONTAINED HEREIN AND IN THE
PROSPECTUS. SUCH COMMITMENT BY THE UNDERSIGNED MAY NOT BE MODIFIED, REVOKE OR
WITHDRAWN, NOR SHALL THE UNDERSIGNED BE ENTITLED TO THE RETURN OF ANY FUNDS
TENDERED TO THE ESCROW AGENT, EXCEPT AS EXPRESSLY PURSUANT TO SECTION 2.
PROVIDED HEREIN
2. The undersigned understands that the Payment will be held in escrow
for his benefit by the Escrow Agent pursuant to the terms of the Escrow
Agreement (the "Escrow Agreement") dated as of May ___, 2000 between the Company
and the Escrow Agent. The offering period will terminate on August __, 2000
which date may be extended or advanced without notice to subscribers until not
later than September __, 2000, by the mutual agreement of the Underwriter and
the Company. The Payment will be returned promptly, with any interest earned
thereon less expenses associated with the Escrow Account, on the basis described
in the Prospectus, in the event that for any reason the purchase and sale of the
Shares is not consummated within thirty days following termination of the
offering period (such date is hereinafter referred to as the Closing Date and
shall in no event be later than September __, 2000) or in the event that the
undersigned"s subscription is rejected.
B. GENERAL PROVISIONS
1. All pronouns and any variations thereof used herein shall be deemed to
refer to the masculine, feminine, singular, or plural as the identity of the
person or persons may require.
<PAGE> 2
2. Neither this Subscription Agreement nor any provisions hereof shall be
waived, modified, changed, discharged, terminated, revoked, or canceled except
by an instrument in writing signed by the party against whom any change,
discharge, or termination is sought.
3. Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed to the other
party at the address of such party set forth in the Prospectus, as amended from
time to time, or, in the case of the undersigned, at the address provided in
this Subscription Agreement, or to such other address furnished by notice given
in accordance with this Article B.
4. Failure of the Company to exercise any right or remedy under this
Subscription Agreement or any other agreement between the Company and the
undersigned, or otherwise, or delay by the Company in exercising such right or
remedy, will not operate as a waiver thereof. No waiver by the Company will be
effective unless and until it is in writing and signed by the Company.
5. This Subscription Agreement shall be enforced, governed and construed
in all respects in accordance with the laws of the State of California, as such
laws are applied by California courts to agreements entered into and to be
performed in California and shall be binding upon the undersigned, the
undersigned"s heirs, estate, legal representatives, successors and assigns and
shall inure to the benefit of the Company and its successors and assigns. The
parties agree that any dispute hereunder shall be adjudicated in State or
Federal court located in the State of California of County of Los Angeles.
6. In the event that any provision of this Subscription Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
7. This Subscription Agreement and the Prospectus constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersede any and all prior or contemporaneous representations, warranties,
agreements and understandings in connection therewith. Except as otherwise
provided in this Article R, this agreement may be amended only by a writing
executed by all parties hereto.
8. Title to the Shares shall be taken as follows (circle one):
(a) Husband and Wife, as Community Property;
(b) Joint Tenants;
(c) Tenants in Common;
(d) Separate Property;
(e) Other (e.g., corporation, partnership, custodian trustee, etc.):
<PAGE> 3
PLEASE NOTE
IF YOU ARE DELIVERING THIS SUBSCRIPTION AGREEMENT TO THE COMPANY PLEASE SEND IT
TO:
I.T. TECHNOLOGY, INC.
C/O KESINGTON CAPITALCORP.
4910 13TH AVE., BROOKLYN
NEW YORK 11219
ATTENTION: ABE SILVER.
UNTIL THIS AGREEMENT AND THE PURCHASE PRICE ARE RECEIVED BY KENSINGTON THE
PURCHASER BEARS ALL RISK OF LOSS. THE COMPANY STRONGLY RECOMMENDS THAT THE
PURCHASER SEND THIS AGREEMENT VIA MESSENGER, FEDERAL EXPRESS OR COMPARABLE
COURIER SERVICE OR IF BY MAIL REGISTERED OR CERTIFIED MAIL RETURN RECEIPT
REQUESTED.
<PAGE> 4
I.T. TECHNOLOGY, INC.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
This page constitutes the Signature Page for the Subscription Agreement.
The undersigned represents to you that (a) the information contained herein is
complete and accurate on the date hereof and may be relied upon by you and (b)
the undersigned will notify you immediately of any change in any of such
information occurring prior to the acceptance of the subscription and will
promptly send you written confirmation of such change. The undersigned hereby
certifies that he has read and understands the Prospectus and this Subscription
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this ________ day of __, 2000..
- --------------------------- ---------------------------------
Number of Shares Subscribed NAME OF PURCHASER
for at $5.00 per Share
$-------------------------- ---------------------------------
Total Purchase Price Signature
- --------------------------- ---------------------------------
Social Security Number Title of Authorized Signatory if
or Federal I.D. Number Purchaser is a corporation,
partnership or other entity
---------------------------------
Signature of Spouse or Co-owner
Purchaser's Address to which all
correspondence should be sent:
---------------------------------
Street Address
---------------------------------
State Zip Code
<PAGE> 1
EXHIBIT 5
[JEFFER, MANGELS, BUTLER & MARMARO LLP LETTERHEAD]
May 8, 2000
60246-0005
I.T. Technology, Inc.
34-36 Punt Road
Windsor 3181
Victoria, Australia
Re: I.T. Technology, Inc. (the "Company") Registration Statement
For Offering of Common Stock, $0.001 par value ("Common Stock")
Gentlemen:
At your request, we have examined the Registration Statement on Form SB-2,
as amended, Registration No. 333-30364 (the "Registration Statement"), filed by
the Company with the Securities and Exchange Commission in connection with the
registration under the Securities Act of 1933, as amended (the "Act"), of (i)
4,500,000 shares of Common Stock for sale by the Company (the "Company Stock"),
and (ii) 500,000 shares of Common Stock for resale by certain selling
stockholders (the "Selling Stockholder Stock"). We are familiar with the actions
taken and proposed to be taken by the Company in connection with the
authorization and proposed issuance and sale of the Company Stock. The Company
Stock and the Selling Stockholder Stock are sometimes collectively referred to
herein as the "Registered Stock."
It is our opinion that when the Registration Statement has become effective
under the Act, subject to (i) due authorization, execution and delivery by the
Company and the Underwriter of the Underwriting Agreement between the Company
and the Underwriter relating to the sale of the Company Stock, (ii) payment for
and delivery of the Company Stock in accordance with the terms of the
Underwriting Agreement, and (iii) appropriate qualification of the Registered
Stock by the appropriate authorities of the various states in which the such
Registered Stock will be sold,
(1) the Company Stock will, upon the issuance and the sale thereof in the
manner referred to in the Registration Statement, be legally issued, fully paid
and non-assessable; and
(2) the Selling Stockholder Stock will, upon the sale thereof by the
selling stockholders in the manner referred to in the Registration Statement, be
legally issued, fully-paid and non-assessable.
<PAGE> 2
JEFFER, MANGELS, BUTLER & MARMARO LLP
I.T. Technology, Inc.
May 8, 2000
Page 2
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
caption "Legal Matters" in the Registration Statement and in the Prospectus
which is a part thereof.
Respectfully submitted,
/s/ Jeffer, Mangels, Butler & Marmaro LLP
<PAGE> 1
EXHIBIT 10.9
REGISTRATION RIGHTS AGREEMENT
MAY 8, 2000
To: Kensington Capital Corp
4910 13th Avenue
Brooklyn, New York 11219
Attention: Mr. Abraham Silver
Gentlemen:
This will confirm that in consideration of your entering on the date
hereof, an Underwriting Agreement among the Company, the Selling Stockholder
and you, pursuant to which your will act as Representative of the Underwriters
and act as exclusive agent for the Company and the Selling Stockholder,
employing your "best efforts" to sell on behalf of the Company, at least the
Minimum Subscription (1,000,000 shares), and at most, the Maximum Subscription
(4,500,000 shares), of the Company's Common Stock, and on behalf of the Selling
Stockholder, up to a maximum of 500,000 shares of Common Stock, commencing as
of the effective date of the Company's Registration Statement on Form SB-2,
filed with the Commission on February 14, 2000 (Commission File No. 333-30364),
as subsequently amended, and terminating on the first to occur of (i) the sale
of the Maximum Subscription or (ii) the conclusion of the Offering Period, the
Company has granted you a non-transferable warrant to purchase 250,000 shares
of Common Stock, at the exercise prices described in the Warrant Agreement
between the Company and you, and as an inducement to you to consummate the
transactions contemplated by the Underwriting Agreement, the Company covenants
and agrees with you as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings (capitalized terms used
herein and not otherwise defined herein shall have the same meaning herein as
in the Underwriting Agreement):
"Company" shall mean I.T Technology, Inc, a Delaware corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean Kensington Capital Corp., its legal
successors and
1
<PAGE> 2
assigns.
"Registration Expenses" shall mean the expenses so described in
Section 6 hereof.
"Restricted Stock" shall mean the Shares, excluding any Shares
which (a) have been registered under the Securities Act pursuant to an
effective registration statement filed thereunder or (b) are eligible for sale
pursuant to Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in
Section 6.
"Shares" shall mean the 250,000 shares of Common Stock of the
Company are issuable upon the exercise of the Warrants.
"Warrants" shall mean the Warrants of the Company, as constituted
as of the date of this Agreement.
2. Term. Holder's Piggyback Rights, as such term is defined in
Section 4 below, with respect to Restricted Stock held by it, shall expire upon
the first to occur of: (a) the Holder no longer holds of record any Warrants or
Restricted Stock or (b) five years will have passed from the consummation of
the Offering.
3. Representations and Warranties of the Company. The Company
represents and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency
of government, the Charter or Bylaws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties
or assets is bound, conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such indenture,
agreement or other instrument or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the properties
or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
2
<PAGE> 3
3. Changes in Common Stock. If, and as often as, there is any change
in the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made
in the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Restricted Stock as so changed.
4. Incidental Registration. If the Company at any time proposes to
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other security holders or
both (except with respect to registration statements on Forms S-4, S-8 or
another form not available for registering the Restricted Stock for sale to the
public), each such time it will give written notice to all holders of
outstanding Restricted Stock of its intention so to do. Upon the written
request of any such holder, received by the Company within 15 days after the
giving of any such notice by overnight delivery and by fax with receipt
confirmed by the Company, to register any of its Restricted Stock ("Piggyback
Rights Notice"), the Company will use its best efforts to cause the Restricted
Stock as to which registration shall have been so requested to be included in
the securities to be covered by the registration statement proposed to be filed
by the Company, all to the extent requisite to permit the sale or other
disposition by the holder of such Restricted Stock so registered. The Piggyback
Rights Notice shall specify in detail the terms and conditions of such
registration and shall include copies of any underwriter's commitment and all
other agreements and commitments then available with respect to the proposed
price and method of distribution of securities and such other information
reasonably requested by Holder to enable Holder to exercise its rights
hereunder. In the event that any registration pursuant to this Section 4 shall
be, in whole or in part, an underwritten public offering of Common Stock, the
number of shares of Restricted Stock to be included in such an underwriting may
be reduced (pro rata among the requesting holders based upon the number of
shares of Restricted Stock owned by such holders) if and to the extent that the
managing underwriter shall be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein, provided, however, that such number of shares of Restricted Stock
shall not be reduced if any shares are to be included in such underwriting for
the account of any person other than the Company or the Selling Stockholder. If
any registration statement includes the sale of shares by the Selling
Stockholder pursuant to such Selling Stockholder's demand or piggyback
registration rights and is not a "firm offering" by an underwriter, then Holder
agrees that all of the Selling stockholder's shares included in such
registration statement may be sold in such offering prior to the sale of any of
the Holder's Shares included therein (collectively, the "Piggyback Rights").
5. Registration Procedures. If and whenever the Company is required by
the provisions of Section 5 to use its best efforts to effect the registration
of any shares of Restricted Stock under the Securities Act, the Company will,
as expeditiously as possible:
(a) furnish to each seller of Restricted Stock and to each
underwriter
3
<PAGE> 4
such number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such registration statement;
(b) use its best efforts to register or qualify the Restricted
Stock covered by such registration statement under the securities or "blue sky"
laws of New York and, in the case of an underwritten public offering, such
other jurisdictions as the managing underwriter shall request; provided however
the Company shall not be required to register the Restricted Stock in a
jurisdiction where as a condition to do so the Company must qualify as a
foreign corporation in such jurisdiction and the Company would not otherwise be
required to so qualify.
(c) use its best efforts to list the Restricted Stock covered
by such registration statement on NASDAQ or with any securities exchange on
which the Common Stock of the Company is then listed;
(d) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading under the circumstances then existing; and
(e) make available for inspection by each seller of Restricted
Stock, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller by supplying one copy to you as agent of such
sellers, underwriter, attorney, accountant or agent in connection with such
registration statement.
Holder acknowledges and agrees that it has no "demand"
registration rights under this Agreement and that its rights hereunder,
including the Piggyback Rights, shall not create an obligation on the part of
the Company to file, pursue or seek the effectiveness of any registration
statement or to keep open any registration statement which has previously been
declared effective.
In connection with each registration of Restricted Stock
hereunder, the Holder will promptly furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as
reasonably shall be necessary in order to assure compliance with federal and
applicable state securities laws.
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In connection with each registration pursuant to Section 4 covering
an underwritten public offering, the Company and Holder agree to enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature including, without
limitation, lock-up agreements.
6. Expenses. All expenses incurred by the Company in complying with
Section 4, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including the Company's counsel
fees) incurred in connection with the Company's complying with state securities
or "blue sky" laws, fees of the National Association of Securities Dealers,
Inc., transfer taxes, fees of transfer agents and registrars, costs of insurance
but excluding any Selling Expenses, are called "Registration Expenses".
All underwriting discounts, selling commissions, income or other related taxes
and the fees and expenses of Holder's legal counsel and accountants applicable
to the sale of Restricted Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with
each registration statement under Section 4. All Selling Expenses in connection
with each registration statement under Section 4 shall be borne by the Holder.
7. Indemnification and Contribution.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 4 of this Agreement, the Company
will indemnify and hold harmless each seller of such Restricted Stock
thereunder, each underwriter of such Restricted Stock thereunder and each other
person, if any, who controls such seller or underwriter within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each such seller, each such underwriter and each such controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in
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conformity with information furnished by any such seller, any such underwriter
or any such controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant to Section 4, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case
if and only to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
information pertaining to such seller, as such, furnished in writing to the
Company by such seller specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of each seller
hereunder shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the public offering
price of the shares sold by such seller under such registration statement bears
to the total public offering price of all securities sold thereunder, but not
in any event to exceed the net proceeds received by such seller from the sale
of Restricted Stock covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party in writing thereof, but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to such indemnified party other than under this Section 7 and
shall only relieve it from any liability which it may have to such indemnified
party under this Section 7 if and to the extent the indemnifying party is
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in and, to the extent
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it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 7 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that (i) there may be defenses available to it which
are different from or additional to those available to the indemnifying party
or (ii) if the interests of the indemnified party conflict with the interests
of the indemnifying party, the indemnified party shall have the right to have
the indemnifying party select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
(d) In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either (i) any
holder of Restricted Stock exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 7 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 7 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
selling holder or any such controlling person in circumstances for which
indemnification is provided under this Sections 8; then, and in each such case,
the Company and such holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that such holder is responsible for the portion
represented by the percentage that the public offering price of its Restricted
Stock offered by the registration statement bears to the public offering price
of all securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any such
case, (A) no such holder will be required to contribute any amount in excess of
the public offering price of all such Restricted Stock offered by it pursuant
to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11 (of the
Securities Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
8. Miscellaneous.
(a) all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
(including without limitation transferees of any Warrants or
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Restricted Stock), whether so expressed or not.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier
or telex, addressed as follows:
if to the Company or to the Holder, at the address of such party
set forth in the Underwriting Agreement;
if to any subsequent holder of Warrants or Restricted Stock, to
it at such address as may have been furnished to the Company in writing by such
holder; or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of the Holder or a holder of
Warrants or Restricted Stock) or to the Holder or the holders of Warrants or
Restricted Stock (in the case of the Company) in accordance with the provisions
of this section.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to conflicts of law
principles thereof.
(d) Any controversy or claim arising out of or relating to this
Agreement, including controversies or claims arising out of or relating to the
parties' decision to enter into this Agreement and the circumstances thereof,
shall be settled by binding arbitration. Either party may initiate arbitration
by making written demand on the other party by written notice. There shall be
one arbitrator selected from the list maintained by and in accordance with the
Rules of the American Arbitration Association. If the parties are unable to
agree upon such an arbitrator or who is willing to serve within forty-five (45)
days of receipt of the demand by the other party, then the American Arbitration
Association ("AAA") shall appoint an arbitrator in accordance with AAA rules.
The parties shall be entitled to discover all documents and information
reasonably necessary for a full understanding of any legitimate issue raised
in the arbitration. They may use all methods of discovery including but not
limited to depositions, requests for admissions and requests for production of
documents. The time periods for compliance shall be set by the arbitrator who
may also set reasonable limits on the scope of such discovery. The proceeding
shall be confidential and the arbitrator shall issue appropriate protective
orders to safeguard both parties' confidential information. The arbitrator
shall, in rendering his or her decision, apply the substantive law of the State
of New York. Except as specifically provided for in this Section, the
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and shall take place either in
New York, New York or as close thereto as practicable, or Los Angeles,
California, or as close thereto as practicable, at the discretion of the
non-initiating party of the arbitration. The arbitrator shall have authority to
determine who shall pay costs and expenses, including reasonable attorney's
fees and arbitrator's fees, it being the intent of the parties that if one
party is found to
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<PAGE> 9
be in breach, it should bear such costs and expenses. The parties waive any
claim for punitive damages and the arbitrator shall exclude any such damages
from any award. Any judgment upon the award rendered by the arbitrator may be
entered in any Court having jurisdiction.
(e) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company and
the Holder.
(f) This Agreement may be executed in two or more counterparts,
each of which of which together shall constitute one and the same instrument.
(g) The Company shall not grant to any third party any
registration rights more favorable than or inconsistent with any of those
contained herein, so long as any of the registration rights under this
Agreement remains in effect.
(h) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any
manner affect or render illegal, invalid or unenforceable any other provision of
this Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(i) Neither Section 7 nor any other Section of this Agreement
shall be construed as providing any rights to underwriters or any other third
party.
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Agreement shall be a
binding agreement between the Company and you.
Very truly yours,
I.T. TECHNOLOGY, INC.
By: /s/ JONATHAN HERZOG
-------------------------------
Title: Chief Financial Officer
-------------------------------
AGREED TO AND ACCEPTED as of
the date first above written.
KENSINGTON CAPITAL CORP.
By: /s/ ABRAHAM SILVER
---------------------------------
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EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 10, 2000, accompanying the
consolidated financial statements of I.T. Technology, Inc., contained in
Amendment No. 4 to Registration Statement on Form SB-2. We consent to the use of
the aforementioned report in the Registration Statement, and to the use of our
name as it appears under the caption "Experts".
/s/ GRANT THORNTON LLP
Los Angeles, California
May 8, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 10, 2000 accompanying the
financial statements of Stampville.Com Inc., contained in Amendment No. 4 to
Registration Statement on Form SB-2. We consent to the use of the aforementioned
report in the Registration Statement, and to the use of our name as it appears
under the caption "Experts".
/s/ GRANT THORNTON LLP
Los Angeles, California
May 8, 2000
