<PAGE> 1
As filed pursuant to Rule 424(B)(1)
under the Securities Act of 1933
Registration No. 333-30364
PROSPECTUS
DATED AUGUST 4, 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."
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 December 4, 2000 (which may be extended to January 3, 2001
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. Upon completion of the offering, we are obligated to issue
to the underwriter warrants to purchase up to 250,000 shares of our common stock
which it can exercise for $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. The
warrants have a term of three years from the date of grant.
<PAGE> 2
KENSINGTON CAPITAL CORP.
AUGUST 4, 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 office is located at 34-36 Punt Road, Windsor 3181 Melbourne,
Victoria, Australia, (011) 613-9533-7800. 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 10% equity interest and an
option to acquire an additional 40.1% 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 and our New York offices are
located at 456 Fifth Avenue, Brooklyn, NY 11215. Stampville's phone number is
(718) 369-8881 and our phone number is (718) 499-2138. 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............................... $5,593,750 to finance acquisition of a majority interest
in Stampville; approximately $650,000 in equivalent
Australian dollars will be used to pay off the balance
owed to Ledger Technologies Pty. Ltd. and $150,000 will be
used to pay off the balance owed to Instanz Nominees Pty.
Ltd.; $3,000,000 for working capital and other general
purposes; approximately $429,000 as of March 31, 2000 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> 3
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
------------- ------------- -------------
(Audited)
<S> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS DATA:
Revenues ........................................... $ -- $ -- $ 5,119
Net loss ........................................... $ (419,443) $ (944,760) $ (3,434,214)
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>
THREE MONTHS ENDED MARCH 31, 2000
-------------------------------------------------------------
PRO FORMA PRO FORMA
HISTORICAL MINIMUM MAXIMUM
------------- ------------- -------------
(Audited)
<S> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS DATA:
Revenues ........................................... $ -- $ -- $ 4,388
Net loss ........................................... $ (335,758) $ (381,601) $ (680,696)
Net loss per share ................................. $ (0.02) $ (0.02) $ (0.03)
Weighted average number of shares outstanding ...... 16,500,000 17,500,000 21,350,000
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 2000
------------------------------------------------------------
PRO FORMA PRO FORMA
HISTORICAL MINIMUM MAXIMUM
------------ ------------ ------------
(Audited)
<S> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Working capital ................................... $ 372,407 $ 3,250,579 $ 20,024,948
Total assets ...................................... 3,893,907 6,634,030 25,687,906
Total liabilities ................................. 1,577,099 567,222 282,686
Accumulated deficit ............................... (755,201) (755,201) (2,505,201)
Stockholders' equity .............................. $ 2,316,808 $ 6,066,808 $ 21,988,808
</TABLE>
2
<PAGE> 4
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> 5
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> 6
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 ............................................... $ 593,750 $5,593,750
Payment of balance owed in equivalent Australian dollars
to Ledger Technologies Pty. Ltd. .................................................. $ 650,000 $ 650,000
Payment of balance owed to Instanz Nominees Pty. Ltd. ............................. $ 150,000 $ 150,000
Working capital ................................................................... $1,500,000 $3,000,000
Payment of the balance owed as of March 31, 2000 on the
building housing our executive offices
located in Melbourne, Australia ................................................... None $ 429,000
Finance additional e-commerce or Internet acquisitions or
ventures or further investments in Stampville ..................................... $ 856,250 $4,577,250
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 on or before December 8, 2001 of an additional amount which
was $593,750 as of August 1, 2000. 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 $593,750 of
proceeds will be used to make an additional investment in Stampville, the next
$1,500,000 will be utilized to fund working capital requirements, approximately
$650,000 in equivalent Australian dollars will be used to pay off the balance
owed to Ledger Technologies Pty. Ltd., $150,000 will be used to pay off the
balance owed to Instanz Nominees Pty. Ltd., 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, $5,000,000 of the proceeds may be used to fund the remainder
of our investment in VideoDome in exchange for up to an additional 40.1% equity
interest.
5
<PAGE> 7
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 the following information as of the date
stated:
- 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
December 8, 2001 and 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
MARCH 31, 2000
--------------------------------------------
ACTUAL MINIMUM MAXIMUM
------------ ------------ ------------
<S> <C> <C> <C>
Payables due to Stampville.Com ................................................. $ 1,009,877 $ -- $ --
============ ============ ============
Notes payable -- long term ..................................................... $ 429,185 $ 429,185 $ --
============ ============ ============
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 .......................... (755,201) (755,201) (2,505,201)
------------ ------------ ------------
Total stockholders' equity ............................................ $ 2,316,808 $ 6,066,808 $ 21,988,808
============ ============ ============
Total capitalization.................................................. $ 3,755,870 $ 6,495,993 $ 21,988,808
============ ============ ============
</TABLE>
6
<PAGE> 8
PRO FORMA FINANCIAL STATEMENTS
The following unaudited Pro Forma Balance Sheets as of March 31, 2000
and unaudited Pro Forma Statements of Operations from February 2, 1999, our date
of inception, through December 31, 1999, and for the three months ended March
31, 2000 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 Statements 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 March 31, 2000.
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 March 31, 2000. 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>
February 2, 1999 (inception) through December 31, 1999
-------------------------------------------------------
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 UNAUDITED 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 at December 31, 1999 of
$1,128,832 plus the $1,250,000 to be made from the Company's
working capital or 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> 9
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.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(ASSUMES MINIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
INCOME AND (EXPENSES)
Foreign currency transaction gain .................. $ 23,996 $ -- $ 23,996
Interest, net ...................................... 8,302 -- 8,302
Legal and professional fees ........................ (43,698) -- (43,698)
Salaries ........................................... (30,823) -- (30,823)
Travel and entertainment ........................... (5,742) -- (5,742)
Equity in net loss of Stampville ................... (266,689) 120,303(1) (146,386)
Other .............................................. (21,104) -- (21,104)
Amortization of excess purchase price over equity
interest in Stampville ........................... -- (166,146)(2) (166,146)
----------- --------- -----------
Net loss ................................... $ (335,758) $ (45,843) $ (381,601)
=========== ========= ===========
Basic loss per common share ............ $ (0.02) $ (0.02)
=========== ===========
Diluted loss per common share .......... $ (0.02) $ (0.02)
=========== ===========
Weighted average shares outstanding .... 16,500,000 17,500,000(3)
=========== ===========
</TABLE>
NOTES TO UNAUDITED 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 at March 31, 2000 of $596,518
plus the $1,250,000 additional investment to be made from the Company's
working capital or the proceeds of this offering (or $507,792), and the
company's total investment in Stampville of $2,750,000, less the
recorded equity investment and cumulative net loss of Stampville of
$248,457. The excess purchase price of $1,993,750 is being amortized on
a straight-line basis over a useful live of 36 months.
(3) Assumes all shares have been outstanding since the beginning of the
period.
8
<PAGE> 10
UNAUDITED PRO FORMA BALANCE SHEET
(ASSUMES MINIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
MARCH 31, 2000
-------------------------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
------------- -------------- ------------
<S> <C> <C> <C>
CURRENT ASSET
Cash ...................................... $ 910,437 $ 4,002,664 (1) $ 3,363,101
(1,250,000)(2)
(300,000)(4)
Other receivables ......................... 12,292 -- 12,292
Prepaid expenses .......................... 13,223 -- 13,223
----------- ----------- -----------
Total current asset ................ 935,952 2,452,664 3,388,616
Property and equipment, net ...................... 648,058 -- 648,058
Investment in Stampville ......................... 2,057,233 204,186 (2) 507,792
(1,993,750)(3)
240,123 (3)
Investment in VideoDome .......................... -- 300,000 (4) 300,000
Deferred offering costs .......................... 252,664 (252,664)(1) --
Excess purchase price over
equity interest in Stampville ................ -- 1,993,750 (3) 1,789,564
(204,186)(2)
------------ ------------ ------------
Total assets ....................... $ 3,893,907 $ 2,740,123 $ 6,634,030
============ ============ ============
CURRENT LIABILITIES
Accounts payable ......................... $ 55,381 $ -- $ 55,381
Accrued expenses ......................... 82,656 -- 82,656
Payable to Stampville.com Inc............. 425,508 (425,508)(3) --
------------ ------------ ------------
Total current liabilities .......... 563,545 (425,508) 138,037
Payable to Stampville.com Inc. ................... 584,369 (584,369)(3) --
Notes payable -- long term ....................... 429,185 -- 429,185
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
pro forma .................................. 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 ...................................... (755,201) -- (755,201)
------------ ------------ ------------
Total stockholders' equity ......... 2,316,808 3,750,000 6,066,808
------------ ------------ ------------
Total liabilities and
stockholders' equity ........... $ 3,893,907 $ 2,740,123 $ 6,634,030
============ ============ ============
</TABLE>
(See Accompanying notes to Pro Forma Balance Sheet).
9
<PAGE> 11
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) Record an adjustment reducing the equity in net losses of Stampville
from 50.1% to 27.5%.
(3) To record 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 at March 31, 2000 of $596,518 plus the $1,250,000 to be
made from the Company's working capital or the proceeds of this
offering (or $507,792) and the company's total investment in Stampville
of $2,750,000 less the equity investment and cumulative net loss of
Stampville of $248,457.
(4) To record the company's initial 5% equity interest in VideoDome of
$150,000 made subsequent to March 31, 2000, plus the additional 5%
equity interest for $150,000 to be made from the proceeds of this
offering.
10
<PAGE> 12
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(ASSUMES MAXIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
Inception to December 31, 1999
------------------------------------------------------------------------------
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
Salaries and consultants ........... (66,618) (115,384) (1,750,000)(1) (1,932,002)
Legal and professional fees ........ (125,687) (35,755) -- (161,442)
Travel and entertainment ........... (33,675) (23,328) -- (57,003)
Rent ............................... -- (11,000) -- (11,000)
Technology expense ................. -- (101,696) -- (101,696)
Other .............................. (33,715) (86,642) -- (120,357)
Equity in the net loss of Stampville (185,955) -- 185,955(2) --
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>
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.
11
<PAGE> 13
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(ASSUMES MAXIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
-------------------------------------------------------------------
IT TECHNOLOGY STAMPVILLE.COM PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
------------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
INCOME AND (EXPENSES)
Revenue.................................... $ -- $ 4,388 $ -- $ 4,388
Cost of goods sold......................... -- (3,357) -- (3,357)
Foreign currency transaction gain.......... 23,996 -- -- 23,996
Interest, net.............................. 8,302 -- -- 8,302
Salaries and consultants................... (30,823) (285,668) -- (316,491)
Legal and professional fees................ (43,698) (82,377) -- (126,075)
Travel and entertainment................... (5,742) (15,326) -- (21,068)
Rent....................................... -- (26,944) -- (26,944)
Technology costs........................... -- (71,848) -- (71,848)
Other...................................... (21,104) (51,182) -- (72,286)
Equity in the net loss of Stampville....... (266,689) -- 266,689(1) --
Amortization of excess purchase price
over assets acquired...................... -- -- (344,938)(2) (344,938)
Minority interest in Stampville............ -- -- 265,625(1) 265,625
----------- -------- --------- -----------
Net Loss................................... $ (335,758) $(532,314) $ 187,376 (680,696)
=========== ======== ========= ===========
Basic loss per common share................ $ (0.02) $ (0.03)
=========== ===========
Diluted loss per common share.............. $ (0.02) $ (0.03)
=========== ===========
Weighted average shares outstanding........ 16,500,000 21,350,000 (3)
=========== ===========
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (MAXIMUM
SUBSCRIPTION)
(1) Adjustment to remove the company's share of Stampville's loss from
operations recorded while under the equity method of accounting. The
adjustment of $265,625 represents the 49.9% minority interest share in the
net loss of Stampville.
(2) Amortization of goodwill of $4,139,250, which 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.
12
<PAGE> 14
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(ASSUMES MAXIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
March 31, 2000
------------------------------------------------------------------------
IT TECHNOLOGY STAMPVILLE.COM PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash ........................................ $ 910,437 $ 362,131 $ 19,652,664(1) $ 20,196,047
(429,185)(2)
(300,000)(6)
Accounts and other receivables .............. 12,292 4,789 -- 17,081
Receivable due from shareholder ............. -- 5,528 -- 5,528
Inventory ................................... -- 18,464 -- 18,464
Prepaid expenses ............................ 13,223 57,291 -- 70,514
------------ ------------ ------------ ------------
Total current assets ............................ 935,952 448,203 18,923,479 20,307,634
Property and equipment, net ..................... 648,058 113,177 -- 761,235
Investment in Stampville ........................ 2,057,233 -- 272,000 (4) --
(2,329,233)(5)
Investment in VideoDome ......................... -- -- 300,000(6) 300,000
Deposits ........................................ -- 8,300 -- 8,300
Deferred offering costs ......................... 252,664 -- (252,664)(1) --
Technology costs ................................ -- 171,487 -- 171,487
Excess purchase price over net -- -- 4,139,250 (5) 4,139,250
assets acquired ................................
------------ ------------ ------------ ------------
Total assets .................................... $ 3,893,907 $ 741,167 $ 21,052,832 $ 25,687,906
============ ============ ============ ============
CURRENT LIABILITIES
Accounts payable ............................ $ 55,381 $ 47,168 $ -- $ 102,549
Accrued expenses ............................ 82,656 88,533 -- 171,189
Payable to Stampville ....................... 425,508 -- (425,508)(5) --
Capital lease obligation .................... -- 8,948 -- 8,948
------------ ------------ ------------ ------------
Total current liabilities ....................... 563,545 144,649 (425,508) 282,686
Notes payable - long term ....................... 429,185 -- (429,185)(2) --
Payable to Stampville, less current portion ..... 584,369 -- (584,369)(5) --
Minority interest in Stampville ................. -- -- 3,416,412(5) 3,416,412
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)(5)
</TABLE>
13
<PAGE> 15
<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 (4)
(2,508,877)(5)
Receivable due from shareholder ................. -- (1,009,877) 1,009,877 (5) --
Deficit accumulated during the
development stage ............................... (755,201) (903,482) (1,750,000)(3) (2,505,201)
903,482 (5)
------------ ------------ ------------ ------------
Total stockholders' equity ...................... 2,316,808 596,518 19,075,482 21,988,808
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity ...... $ 3,893,907 $ 741,167 $ 21,052,832 $ 25,687,906
============ ============ ============ ============
</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 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.
(5) 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 March 31, 2000 $1,500,000
Cash payable from working capital or 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>
(6) To record the company's initial 5% equity interest in VideoDome of
$150,000 made subsequent to March 31, 2000, plus the additional 5%
equity interest for $150,000 to be made from the proceeds of this
offering.
14
<PAGE> 16
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of July 19, 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 July 19, 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> 17
(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 March 31, 2000, the net tangible book value of the company was
approximately $2,064,144, or $0.13 per share.
As of March 31, 2000, 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 $0.24 and $0.83,
respectively. For the maximum subscription, this represents an immediate
increase of $.70 per share to existing stockholders and an immediate and
substantial dilution of $4.17 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 $4.76 per share, while existing stockholders would have
an immediate increase of $0.11 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 March 31, 2000 ...................... $ 0.13
Increase attributable to new investors ............................ $ 0.11
------
Pro forma net tangible book value after the Offering .............. $ 0.24
------
Dilution in net tangible book value to new investors .............. $ 4.76
======
Percentage dilution to new investors .............................. 95.2%
ASSUMES MAXIMUM SUBSCRIPTION
Initial public offering price ..................................... $ 5.00
Net tangible book value as of March 31, 2000 ...................... $ 0.13
Increase attributable to new investors ............................ $ 0.70
------
Pro forma net tangible book value after the Offering .............. $ 0.83
------
Dilution in net tangible book value to new investors(1) ........... $ 4.17
======
Percentage dilution to new investors .............................. 83.4%
</TABLE>
16
<PAGE> 18
<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 12.3% $ 0.19
New investors ................. 4,500,000 21.4% $22,500,000 87.7% $ 5.00
----------- ------ ----------- ------ --------
Total ................ 21,000,000 100.0% $25,658,750 100.0% $ 1.22
=========== ====== =========== ====== ========
</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 38.7% $ 0.19
New investors ................. 1,000,000 5.7% $ 5,000,000 61.3% $ 5.00
----------- ------ ----------- ------ --------
Total ................ 17,500,000 100.0% $ 8,158,750 100.0% $ .47
=========== ====== =========== ====== ========
</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> 19
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 until at least several months
following the consummation of this offering, if at all. Accordingly, a
comparison of the quarter ended March 31, 2000 to the period from the Company's
formation in February 1999 through March 31, 1999 is not meaningful.
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. 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.
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.
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 March 31, 2000 our
cumulative net losses were $755,210. 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.
Quarter ended March 31, 2000
During the quarter ending March 31, 2000, we made payments to Stampville
of $1,000,000 and continued the expansion of Stampville's developmental
activities. Through March 31, 2000, we invested $1,500,000 in Stampville. In
particular we added to Stampville's management team through the appointment of
Robert Petty as Stampville's acting Chief Executive Officer, and other
additional employees at Stampville. We also continued with the development of
Stampville's Web site during the
18
<PAGE> 20
quarter expending approximately $230,000 in technology. On March 24, 2000, our
wholly-owned subsidiary, Bickhams Capital, Inc., entered into an agreement
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. After the first quarter,
on April 10, 2000, we exercised the initial tranche to purchase 5% of the equity
interest in VideoDome through the payment of $150,000. On July 28, 2000, we
exercised the second tranche to purchase an additional 5% of the equity
interest in VideoDome through the payment of an additional $150,000. 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 through this offering or through other sources
of sufficient funds to complete the potential investment in VideoDome. Other
factors which will enter into the Company's ultimate investment in VideoDome
will be our intended investment in Stampville, financing 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.
As a result of these activities, we incurred a net loss of $335,758
during this period. As we were only incorporated on February 2, 1999 and had
yet to make any investments during the first quarter of 1999, our activities
during the first quarter of 1999 were essentially limited to that of initial
formation efforts.
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 prepare it for the initial
launch of its main web site during the second quarter of 2000. 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 initial
investment in Stampville and VideoDome. Additional capital will be needed to
complete the purchase of Stampville, acquire an additional 40.1% 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
March 31, 2000, we had working capital of $372,407.
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 March 31,
2000 equaled to approximately $429,000 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. 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 twelve months following the consummation of this
offering, we intend to finance the acquisition of a majority interest in
Stampville for $5,593,750, possibly increase our interest in VideoDome with an
investment of up to $5,000,000, 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. On July 27, 2000,
Instanz Nominees Pty. Ltd. lent us $150,000 to supplement our working capital
needs through the month of August 2000. 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 $4,577,250 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 $593,750 of proceeds would be invested in Stampville,
$650,000 in equivalent Australian dollars will be used to pay off the balance
owed to Ledger Technologies Pty. Ltd., $150,000 will be used to pay off the
balance owed to Instanz Nominees Pty. Ltd., the next $1,500,000 would be
utilized to fund our working capital requirements, and the remaining $856,250
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 $593,750 in Stampville. This investment
will be adequate to allow Stampville to 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, will be
sufficient for Stampville to operate for at least twelve months, even if
Stampville does not generate material revenues from the sale of stamps.
As previously noted, we intend to retain $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 March 31, 2000, 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 and
the exercise of our initial investment in VideoDome. We made additional payments
in May, June and July, 2000, aggregating to $656,250 under our agreement with
Stampville for a total investment of $2,156,250 to date. Stampville has also
continued its development of its Web site and has launched several micro-sites
since the end of the first quarter. On April 10, 2000, we invested an initial
$150,000 and purchased a 5% equity interest in VideoDome pursuant to our option
agreement with VideoDome. On July 28, 2000, we invested an additional $150,000
to exercise the second tranche to purchase an additional 5% of the equity
interest in VideoDome. Our exercise of the final tranche of $5,000,000 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.
On July 26, 2000, Ledger Technologies Pty. Ltd. loaned us $650,000, of
which $500,000 was used to make further payments to Stampville, and $150,000 was
used to exercise the second tranche to purchase an additional 5% of the equity
interest in VideoDome. 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 July 27, 2000, Instanz
Nominees Pty. Ltd. lent us $150,000 to supplement our working capital needs
through the month of August 2000. Instanz Nominees Pty. Ltd. is also a
stockholder and Helen Abeles, an affiliate of Instanz, is one of our directors.
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.
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 August 1, 2000, we have invested $2,156,250 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 and July 28, 2000, we exercised the first two
of our tranches to purchase equity in VideoDome by investing an aggregate of
$300,000 in exchange for a 10% 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
Brooklyn, New York. Henry Herzog, our President, relocated to our New York
offices on a temporary basis.
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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 August 1, 2000, we
have invested $2,156,250 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 investment on or before December 8, 2001 of an additional amount
which was $593,750 as of August 1, 2000. 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 $593,750 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 $593,750 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.
- On July 28, 2000, we acquired an additional 5% of the capital
stock of VideoDome for an additional $150,000.
- 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
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 $429,185 as of March 31, 2000, 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. Stampville's offices and our New
York office are located at 456 Fifth Avenue, Suite 200, Brooklyn, N.Y. 11215.
The telephone and facsimile numbers for our New York office are (718) 499-2138
and (718) 499-2168, respectively. The telephone and facsimile numbers for
Stampville 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 15, 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. 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 May 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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<PAGE> 38
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> 39
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 May 15, 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
</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> 40
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.
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.
Our board and Henry Herzog, our President, have agreed that Mr. Herzog should
relocate to New York for up to twelve months. Accordingly, Mr. Herzog relocated
to New York on a temporary basis in May 2000. 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> 41
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. The consulting agreement provides for the payment of an
aggregate amount of approximately $8.000 per month by Stampville to Petty
Consulting, Inc. for the services of Mr. Petty. 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.
On July 26, 2000, Ledger Technologies Pty. Ltd. loaned us $650,000, of
which $500,000 was used to make further payments to Stampville and $150,000 was
used to exercise the second tranche to purchase an additional 5% of the equity
interest in VideoDome. 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 July 27, 2000, Instanz
Nominees Pty. Ltd. lent us $150,000 to supplement our working capital needs
through the month of August 2000. Instanz Nominees Pty. Ltd. is also a
stockholder and Helen Abeles, an affiliate of Instanz, is one of our directors.
These loans will 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.
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> 42
- 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> 43
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 the first four items listed above each have an
exercise price of $1.00 per option share. The options described in the last item
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 July 19, 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> 44
- 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 July 19, 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 July 19, 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> 45
(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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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
45
<PAGE> 47
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> 48
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> 49
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. 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> 50
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> 51
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 3,500,000
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 7.99%
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 any of the foregoing
commissions. Any commissions payable to Kensington or any dealers will instead
be paid by the company. The total commission paid to Kensington with respect to
shares sold by Instanz could total $195,000, and 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> 52
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 December 4, 2000. Unless the offer is fully
subscribed at an earlier date, your stock order form must be received before
December 4, 2000, or if the offer is extended, January 3, 2001. 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 offering, we are obligated to issue to the
underwriter warrants to purchase up to 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. The number of
shares subject to the warrants will be based on the number of shares sold in the
offering. The underwriter will acquire one share of the company's common stock
for every ten shares sold in the offering, up to a maximum of 250,000 shares.
The $1.00 variance in the exercise price per share of the warrants is intended
to reflect an increase in the value of the common stock of the Company over the
three year period. 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. The warrants to purchase shares of the
company's common stock will be restricted from sale, transfer, assignment, or
hypothecation for a period of one year from the effective date of the offering
except to officers or partners, excluding directors, of the underwriter and
members of the selling group and/or their officers or partners.
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> 53
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> 54
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, 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> 55
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-1
Consolidated Balance Sheets .......................................... F-2
Consolidated Statements of Operations................................. F-3
Consolidated Statement of Stockholders' Equity ....................... F-4
Consolidated Statements of Cash Flows ................................ F-5
Notes to Consolidated Financial Statements ........................... F-6
Stampville.Com Inc.
Report of Independent Certified Public Accountants ................... F-12
Balance Sheets ....................................................... F-13
Statements of Operations ............................................. F-14
Statement of Stockholders' Equity .................................... F-15
Statements of Cash Flows ............................................. F-16
Notes to Financial Statements ........................................ F-17
</TABLE>
<PAGE> 56
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 of America. 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 of America.
/s/ GRANT THORNTON LLP
Los Angeles, California
March 10, 2000
F-1
<PAGE> 57
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1999 March 31, 2000
----------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSET
Cash $2,179,998 $ 910,437
Other receivable -- 12,292
Prepaid expenses -- 13,223
---------- ----------
2,179,998 935,952
PROPERTY AND EQUIPMENT, net 649,021 648,058
INVESTMENT IN STAMPVILLE.COM INC. 2,323,922 2,057,233
DEFERRED OFFERING COSTS 33,682 252,664
---------- ----------
Total assets $5,186,623 $3,893,907
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 28,001 $ 55,381
Accrued expenses 40,331 82,656
Payable due to Stampville.Com Inc. 1,425,508 425,508
---------- ----------
Total current liabilities 1,493,840 563,545
PAYABLE TO STAMPVILLE.COM INC.--less current portion 584,369 584,369
NOTE PAYABLE 455,848 429,185
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 shares respectively 16,500 16,500
Additional paid-in capital 3,055,509 3,055,509
Deficit accumulated during the development stage (419,443) (755,201)
---------- ----------
Total stockholders' equity 2,652,566 2,316,808
---------- ----------
$5,186,623 $3,893,907
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE> 58
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from February
2, 1999 (inception)
through December 31, Three months ended Cumulative
1999 March 31, 2000 to March 31, 2000
--------------------- --------------- --------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Income and (expenses)
Foreign currency transaction gain $ 17,033 $ 23,996 $ 41,029
Interest, net 9,174 8,302 17,476
Legal and professional fees (125,687) (43,698) (169,385)
Salaries (66,618) (30,823) (97,441)
Travel and entertainment (33,675) (5,742) (39,417)
Equity in loss of Stampville.Com Inc. (185,955) (266,689) (452,644)
Other expense (33,715) (21,104) (54,819)
------------ ------------ ------------
NET LOSS $ (419,443) $ (335,758) $ (755,201)
============ ============ ============
Basic and diluted loss per common share $ (0.04) $ (0.02)
============ ============
Weighted-average shares outstanding 11,222,139 16,500,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 59
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period from February 2, 1999 (inception) through December 31, 1999
and three months ended March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Additional during the
--------------------------- ------------------------- paid-in development
Shares Amount Shares Amount 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
Net loss for the period -- -- -- -- -- (335,758) (335,758)
------------- ------------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2000 $ -- $ -- 16,500,000 $ 16,500 $ 3,055,509 $ (755,201) $ 2,316,808
============= ============= =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE> 60
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from February
2, 1999 (inception)
through December Three months ended Cumulative to
31, 1999 March 31, 2000 March 31, 2000
-------------------- ------------------ --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss $ (419,443) $ (335,758) $ (755,201)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 14,852 8,779 23,631
Equity in losses of Stampville.Com Inc. 185,955 266,689 452,644
Increase in prepaid expenses -- (13,223) (13,223)
Increase in other receivables -- (12,292) (12,292)
Increase in accounts payable 28,001 27,380 55,381
Increase in accrued expenses 40,331 42,325 82,656
Nonmonetary compensation 7,500 -- 7,500
----------- ----------- -----------
Net cash flows used in operating activities (142,804) (16,100) (158,904)
----------- ----------- -----------
Cash flows from investing activities:
Investment in Stampville.Com Inc. (500,000) (1,000,000) (1,500,000)
Purchase of property and equipment (208,025) (7,815) (215,840)
----------- ----------- -----------
Net cash flows used in investing activities (708,025) (1,007,815) (1,715,840)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,064,509 -- 3,064,509
Increase in deferred offering costs (33,682) (218,983) (252,665)
----------- ----------- -----------
Net cash flows (used in)provided by
financing activities 3,030,827 (218,983) 2,811,844
----------- ----------- -----------
Effect of exchange rate changes on cash -- (26,663) (26,663)
----------- ----------- -----------
Net (decrease) increase in cash 2,179,998 (1,269,561) 910,437
Cash at beginning of period -- 2,179,998 --
----------- ----------- -----------
Cash at end of period $ 2,179,998 $ 910,437 $ 910,437
=========== =========== ===========
Supplemental disclosures of noncash investing activities:
Property acquired by issuance of note payable $ 455,848 $ -- $ 455,848
=========== =========== ===========
Investment in Stampville.Com Inc.
acquired through a liability $ 2,009,877 $ -- $ 2,009,877
=========== =========== ===========
Issuance of Common Stock for Services $ 7,500 $ -- $ 7,500
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 61
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 (Unaudited) and December 31, 1999
NOTE A - COMPANY BACKGROUND AND BUSINESS PLAN
I.T. Technology, Inc. (ITT or the "Company") 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 - UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS
The consolidated financial data as of and for the three months ended
March 31, 2000 included in the notes and in the accompanying financial
statements have been derived from our unaudited financial statements.
In the opinion of management, the unaudited financial statements 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 as of such date and for such period. The results
for the three month period ended March 31, 2000 are not necessarily
indicative of the results to be expected for the entire year or the
quarters following in 2000. The Company's activity was limited to
initial formation efforts from February 2, 1999 through March 31, 1999.
NOTE C - 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).
F-6
<PAGE> 62
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 (Unaudited) and December 31, 1999
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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. 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 initially 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 D - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of:
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
------------ ---------
(unaudited)
<S> <C> <C>
Land $ 150,000 $ 150,000
Building 451,630 451,630
Office equipment 62,243 70,176
--------- ---------
663,873 671,806
Less accumulated depreciation (14,852) (23,748)
--------- ---------
$ 649,021 $ 648,058
========= =========
</TABLE>
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).
F-7
<PAGE> 63
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 (Unaudited) and December 31, 1999
NOTE E - CAPITALIZATION - Continued
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.
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 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 made the further payment of
$5,000,000 (as noted in point 4 above), its ownership percentage would
be reduced to the lessor 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.
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
----------- -----------
(unaudited)
<S> <C> <C>
Cash payment of $250,000 (paid under original agreement) $ 250,000 $ 250,000
Cash payment of $250,000 (paid prior to December 31, 1999) 250,000 $ 250,000
Cash payment of $1,000,000 (paid on or about February 14, 2000) 1,000,000 1,000,000
Installment payable, less discount of $240,123 1,009,877 1,009,877
Equity in losses in Stampville.Com Inc. (185,955) (452,644)
----------- -----------
$ 2,323,922 $ 2,057,233
=========== ===========
</TABLE>
F-8
<PAGE> 64
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 (Unaudited) and December 31, 1999
NOTE F - INVESTMENT IN STAMPVILLE.COM INC. - Continued
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.
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,
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.
NOTE G - 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-9
<PAGE> 65
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 (Unaudited) and December 31, 1999
NOTE H - 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 Three months ended March 31, 2000
December 31, 1999 (Unaudited)
---------------------------------------- ----------------------------------------
Weighted- Per Weighted- Per
Average share Average share
Net loss Shares Amount Net loss Shares Amount
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic loss per share
Net loss available to
common shareholders $ (419,443) 11,222,139 $ (0.04) $ (335,758) 16,500,000 $ (0.02)
========== ========== ========== ========== ========== ==========
Diluted loss per share
Net loss available to
common shareholders $ (419,443) 11,222,139 $ (0.04) $ (335,758) 16,500,000 $ (0.02)
========== ========== ========== ========== ========== ==========
</TABLE>
F-10
<PAGE> 66
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 (Unaudited) and December 31, 1999
NOTE I - 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 J - SUBSEQUENT EVENTS
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 rest 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.
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.
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
and purchased a 5% equity interest in VideoDome. The Company has the
option to acquire an additional 5% for $150,000 and the remaining 40.1%
equity interest for approximately $5,000,000 upon completion of complete
due diligence regarding VideoDome, receipt from VideoDome of audited
financial statements, and the raising of sufficient funds to complete
the potential investment in VideoDome, to complete its intended
investment in Stampville and to finance its other operations and/or
other potential investments. Management is under no obligation to either
continue or discontinue the Videodome acquisition. Management believes
that given the significant level of uncertainty, the consummation of the
proposed acquisition is currently not probable.
On June 6, 2000, Ledger Technologies Pty. Ltd., a related party,
committed to loan the Company up to $500,000 to fund its working capital
needs, including potential quarterly payments to Stampville. In June
2000, the Company borrowed $200,000 against this loan. On July 26, 2000,
the loan agreement with Ledger Technologies was increased to $650,000
and an additional $450,000 was borrowed. The total borrowings of
$650,000 were used to make additional payments to Stampville of $500,000
and to acquire an additional 5% equity interest in VideoDome for
$150,000. On July 27, 2000, the Company borrowed $150,000 from Instanz
Nominees Pty. Ltd., a related party, for working capital purposes.
These loans bear interest at the rate of ten percent (10%) per annum and
the loan from Ledger Technologies Pty. Ltd. is payable in equivalent
Australian dollars.
F-11
<PAGE> 67
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 of America. 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 of America.
/s/ GRANT THORNTON LLP
Los Angeles, California
March 10, 2000
F-12
<PAGE> 68
Stampville.Com Inc.
(a development stage enterprise)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 47,066 $ 362,131
Accounts receivable 1,370 4,789
Receivable due from shareholder 1,000,000 5,528
Inventories 18,459 18,464
Prepaid expenses -- 57,291
----------- -----------
Total current assets 1,066,895 448,203
EQUIPMENT, net 74,739 113,177
DEPOSITS 6,160 8,300
TECHNOLOGY COSTS 11,487 171,487
----------- -----------
$ 1,159,281 $ 741,167
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to IGPC $ 29,273 $ 25,079
Accounts payable -- 22,089
Accrued expenses 1,176 88,533
Capitalized lease obligation -- 8,948
----------- -----------
Total current liabilities 30,449 144,649
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 100,000 shares,
issued and outstanding 100,000 shares, respectively 1,000 1,000
Additional paid-in capital 2,508,877 2,508,877
Receivable due from shareholder (1,009,877) (1,009,877)
Deficit accumulated during the development stage (371,168) (903,482)
----------- -----------
Total stockholders' equity 1,128,832 596,518
----------- -----------
$ 1,159,281 $ 741,167
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-13
<PAGE> 69
Stampville.Com Inc.
(a development stage enterprise)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from April 14,
1999 (inception)
through December 31, Three months ended Cumulative to
1999 March 31, 2000 March 31, 2000
--------------------- ------------------ -----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues $ 5,119 $ 4,388 $ 9,507
Cost of goods sold (2,482) (3,357) (5,839)
--------- --------- ---------
Gross profit 2,637 1,031 3,668
General and administrative expenses
Salaries and consultants (115,384) (285,668) (401,052)
Legal and professional fees (35,755) (82,377) (118,132)
Rent (11,000) (26,944) (37,944)
Travel and entertainment (23,328) (15,326) (38,654)
Technology expense (101,696) (71,848) (173,544)
Other (86,642) (51,182) (137,824)
--------- --------- ---------
NET LOSS $(371,168) $(532,314) $(903,482)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-14
<PAGE> 70
Stampville.Com Inc.
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
Period from April 14, 1999 (inception) through December 31, 1999
and three months ended March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Deficit
accumulated
Common Stock Additional Receivable during the
--------------------------- paid-in due from development
Shares Amount 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 receivable 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
Net loss for the period -- -- -- -- (532,314) (532,314)
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2000 100,000 $ 1,000 $ 2,508,877 $(1,009,877) $ (903,482) $ 596,518
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-15
<PAGE> 71
Stampville.Com Inc.
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from April
14, 1999 (inception) Three months
through December ended March Cumulative to
31, 1999 31, 2000 March 31, 2000
-------------------- ----------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss $ (371,168) $ (532,314) $ (903,482)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 6,249 8,985 15,234
Increase in accounts receivable (1,370) (3,419) (4,789)
Increase in inventories (18,459) (5) (18,464)
Increase in prepaid expenses -- (57,291) (57,291)
Increase in deposits (6,160) (2,140) (8,300)
Increase in accounts payable and accrued expenses 30,449 105,253 135,702
----------- ----------- -----------
Net cash flows used in operating activities (360,459) (480,931) (841,390)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of equipment (80,988) (38,476) (119,464)
Increase in technology costs (11,487) (160,000) (171,487)
----------- ----------- -----------
Net cash flows used in investing activities (92,475) (198,476) (290,951)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 500,000 1,000,000 1,500,000
Receivable from shareholder -- (5,528) (5,528)
----------- ----------- -----------
Net cash flows provided by financing activities 500,000 994,472 1,494,472
----------- ----------- -----------
Net increase in cash 47,066 315,065 362,131
Cash at beginning of period -- 47,066 --
----------- ----------- -----------
Cash at end of period $ 47,066 $ 362,131 $ 362,131
=========== =========== ===========
Non-cash financing activity:
Issuance of common stock for receivables
due from shareholders
Amount classified as an asset $ 1,000,000 $ -- $ 1,000,000
Amount classified as an offset to equity 1,009,877 -- 1,009,877
----------- ----------- -----------
$ 2,009,877 $ -- $ 2,009,877
=========== =========== ===========
Equipment acquired through capital lease obligation $ -- $ 13,792 $ 13,792
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-16
<PAGE> 72
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 (Unaudited) and 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 amount sup 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.
F-17
<PAGE> 73
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 (Unaudited) and December 31, 1999
NOTE B - UNAUDITED CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS
The financial data as of and for the three months ended March 31, 2000
included in the notes and in the accompanying financial statements have
been derived from our unaudited financial statements. In the opinion of
management, the unaudited financial statements 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 as of such dates and for such periods. The results for the
three month period ended March 31, 2000 are not necessarily indicative
of the results to be expected for the entire year or the quarters
following in 2000.
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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 D - 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.
F-18
<PAGE> 74
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 (Unaudited) and December 31, 1999
NOTE D - CAPITALIZATION - Continued
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 E - 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.
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 $29,000 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 effect
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 F - 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> 75
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 ..................................................................... 5
Dividend Policy ..................................................................... 6
Capitalization and Stock Ownership .................................................. 6
Dilution ............................................................................ 16
Management's Discussion and Analysis of Financial Condition and Results of Operations 18
Business ............................................................................ 22
Management .......................................................................... 35
Principal Stockholders .............................................................. 42
Description of Capital Stock ........................................................ 44
Selling Shareholders ................................................................ 47
Registration Rights ................................................................. 47
Shares Eligible for Future Sale ..................................................... 48
Underwriting ........................................................................ 50
Legal Matters ....................................................................... 52
Experts ............................................................................. 52
Where You Can Find More Information ................................................. 52
Index to Financial Statements ....................................................... F-1
</TABLE>
Dealer Prospectus Delivery Obligations:
UNTIL AUGUST 29, 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 SUBSCRIPTIONS.
I.T. TECHNOLOGY, INC
Common Stock
Up to 4,500,000 Shares
500,000 Shares by a Selling Shareholder
PROSPECTUS
August 4, 2000
