SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 2O549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended - September 30, 2000
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 000-30-543
I.T. TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)
Delaware 98-0200077
--------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
34-36 Punt Road Windsor Melbourne Victoria, 3181 Australia
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
0ll (613)9533-7800
------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements the past 90 days.
Yes X No
-------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. There were 16,500,000 shares
of common stock outstanding as of October 10, 2000.
---------------------------------------------------
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE
----
CONSOLIDATED BALANCE SHEETS F-1
CONSOLIDATED STATEMENTS OF OPERATIONS F-2
CONSOLIDATED STATEMENT OF CASH FLOWS F-3
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-4 F-13
[CAPTION]
I.T. Technology, Inc. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED BALANCE SHEETS
September 30, 2000 December 31,1999
(Unaudited)
------------------ ----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 82,224 $ 2,179,998
Prepaid expenses 13,390 -
------------------ ----------------
95,614 2,179,998
PROPERTY AND EQUIPMENT, net 631,630 649,021
INVESTMENT IN STAMPVILLE.COM INC 1,606,435 2,323,922
INVESTMENT IN VIDEO DOME 300,000 -
DEFERRED OFFERING COSTS 613,781 33,682
------------------ ----------------
Total assets $ 3,247,460 $ 5,186,623
================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 27,463 $ 28,001
Accrued expenses 69,329 40,331
Notes Payable - affiliates 975,000 -
Payable due to Stampville.Com Inc 360,000 1,425,508
------------------ ----------------
Total current liabilities 1,431,792 1,493,840
PAYABLE TO STAMPVILLE.COM INC.
-less current portion - 584,369
NOTE PAYABLE 381,850 455,848
COMMITMENTS AND CONTINGENCIES - -
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 share
respectively 16,500 16,500
Additional paid-in capital 3,055,509 3,055,509
Deficit accumulated during
the development stage (1,638,191) (419,443)
------------------ ----------------
1,433,818 2,652,566
------------------ ----------------
$ 3,247,460 $ 5,186,623
================== ================
The accompanying notes are an integral part of these financial statements.
F-1
<TABLE>
<CAPTION>
I.T. TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Period from
February 2,
Three Months Ended Nine Months Ended 1999
September 30 September 30 (inception)
------------------ ----------------- through
2000 1999 2000 1999 September 30,
2000
------- -------- ------- ------- ------------
Income and (expenses)
Foreign currency translation gain $ 27,090 $ 2,560 $ 62,654 $15,858 $ 79,687
Other income 4,563 3,760 8,979 3,760 8,979
Interest, net (60,552) (5,504) (173,135) (5,504) (163,961)
Legal and professional fees (14,369) (12,993) (74,351) (67,336) (200,038)
Salaries (46,865) (25,000) (152,840) (25,000) (219,458)
Travel and entertainment (17,163) (606) (39,666) (3,783) (73,341)
Equity in loss of Stampville.Com Inc. (290,493) (4,331) (803,271) (4,331) (989,226)
Other expense (20,957) (20,709) (47,118) (21,372) (80,833)
------- -------- ------- ------- ------------
NET LOSS $(418,746) $(62,823) $(1,218,748 $(107,708) $(1,638,191)
======= ======== ========== ======== ==============
Basic and diluted loss per
common share $(0.03) $ (0.01) $ (0.07) $ (0.01)
========== ========== ========== ==========
Weighted-average shares outstanding 16,500,000 12,150,000 16,500,000 10,157,292
========== ========== ========== ==========
The accompanying condensed notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
I.T. Technology, Inc. and Subsidiaries
(a development stage enterprise)
CONSOLIDTED STATEMENT OF CASH FLOWS
<S> <C> <C> <C>
Period from
February 2, 1999
Nine Months Ended (inception)
September 30 through
----------------- September 30, 2000
2000 1999
-------- ------- ------------------
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss $(1,218,748) $ (107,708) $(1,611,923)
Adjustments to reconcile net loss to net
cash used - operating activities
Depreciation and amortization 25,631 7,170 40,483
Amortization of debt discount 143,065 - 143,065
Equity in losses of Stampville.Com Inc. 803,271 4,331 989,226
Increase in prepaid expenses (13,390) - (13,390)
Increase in accounts payable (538) 50,206 27,463
Increase in accrued expenses 31,522 25,000 45,585
Nonmonetary compensation - 7,500 7,500
--------- -------- ---------
Net cash used - operating activities (229,187) (13,501) (371,991)
--------- -------- ---------
Cash flows from investing activities:
Investment in Stampville.Com Inc. (1,881,250) (250,000) (2,381,250)
Investment in Video Dome (300,000) - (300,000)
Purchase of property plant & equipment (8,240) (194,010) (216,265)
---------- -------- ---------
Net cash used in investing activities (2,189,490) (444,010) (2,897,515)
---------- -------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock - 624,040 3,064,509
Proceeds from notes payable - affiliates 975,000 65,300 975,000
Increase in deferred offering costs (580,099) (59,147) (613,781)
--------- -------- ---------
Net cash provided by
financing activities 394,901 630,193 3,425,728
--------- -------- ---------
Effect of exchange rate changes on cash (73,998) - (73,998)
--------- -------- ---------
Net (decrease) increase in cash (2,097,774) 172,682 82,224
Cash at beginning of period 2,179,998 - -
--------- -------- ---------
Cash at end of period $ 82,224 $172,682 $ 82,224
========= ======== =========
Supplemental disclosures of noncash
investing activities:
Property acquired by issuance of note payable $ - $ 457,098 $ 455,848
Investment in Stampville.Com Inc,
acquired through a liability $ - $ - $ 2,009,877
Issuance of Common Stock for Services $ - $ - $ 7,500
The accompanying condensed notes are an integral part of these consolidated financial statements.
F-3
</TABLE>
<PAGE>
[CAPTION]
I.T. Technology, Inc. and Subsidiaries
(A development stage enterprise)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - COMPANY BACKGROUND AND BUSINESS PLAN
I.T. Technology, Inc. (I.T.) 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. I.T. has two wholly-owned subsidiaries, I.T.
Technology Pty. Ltd., which furthers its operations in Australia, and Bickhams
Capital, Inc. (collectively referred to as the "Company").
The Company is in the development stage, and its efforts through September 30,
2000 have been principally devoted to organizational activities, raising
capital, acquiring equity interests in Stampville.Com Inc. and VideoDome.com
Networks, Inc and other development efforts. Management anticipates incurring
substantial additional losses as it pursues its strategies. Additionally, the
Company will require additional capital to fund further development and
operations of Stampville.Com Inc. (See Note F). The Company intended to meet
its current anticipated capital funding requirements principally through
proceeds from the sale of up to 4.5 million of its shares of common stock in an
Initial Public Offering ("IPO"). On August 4, 2000, the Company's registration
statement filed on Form SB-2 with the Securities and Exchange Commission
covering the offer and sale of these shares was declared effective. Prior to
the disbursement to the Company of any proceeds from the sale of shares in the
IPO, the Company must receive a minimum of $5 million of proceeds. To date this
minimum has not been reached and the Company's Board of Directors has approved
a management proposal to restructure the share capital of the company to a
five-for-one forward split, and to amend the IPO to offer 25,000,000 shares of
common stock at $.10 per share. As part of its restructuring proposal, the
Board of Directors also approved a $450,000 private placement of restricted
common shares to an affiliate. Until such time as the Company amends its IPO
and raises capital from the sale of shares in the IPO, it will rely on loans
from affiliates, at their discretion, and/or debt or equity financings through
subsequent private placements to finance its operations.
NOTE B - UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS
The consolidated financial data as of and for the nine months and the three
months ended September 30, 2000 included in the accompanying financial
statements have been derived from our unaudited financial statements, pursuant
to the rules and regulations of the Securities and Exchange Commission ("the
Commission"). Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These interim financial
statements should be read in conjunction with the audited financial statements
and notes thereto for the year ended December 31, 1999, included in the
Company's amendment No. 7 to Form SB-2 Registration Statement dated August 4,
2000. In the opinion of management, the unaudited financial statements and
condensed notes have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial position and
the results of operations. The results for the nine- month and the three-month
periods ended September 30, 2000 are not necessarily indicative of the results
to be expected for the entire year or the remaining final quarter of 2000.
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The consolidated financial statements include the accounts of I.T. and its
wholly-owned subsidiaries. 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 is 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. (See Note F and Note K).
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.
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. Deferred Offering Costs
Deferred offering costs include expenses incurred in connection with the
Company's registration statement on Form SB-2, which was declared effective on
August 4, 2000. These costs will be charged against stockholders' equity upon
successful completion of the offering. If the offering is not consummated, the
deferred offering costs will be charged to expense.
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of:
September 30, December 31,
2000 1999
(unaudited)
------------- ------------
Land $150,000 $ 150,000
Building 451,630 451,630
Office equipment 70,483 62,243
------------- ------------
672,113 663,873
Less accumulated depreciation (40,483) (14,852)
------------- ------------
$631,630 $ 649,021
============= ============
F-6
NOTE E - 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 to
Instanz Nominees Pty. Ltd., a related party, at a purchase price of $1.00 per
share, excluding offering costs of $59,531.
On September 28, 2000, the Board of Directors approved a restructuring plan,
including a five-to-one forward split of the Company's common stock.
Shareholders approved this stock split on November 6, 2000. The number of
shares outstanding and loss per share amounts have not been restated in this
report for the split, but will be restated effective December 31, 2000.
F-7
NOTE F - 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 September 30, 2000 have been
principally devoted to organizational and development activities, including the
continued development of its database of stamp information and the initial
launch of its website and various micro websites.
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 included 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. The installment payable
was discounted $240,123, using a discount rate of 20%. Through September 30,
2000, quarterly payments including advanced quarterly payments of $881,250 were
made. 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.
F-8
If the Company fails to make or have made the further payment of $5,000,000 (as
noted in point 4 above), its ownership percentage would be reduced to the
lessor of (a) 27.5% of Stampville's Common Stock or (b) the total invested by
the Company pursuant to the purchase agreement divided by $100,000.
In October, 2000, the Company entered into a revised agreement with Stampville,
which significantly changed the terms of the agreement as recited above. (See
Note K).
The following summarizes the investment in Stampville.Com Inc.:
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
---------
Total Contribution 2,509,877
Equity in losses in Stampville.Com Inc.
for the period ended December 31, 1999 (185,955)
---------
Balance as at December 31, 1999 2,323,922
Equity in losses in Stampville.Com Inc.
for the 9 months ended September 30, 2000 (unaudited) (803,271)
Adjustment to installment payable per revised
agreement (See Note K) 85,784
---------
Balance as at September 30, 2000 (unaudited) $1,606,435
==========
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
annum. (See Note K).
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 the Inter-Governmental Philatelic Corporation. 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. Stampville is presently pursuing business relationships with various
other worldwide philatelic dealers.
The Company has entered into a consulting agreement with an individual, who is
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.
F-10
NOTE G INVESTMENT IN VIDEODOME.COM NETWORKS INC.
On March 24, 2000, the Company entered into an option agreement to acquire up
to a 50.1% equity interest in VideoDome.Com Networks, Inc. (VideoDome). On
April 10, 2000, the Company invested an initial $150,000 for a 5% equity
interest in VideoDome. On July 28, 2000 the Company invested a further $150,000
for an additional 5% equity interest. An option to acquire a further 40.1%
equity interest for approximately $5,000,000 upon completion of due diligence,
receipt from VideoDome of audited financial statements, and the raising of
sufficient funds to complete the potential investment in VideoDome expired on
October 31, 2000. Management is under no obligation to either continue or
discontinue the Videodome acquisition. (See Note K).
NOTE H - NOTES PAYABLE
Long-term debt at September 30, 2000 consists of:
1) 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.
2) Note payable to Ledger Technologies Pty. Ltd., a related party. As at
September 30, 2000, Ledger Technologies Pty. Ltd. has advanced the Company
$825,000 to fund its working capital needs, including potential quarterly
payments to Stampville. The loan bears interest at the rate of ten percent
(10%) per annum and is payable in equivalent Australian dollars.
3) On August 1, 2000, the Company borrowed $150,000 from Instanz Nominees
Pty. Ltd., a related party. The loan bears interest at the rate of ten percent
(10%) per annum.
Notes Payable consists of the following as of:
September 30, December 31,
2000 1999
(unaudited)
------------ ------------
Property loan
34-36 Punt Road Melbourne Australia $ 381,850 $ 455,848
Loan from affiliate -
Ledger Technologies Pty. Ltd 825,000 -
Loan from affiliate
Instanz Nominees Pty Ltd 150,000 -
------------ ------------
$ 1,356,850 $ 455,848
============ ============
F-11
NOTE I - STOCK OPTION PLAN
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.
NOTE J CONSULTING AGREEMENT WITH PETTY CONSULTING, INC.
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. Stampville has also entered into a
one-year Consulting Agreement with Petty Consulting, Inc. pursuant to which
Robert Petty agreed to provide consulting services.
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. (See Note K.)
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. (See Note K).
NOTE K - SUBSEQUENT EVENTS
On September 28, 2000, the Board of Directors approved a restructuring plan,
which it implemented by resolutions of the Board on October 20, 2000. Pursuant
to the restructuring plan, the Company will, subject to shareholder approval,
increase its share capital to 500,000,000 common shares in a five-to-one share
forward split, and amend its IPO to offer 25,000,000 shares of its common stock
at $.10 per share, for a total offering of $2,500,000, which will be self-
underwritten by the company and sold by its officers and directors. The company
further accepted a private placement subscription for 1,800,000 pre-split
shares of its common stock at $.25 per share, for total proceeds of $450,000,
from Sunswipe Australasia Pty. Ltd., a company affiliated with Lisa Mochkin,
the spouse of Levi Mochkin, our Chief Executive Officer and director. The Board
also authorized the conversion of $975,000 in Notes Payable to affiliates
outstanding at September 30, 2000 and an additional $80,000 advanced by Ledger
Technologies Pty Ltd on October 3, 2000 (plus accrued interest) at the rate of
$.04 per post split shares, at the option of the creditors, who were given
until November 6, 2000 to accept the offer. Ledger Technologies, Inc., who is
owed $905,000 of this $1,055,000 has exercised its option to accept the offer.
Subsequent to September 30, 2000, the Company made additional payments to
Stampville of approximately $173,000.
F-12
As of October 13, 2000, the Company entered into an amended stock purchase
agreement with Stampville.com, Inc, pursuant to the terms of which the Company
retains a 50.1 percent equity investment in Stampville in return for the
$2,461,250 already paid including an additional $80,000 payment on October 3,
2000, and additional payments totalling $280,000. Two additional payments of
$93,000 each were made on October 16 and October 30, 2000, and $94,000 is
payable on or about November 29, 2000. In addition, the options granted to
nominees of the current shareholders of Stampville.com, Inc. were canceled, and
the Company agreed to issue outright 1,000,000 shares of company common stock
(5,000,000 post-split) over a three year period, in place of the options. The
financial statements of Stampville.com will be consolidated with the Company
going forward.
On or about October 4, 2000, Helen Abeles (affiliated with Instanz Nominees)
resigned as a director of the company.
Subsequent to September 30, 2000, the Company has also canceled all previous
options outstanding to Robert Petty and has approved granting Mr. Petty an
option to purchase up to five million (5,000,000) post-split shares of the
company's common stock over the next three years at a price of $0.10 per share.
The exact terms of the amended option agreement are yet to be finalized and
approved between the Company and Mr. Petty.
On October 31, 2000 the Company's previous option to acquire an additional
40.1% of VideoDome expired. The Company and VideoDome subsequently entered into
a newly amended and restated Stock Option Agreement, granting the Company the
right to increase its present holding of 10% of VideoDome and initially acquire
up to 25% of the outstanding capital stock of VideoDome at an exercise price of
$1,000,000 payable in ten monthly installments, with subsequent options to move
to 50.1% and potentially beyond. The Company is under no obligation to exercise
the options to purchase the further interests in VideoDome.
CAUTIONARY SAFE HARBOR STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
Certain information contained in this Form 10-Q is forward looking information
within the meaning of the Private Securities Litigation Act of 1995 (the "Act")
which became law in December 1995. In order to obtain the benefits of the "safe
harbor" provisions of the act for any such forwarding looking statements, the
Company wishes to caution investors and prospective investors about significant
factors which among others have affected the Company's actual results and are
in the future likely to affect the Company's actual results and cause them to
differ materially from those expressed in any such forward looking statements.
This Form 10-Q report contains forward looking statements relating to future
financial results. Actual results may differ as a result of factors over which
the Company has no control including: the availability of financing, the
success of Stampville's operations, competition, technological advances and
slower than anticipated completion of research and development projects.
ITEM 2. 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.
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 for at least several months, if at all.
Depending upon the level of our business activity and the timing and
availability of financing proceeds, we anticipate hiring several additional
employees over the next twelve months to market our services to potential
businesses and develop the infrastructure of Stampville and potentially
VideoDome. 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.
Subject to the availability of financing, Stampville's business plans
contemplate a continuance of development of 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. These plans also contemplate expansion
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.
We have generated losses from our inception and 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. Since our inception through September 30, 2000 our
cumulative net losses were $ 1,638,191. 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.
Nine months ended September 30, 2000
During the quarter ending September 30, 2000, we made payments to Stampville of
$525,000 and continued the expansion of Stampville's developmental activities,
including the launch of several new micro-sites. For the nine months ended
September 30, 2000 total payments to Stampville were $1,881,250. Through
September 30, 2000, we invested a total of $2,381,250 in Stampville. In
particular we established business infrastructure, launched the web site and
continued development of our database of stamp information involving scanning
and data entry on each stamp. See Recent Developments.
On July 28, 2000, we exercised our option to purchase an additional 5% of the
equity interest in VideoDome through the payment of $150,000, through our
wholly-owned subsidiary, Bickhams Capital, Inc., pursuant to our agreement from
March 24, 2000, granting 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. Our
exercise of the final tranche for 40.1% of the equity interest in VideoDome for
$5,000,000 is contingent upon completion to our satisfaction of complete due
diligence regarding VideoDome, receipt from VideoDome of audited financial
statements, and our acquisition of sufficient funds to complete this investment
in VideoDome. This option expired on October 31, 2000. While further
discussions are continuing in this respect, we can offer no guarantee that
acquisition of a majority interest in VideoDome will be realized. See Recent
Developments.
As a result of these activities, we incurred a net loss of $418,746 during the
quarter and $1,218,748 for the nine months. As we only made our initial
investment in Stampville on June 18, 1999, our activities during the third
quarter of 1999 were essentially limited to that of assisting in the
establishment of Stampville and preparing to raise capital, our net loss in
that quarter was $62,823.
On June 6, 2000, Ledger Technologies Pty. Ltd. entered into a loan agreement
with us, which resulted in us receiving a total of $825,000 in advances as at
September 30, 2000 to fund our working capital needs, including quarterly
payments in Stampville. Ledger Technologies is one of our stockholders. Lisa
Mochkin, a director of Ledger Technologies, is the wife of Levi Mochkin, our
Chief Executive Officer and director. In addition on or about August 1, 2000
Instanz Nominees Pty. Ltd. lent us $150,000 to supplement our working capital
needs and additional payments to Stampville through the month of August 2000.
Instanz Nominees Pty. Ltd. is also a stockholder and Helen Abeles, an affiliate
of Instanz, is a former director of the company. These loans bear interest at
the rate of ten percent (10%) per year and the amount borrowed from Ledger
Technologies Pty. Ltd. is due in equivalent Australian dollars.
Fiscal Year ended December 31, 1999
During 1999 our principal activities consisted of initial formation activities,
the assembly of our current management team, the raising of capital through
private placements and our location of and acquiring interests in our initial
acquisition target, Stampville.Com Inc. 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 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 launch its main web
site. 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. For the period from February 2, 1999, our date of
inception, to December 31, 1999, we incurred a net loss of $419,443.
LIQUIDITY AND CAPITAL RESOURCES
Our primary capital requirements have been to fund our investment in Stampville
and VideoDome. Additional capital will be needed to maintain the operations of
Stampville, acquire an additional 40.1% equity interest in VideoDome, if we so
choose and the option is still available to us, 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, the issuance of long-
term debt and through loans from our affiliates. Until such time as we raise
additional funds in our IPO, we will seek to obtain additional financing
through loans from our affiliates, at their discretion, and or debt or equity
financing (in private placements) to finance our operations. At September 30,
2000, we had a working capital deficit of $1,338,702, which deficit includes an
$825,000 loan payable to Ledger Technologies Pty Ltd and a $150,000 loan
payable to Instanz Nominees Pty Ltd, which the Lenders and us agree will be
paid after we receive additional financing and at that time upon our mutual
agreement. Accordingly, these loans may not be paid in the next 12 months.
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 September 30,
2000 equaled to approximately $381,850 USD. Such indebtedness bears interest at
the rate of 7.25% per annum and is repayable in July 2001. In the event the
exchange rate of Australian dollars to U.S. dollars increases, the amount of
U.S. dollars required to settle this obligation, as well as any other
obligations we have in Australia to be paid in Australian dollars, will
increase.
The capital requirements relating to implementation of our business plan will
be significant. During the next twelve months, we intend to invest in the
operations of 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, we have no material
commitments for capital expenditures.
We are dependent on the proceeds of the IPO or other financing in order to
fully implement our proposed plan of operation. Depending on how long it takes
for us to raise additional capital, we may borrow additional funds for our
working capital requirements through loan transactions with parties related to
us, which may be repaid out of the proceeds of the offering or debt or equity
financing (through private placements to a limited number of highly accredited
investors).
In the event that our plans change, our assumptions change or prove to be
inaccurate, or if the proceeds received from the IPO otherwise 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 the IPO 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 received from the IPO 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
As of October 3, 2000, the loan agreement with Ledger Technologies Pty. Ltd.,
was increased to $905,000 and an additional $80,000 was borrowed under the
note.
On September 28, 2000, the Board of Directors approved a restructuring plan,
which it implemented by resolutions of the Board on October 20, 2000. Pursuant
to the restructuring plan, the Company will, subject to shareholder approval,
increase its share capital to 500,000,000 common shares in a five-to-one share
forward split, and amend its IPO to offer 25,000,000 shares of its common stock
at $.10 per share, for a total offering of $2,500,000, which will be self-
underwritten by the company and sold by its officers and directors. The company
further accepted a private placement subscription for 1,800,000 pre-split
shares of its common stock at $.25 per share, for total proceeds of $450,000,
from Sunswipe Australasia Pty. Ltd., a company affiliated with Lisa Mochkin,
the spouse of Levi Mochkin, our Chief Executive Officer and director. The Board
also authorized the conversion of $975,000 in Notes Payable to affiliates
outstanding at September 30, 2000 and an additional $80,000 advanced by Ledger
Technologies Pty Ltd on October 3, 2000 (plus accrued interest) at the rate of
$.04 per post split shares, at the option of the creditors, who were given
until November 6, 2000 to accept the offer. Ledger Technologies, Inc., who is
owed $905,000 of this $1,055,000 has exercised its option to accept the offer.
Subsequent to September 30, 2000, the Company made additional payments to
Stampville of approximately $173,000.
Subsequent to September 30, 2000, a number of developments occurred which have
had a significant impact on our business, operations and results, as well as
continued developmental activities. We made additional payments in October,
2000 aggregating to $173,000 under a newly amended agreement with Stampville
for a total investment of $2,554,250 to date. Stampville has also continued its
development of its Web site and has launched additional micro-sites since the
end of the third quarter.
As of October 13, 2000, the we entered into an amended stock purchase agreement
with Stampville.com, Inc, pursuant to the terms of which we retain our 50.1
percent equity investment in Stampville in return for the $2,461,250 already
paid including an additional $80,000 payment on October 3, 2000, and additional
payments totaling $280,000. Two additional payments of $93,000 each were made
on October 16 and October 30, 2000, and $94,000 is payable on or about November
29, 2000. In addition, the options granted to nominees of the current
shareholders of Stampville.com, Inc. were canceled, and the we agreed to issue
outright 1,000,000 shares of company common stock (5,000,000 post-split) over a
three year period, in place of the options.
On or about October 4, 2000, Helen Abeles (affiliated with Instanz Nominees)
resigned as a director of the Company. On October 20, 2000, Farrel Meltzer
resigned as a director of the Company and David Landauer was appointed to the
Board to fill the vacancy.
Subsequent to September 30, 2000, we have also canceled all previous options
outstanding to Robert Petty and have approved granting Mr. Petty an option to
purchase up to five million (5,000,000) post-split shares of our common stock
over the next three years at a price of $0.10 per share, the exact terms of the
amended option agreement are yet to be finalized and approved between us and
Mr. Petty.
On October 31, 2000 our previous option to acquire an additional 40.1% of
VideoDome expired. We subsequently entered into a newly amended and restated
Stock Option Agreement with VideoDome, granting us the right to increase our
present holding of 10% of VideoDome and initially acquire up to 25% of the
outstanding capital stock of VideoDome at an exercise price of $1,000,000
payable in ten monthly installments, with subsequent options to move to 50.1%
and potentially beyond. We are under no obligation to exercise the options to
purchase the further interests in VideoDome.
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 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.
PART II
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company filed a Form 14a on October 25, 2000, proposing shareholder
approval of a five to one forward split of existing share capital and and
amendment to its certificate of incorporation.
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports
The Company did not file any Report on Form 8-K during the three months ended
September 30, 2000.
(b) Exhibits
Exhibit 1: Amendment No. 2 to Stock Purchase Agreement between the company and
Stampville.com, Inc.
(FORM 10-Q)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
I.T. TECHNOLOGY, INC.
Dated: November 9, 2000
By: /s/ Levi Mochkin
--------------------
Levi Mochkin
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Jonathan Herzog
--------------------
Jonathan Herzog
Director, Secretary and
Chief Financial Officer
(Principal Financial Officer)
[CAPTION]
EXHIBIT 1. AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT BETWEEN I.T.
TECHNOLOGY, INC. AND STAMPVILLE.COM, INC.
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT (this "Amendment") is entered
into as of October 13, 2000, by and between I.T. Technology, Inc., a Delaware
corporation ("I.T.") and Stampville.com Inc., a New York corporation
("Stampville").
RECITALS
A. I.T. and Stampville have entered into a Stock Purchase Agreement (the
Original Agreement ) dated as of June 18, 1999 relating to the acquisition of
stock of Stampville by I.T. and amended pursuant to an Amendment to Stock
Purchase Agreement ( Amendment No. 1) dated as of December 8, 1999 (the
Original Agreement and Amendment No. 1. are collectively referred to as the
Amended Agreement ).
B. I.T. has, as of the date of this Agreement, paid $2,461,250 of the
consideration contemplated by the Amended Agreement.
C. I.T. and Stampville now desire to amend certain terms of the Amended
Agreement.
NOW, THEREFORE, in consideration of the promises and the terms, provisions,
covenants and conditions hereinafter set forth, and for other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
AGREEMENT
1
[TYPE]EX-27
<SEQUENCE>3
[DESCRIPTION]FINANCIAL DATA SCHEDULE
[ARTICLE] 5
[MULTIPLIER]
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-2000
[PERIOD-START] JUL-01-2000
[PERIOD-END] SEP-30-2000
[CASH] 82,224
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 95,614
[PP&E] 672, 113
[DEPRECIATION] 40, 483
[TOTAL-ASSETS] 3,247,460
[CURRENT-LIABILITIES] 1,431,792
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 16, 500
[OTHER-SE] 1,417,318
[TOTAL-LIABILITY-AND-EQUITY] 3,247,460
[SALES] 0
[TOTAL-REVENUES] 0
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 358,194
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 60,552
[INCOME-PRETAX] (418,746)
[INCOME-TAX] 0
<INCOME-CONTINUING 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (418,746)
[EPS-BASIC] (.03)
[EPS-DILUTED] (.03)
