<PAGE> 1
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 15, 2000
REGISTRATION NO. 333-30364
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
I.T. TECHNOLOGY, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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DELAWARE 5961 98-0200077
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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34-36 PUNT ROAD
WINDSOR 3181
MELBOURNE, VICTORIA AUSTRALIA
(011) 613 9533-7800
(ADDRESS AND TELEPHONE NUMBER OF
PRINCIPAL EXECUTIVE OFFICES
AND PRINCIPAL PLACE OF BUSINESS)
LEVI MOCHKIN, CHIEF EXECUTIVE OFFICER
I.T. TECHNOLOGY, INC.
34-36 PUNT ROAD
WINDSOR 3181
MELBOURNE, VICTORIA
AUSTRALIA
(011) 613 9533-7800
(NAME, ADDRESS AND TELEPHONE NUMBER
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
BARRY L. BURTEN, ESQ.
ROBERT E. BRAUN, ESQ.
JEFFER, MANGELS, BUTLER & MARMARO LLP
2121 AVENUE OF THE STARS, 10TH FLOOR
LOS ANGELES, CALIFORNIA 90067
(310) 203-8080
FAX (310) 203-0567
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
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Common Stock, par value $.001
per share................... 5,000,000(2) $5.00 $25,000,000 $6,600.00(3)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes the reoffer and resale of 500,000 shares of Common Stock held by
Instanz Nominees Pty. Ltd.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
I.T. TECHNOLOGY, INC.
CROSS REFERENCE SHEET FOR PROSPECTUS UNDER FORM SB-2
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FORM SB-2 ITEM NO. AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
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1. Front of Registration Statement and Outside Outside Front Cover Page; Cross Reference Sheet;
Front Cover of Prospectus Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside front and Outside Back Cover Pages
Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page; Risk Factors; Underwriting
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Inside Front Cover Page; Underwriting
9. Legal Proceedings Business -- Legal Proceedings
10. Directors, Executive Officers Promoters and Management
Control Person
11. Security Ownership of Certain Beneficial Owners Principal Shareholders; Management
and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on Management -- Limitation of Liability;
Indemnification for Securities Act Liabilities Underwriting; Management -- Indemnification of
Officers and Directors
15. Organization within Last Five Years Business
16. Description of Business Business
17. Certain Relationships and Related Transactions Certain Relationships and Related Transactions
18. Market for Common Equity and Related Shareholder Risk Factors; Dividend Policy; Description of
Matters Securities; Shares Eligible for Future Sale
19. Executive Compensation Management -- Executive Compensation
20. Financial Statements Financial Statements
21. Changes in and Disagreements with Accountants on Not Applicable
Accounting and Financial Disclosure
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<PAGE> 3
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED FEBRUARY , 2000
PROSPECTUS
UP TO 5,000,000 SHARES
[LOGO]
I.T. TECHNOLOGY, INC.
COMMON STOCK
------------------------
This Prospectus covers the offer of 5,000,000 shares of common stock (the
"Shares") of I.T. Technology, Inc. (the "Company") in an initial public offering
of which 4,500,000 Shares are being offered by the Company and the balance of
500,000 Shares by Instanz Nominees Pty. Ltd. ("Instanz") (collectively, the
"Offering"). Helen Abeles, a director of the Company is an affiliate of Instanz.
We must raise a minimum of $5,000,000, or sell at least 1,000,000 Shares, in
order for this Offering to be effective. The offering price of the Shares is
$5.00 per share.
Through a qualified market maker, we have applied to have our common stock,
$.001 par value per share (the "Common Stock"), approved for quotation on the
NASDAQ SmallCap Market under the symbol " ." Prior to this Offering there
has not been a public market for our Common Stock, and we cannot be sure that an
active and liquid trading market for our Common Stock will develop, or that
investors will be able to sell their shares at or above the purchase price.
For information on how to subscribe, call ( ) and ask for a
representative. Sale of our Common Stock will only be made in
connection with this Prospectus.
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MINIMUM MAXIMUM PROCEEDS TO PROCEEDS TO
SHARES SHARES PRICE TO SELLING US US
OFFERED(1)(2) OFFERED(1)(2) PUBLIC COMMISSIONS (MINIMUM) (MAXIMUM)
------------- ------------- ----------- ----------- ----------- -----------
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I.T. Technology, Inc........ 1,000,000 4,500,000 $ 5.00 $ $
--------- --------- ----------- -------- ---- ----
Instanz Nominees Pty.
Ltd....................... 0 500,000 $ 5.00 $ $
--------- --------- ----------- -------- ---- ----
1,000,000 5,000,000 $25,000,000 $ $
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(1) We are offering these Shares on a "best efforts, minimum-maximum basis."
Unless at least 1,000,000 Shares are sold, we will not sell any Shares. All
proceeds received for the Offering will be deposited in an escrow account
with Comerica Bank (the "Escrow Account"), and will not be released unless
at least 1,000,000 Shares are sold on or before , 2000 (which may
be extended to , 2000 at our option). If we do not sell at least
1,000,000 Shares that time, we will return the investment, with interest.
(2) Pursuant to the terms of an agreement between the Company and Instanz, the
initial $5,000,000 of proceeds from the sale of Shares in this Offering
shall be allocated to the Company, the next $2,500,000 shall be allocated to
Instanz and the balance of the proceeds of up to $17,500,000 shall be
allocated to the Company.
SEE "RISK FACTORS" ON PAGES 4 TO 11 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 as underwriter to assist in the distribution
of the Shares, on a best efforts basis. If necessary, will manage
the selected broker-dealers to assist in selling the Shares.
We must receive an original stock order form together with full payment of
$5.00 per share for all Shares for which subscription is made, at
by 4:00 p.m., Los Angeles time, on , 2000. Subscription funds will be
placed in an Escrow Account with Comerica Bank-California and will earn interest
from the date of receipt until completion or termination of the 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 the Company's sole
discretion), the Offering will be terminated and all subscription funds held in
the Escrow Account will be returned to investors with interest. In the event of
an oversubscription, the shares of Common Stock will be allocated pro rata among
the subscribers in this Offering, based on the amount of their respective
subscriptions. The minimum purchase is 100 Shares. The purchase limitations
described herein are subject to increase or decrease at our sole discretion.
UNDERWRITER
, 2000.
<PAGE> 4
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, or SEC, a
registration statement on Form SB-2 under the Securities Act of 1933, as
amended, or the Securities Act, for the shares of our Common Stock being offered
by this Prospectus. This Prospectus does not contain all of the information set
forth in the registration statement and the exhibits. For further information
about the Company and the Common Stock being offered, see the registration
statement and the exhibits thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other document to which reference
is made are not necessarily complete, and, in each instance where a copy of a
contract or other document has been filed as an exhibit to the registration
statement, reference is made to the copy so filed, each of those statements
being qualified in all respects by that reference. A copy of the registration
statement and the exhibits may be inspected without charge at the SEC's offices
at Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549, and copies of all
or any part of the registration statement may be obtained from the Public
Reference Room of the SEC, Washington, D.C. 20549 upon the payment of the fees
prescribed by the SEC. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a
web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, such as us, that file
electronically with the SEC. As a result of this Offering, we will become
subject to the information and reporting requirements of the Securities Exchange
Act of 1934, as amended, or the Exchange Act, and we will file periodic reports,
proxy statements and other information with the SEC. We intend to furnish our
stockholders with annual reports containing audited financial statements and
with quarterly reports for the first three quarters of each 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 the Company.
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 the affairs of the
Company or the facts which are herein set forth since the date hereof.
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER ALLOTMENT, ENTERING STABILIZATION BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE OTC BULLETIN BOARD
IN ACCORDANCE WITH RULE 103 OF REGULATION M OF THE SECURITIES ACT.
i
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary..........................................
Risk Factors................................................
Forward-Looking Statements..................................
Use of Proceeds.............................................
Dividend Policy.............................................
Dilution....................................................
Capitalization..............................................
Selected Financial Data.....................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................
Business....................................................
Management..................................................
Principal and Selling Shareholders..........................
Certain Transactions........................................
Description of Capital Stock................................
Shares Eligible for Future Sale.............................
Underwriting................................................
Legal Matters...............................................
Experts.....................................................
Additional Information......................................
Index to Financial Statements............................... F-1
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ii
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this Prospectus.
This summary does not contain all of the information that you should consider
before investing in our Common Stock. You should read the entire Prospectus
carefully, especially the risks of investing in our Common Stock discussed under
"Risk Factors."
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, directly and through acquiring a majority interest in Internet
related and other technology companies. To date, the Company has acquired
interests in Stampville.Com Inc., a New York corporation ("Stampville").
Stampville, incorporated in 1999, and which is in the process of developing its
web-site at www.stampville.com, intends to specialize in the wholesale and
Internet sale of philatelic memorabilia, including stamps and other
collectibles. Stampville has commenced limited operations through the launch of
two micro-sites, www.beegeesstamps.com and www.sheldonstamps.com at their
Web-site. Stampville intends to launch its core Web-site plus additional
micro-sites during the first six months of 2000. See "Research and
Development -- Stampville -- Current Development Status." The Company is also
actively seeking to identify other potential investments and acquisitions in the
United States and abroad, although there can be no assurance that the Company
will come to terms with or engage in a transaction with any such entity.
References hereinafter to the "Company", "we" or "our" include I.T. Technology,
Pty. Ltd. and Stampville unless the context indicates otherwise.
Subject to the amount of proceeds raised by the Company in this Offering
and the amount thereof which is actually invested in Stampville, the proposed
business activities described herein may classify the Company as a "blank check"
or "blind pool" entity. Many states have enacted statutes, rules, and
regulations limiting the sale of securities of "blank check" companies in their
respective jurisdictions.
THERE CAN BE NO ASSURANCES GIVEN THAT THE COMPANY WILL BE ABLE TO
SUCCESSFULLY LOCATE ANY ADDITIONAL ACQUISITION TARGET(S) OR CONSUMMATE ANY
ADDITIONAL ACQUISITION(S). STATUTES, REGULATIONS, RULES AND THE POSITIONS OF
REGULATORY AUTHORITIES HAVE BEEN BECOMING MORE ADVERSE AND RESTRICTIVE TOWARD
SUCH ACQUISITIONS AND TOWARD "BLIND POOL" ENTITIES SUCH AS THE COMPANY.
1
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THE OFFERING
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SHARES OF COMMON STOCK OFFERED IN THIS
PROSPECTUS
MINIMUM .................................... 1,000,000 shares(1)(2)
MAXIMUM..................................... 5,000,000 shares(2)(3)(5)
TOTAL SHARES OF COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING
MINIMUM..................................... 17,500,000 shares(1)(2)(4)
MAXIMUM..................................... 21,000,000 shares(2)(4)(5)
USE OF PROCEEDS BY THE COMPANY(5)(6).......... 1. $6,250,000 to finance acquisition of a majority
interest in Stampville;
2. approximately $3,000,000 for working capital and
other general purposes;
3. approximately $463,000 will be used to payoff the
balance due on the building housing the Company's
executive offices located in Melbourne, Australia;
and
4. the remaining proceeds to finance other Internet
or e-commerce acquisitions or ventures by the
Company.
PROPOSED NASDAQ SMALLCAP SYMBOL............... [ ]
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(1) This Offering will be consummated with the sale of no less than 1,000,000
Shares of Common Stock (the "Minimum Subscription").
(2) [Does not include up to Shares that underwriters may purchase
from us if they exercise their over allotment option in full.]
(3) Includes the reoffer and resale of up to 500,000 Shares by Instanz which
will occur after the Minimum Subscription is sold.
(4) Does not include the issuance of an additional 350,000 shares of Common
Stock by the Company which is contingent upon the Company raising the
Additional Stampville Investment. See "Compensation of Officers and
Directors -- Employment Agreements -- Consulting Agreement with Mendel
Mochkin."
(5) Assumes sale of all 5,000,000 Shares of Common Stock being offered.
(6) In the event the Minimum Subscription is sold, the initial $ 1,250,000 of
proceeds would be invested in Stampville, the next $1,500,000 would be
utilized to fund the Company's working capital requirements and, the
remaining balance to finance other e-commerce or Internet acquisitions
or ventures and/or additional investments in Stampville.
Unless otherwise indicated, all information in this Prospectus assumes (1)
no exercise of the over allotment option granted to the underwriters, and (2) an
initial public offering price of $5.00 per share.
RISK FACTORS
INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK AND COULD
RESULT IN A LOSS OF YOUR ENTIRE INVESTMENT. SEE "RISK FACTORS" FOR A DISCUSSION
OF VARIOUS RISKS ASSOCIATED WITH AN INVESTMENT IN OUR COMMON STOCK.
2
<PAGE> 8
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.
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FEBRUARY 2, 1999 (INCEPTION)
THROUGH SEPTEMBER 30, 1999
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PRO FORMA(1)
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ACTUAL MINIMUM MAXIMUM
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SELECTED STATEMENT OF OPERATIONS DATA:
Revenues............................................ $ -- $ -- $ --
Net loss............................................ $ (107,708) $ (575,548) $(1,426,255)
Net loss per share.................................. $ (.01) $ (0.03) $ (0.07)
Weighted average number of shares outstanding....... 10,157,292 17,500,000 21,350,000
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SEPTEMBER 30, 1999
--------------------------
(000S)
PRO FORMA(1)
-----------------
ACTUAL MINIMUM MAXIMUM
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SELECTED BALANCE SHEET DATA:
Working capital............................................. $ 91 $5,031 $24,668
Total assets................................................ 1,121 8,562 29,709
Total liabilities........................................... 598 598 145
Accumulated deficit......................................... (108) (108) (1,853)
Stockholders' equity........................................ $ 524 $7,964 $25,741
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(1) Gives effect to the sale of the Common Stock offered hereby and the
application of the estimated net proceeds therefrom. See "Use of Proceeds"
and "Pro Forma Financial Statements."
3
<PAGE> 9
RISK FACTORS
An investment in our Common Stock involves a high degree of risk. You
should consider carefully the following information about these risks before
buying shares of Common Stock. The risks described below are not the only ones
facing our Company. Additional risks may impair our business operations. If any
of the following risks occur, our business, results of operations or financial
condition could be adversely affected. In that case, the trading price of our
Common Stock could decline, and you may lose all or part of your investment. You
should also refer to the other information contained in this Prospectus,
including our financial statements and the notes to those statements.
RISKS RELATED TO OUR BUSINESS
NO OPERATING HISTORY.
The Company is a recently formed entity without any operating history. In
addition, Stampville is also a recently formed entity and has no operating
history. There can be no assurance that the Company will be able to successfully
operate its proposed business, or that Stampville will be able to execute its
business plan.
DEPENDENCE ON NET PROCEEDS OF THIS OFFERING.
The Company has very limited resources and is dependent on the net proceeds
of this Offering to implement its plan of operation. Although the Company
anticipates that the maximum net proceeds of this Offering will enable it to
fund its acquisition of interests in Stampville, as well as other potential
investments and acquisitions in Australia and the United States, unless at least
$12,250,000 is raised in this Offering, there can be no assurance that the
proceeds from this Offering will be sufficient to finance the Company's business
plans. Included in such proceeds from this Offering will be $2,500,000 from the
sale of shares by a shareholder, Instanz, which will not benefit the Company.
See "Use Of Proceeds." If the Company's plans change, its assumptions prove to
be inaccurate or the capital resources available to the Company otherwise prove
to be insufficient to implement its plan of operation (as a result of
unanticipated expenses, problems, or otherwise), the Company could be required
to seek additional financing or may be required to limit its business
activities. There can be no assurance that the Company will be able to obtain
any additional financing or if any financing is available to the Company it will
be on terms and conditions acceptable to the Company.
CONCENTRATION OF AND RELIANCE ON MANAGEMENT; KEY PERSONNEL.
All decisions with respect to the day-to-day management of the Company will
be made exclusively by Henry Herzog, Levi Mochkin, Jonathan Herzog and certain
other individuals. See "Management." Investors will have no right or power
solely by ownership of Common Stock to take part in the day-to-day management of
the Company. If the minimum subscription is sold, these entities will own over
94% of the outstanding voting rights and Common Stock of the Company.
Accordingly, no person should purchase any shares of Common Stock offered hereby
unless he or she is willing to entrust all aspects of the day-to-day management
of the Company to the board of directors and management. There can be no
assurance that the Company's board of directors and officers will be able to
operate or manage the Company's business successfully or that the Company will
be able to achieve profitable operations. If Messrs. Henry Herzog, Levi Mochkin
or Jonathan Herzog are unable to perform for any reason, including without
limitation from death or disability, that could seriously adversely affect the
Company. The Company does not maintain key man or other insurance to protect
against the foregoing risks. In addition, the Company's management and Directors
have no prior experience in operating Internet or e-commerce companies and have
very limited experience in "blind pool" or "blank check" companies.
4
<PAGE> 10
COMPETITION FOR EMPLOYEES.
The success of Internet ventures depends on the availability of highly
skilled employees with technical, management, marketing, sales, product
development and other specialized training for which competition is intense, and
there can be no assurance that the Company, Stampville or any other entity in
which the Company invests or acquires will be successful in attracting and
retaining such personnel. In particular, the Company's emphasis on
Internet-related entities will result in a relatively small and highly
sought-after base of employees upon which it will be dependent. There can also
be no assurance that employees will not leave the Company or Stampville or
compete against the Company or Stampville. The Company's or Stampville's failure
to attract additional qualified employees or to retain the services of key
personnel could materially adversely affect the Company's or Stampville's
business, operating results and financial condition. See "Management."
CONCENTRATION OF SHARE OWNERSHIP.
Members of the Company's management, together with affiliates of members of
management, and Instanz, whose affiliate, Helen Abeles, is a director of the
Company, collectively own all of the outstanding Common Stock and the voting
rights of the Company. If all 5,000,000 Shares being offered hereby are sold,
the foregoing entities will own collectively approximately 75% of the
outstanding Common Stock and voting rights of the Company. Accordingly, the
current officers and directors will have the voting power required to elect at
least a majority of the directors and to approve other matters requiring
approval by the shareholders of the Company in the foreseeable future. Certain
members of the Company's board of directors are members of the Company's
management. See "Management" and "Capitalization and Stock Ownership."
POTENTIAL ADVERSE IMPACT OF ADDITIONAL STOCK.
The board of directors could, without shareholder approval, issue Common
Stock, preferred stock, options, warrants or other securities, including both
debt and equity securities, with voting and other rights that could adversely
affect the voting rights of the holders of the Common Stock and could have
certain anti-takeover effects.
RISKS RELATED TO THE INDUSTRY/INTERNET
OUR SUCCESS DEPENDS ON THE INTERNET'S ABILITY TO ACCOMMODATE GROWTH IN
E-COMMERCE.
The use of the Internet for retrieving, sharing and transferring
information among businesses, buyers, suppliers and partners has only recently
begun to develop. If the Internet is not able to accommodate growth in
e-commerce, our business would suffer. The recent growth in the use of the
Internet has caused frequent periods of performance degradation and
interruption. Our ability to sustain and improve our services is limited, in
part, by the speed and reliability of the networks operated by third parties.
Consequently, the emergence and growth of the market for our services is
dependent on improvements being made to the Internet infrastructure to alleviate
overloading and congestion.
WE ARE DEPENDENT UPON THE GROWTH OF THE INTERNET AS A MEANS OF COMMERCE.
If the e-commerce market does not grow or grows more slowly than expected,
our business will suffer. The possible slow adoption of the Internet as a means
of commerce by businesses may harm our prospects. A number of factors could
prevent the acceptance and growth of e-commerce, including the following:
- e-commerce is at an early stage and buyers may be unwilling to shift
their traditional purchasing to online purchasing;
- businesses may not be able to implement e-commerce applications on these
networks;
5
<PAGE> 11
- increased government regulation or taxation may adversely affect the
viability of e-commerce;
- insufficient availability of telecommunication services or changes in
telecommunication services may result in slower response times; and
- adverse publicity and consumer concern about the reliability, cost, ease
of access, quality of services, capacity, performance and security of
e-commerce transactions could discourage its acceptance and growth.
Even if the Internet is widely adopted as a means of commerce, the adoption
of our network for procurement, particularly by companies that have relied on
traditional means of procurement, will require broad acceptance of the new
approach. In addition, companies that have already invested substantial
resources in traditional methods of procurement, or in-house e-commerce
solutions, may be reluctant to adopt our e-commerce solution.
SECURITY RISKS OF ELECTRONIC COMMERCE MAY DETER USE OF OUR PRODUCTS AND
SERVICES.
A fundamental requirement to conduct e-commerce is the secure transmission
of information over public networks. If purchasers are not confident in the
security of e-commerce, they may not effect transactions on our e-marketplaces
which would severely harm our business. We cannot be certain that advances in
computer capabilities, new discoveries in the field of cryptography, or other
developments will not result in the compromise or breach of the algorithms which
protect content and transactions on our e-marketplaces or proprietary
information in our databases. Anyone who is able to circumvent our security
measures could misappropriate proprietary, confidential information, place false
orders or cause interruptions in our operations. We may be required to incur
significant costs to protect against security breaches or to alleviate problems
caused by breaches. Further, a well-publicized compromise of security (whether
relating to our business or to other Internet businesses) could deter people
from using the Internet to conduct transactions that involve transmitting
confidential information. This risk has been emphasized by a well publicized
attack commonly referred to as a "denial of service attack" on some of the most
well known Internet services and providers. Our failure to prevent security
breaches, or well-publicized security breaches affecting the Internet in general
could adversely affect our business.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES COULD IMPAIR THE GROWTH OF THE
INTERNET AND DECREASE DEMAND FOR OUR SERVICES AND INCREASE OUR COST OF DOING
BUSINESS.
The laws governing Internet transactions remain largely unsettled, even in
areas where there has been some legislative action. The adoption or modification
of laws or regulations relating to the Internet could increase our costs and
administrative burdens. It may take years to determine whether and how existing
laws such as those governing intellectual property, privacy, libel, consumer
protection and taxation apply to the Internet.
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. We must comply with new regulations in
the United States and other countries where we conduct business. The growth and
development of the e-commerce market may prompt calls for more stringent laws
governing consumer protection and the taxation of e-commerce. Noncompliance with
any newly adopted laws and regulations could expose us to significant
liabilities.
We currently hold various Internet Web addresses relating to our business.
If we are not able to prevent third parties from acquiring Web addresses that
are similar to our addresses, third parties could acquire similar domain names
which could create confusion and divert traffic to other web sites away from our
e-marketplaces hereby adversely affecting our business. The acquisition and
maintenance of Web addresses is generally regulated by governmental agencies and
their designees. The regulation of Web addresses in the United States and in
foreign countries is subject to change. As a result, we may not be able to
acquire or maintain relevant Web addresses in all countries where we conduct
business. Furthermore, the relationship between regulations governing such
addresses and laws protecting proprietary rights is unclear.
6
<PAGE> 12
RISKS RELATING TO THE INDUSTRY AND NATURE OF UNIDENTIFIED ACQUISITION TARGETS
GENERAL
Part of the Company's business strategy includes the acquisition of
additional business ventures within the Internet, electronic commerce and
technology industries. Except for Stampville, the Company has not selected any
particular acquisition target or venture ("Target") in which to concentrate its
acquisition efforts. Except for Stampville, the directors and executive officers
of the Company have had no definitive contacts or discussions with any entity or
representatives of any entity regarding the consummation of an acquisition.
Accordingly, there is no basis to evaluate the possible merits or risks of a
Target or the particular industry in which the Company may ultimately operate,
and therefore risks of a currently unascertainable nature may arise when a
specific Target and industry is chosen. For example, to the extent that the
Company effects an acquisition with a financially unstable company or an entity
in its early stage of development or growth (including entities without
established records of revenues or income), the Company will become subject to
numerous risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. In addition, to the
extent that the Company effects an acquisition with an entity in an industry
characterized by a high level of risk, the Company will become subject to the
currently unascertainable risks of that industry. An extremely high level of
risk frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate the risks inherent in a particular
Target or industry, there can be no assurance that the Company will properly
ascertain or assess all such risks.
SCARCITY OF AND COMPETITION FOR ACQUISITION OPPORTUNITIES MAY HINDER THE
IDENTIFICATION OF A TARGET AND THE CONSUMMATION OF AN ACQUISITION
The Company expects to encounter intense competition from other entities
having business objectives similar to those of the Company. Many of these
entities, including venture capital partnerships and corporations, other blind
pool companies, large industrial and financial institutions, small business
investment companies, "incubators" and wealthy individuals, are well-established
and have extensive experience in connection with identifying and effecting
acquisitions directly or through affiliates. Many of these competitors possess
greater financial, technical, human and other resources than the Company and
there can be no assurance that the Company will have the ability to compete
successfully. The Company's financial resources will be limited in comparison to
those of many of its competitors. This inherent competitive limitation may
compel the Company to select certain less attractive acquisition prospects.
There can be no assurance that such prospects will permit the Company to achieve
its stated business objectives.
SUCCESS OF THE COMPANY'S BUSINESS PLAN DEPENDS IN LARGE PART UPON THE
CONSUMMATION OF ADDITIONAL ACQUISITIONS OR NEW VENTURES
The success of the Company's proposed plan of operation will depend to a
great extent on locating and consummating an acquisition of one or more Targets.
Subsequent to any acquisition, the Company's success will depend greatly on the
operations, financial condition, and management of the identified Target.
Management may also acquire companies or assets that do not have an established
operating history. If the Company completes one or more acquisitions, the
success of the Company's operations may be dependent upon management of the
acquired entities together with numerous other factors beyond the Company's
control.
THE COMPANY MAY BE SUBJECT TO UNCERTAINTY IN THE COMPETITIVE ENVIRONMENT OF A
TARGET
If the Company succeeds in effecting an acquisition, the Company will, in
all likelihood, become subject to intense competition from competitors of the
Target. In particular, certain industries which experience rapid growth
frequently attract an increasingly larger number of competitors, including
competitors with greater financial, marketing, technical, human and other
resources than the initial competitors in the industry. The degree of
competition characterizing the industry of any prospective
7
<PAGE> 13
Target cannot presently be ascertained. There can be no assurance that,
subsequent to a consummation of an acquisition, the Company will have the
resources to compete effectively in the business of the Target, especially to
the extent that the Target is in a highly competitive area of commerce or
Internet business.
PROBABLE LACK OF BUSINESS DIVERSIFICATION DUE TO LIMITED RESOURCES LIMITS THE
PROSPECTS FOR THE COMPANY'S SUCCESS
Even after the completion of this Offering, the Company will have limited
resources; accordingly, the Company in all likelihood, will have the ability to
effect only a few significant acquisitions. Accordingly, the prospects for the
Company's success will be entirely dependent upon the future performance of a
few businesses. Unlike certain entities which have the resources to consummate
several acquisitions or entities operating in multiple industries or multiple
segments of a single industry, it is highly likely that the Company will not
have the resources to diversify its operations or benefit from the possible
spreading of risks or offsetting of losses. The Company's probable lack of
diversification may subject the Company to numerous economic, competitive and
regulatory developments, any or all of which may have a material adverse impact
upon the particular industry in which the Company may operate subsequent to the
consummation of an acquisition. The prospects for the Company's success may
become dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Accordingly, notwithstanding
the possibility of capital investment in and management assistance to any Target
by the Company, there can be no assurance that such Target(s) will prove to be
commercially viable.
THE COMPANY MAY PURSUE AN ACQUISITION WITH A TARGET OPERATING OUTSIDE THE UNITED
STATES: SPECIAL ADDITIONAL RISKS RELATING TO DOING BUSINESS IN A FOREIGN COUNTRY
The Company may effectuate an acquisition with a Target whose business
operations, headquarters, place of formation or primary place of business are
located in Australia and in other locations outside the United States. In such
event, the Company may face the significant additional risks associated with
doing business in that country. In addition to potential language barriers,
different presentations of financial information, different business practices,
and other cultural differences and barriers that may make it difficult to
evaluate such a Target, ongoing business risks result from the internal
political situation, uncertain legal systems and applications of law, prejudice
against foreigners, corrupt practices, uncertain economic policies and potential
political and economic instability that may be exacerbated in various foreign
countries.
RISKS RELATED TO THIS OFFERING
YOU WILL EXPERIENCE IMMEDIATE DILUTION WITH RESPECT TO YOUR SHARES. WE MAY NEED
ADDITIONAL CAPITAL AND RAISING ADDITIONAL CAPITAL MAY DILUTE EXISTING
STOCKHOLDERS.
In the event of the Minimum Subscription, you will incur immediate and
substantial dilution of $4.54 per share in the net tangible book value of your
shares as a result of this Offering. Assuming the sale of all of the 4,500,000
Shares of Common Stock being offered in this Prospectus by the Company, you will
incur immediate and substantial dilution of $3.80 per share in the net tangible
book value of your shares as a result of this Offering. See "Dilution."
Historically, we have financed our business and operations through the sale
of equity.
In the event we reach only the Minimum Subscription, the Company will have
only approximately $1,250,000 committed for investment in Stampville, an
additional amount of approximately $ for investment in other Targets
and/or additional investments in Stampville and approximately 12 months' working
capital. In such event it will need significant additional financing to complete
its required investment in Stampville in order to continue to retain its 50.1%
ownership and to accomplish its business plan and/or consummate or fund its
additional Targets. These additional financings may result in significant
additional dilution to existing shareholders. Assuming the sale of all 4,500,000
Shares being offered by the Company in this Prospectus, we believe that the net
proceeds from this Offering will enable
8
<PAGE> 14
us to maintain our current and planned operations for approximately 24 months.
After that, we may need to raise additional funds. If our capital requirements
vary materially from those currently planned, we may require additional
financing sooner than anticipated. Such financing may not be available in
sufficient amounts or on terms acceptable to us, or at all, and will dilute the
existing stockholders' equity interest in the Company.
OUR STOCK HAS NOT BEEN PUBLICLY TRADED BEFORE THIS OFFERING AND OUR STOCK PRICE
MAY BE VOLATILE.
Our Common Stock has not been publicly traded, and an active trading market
may not develop or be sustained after this Offering. The potential that an
active trading market does not develop or cannot be sustained will be
exacerbated if the amount of Shares sold are at or about the Minimum
Subscription. We and the representatives of the underwriters have determined the
initial public offering price. The price at which our Common Stock will trade
after this Offering is likely to be highly volatile and may fluctuate
substantially due to factors such as:
- actual or anticipated fluctuations in our results of operations;
- changes in or failure by us to meet securities analysts' expectations;
- announcements of technological innovations;
- introduction of new services by us or our competitors;
- developments with respect to intellectual property rights;
- conditions and trends in the Internet and other technology industries;
- impact of additional acquisitions;
- the terms of any new financings which may be dilutive; and
- general market conditions.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
common stocks of technology companies, particularly Internet companies. These
broad market fluctuations may result in a material decline in the market price
of our Common Stock. In the past, following periods of volatility in the market
price of a particular company's securities, securities class action litigation
has often been brought against that company. We may become involved in this type
of litigation in the future. Litigation is often expensive and diverts
management's attention and resources which is needed to successfully run our
business.
NO FIRM COMMITMENT TO PURCHASE SHARES.
There is no commitment to purchase all or any part of the Shares being
offered. The Shares are 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 for an aggregate of 5,000,000 Shares representing the
maximum Offering. If 1,000,000 Shares are not sold prior to , 2000,
which is 120 days from date of this Prospectus, or thereafter in the Company's
sole discretion on ,2000, which is 150 days from the date of this
Offering, all funds received from subscriptions will be promptly returned in
full, with interest thereon, to the subscribers and no shares will be sold.
During the stated Offering period, subscriptions are irrevocable and subscribers
will not have the opportunity to have their funds returned. It is therefore
possible that subscribers will not have the use of, or earn interest on, their
funds for up to five months. If no material developments occur, subscribers will
receive no further written information about the Company or the status of the
Offering during that period.
SHARES ELIGIBLE FOR FUTURE SALE BY OUR EXISTING STOCKHOLDERS MAY ADVERSELY
AFFECT OUR STOCK PRICE.
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 Common Stock.
After this Offering, if all the 5,000,000 Shares are sold, 21,000,000
shares of Common Stock will be outstanding (17,500,000 if the minimum of
1,000,000 Shares are sold), excluding shares issuable to Mendel Mochkin. Of
these shares, the 5,000,000
9
<PAGE> 15
Shares sold in this Offering (1,000,000 Shares if only the minimum is sold) will
be freely tradable 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 Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of . These individuals
or entities may request that consider an early release from their
lock-up agreement. may, at any time and without notice, grant an
early release for shares subject to these lock-up agreements. Upon expiration of
this 180-day 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 the Company's currently outstanding shares
have agreed not to sell any of their shares, other than the sale of 500,000
Shares by Instanz 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
shall have the right to demand that the Company file a registration statement
covering the reoffer and resale by Instanz of any of its 500,000 Shares offered
through this Prospectus 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's registration rights. For a further description of
Instanz' rights see "Certain Transactions." 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. See
"Shares Eligible for Future Sale."
OUR ARTICLES OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
WHICH COULD DELAY OR PREVENT A CHANGE IN CONTROL AND COULD ALSO LIMIT THE MARKET
PRICE OF YOUR STOCK.
Our Certificate of Incorporation and Bylaws contain provisions that could
delay or prevent a change in control. These provisions could limit the price
that investors might be willing to pay in the future for shares of our Common
Stock. Some of these provisions:
- authorize the issuance of preferred stock which can be created and issued
by the board of directors without prior stockholder approval, commonly
referred to as "blank check" preferred stock, with rights senior to those
of Common Stock; and
- establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can be
acted upon by stockholders at a meeting.
In addition, certain provisions of Delaware law make it more difficult for
a third party to acquire us. Some of these provisions:
- establish a supermajority stockholder voting requirement to approve an
acquisition by a third party of a controlling interest; and
- impose time restrictions or require additional approvals for an
acquisition of us by an interested stockholder.
These provisions could also limit the price that investors might be willing
to pay in the future for shares of our Common Stock. See "Description of Capital
Stock" for additional discussion of these provisions.
OUR STOCKHOLDERS MAY HAVE DIFFICULTY IN RECOVERING MONETARY DAMAGES FROM
DIRECTORS.
Our Certificate of Incorporation contains a provision which may eliminate
personal liability of our directors for monetary damages to be paid to us and
our stockholders for some breaches of fiduciary
10
<PAGE> 16
duties. As a result of this provision, our stockholders may be unable to recover
monetary damages against our directors for their actions that constitute
breaches of fiduciary duties, negligence or gross negligence. Including this
provision in our Certificate of Incorporation may also reduce the likelihood of
derivative litigation against our directors and may discourage lawsuits against
our directors for breach of their duty of care even though some stockholder
claims might have been successful and benefited stockholders.
FUTURE GROWTH OF OUR OPERATIONS MAY MAKE ADDITIONAL CAPITAL OR FINANCING
NECESSARY.
In the event we reach only the Minimum Subscription, the Company will have
only approximately $1,250,000 committed for investment in Stampville, an
additional amount of approximately $ for investment in other Targets
and/or additional investments in Stampville and will have approximately 12
months working capital. In such event it will need significant additional
financing to complete its required investment in Stampville in order to continue
to retain its 50.1% ownership and to accomplish its business plan and/or
consummate or fund its additional Targets. These additional financings may
result in significant additional dilution to existing shareholders. Assuming the
sale of all 4,500,000 Shares being offered by the Company in this Prospectus, we
believe that the net proceeds from this Offering will enable us to maintain our
current and planned operations for approximately 24 months. After that, we may
need to raise additional funds in order to:
- Finance unanticipated working capital requirements.
- Develop or enhance existing services or products.
- Fund costs associated with strategic marketing alliances.
- Respond to competitive pressures.
- Acquire complementary businesses, technologies, content or products.
If our capital requirements vary materially from those currently planned,
we may require additional financing sooner than anticipated. Such financing may
not be available in sufficient amounts or on terms acceptable to us, or at all,
and may be dilutive to existing stockholders.
We cannot be certain that we will be able to obtain funds on favorable
terms, if at all. If we decide to raise funds by issuing additional equity
securities, purchasers in this Offering may experience additional dilution.
Issuance of additional equity securities may also involve granting preferences
or privileges ranking senior to those purchasers in this Offering. If we cannot
obtain sufficient funds, we may not be able to grow our operations, take
advantage of future business opportunities or respond to technological
developments or competitive pressures. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
WE DO NOT INTEND TO PAY DIVIDENDS.
We have never paid dividends on our Common Stock. We do not intend to pay
dividends and purchasers should not expect to receive dividends on our Common
Stock for the foreseeable future. See "Dividend Policy."
WARNING REGARDING OUR USE OF FORWARD-LOOKING STATEMENTS.
This Prospectus contains forward-looking statements which relate to
possible future events, our future performance and our future operations. In
some cases, you can identify forward-looking statements by our use of words such
as "may," "will," "should," "anticipates," "believes," "expects," "plans,"
"future," "intends," "could," "estimate," "predict," "potential" or "continue,"
the negative of these terms or other similar expressions. These forward-looking
statements are only our predictions. Our actual results could and likely will
differ materially from these forward-looking statements for many reasons,
including the risks described above and appearing elsewhere in this Prospectus.
We cannot guarantee future results, levels of activity, performance or
achievements. We are under no duty to update any of the forward-looking
statements after the date of this Prospectus to conform them to actual results
or to changes in our expectations.
11
<PAGE> 17
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, will be approximately
[$ million], and the minimum net proceeds to be approximately [$
million]. 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 that we will pay. Pursuant to an
agreement with Instanz, the initial $5,000,000 of proceeds from the sale of
Common Stock in the Offering will be allocated to the Company, the next
$2,500,000 of proceeds to Instanz and the remaining proceeds of up to
$17,500,000 to the Company. Assuming that all 4,500,000 Shares being offered by
the Company are sold in this Offering, we intend to use the proceeds from this
Offering as follows:
- Approximately $6,250,000 will be invested in Stampville in connection
with the Company's purchase of 50.1% of Stampville's capital stock. See
"Business -- Acquisition of Equity Interest in Stampville."
- Approximately $3,000,000 of the net proceeds for general corporate
purposes, including working capital.
- In the event the maximum subscription occurs approximately $463,000 will
be used to payoff the balance due on the building housing the Company's
executive offices located in Melbourne, Australia.
- The remaining net proceeds or approximately $ , ,000 of the
net proceeds from the Offering will be used to purchase equity interests
in or to develop other Internet companies or ventures.
In the event the Company receives at least $10,000,000 from the sale of its
Common Stock in the Offering, it has agreed to go forward with an investment in
Stampville of $5,000,000 within thirty (30) days of its receipt of these funds
from the Offering and an investment of an additional $1,250,000 on or before
December 8, 2001. Depending on how much additional proceeds it receives from
this Offering, it will retain no less than $1,500,000 for working capital
purposes and invest the remainder in and/or other Internet companies. 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 the Company only receives the Minimum Subscription, the initial
$1,250,000 of proceeds would be invested in Stampville, the next $1,500,000
would be utilized to fund the Company's working capital requirements and, the
remaining balance to finance other e-commerce or Internet acquisitions or
ventures and/or additional investments in Stampville.
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.
12
<PAGE> 18
CAPITALIZATION AND STOCK OWNERSHIP
The board of directors of the Company has authorized the issuance of
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 the investors.
The following table sets forth as of September 30, 1999, (i) the actual
capitalization of the Company, (ii) 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 5,000,000 Shares of Common Stock offered herein at the
initial public offering price of $5.00 per share and the application of the
estimated proceeds therefrom, and (iii) in the event the maximum subscription is
obtained, the issuance of 1,600,000 stock options granted to C. Jonathan Malamud
as partial consideration for a 50.1% equity interest in Stampville. This table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and notes thereto appearing elsewhere in this document.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------
PRO FORMA
-----------------
ACTUAL MINIMUM MAXIMUM
------ ------- -------
<S> <C> <C> <C>
Notes payable -- long term(1)............................... $ 457 $ 457 $ -
Stockholders equity
Preferred Stock, par value $.001; authorized 25,000,000
shares;
no shares issued and outstanding actual and pro forma
minimum and maximum.................................... 0 0 0
Common Stock, par value $.001; authorized 100,000,000
shares, issued and outstanding 14,000,000 shares
actual; and 17,500,000 minimum shares outstanding pro
forma and 21,350,000 maximum shares outstanding
pro forma(2)........................................... 14 18 21
Additional paid in capital.................................. 618 8,054 26,173
Deficit accumulated during the development stage............ (108) (108) (453)
----- ------ -------
Total stockholders' equity........................ $ 524 $7,964 $25,741
===== ====== =======
Total capitalization.............................. $ 981 $8,421 $25,741
===== ====== =======
</TABLE>
PRO FORMA ADJUSTMENTS:
(1) See notes to Consolidated Financial Statements.
(2) Based on the number of shares outstanding as of September 30, 1999. If only
the Minimum Subscription occurs, the pro forma adjustments exclude (1)
issuance of 350,000 shares of restricted Common Stock to be transferred at
the closing of the Offering to Mendel Mochkin for consulting services; and
(2) the 1,600,000 stock options granted to C. Jonathan Malumud as partial
consideration for a 50.1% equity interest in Stampville.
13
<PAGE> 19
STAMPVILLE
Upon the consummation of the transactions contemplated by the Stock
Purchase Agreement, dated June 18, 1999, as subsequently amended pursuant to the
Amendment to Stock Purchase Agreement dated December 8, 1999 (the "Amended
Purchase Agreement") (collectively, the "Stock Purchase Agreement"), the Company
will hold 50.1% of the capital stock of Stampville on a fully diluted basis;
provided, that the Company's ownership could be reduced to the lesser of (a)
27.5% of the outstanding shares of Stampville's common stock, or (b) the total
amount invested by the Company pursuant to the Stock Purchase Agreement divided
by 100,000 if the Company fails to make certain investments in Stampville. "See
Business -- Acquisition of Equity Interest in Stampville." The Company's
ownership in Stampville could also be reduced by up to 1% if certain conditions
are met (including the approval of Stampville and its shareholders) under which
the Company may transfer shares of Stampville's stock to Mr. Mendel Mochkin. The
Company, as a majority shareholder of Stampville, does not intend to approve a
transfer of this one percent (1%) interest in Stampville. See "Business --
Acquisition of Equity Interest in Stampville" and "Compensation of Directors and
Officers".
14
<PAGE> 20
PRO FORMA FINANCIAL STATEMENTS
The following unaudited Pro Forma Balance Sheets as of September 30, 1999
and unaudited Pro Forma Statements of Operations from February 2, 1999
(inception) through September 30, 1999 give effect to the acquisition of an
equity interest in Stampville assuming that the Minimum or Maximum Subscriptions
are sold. In the event the Minimum Subscription is sold, the Pro Forma Financial
Statements assumes that the Company's ownership is reduced to 27.5% of the
outstanding shares of Stampville. The pro forma information is based on the
historical consolidated financial statements of the Company giving effect to the
transaction using the purchase method of accounting and the assumptions and
adjustments described in the accompanying notes to the unaudited Pro Forma
Financial Statements. The unaudited Pro Forma Statement of Operations gives
effect to the acquisition as if it occurred at the beginning of the period
(February 2, 1999). The unaudited Pro Forma Balance Sheet gives effect to the
acquisition as of September 30, 1999.
The unaudited pro forma statements have been prepared by the management of
the Company 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 September 30, 1999. The
unaudited pro forma statements should be read in conjunction with the audited
financial statements and related notes of the Company and Stampville.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(ASSUMES MINIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------- ----------- -------------
<S> <C> <C> <C>
INCOME AND (EXPENSES)
Legal and professional fees....................... $ (67,336) $ (67,336)
Salary expense.................................... (25,000) (25,000)
Interest expense.................................. (5,504) (5,504)
Travel and entertainment.......................... (3,783) (3,783)
Equity investment in net loss of Stampville....... (4,331) (19,491)(1) (23,822)
Other............................................. (21,372) (21,372)
Foreign currency transaction gain................. 15,858 15,858
Other income...................................... 3,760 3,760
Amortization of excess purchase price over equity
interest in Stampville.......................... -- (448,349)(2) (448,349)
----------- ---------- -----------
Net loss....................................... $ (107,708) $ (467,840) $ (575,548)
=========== ========== ===========
Basic loss per common share.................. $ (0.01) $ (0.03)
=========== ===========
Diluted loss per common share................ $ (0.01) $ (0.03)
=========== ===========
Weighted average shares outstanding.......... 10,157,292 17,500,000(3)
=========== ===========
</TABLE>
- ---------------
(1) Adjustment to record the Company's 27.5 percent Minimum Subscription share
of Stampville's net loss from operations under the equity method of
accounting.
(2) The adjustment represents the amortization of the difference between the
Company's underlying equity in the net assets of Stampville and the
Company's total investment in Stampville. The excess purchase price of
$2,013,241 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.
15
<PAGE> 21
UNAUDITED PRO FORMA BALANCE SHEET
(ASSUMES MINIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------- ----------- -------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash............................................ $ 172,682 $ 2,498,750(1) $ 5,171,432
(2,500,000)(3)
5,000,000(2)
Deferred offering costs......................... 59,147 (58,306)(1) 841
---------- ----------- -----------
Total current assets.................... 231,829 4,940,444 5,172,273
Property and equipment, net....................... 643,938 643,938
Investment in Stampville.......................... 245,669 2,500,000 (3) 732,428
(2,013,241)(3)
Excess purchase price over equity interest in
Stampville...................................... -- 2,013,241(3) 2,013,241
---------- ----------- -----------
Total assets............................ $1,121,436 $ 7,440,444 $ 8,561,880
========== =========== ===========
CURRENT LIABILITIES
Accounts payable................................ $ 50,206 50,206
Accrued expenses................................ 25,000 29,035
Notes payable -- current portion................ 65,300 65,300
---------- ----------- -----------
Total current liabilities............... 140,506 -- 140,506
Notes payable -- long term........................ 457,098 457,098
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 par value
authorized 25,000,000 shares, no shares
issued and outstanding actual and pro
forma........................................ -- --
Common stock, par value $.001 par value;
authorized 100,000,000 shares, 14,000,000
shares issued and outstanding actual and
17,500,000 shares issued and outstanding pro
forma........................................ 14,000 2,500(1) 17,500
1,000(2)
Additional paid-in-capital...................... 617,540 2,437,944(1) 8,054,484
4,999,000(2)
Deficit accumulated during the development
stage........................................ (107,708) (107,708)
---------- ----------- -----------
Total Stockholders' Equity.............. 523,832 7,440,444 7,964,276
---------- ----------- -----------
Total Liabilities and Stockholders'
Equity................................ $1,121,436 $ 7,440,444 $ 8,561,880
========== =========== ===========
</TABLE>
(See Accompanying Notes to Pro Forma Balance Sheet).
16
<PAGE> 22
UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS
(1) Issuance of 2,500,000 shares of Common Stock to Instanz Nominees Pty.
Ltd. on October 26, 1999, less $58,306 in offering costs and $1,250 in escrow
fees in a private placement transaction.
(2) Raising of the Minimum Subscription of 1,000,000 shares of Common Stock
effected through this Offering at $5.00 per share, less estimated Offering costs
of $_______.
(3) To record the Company's purchase of a 27.5% equity interest in
Stampville for additional consideration of $2,500,000 of which $1,250,000 was
paid subsequent to September 30, 1999 and the balance is intended to be paid
from the Offering proceeds. See "Business -- Acquisition of Equity Interest in
Stampville." The excess purchase price over the Company's proportionate share
of Stampville's net assets is $2,013,241.
17
<PAGE> 23
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
(ASSUMES MAXIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
IT TECHNOLOGY STAMPVILLE.COM PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
------------------ ------------------ ----------- ---------------
<S> <C> <C> <C> <C>
INCOME AND (EXPENSES)
Legal and professional fees.... $ (67,336) $(16,849) $ (350,000)(1) $ (434,185)
Salary expense................. (25,000) (52,361) (77,361)
Interest expense............... (5,504) -- (5,504)
Travel and entertainment....... (3,783) (3,000) (6,783)
Equity in the net loss of
Stampville................... (4,331) -- 4,331 (2) --
Foreign currency transaction
gain......................... 15,858 -- 15,858
Other income................... 3,760 -- 3,760
Other.......................... (21,372) (14,416) (35,788)
Goodwill....................... -- -- (929,478)(3) (929,478)
Minority interest in
Stampville................... -- -- 43,226 (2) 43,226
----------- -------- ----------- ------------
Net loss..................... $ (107,708) $(86,626) $(1,231,921) $(1,426,255)
=========== ======== =========== ============
Basic loss per common share.... $ (0.01) $ (0.07)
=========== ===========
Diluted loss per common
share........................ $ (0.01) $ (0.07)
=========== ===========
Weighted average shares
outstanding.................. 10,157,292 7,350,000(4) 21,350,000(4)
=========== =========== ===========
</TABLE>
- ---------------
(1) Recognition of compensation expense of $350,000 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 its operations and other business infrastructure matters. The
restricted shares were valued using the October 1999 private placement price
of $1.00 per share. Pursuant to the Consulting Agreement, the Company agreed
to transfer up to one percent (1%) of its equity ownership in Stampville,
subject to certain conditions. See "Compensation of Directors and Officers."
The Company does not intend to approve the transfer of this one percent (1%)
interest.
(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 $43,226 represents the 49.9 percent minority interest share in
the net loss from operations of Stampville.
(3) Amortization of goodwill of $4,182,650, 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.
18
<PAGE> 24
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(ASSUMES MAXIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
IT TECHNOLOGY STAMPVILLE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENT CONSOLIDATED
------------------ ------------------ ----------- ---------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash....................... $ 172,682 $ 97,279 $ 2,498,750(1) $24,811,613
22,500,000(2)
Inventory.................. 487 (457,098)(2) 487
Deferred offering costs.... 59,147 (58,306)(1) 841
---------- -------- ----------- -----------
Total current
assets........... 231,829 97,766 24,483,346 24,812,941
Property and equipment,
net........................ 643,938 17,643 661,581
Investment in Stampville..... 245,669 (245,669)(4) --
Capitalized software costs... 52,000 52,000
Intangible assets............ 4,182,650(4) 4,182,650
---------- -------- ----------- -----------
Total assets....... $1,121,436 $167,409 $28,420,327 $29,709,172
========== ======== =========== ===========
CURRENT LIABILITIES
Accounts payable........... $ 50,206 50,206
Accrued expenses........... 25,000 4,035 29,035
Notes payable -- current
portion................. 65,300 65,300
---------- -------- ----------- -----------
Total current liabilities.... 140,506 4,035 -- 144,541
Notes payable -- long term... 457,098 (457,098)(2) --
Minority interest in
Stampville................. 3,824,024(4) 3,824,024
STOCKHOLDERS' EQUITY
Preferred stock, par value
$0.001.................. -- --
Common stock, par value
$0.001.................. 14,000 2,500(1) 21,350
4,500(2)
350(3)
Additional
paid-in-capital......... 617,540 250,000 2,437,944(1) 26,172,634
22,495,500(2)
349,650(3)
272,000(4)
(250,000)(4)
Deficit accumulated during
the development stage... (107,708) (86,626) (350,000)(3) (453,377)
4,331(4)
86,626(4)
---------- -------- ----------- -----------
Total Stockholders'
Equity........... 523,832 163,374 25,053,401 25,740,607
---------- -------- ----------- -----------
Total Liabilities
and
Stockholders' Equity... $1,121,436 $167,409 $28,420,327 $29,709,172
========== ======== =========== ===========
</TABLE>
(See accompanying notes to Pro Forma Consolidated Balance Sheet)
19
<PAGE> 25
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET ADJUSTMENTS
(1) Issuance of 2,500,000 shares of Common Stock to Instanz Nominees Pty. Ltd.
on October 26, 1999, less $58,306 in offering costs and $1,250 in escrow
fees in a private placement transaction.
(2) Raising of the maximum subscription of 4,500,000 shares at $5.00
($22,500,000) through this offering, excluding the Shares being offered by
Instanz for sale therein. In addition, the repayment of the note payable of
$457,098 as of September 30, 1999 is included.
(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 the October 1999 private
placement price of $1.00 per share. Pursuant to the Consulting Agreement,
the Company agreed to transfer up to 1% of its equity ownership in
Stampville, subject to certain conditions. See "Compensation of Directors
and Officers." The Company does not intend to approve the transfer of this
one percent (1%) interest.
(4) To record the Company's purchase of 50.1% equity investment in Stampville
for aggregate consideration of $7,750,000 in cash payable to Stampville, of
which $250,000 was paid as of September 30, 1999, and 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. The following table summarizes the net assets acquired:
<TABLE>
<S> <C>
Cash consideration given:
Cash paid to Stampville as of September 30, 1999 $ 250,000
Cash paid subsequent to September 30, 1999 and
prior to this offering 1,250,000
Cash payable from this offering 6,250,000
----------
Total consideration given $7,750,000
==========
Company's share of the cash given $3,867,250
Stock options granted 272,000
----------
Purchase price of 50.1 percent interest in Stampville 4,139,250
Less net deficit acquired 43,400
----------
Intangible assets $4,182,650
==========
</TABLE>
As the Company contributed the entire amount of Stampville's Common Stock as
of September 30, 1999, the net deficit excludes the $250,000 paid as of that
date.
20
<PAGE> 26
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of February , 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 C. Jonathan
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.
BENEFICIAL OWNERSHIP OF COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME OF SHAREHOLDER OF COMMON STOCK HELD(1) CLASS
------------------- ----------------------- ----------
<S> <C> <C>
Ledger Technologies Pty. Ltd.(2)
Levi Mochkin(2)........................................... 6,300,000 38.18%
Instanz Nominees Pty. Ltd.(3)
Helen Abeles(3)........................................... 3,700,000 22.42%
Riccalo Pty. Ltd.(4)
Henry Herzog(4)........................................... 2,000,000 12.12%
Eurolink International Pty. Ltd.(5)
Jonathan Herzog(5)........................................ 2,000,000 12.12%
Atcor Aus. Pty. Ltd.(6)
Farrel Meltzer(6)......................................... 750,000 4.54%
Tilbia Nominees Pty. Ltd.(7)
Anthony Davis(7).......................................... 1,600,000 9.10%
Mendel Mochkin(8)........................................... 150,000 0.91%
----------
Total Outstanding Shares.................................... 16,500,000
==========
</TABLE>
- ---------------
(1) Pursuant to the rules promulgated by the SEC, all shares underlying options
which were exercisable on February , 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. 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.
21
<PAGE> 27
(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. Does not include the
additional 350,000 shares of Common Stock which is contingent upon the
Company completing the Additional Stampville Investment. See "Compensation
of Officers and Directors" and "Compensation of Officers and Directors --
Employment Agreements -- Consulting Agreement with Mendel Mochkin."
The preceding table of beneficial ownership does not include options to
purchase 1,600,000 shares of Common Stock which have been granted to C. Jonathan
Malamud. These shares will only become exercisable in the event the Company
makes an additional payment of $5,000,000 to Stampville above the "Stage One
Investment," as such term is defined the Stock Purchase Agreement, or raises at
least $10,000,000 in this Offering, and then only in installments commencing two
years after such date. The beneficial ownership table also does not include
1,450,000 shares subject to options granted to Robert Petty ("Petty Options").
Petty Options, representing an aggregate of 950,000 shares of Common Stock, will
be exercisable at $1.00 per share and Petty Options representing 500,000 shares
will be exercisable at $2.00 per share, such shares shall become vested and
exercisable upon the Company reaching certain levels of market capitalization
and the occurrence of certain other events. For further information on the Petty
Options, see "Compensation of Officers and Directors -- Employment Agreements --
Consulting Agreement with Petty Consulting, Inc. for the Services of Robert
Petty."
22
<PAGE> 28
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 proceeds from the sale of 2,500,000
shares to Instanz at $1.00 per share is reduced by the amount of our total
liabilities, divided by the number of shares of Common Stock outstanding, as
adjusted. As of September 30, 1999, the net tangible book value of the Company
was approximately $3,024,000 or $0.18 per share.
As of September 30, 1999, our pro forma net tangible book value, as
adjusted for the sale of the minimum and maximum shares offered in this Offering
and the application of the net proceeds (at the initial public offering price of
$5.00 per share and prior to deducting the estimated Offering expenses) was
$0.46 and $1.22, respectively. For the maximum subscription, this represents an
immediate increase of $1.03 per share to existing stockholders and an immediate
and substantial dilution of $3.78 per share to new investors purchasing Common
Stock in this Offering. If only a the Minimum Subscription was sold, new
investors purchasing Common Stock in this Offering would experience an immediate
and substantial dilution of $4.54 per share, while existing stockholders,
including Instanz, would have an immediate increase of $0.28 per share. The
following tables illustrate this per share dilution:
ASSUMES MINIMUM SUBSCRIPTION
<TABLE>
<S> <C> <C>
Initial public offering price............................... $5.00
Net tangible book value as of September 30, 1999............ $0.18
Increase attributable to new investors...................... $0.28
-----
Pro forma net tangible book value after the Offering........ $0.46
-----
Dilution in net tangible book value to new investors........ $4.54
=====
</TABLE>
ASSUMES MAXIMUM SUBSCRIPTION
<TABLE>
<S> <C> <C>
Initial public offering price............................... $5.00
Net tangible book value as of September 30, 1999............ $0.18
Increase attributable to new investors...................... $1.03
-----
Pro forma net tangible book value after the Offering........ $1.22
-----
Dilution in net tangible book value to new investors(1)..... $3.78
=====
</TABLE>
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(2).................. 16,500,000 78% $ 3,158,750 12% $ .19
New investors............................. 4,500,000 22% $22,500,000 88% $5.00
---------- ---- ----------- ---- -----
Total........................... 21,000,000 100% $25,658,750 100% $1.22
========== =========== =====
</TABLE>
- ---------------
(1) Excludes the 350,000 shares issuable to Mendel Mochkin for consulting
services upon the closing of an initial public offering.
(2) Includes the 2,500,000 shares of Common Stock sold to Instanz subsequent to
September 30, 1999.
23
<PAGE> 29
The foregoing table is based on the sale of the maximum of 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
-------------------- -------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1).................. 16,500,000 94.29% $3,158,750 38.72% $ .19
New investors............................. 1,000,000 5.71% $5,000,000 61.28% $5.00
---------- ------ ---------- ------ -----
Total........................... 17,500,000 100% $8,158,750 100% $ .46
========== ========== =====
</TABLE>
(1) Includes the 2,500,000 shares sold to Instanz subsequent to
September 30, 1999.
As of September 30, 1999, there were no outstanding options to purchase the
Company's Common Stock. Subsequent to September 30, 1999, the Company granted
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 C. Jonathan
Malamud (the "Malamud Options"). For a further discussion of the Malamud Options
see "Option Grants in Last Fiscal Year." The remaining options consist of the
Petty Options to purchase 1,450,000 shares. For further information on the Petty
Options see "Compensation of Officers and Directors -- Employment Agreements --
Consulting Agreement with Petty Consulting Inc. for the Services of Robert
Petty."
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.
24
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes to those statements that appear elsewhere in this
Prospectus. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ from
those discussed in the forward-looking statements. Factors that could cause or
contribute to any differences include, but are not limited to, those discussed
below and elsewhere in this Prospectus, particularly in "Risk Factors."
OVERVIEW AND PLAN OF OPERATIONS
The Company was formed in February 1999 and is in the early stage of
development. The Company is engaged in Internet, e-commerce and other technology
businesses. The Company adds and expects to add value to operating companies
through active ongoing management infrastructure, support, funding, and
expertise.
The Company's goal is to identify entities that have high growth potential
and can benefit from the commercial and financial expertise of the Company and
its personnel. It assists in the development and recruitment of key management
to support accelerated financial and operational growth and enhanced efficiency.
The Company's practice is to emphasize relationships in which its resources can
enhance the creative and technological skills of its partners.
In mid-1999, the Company signed an agreement with Stampville, a
newly-formed company. Stampville is being developed to become a global center
for stamp products and services. The Company has assisted the founders of
Stampville in developing this enterprise, recruiting key management and
implementing systems to advance its development and prepare it for its full
launch later this year. In December 1999, Stampville became a 50.1% owned
subsidiary of the Company. To date, the Company has invested $1,500,000 in
Stampville and at this stage, upon the completion of the Company raising a
minimum of $10,000,000 through the initial public offering, anticipates
contributing up to an additional $6,250,000 million to Stampville.
Stampville plans to use that portion of the Offering proceeds which it will
receive to continue to develop a portal community Website for the collectable
postage stamp community that will service a wide range of areas surrounding the
stamp market. 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.
Beyond the Company's development of Stampville, it is continually reviewing
and considering e-commerce and other related enterprises and ventures, but has
not made any commitments at this stage.
The Company does not have any meaningful revenues, and will not generate
any meaningful revenues until after the Company implements its strategic plan
and attracts and retains a significant number of e-commerce and related
businesses. The Company does not anticipate generating any revenue of
significance until several months following the consummation of this Offering,
if at all. For the period from February 2, 1999 (inception) to September 30,
1999, the Company incurred a cumulative net loss of approximately $108,000. The
Company anticipates that it will continue to incur significant losses until, at
the earliest, the Company generates sufficient revenues to offset the
substantial up-front expenditures and operating costs associated with
establishing, attracting and retaining a significant business base. There can be
no assurance that the Company will be able to attract and retain a sufficient
number of e-commerce businesses to generate meaningful revenues or achieve
profitable operations.
Depending upon the level of its business activity, the Company anticipates
that it will use a portion of the proceeds of this Offering to hire several
additional employees over the next twelve months to market the Company's
services to potential businesses and develop the infrastructure of Stampville.
25
<PAGE> 31
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements have been to fund its initial
investment in Stampville. Additional capital will be needed to complete the
purchase of Stampville and pursue other business opportunities, as well as to
fund its working capital requirements, including legal and professional
expenses. To date, the Company has financed its capital requirements through the
issuance of equity securities and issuance of long-term debt.
At September 30, 1999, the Company had working capital of $91,323. Prior to
September 30, 1999, the Company issued 14,000,000 shares of Common Stock to
various entities that are affiliates of certain officers of the Company and
received cash proceeds of $651,250 and services of $7,500.
In October 1999, the Company consummated a private placement pursuant to
which it issued 2,500,000 shares of Common Stock and received proceeds of
$2,500,000. The proceeds were used primarily to finance further investment in
Stampville, and pay legal and professional fees and expenses in connection with
this Offering.
In July 1999, the Company entered into an agreement to purchase a building
in exchange for cash and a note payable of approximately $595,000. Such
indebtedness bears interest at the rate of 7.25% per annum and is repayable in
July 2001. The Company will use a portion of the proceeds of this Offering to
repay such indebtedness.
The capital requirements relating to implementation of the Company's
business plan will be significant. During the twelve months following the
consummation of this Offering, the Company intends to finance the acquisition of
a majority interest in Stampville, finance or acquire interests in other
Internet or e-commerce enterprises and meet its own working capital needs. Other
than as described above, as of the date of this Prospectus, the Company has no
material commitments for capital expenditures.
The Company is dependent on the proceeds of this Offering or other
financing in order to fully implement its proposed plan of operation. Based on
currently proposed plans and assumptions relating to the implementation of its
business plans in the event the Company sells all of its shares offered in this
Offering, it will retain approximately $3,000,000 which will be sufficient to
satisfy its contemplated working capital requirements for approximately two
years following the consummation of this Offering. In addition, the Company
would retain approximately $ for investment, acquisition and
development of the Internet and e-commerce ventures. In the event the Company
raises approximately $10,000,000 in this Offering, it would retain approximately
$1,500,000 which would be sufficient to fund its working capital requirement for
approximately one year following this Offering. In such event, the Company would
have sufficient funds to complete its contemplated investment in Stampville but
would need to raise additional capital to invest in, acquire and develop other
Internet or e-commerce ventures. If the Company raises only the Minimum
Subscription, the initial $1,250,000 of proceeds would be invested in
Stampville, the next $1,500,000 would be utilized to fund the Company's working
capital requirements and, the remaining $ to finance other e-commerce or
Internet acquisitions or ventures and/or additional investments in Stampville.
In the event that the Company's plans change, its assumptions change or prove to
be inaccurate or if the proceeds of this Offering prove to be insufficient to
implement its business plans, the Company would be required to seek additional
financing sooner than currently anticipated. There can be no assurance that the
proceeds in this Offering will be sufficient to permit the Company to implement
its 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 the Company to generate
meaningful revenues or achieve profitable operations, the inability to obtain
additional financing will have a material adverse effect on the Company. There
can be no assurance that any such financing will be available to the Company on
commercially reasonable terms, or at all.
RECENT DEVELOPMENTS
Subsequent to September 30, 1999, a number of developments occurred which
had a significant impact on the operations and results of the Company, including
the following:
The Company commenced a private placement of 2,500,000 shares of the
Company's Common Stock for $1.00 per share, which was completed October 26,
1999.
26
<PAGE> 32
On December 8, 1999, the Company entered into an amendment of its original
agreement to acquire an interest in Stampville, pursuant to which the Company
agreed to accelerate and increase its investment in Stampville to an aggregate
amount of up to $7,750,000 in exchange for an immediate 50.1% interest in
Stampville. The Company's 50.1% interest may be reduced in the event the Company
does not complete its funding of the $7,750,000 in Stampville. The Company's
ownership interest in Stampville may also be reduced in the event the Company
arranges for third party financing in lieu of its direct investment in
Stampville. See "Business -- Acquisition of Equity Interest in Stampville."
INFLATION
The Company has not been materially affected by inflation in the United
States. While the Company does not anticipate inflation affecting the Company's
operations, increases in labor and supplies could impact the Company's ability
to compete.
YEAR 2000 COMPLIANCE AND COSTS
As has been widely reported, there is worldwide concern that Year 2000
technology problems may materially and adversely impact a variety of businesses,
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. The Company, as a newly formed entity, has
acquired computer hardware and software which is Year 2000 compliant, and does
not expect future expenses associated with ongoing compliance to be material to
the Company's financial position or future results of operations, although there
can be no assurance that presently unforeseen computer programming difficulties
will not arise.
It is possible that the Company's future performance may be adversely
impacted by payment and financial difficulties experienced by customers, and by
shipping, fulfillment and accounting difficulties experienced by vendors, which
are related to computer malfunctions. This is particularly the case as the
Company seeks to effect acquisitions, as it currently plans to do. The Company
believes that it can establish and maintain sufficient resources, including cash
reserves to maintain operations during delays in payments or supplies of
inventories. However, the Company is aware that extended difficulties by larger
vendors or customers may have a significant impact; however, it is unable, at
this time, to anticipate the extent of any such impact, were it to occur. An
adverse impact on such customers due to the Year 2000 issue or similar computer
malfunctions could also have a material adverse effect on the Company's
business, financial condition and results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, as amended, "Accounting
for Derivative Instruments and Hedging Activities." The 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 the Company in January
2001.
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BUSINESS
THE COMPANY
The Company is 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. The
Company's wholly-owned subsidiary, I.T. Technology Pty. Ltd. furthers the
Company's operations in Australia and owns the Company's executive offices.
The Company actively seeks investments in and acquisitions of entities with
unique opportunities in the Internet, e-commerce and technology-related areas.
The Company, through its executive officers and directors, identifies companies
which have high growth potential and which can benefit from the commercial and
financial expertise of the Company and its personnel. The Company emphasizes
relationships in which its resources can enhance the creative and technological
skills of its partners, and is 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, the Company has acquired 50.1% of the equity of Stampville, a corporation
specializing in the business of selling collectible stamps and other memorabilia
through the Internet and on a wholesale basis to large chain stores and small
businesses, and on a retail basis to the general public and collectors. The
Company's 50.1% interest may be reduced in the event the Company does not
complete its funding of the $7,750,000 in Stampville. The Company's ownership
interest in Stampville may also be reduced in the event the Company arranges for
third party financing in lieu of its direct investment in Stampville. See
"Business -- Acquisition of Equity Interest in Stampville." As of February 14,
2000, the Company has invested $1,500,000 in Stampville.
The Company intends to identify other potential Internet or e-commerce
businesses to acquire or invest in, in addition to Stampville; however, the
Company has not at this time entered into substantive negotiations with any such
potential Targets and there can be no assurance that the Company will be able to
successfully locate other investment or acquisition candidates or ventures or if
located successfully, negotiate a transaction with such targeted entities. See
"Risk Factors."
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 the 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
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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"). 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 transparent to the user. Electronic
documents are published on Web servers in a common format described by Hyper
Text Mark-up Language ("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 ("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 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 ("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
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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 its investments in Stampville, the Company intends 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 these Internet related businesses or
"Targets," the Company will in most cases seek to either acquire a majority of
the capital stock of the Targets or in certain circumstances to control the
Targets from the management level. The Company may also make small investments
in entities without seeking a majority interest, where this may be either of
strategic significance to the Company or circumstances warrant a relatively
smaller involvement.
Stampville -- Operational Strategy
Stampville plans to develop a "portal community" Web site for the
collectable 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.
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 and the availability of framed
philatelic art.
The Company believes 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.
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 large national department and specialty stores, as well as gift shops
(including gift and sundry shops located at hotels), small vendors and other
potential vendors.
Stampville has entered into a three year Supplier's Agreement with
Inter-Governmental Philatelic Corporation ("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,
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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 IGPC Agreement automatically will extend for
an additional two year period. IGPC's President is Sam Malamud, the father of C.
Jonathan 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.
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:
- The total United States market for stamps is $791 million.
- Numbers for the rest of the world are hard to come by. 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.
Stampville believes that these conditions make it possible for a firm
providing sales and information through the Internet to provide a valuable
service which will result in meaningful results.
Acquisitions of Additional Businesses or Establishment of Ventures
In addition to the operations of Stampville, the Company plans 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, the Company has no definitive plan, proposal, agreement,
understanding, or arrangement to acquire any specific business or company other
than its arrangements with Stampville. While the Company seeks opportunities in
Internet, e-commerce and technology based businesses, the Company will not
restrict its search to any specific business, industry, or geographical
location, and may participate in business ventures of virtually any kind or
nature. Discussion of this proposed plan of operation and acquisitions under
this caption and throughout this Prospectus is purposefully general and is not
meant to restrict the Company's virtually unlimited discretion to search for and
enter into potential business opportunities.
The Company 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
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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. The Company may purchase assets and
establish wholly-owned subsidiaries in various businesses or purchase existing
businesses as subsidiaries.
Selecting a Target will be complex and extremely risky. Because of general
economic conditions, rapid technological advances being made in some industries,
and shortages of available capital, 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 (subject to restrictions of applicable statutes) for all stockholders,
and other items. Potential Targets may exist in many different 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.
The Company may not have sufficient capital with which to provide the
owners of Targets significant cash or other assets. Management believes the
Company 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, the Company has not conducted
market research and is not aware of statistical data that would support the
perceived benefits of an acquisition transaction for the owners of a Target.
The Company will not restrict its search for any specific kind of Target,
and may acquire an entity which is in its preliminary or development 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 the Company 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 the Company may offer.
Selection and Evaluation of Targets
Management of the Company will have complete discretion and flexibility in
identifying and selecting a prospective Target. In connection with its
evaluation of a prospective Target, 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 the
Company.
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, the Company 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, the Company 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
securities of the Company, and the consultants or third parties may be placement
agents or their affiliates.
The Company will seek potential Targets from all known sources and
anticipates that various prospective Targets will be brought to its attention
from various nonaffiliated sources, including securities broker-dealers,
investment bankers, venture capitalists, bankers, other members of the financial
community and affiliated sources, including, possibly, the Company's executive
officers, directors and their affiliates.
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While the Company has not yet ascertained how, if at all, it will advertise and
promote itself, the Company may elect to publish advertisements in financial or
trade publications seeking potential business acquisitions. While the Company
does not presently anticipate engaging the services of professional firms that
specialize in finding business acquisitions on any formal basis, the Company may
engage such firms in the future, in which event the Company may pay a finder's
fee or other compensation.
In analyzing prospective Targets, management may consider, among other
factors, such matters as:
(1) the extent to which the Targets provide complementary services or
technology or is otherwise synergistic with the Company's operations;
(2) the available technical, financial and managerial resources;
(3) working capital and other financial requirements;
(4) history of operation, if any;
(5) prospects for the future;
(6) present and expected competition;
(7) the quality and experience of management services which may be
available and the depth of that management;
(8) the potential for further research, development or exploration;
(9) specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the Company;
(10) the potential for growth or expansion;
(11) the potential for profit;
(12) the perceived public recognition or acceptance of products,
services or trades; and
(13) name identification.
Acquisition opportunities in which the Company may participate will present
certain risks, many of which cannot be adequately identified prior to selecting
a specific opportunity. The Company's stockholders must, therefore, depend on
the Company's 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 Company of the
related costs incurred.
There can be no assurance that the Company 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. The Company 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 to the Company, the Target and their respective stockholders while
still accomplishing the Company's strategic objectives. There can be no
assurance that the Internal Revenue Service or relevant state tax authorities
will ultimately assent to the Company's 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 the
Company, the Target and their respective stockholders. Tax considerations as
well as other relevant factors will be evaluated in determining the precise
structure of a particular acquisition.
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The Company may utilize available cash and equity securities in effecting
an acquisition. The Company 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 a Company's stockholders will occur.
Additionally, a change in control of the Company may occur which may affect,
among other things, the Company's ability to utilize net operating loss, if any.
There currently are no limitations on the Company's ability to borrow funds
to effect an acquisition. However, the Company's limited resources and lack of
operating history may make it difficult to borrow funds. The amount and nature
of any borrowings by the Company will depend on numerous considerations,
including the Company's capital requirements, potential lenders' evaluation of
the Company's ability to meet debt service on borrowings and the then prevailing
conditions in the financial markets, as well as general economic conditions. The
Company has 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 the best interests of the Company. The inability of
the Company 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 the Company's 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 the Company 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
The Company holds approximately 50.1% interest in Stampville pursuant to
the Stock Purchase Agreement.
Under the Purchase Agreement, Stampville agreed to issue to the Company an
equity interest of 25% in exchange for payment by the Company of up to
$5,000,000, payable in installments. Pursuant to the Amended Purchase Agreement,
the Company accelerated and increased the payment of the consideration up to
$7,750,000 in exchange for an immediate 50.1% equity interest in Stampville. As
of February 14, 2000, the Company had invested $1,500,000 in Stampville.
The Company has agreed that if it raises $10,000,000 in this Offering, it
will complete the purchase of its 50.1% interest in Stampville through the
payment to Stampville of $5,000,000 within thirty (30) days of its receipt of
the funds from the Offering (the "Additional Payment") and an additional
$1,250,000 on or before December 8, 2001 (the "Remaining Stage Two
Consideration"). If the Company does not raise $10,000,000 in this Offering it
will consider other alternatives for the funding of Stampville. If the Company
fails to make or arrange for the Additional Payment or the Remaining Stage Two
Consideration in full, the Company has agreed to surrender such number of shares
of Common Stock of Stampville so that, upon such surrender, the Company shall
hold a percentage of the outstanding shares of Common Stock equal to the lesser
of (a) 27.5% of the outstanding shares of Common Stock of Stampville, or (b) the
total amount invested by the Company pursuant to the Stock Purchase Agreement
divided by $100,000. Thus, if the Company invests an aggregate of $2,500,000 in
Stampville and does not make or arrange for the Additional Payment, the
Company's percentage investment in Stampville shall be 25%. If the Company
arranges for the Additional Payment, rather than provide the Additional Payment
itself, the equity interest of the Company in Stampville shall be reduced by the
amount required by the party providing the Additional Payment, provided,
however, that the Company's 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 the Company. The Company has also agreed,
pursuant to its consulting agreement with Mendel Mochkin, to transfer to Mr.
Mochkin up to an aggregate of one percent (1%) of its equity interests in
Stampville if the Company consummates its investment in Stampville. The transfer
of such interests is subject to certain conditions, including the approval of
Stampville and its shareholders and the continued employment of Mr. Mochkin
under the consulting agreement. Stampville has not consented to the transfer and
no shares of Stampville's capital stock have been transferred to Mr. Mochkin as
of February 14, 2000. The Company, as majority shareholder of Stampville, does
not intend to approve a transfer of this one percent (1%) interest in
Stampville. See "Compensation of Directors and Officers."
In connection with its investment in Stampville, the Company and all of the
other shareholders of Stampville entered into a Shareholders Agreement (the
"Shareholders Agreement"). The Shareholders
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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 in Stampville; provides that each shareholder's interest in
Stampville shall be subject to purchase by the Company 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,
the Company is entitled to appoint to the board of directors of Stampville such
additional nominees selected by the Company so that at all times half of the
members of the board of directors of Stampville shall consist of individuals
nominated by the Company. The Company's nominees serving on the Stampville board
of directors are Levi Mochkin and . The Company is 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. The
Company has designated Robert Petty as Stampville's Acting Chief Executive and
Financial Officer. The Company's 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 the Company as
Vice President -- Business Development. If the Company fails to make or arrange
for the Additional Payment or the Remaining Stage Two Payment, the Company's
management rights shall be limited to designating one individual to the board of
directors of Stampville and the approval of the Company's designated director
shall be required for certain significant corporate transactions. Under any
circumstances, the Company's right to any preferential board and management
representation will terminate by no later than June 18, 2002.
COMPETITION
I.T. Technology
The Company is, and will continue for the indeterminate future to be, an
insignificant participant in the Internet and e-commerce business. The Company
expects to encounter intense competition from other entities having business
objectives similar to those of the Company with respect to the acquisition of
additional Targets. Many of these entities, including venture capital
partnerships and corporations, other blind pool companies, large industrial and
financial institutions, small business investment companies, "incubators" and
wealthy individuals, are well-established and have extensive experience in
connection with identifying and effecting acquisitions directly or through
affiliates. Many of these competitors possess far greater financial, technical,
human and other resources than the Company and there can be no assurance that
the Company will have the ability to compete successfully. The Company's
financial resources will be limited in comparison to those of many of its
competitors. This inherent competitive limitation may compel the Company to
select certain less attractive prospects. There can be no assurance that such
prospects will permit the Company to achieve its 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. Our 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 or 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 bases, greater brand
recognition in other businesses and Internet markets and significantly greater
financial, marketing, technical and other resources than we have. Competitive
pressures created by any one of these companies, or by our competitors
collectively, could have material adverse effect on our business, results of
operations and financial condition, and we can give no assurance that we will be
able to compete successfully against current and future competitors.
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<PAGE> 41
In addition, other major nationally-known companies have the capability to
include a stamp collecting content to 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 companies and Internet companies will develop competitive Web
sites. All of these companies would be better known than we are, and they 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 scaleability of its Web site will attract users
worldwide.
INTELLECTUAL PROPERTY
All of the Company's and Stampville's software was acquired from third
parties. Neither the Company nor Stampville has 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.
ENVIRONMENTAL MATTERS
The Company believes it is in material compliance with all relevant
federal, state, and local environmental regulations and does not expect to incur
any significant costs to maintain compliance with such regulations in the
foreseeable future.
EMPLOYEES AND LABOR RELATIONS
The Company, through its Australian subsidiary, I.T. Technology Pty. Ltd.,
employed one full-time employee and two part time employees, including one
officer on February 4, 2000. On February 4, 2000, Stampville employed 15
full-time employees (including consultants working for Stampville), including 5
executive officers. In addition, 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, and for
the services of Douglas Wu as a financial consultant. None of the Company's nor
Stampville's employees are represented by a labor union, and we believe that
relations with the Company's and Stampville's employees are good. In the event
the Company raises at least $10,000,000 in the Offering, it intends to hire
additional executives on a full time basis at least one of whom will be located
in the United States.
PROPERTIES
The Company has entered into an agreement to purchase its executive
offices, located at 34-36 Punt Road, Windsor 3181, Melbourne, Victoria, through
its 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 is $900,000 (Australia), or approximately $595,000 (US), of
which $200,000 (Australia), or approximately $132,000 (US) was paid in cash and
the remainder was financed through a loan with the seller secured by the
property bearing interest at the rate of 7.25% per annum, with interest payments
only due monthly and a single balloon payment of $704,000 (Australia), or
approximately $463,000 (US) 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 the
Company raises
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<PAGE> 42
$22,500,000 through the sale of all of its Shares in this Offering it will
pay off this loan. Stampville's offices are located at 456 Fifth Avenue, Suite
200, Brooklyn, N.Y. 11215. Stampville's telephone and facsimile numbers are
(718) 369-8881 and (718) 369-6270, respectively.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims
arising out of our operations in the normal course of business. We are not party
to any material legal proceeding.
RESEARCH AND DEVELOPMENT
STAMPVILLE -- CURRENT DEVELOPMENT STATUS
As of February 1, 2000, Stampville had launched two separate "micro" Web
sites, www.beegeesstamps.com and www.sheldonstamps.com. Each of the sites allow
a user to view and purchase stamp-related products which relate to the subject
matter of the Web site.
Stampville is currently finalizing the development of its core Web site and
additional "micro" Web sites which it expects to launch during the first half of
2000. Stampville plans the following key components to the core Web site:
- a display of 10,000 stamps available for sale, together with detailed
descriptions of each stamp;
- topical forums and chat rooms facilitating discussions with collectors
with similar interests;
- 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;
- classified advertisements; and
- "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 the principal products/services of Company, nor does Company know
of any existing or probable governmental regulations affecting Company's
activities.
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<PAGE> 43
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's 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.
The following table sets forth, as of February , 2000, the name, age and
position within the Company 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.................. 34 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>
HENRY HERZOG
Mr. Henry Herzog headed up a restructuring and reorganization of Bayou
International (NASDAQ OTCBB "BAYU") 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 business experience. He was responsible for the
reorganization of the Kingsway Group, which was to become 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 (ASX 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
Mr. Farrel Meltzer is a Senior Executive with the ANZ Banking Group
(February 1997 through present). ANZ is one of Australia's four major banks with
assets in excess of $150 billion (Australia), or approximately $97 billion
(United States). Farrel 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 Assistant General Manager of the
Private and Professional Banking division of the Mercantile Lisbon Banking Group
in South Africa, prior to which he spent a number of years in Audit, Tax &
Corporate Advisory with Grant Thornton LLP and Pannell Kerr Forster in
Johannesburg, South Africa.
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<PAGE> 44
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 with a market capitalization of approximately $350 million. 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 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 to Bell Securities Limited and was instrumental in the development of
Bell's stock brokerage business. In late 1997, Bell through 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 (Australia). 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 the Company to provide certain services
relating to Stampville. See "Compensation of Directors and Officers -Employment
Agreements -- Consulting Agreement with Mendel Mochkin."
JONATHAN HERZOG
Mr. Jonathan Herzog is a founding director of the Company and has served as
its 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. 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. 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. Ltd., one of Australia's
largest private companies. She actively participates in the
39
<PAGE> 45
management of a number of subsidiary companies of JGL Investments Pty. Ltd. Ms.
Abeles is a director, major shareholder and board member in a number of other
private companies. She invests in both domestic and offshore equity markets. She
also provides venture capital funding for small to medium size enterprises. Ms.
Abeles is also an advisor on equity investments to the trustees of the JGL
Investments Pty. staff superannuation plan. Ms. Abeles holds a Bachelor of
Science Degree from the Melbourne University, Australia.
ROBERT PETTY
Robert Petty has an extensive background in management and operations
across the following industries: manufacturing, retail and Internet e-commerce.
Since October 1999, he has been engaged by the Company and its subsidiaries as a
consultant in various capacities. He has served as Vice President -- Business
Development for the Company since January 2000 and Acting Chief Executive and
Chief Financial Officer of Stampville since January 2000. Prior to consulting
for the Company, Robert 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, Robert 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.
BOARD COMMITTEES
The Company's 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. The Company currently has no Board
committees. On the effective date of this Offering, the board of directors will
have two committees: 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 two members and
. Since both Committees will be established during the Company's
fiscal year ended December 31, 2000, they did not meet in the Company's fiscal
year ended December 31, 1999.
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<PAGE> 46
Stampville
The following table sets forth, as of February , 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>
C. Jonathan 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
ITT Designee..............................
Robert Petty.............................. 35 Acting Chief Executive and Financial
Officer
Jennifer Christopher...................... 29 Vice President of Human Resources
Steven Komito............................. 42 Project Manager
</TABLE>
C. 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 Marketing. Previously, he was Manager of the Telemarketing Division of
Sports Stamps Collectible Association located in New York, New York from July
1998 to April 1999. 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. C.
Jonathan Malamud also worked briefly in 1998 as a securities trader for
Precision Edge Securities Company located in New York, New York. Mr. C. 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 C. Jonathan Malamud.
ROBERT PETTY
For biographical information see "Management -- Executive Officers and
Directors -- I.T. Technology, Inc."
JENNIFER CHRISTOPHER
Ms. Christopher joined Stampville as Vice President -- Human Resources in
January 2000. Previously, she was an Executive Recruiter at Olsten Corporation,
a New York based executive search firm from March 1999 to January 2000. Ms.
Christopher was an Account Executive at Schenker International (Italian
Division) from June 1997 to August 1998 where she managed all ocean and air
traffic from Italy to the United States. From August 1998 to March 1999, she was
an Account Executive at Volt Services Group, a division of Volt Information
Services where she was responsible for generating new clients for their
temporary staffing division. Previously, Ms. Christopher was Business Manager at
Chanel, Inc. (Cosmetic Division) from 1995 to 1997. She was also Sales Manager
at Limited, Inc. where she trained and developed over 100 employees and managed
over $10 million in sales from 1993 to 1995.
41
<PAGE> 47
STEVEN KOMITO
Mr. Komito joined Stampville as Information Technology Project Manager in
January 2000. He has been employed for the last 12 years as an Information
Technology professional. Prior to joining Stampville, Mr. Komito was a Technical
Consultant with Infra -- Structures, Inc. His responsibilities were integrating
server management systems, large screen display devices, wall controllers, and
sound systems with Infra structure's line of command and control consoles. He
reviewed new technology and products, wrote white papers comparing the features
and limitations of currently available equipment, and selected clients such as
United States Special Operations Command Center (USSCOM), Nextlink. From 1998 to
1999, Mr. Komito was employed by C-C-C USA, INC. as Senior Project Manager where
he managed all aspects of project management related to CCC Group's product line
of Server Management, and information delivery systems. From 1993 to 1998 Mr.
Komito was a Technical Manager with Dataform Business Systems, where he provided
hands on technical support and troubleshooting of all types of hardware,
software and network related problems.
COMPENSATION OF DIRECTORS AND OFFICERS
Effective as of December 6, 1999, the Company agreed to pay Jonathan
Herzog, its 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 $12,000 per annum for the services of Robert Petty as Vice
President -- Business Development of the Company. In addition, Mr. Petty was
granted options to purchase up to 1,450,000 shares of the Company's stock. Petty
Options representing an aggregate of 950,000 shares will become exercisable at
$1.00 per share. Petty Options representing 500,000 shares will be exercisable
at $2.00 per share. Portions of the Petty Options vest and become exercisable
upon the Company reaching certain levels of market capitalization or the
occurrence of certain other events. For further information on the Petty Options
see "Compensation of Directors and Officers -- Employment Agreements --
Consulting Agreement with Petty Consulting, Inc. for the Services of Robert
Petty." Except as set forth above, the Company has not made any payments to its
officers or directors, other than reimbursing an aggregate of approximately
$65,000 of loans from an affiliate of Levi Mochkin to the Company and business
expenses primarily incurred after September 30, 1999, which have not exceeded
approximately $50,000. The Company may, subject to the financial condition and
resources of the Company, compensate its other senior officers or directors.
Stampville has entered into a one year consulting agreement with Petty
Consulting Inc. ("Petty Consulting") 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 and Douglas Wu as financial
consultant (the "Petty Consulting Agreement"). The Petty Consulting Agreement
provides for the payment of an aggregate amount of approximately $27,000 per
month by Stampville to Petty Consulting for the services of Mr. Petty, Mr. Wu
and Ms. Christopher. Under the Petty Consulting Agreement, Stampville has agreed
to reimburse 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. Mr. Wu, who will be providing Stampville with
strategic and financial advisory services, has over 15 years experience in
private equity/venture investing at firms such as Dillon Read & Co., Inc., Peers
& Co. and Rothschild Emerging Markets (an affiliate of Rothschild Inc.).
Stampville has employed C. Jonathan Malamud, a director and Vice President --
Marketing, at an annual salary of $40,000. 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 $40,000. Mr. Popack is also the beneficial owner of 16.64% of
Stampville's common stock. Steven Komito, Stampville's Project Manager is
employed at an annual salary of $85,000.
During the period ended September 30, 1999 no executive officer or director
received a salary at the Company. The Company has accrued a salary expense for
this period of $25,000 for services rendered on its behalf by certain
affiliates.
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<PAGE> 48
CERTAIN TRANSACTIONS
On October 26, 1999, the Company raised $2,500,000 in a private placement
through the sale of 2,500,000 shares of its Common Stock to Instanz. At the same
time Instanz 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 the Company's board of directors, is an affiliate of
Instanz. In connection with its purchase of the Company's shares, the Company
agreed to allow Instanz to offer to sell 500,000 Shares in this Offering;
provided that such Shares are offered and sold only after the Company has
received net proceeds of $5,000,000 from this Offering. In addition, to the
extent that Instanz is unable to receive at least $2,500,000 from the sale of
Shares in this Offering, the Company agreed to grant it registration rights to
sell a sufficient amount of shares to cover such short fall. 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 when Instanz is able to otherwise sell such amount of
shares under Rule 144 promulgated under the Securities Act. Until such
registration right period terminates, Instanz and all of the other 10% or
greater holders of the Company's Common Stock and the Company's directors have
agreed not to sell any of their shares without the consent of the other 10%
holders and directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not Applicable.
OPTION GRANTS IN LAST FISCAL YEAR
The Company was formed in 1999 and accordingly, did not grant any options
prior to its 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 the Company's 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:
- 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, 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.
<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 Malamud.............. 12/8/99 1,600,000(2) $1.25 $8,210,252 $10,884,080
</TABLE>
- ---------------
(1) Assumes an initial stock price of $5.00 per share.
(2) These options shall only become exercisable in the event the Company raises
at least $10,000,000 in this Offering or invests an additional $5,000,000
in Stampville above the "Stage One Investment," as such term is defined in
the Stock Purchase Agreement. In such event, the options will be exercisable
in increments of 20% per annum commencing two years after they initially
become exercisable. The Malamud options will have a five year term
commencing on the date the initial installment becomes exercisable.
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<PAGE> 49
EMPLOYMENT AGREEMENTS
CONSULTING AGREEMENT WITH MENDEL MOCHKIN
The Company has entered into a Consulting Agreement dated as of June 18,
1999 with Mendel Mochkin pursuant to which the Company has agreed to compensate
Mendel Mochkin with shares of the Company's stock, in part subject to the
completion of all stages of the Company's investment in Stampville. The Company
has issued 150,000 shares of its Common Stock to Mendel Mochkin and has agreed
to issue up to an additional 350,000 shares of its Common Stock to Mendel
Mochkin, if the Company raises no less than $10 million in this Offering or
invests in or arranges for additional financing in Stampville in an amount such
that the Company retains no less than 27.5% of the equity of Stampville (the
"Additional Stampville Investment"). The exact amount of the additional shares
of Common Stock it may issue to Mendel Mochkin will depend on the ultimate
dollar amount of the Additional Stampville Investment. In addition, the Company
has agreed to transfer to Mendel Mochkin equity interests aggregating up to one
percent (1%) of the equity of Stampville. The transfer of such interests is
subject to certain conditions, including the approval of Stampville and its
shareholders and the continued employment of Mr. Mochkin under the consulting
agreement. Stampville has not consented to the transfer, and no shares of
Stampville's capital stock have been transferred to Mr. Mochkin as of February
14, 2000. The Company, as majority shareholder of Stampville, does not intend to
approve a transfer of this one percent (1%) interest in Stampville. See
"Business -- Acquisition of Equity Interest in Stampville." Mendel Mochkin is
the brother of Levi Mochkin, a director and Chief Executive Officer of the
Company.
CONSULTING AGREEMENT WITH PETTY CONSULTING, INC. FOR THE SERVICES OF ROBERT
PETTY
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.
Robert Petty was granted options to purchase up to a total of 1,450,000
shares of Common Stock ("Petty Options") upon the execution of the Consulting
Agreement (the "Grant Date"). The Stock Options vest upon the occurrence of the
following events (the "Vesting Date"), no Petty Options may vest after the
termination of Robert Petty's employment or consulting arrangement with the
Company:
1. Two Hundred Fifty Thousand (250,000) Petty Options shall vest upon the
Company reaching a market capitalization of One Hundred Fifty Million
Dollars ($150,000,000) for thirty (30) consecutive business days within
three years of the Grant Date ("First Capitalization Option");
2. Three Hundred Fifty Thousand (350,000) Petty Options shall vest upon the
Corporation reaching a market capitalization of Three Hundred Million
Dollars ($300,000,000) for sixty (60) consecutive business days within
three years of the Grant Date ("Second Capitalization Option");
3. One Hundred Seventy-Five Thousand (175,000) Petty Options shall vest
upon the successful sale of equity securities of one of the Company's
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 Grant Date, or the sale
of all or any portion of the shares or assets of such subsidiary for no
less than $50,000,000 ("Subsidiary IPO Option");
4. One Hundred Seventy-Five Thousand (175,000) Petty 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
Grant Date ("Stampville IPO Option"); and
5. Five Hundred Thousand (500,000) Petty Options shall vest upon the
Company reaching a market capitalization of Seven Hundred Million
Dollars ($700,000,000) for sixty (60) consecutive business days within
three years of the Grant Date ("Third Capitalization Option").
The term of the Petty Options is the lesser of (i) two years from the
Vesting Date, (ii) five years from the Grant Date, or (iii) 30 days after the
termination of Robert Petty's employment or consulting arrangement for the
Company. The First Capitalization Option, the Second Capitalization Option, the
Stampville IPO Option and the Subsidiary IPO Option, each have an exercise price
of $1.00 per option share. The Third Capitalization Option has an exercise price
of $2.00 per option share.
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<PAGE> 50
2000 STOCK OPTION PLAN
The Company's board of directors have authorized the issuance of up to
1,650,000 shares of Common Stock in connection with the grant of Options
pursuant to the Company's 2000 Stock Option Plan (the "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
the Company and its subsidiaries. To date the Company has not granted any
options under the 2000 Stock Option Plan.
1999 PRIVATE PLACEMENTS
In October 26, 1999, the Company consummated the sale, in a private
placement, of 2,500,000 shares of Common Stock for $1.00 per share to Instanz,
for which the Company received proceeds of $2,500,000. A portion of the proceeds
from this sale was used to complete a portion of the Company's investment in
Stampville. See "Certain Transactions" and "Business -- Acquisition of Equity
Interest in Stampville."
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock as of February , 2000, and as adjusted
to reflect the sale of the shares of Common Stock offered under this Prospectus
by: (1) each person who we know owns beneficially more than 5% of our Common
Stock, (2) each of our directors individually, (3) each of our executive
officers individually and (4) 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 February , 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
NAME OF SHAREHOLDER 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% 3,200,000 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 7.49% 1,600,000 9.14%
Robert Petty(8)................................. -0- -0- -0-
All Directors and Officers as a Group (7
Persons)...................................... 16,350,000 96.90% 15,850,000 93.43%
</TABLE>
- ---------------
(1) Pursuant to the rules promulgated by the SEC, all shares underlying options
which were exercisable on February , 2000 or which become exercisable
within 60 days, held by a described person are
45
<PAGE> 51
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. 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.
(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. For further information on the Petty Options. See "Compensation of
Officers and Directors -- Employment Agreements -- Consulting Agreement with
Petty Consulting Inc. for the Services of Robert Petty."
The preceding table of beneficial ownership also does not include options
to purchase 1,600,000 shares of the Company's Common Stock which have been
granted to C. Jonathan Malamud. These shares will only become exercisable in the
event the Company makes the Additional Payment of $5,000,000 to Stampville
above the "Stage One Investment," as such term is defined in the Stock Purchase
Agreement, or raises at least $10,000,000 in the Offering, and then only in
installments commencing two years after such date.
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<PAGE> 52
DESCRIPTION OF CAPITAL STOCK
I.T. TECHNOLOGY
General
The Company's Certificate of Incorporation authorizes the Company to issue
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 in accordance
with the holdings specified in the chart above. See "Principal Shareholders."
The board of directors has also authorized the issuance of (i) up to 350,000
shares of Common Stock to Mendel Mochkin, in consideration of services rendered
in connection with the Stampville acquisition; (ii) up to 1,600,000 shares
relating to options granted to C. Jonathan Malamud; (iii) up to 1,450,000 shares
relating to options granted to Petty Consulting Inc.; (iv) up to 4,500,000
Shares pursuant to this Offering; and (v) up to 1,650,000 shares pursuant to the
2000 Stock Option Plan. 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 the Company's stock that ranks senior as to dividends
to the Common Stock.
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 January 31, 2000, the capitalization of Stampville consists of
100,000 common shares, each with a par value of $0.01. As of the date of this
Prospectus, 50,100 common shares are held by the Company, 16,634 shares are
beneficially held by David Eli Popack and 33,266 shares beneficially by C.
Jonathan Malamud. The Company's interest in Stampville is subject to reduction
if it does not complete its planned investment in Stampville. See "Business --
Acquisition of Equity Interest in Stampville."
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
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
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<PAGE> 53
- 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 the
Company 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; it prohibits stockholders
the from acting by written consent. Additionally, our bylaws provides that
special meetings of our stockholders may be called only by the board of
directors or a 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, the Company intends to supplement
its existing directors' and officers' insurance to provide indemnification for
certain securities matters. We believe that these
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<PAGE> 54
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 the Company by means of a proxy contest, tender offer, merger
or otherwise.
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority in 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 the Offering, our
executive officers and directors on their own, as the beneficial owners of
approximately 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.
SELLING SHAREHOLDERS
An aggregate of 500,000 Shares of Common Stock may be offered for resale by
the following Selling Shareholders. 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 in connection with Instanz's purchase of 2,500,000 shares of
Common Stock from the Company 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 the Company or any of its predecessors or affiliates, nor have
any such material relationships existed within the past three years.
<TABLE>
<CAPTION>
NUMBER OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES
NUMBER OF SHARES OF COMMON STOCK OF COMMON STOCK OF COMMON STOCK
OF COMMON STOCK COVERED BY AFTER OFFERING AFTER OFFERING
SELLING SHAREHOLDER BENEFICIALLY OWNED THIS PROSPECTUS (MINIMUM SOLD) (MAXIMUM SOLD)
------------------- ------------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Instanz Nominee Pty. Ltd.(1)..... 3,700,000 500,000 3,700,000 3,200,000
</TABLE>
- ---------------
(1) Helen Abeles, a director, is an affiliate of Instanz. Ms. Abeles exercises
shared investment and voting power over these shares and may be deemed to be
a beneficial owner thereof.
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.
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<PAGE> 55
NASDAQ STOCK MARKET LISTING
We have applied to have our Common Stock quoted on the NASDAQ SmallCap
Market under the trading symbol " ."
REGISTRATION RIGHTS
After this Offering, Instanz, currently the holder of 3,700,000 shares of
Common Stock, will be entitled to registration rights to the extent that Instanz
is unable to receive at least $2,500,000 from the sale of its Shares in this
Offering. In such event, the Company has agreed to grant to Instanz registration
rights to sell a sufficient amount of shares to cover such short fall (the
"Unsold Shares"). In addition, Instanz may also require us to "piggy-back" or
include its Unsold Shares in future registration statements that we file. Upon
registration, the Unsold Shares will be freely tradable in the public market
without restriction.
If applicable, the registration period shall commence 120 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 effective date of
this Offering or when Instanz is able to otherwise sell such amount of shares
under Rule 144 promulgated under the Securities Act. Except for the Unsold
Shares, until such registration right period terminates Instanz and all of the
other 10% or greater holders of the Company's Common Stock and the Company's
directors have agreed not to sell any other shares without the consent of the
other 10% holders and directors.
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<PAGE> 56
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, we will have 21,000,000 shares of Common
Stock outstanding assuming no exercise of the underwriters' over-allotment
option or outstanding options. Of this amount, the 5,000,000 Shares offered by
this Prospectus will be available for immediate sale in the public market as of
the date of this Prospectus. Assuming all of the 500,000 Shares being offered
for sale by Instanz in the Offering are sold, approximately 12,800,000
additional shares will be available for sale in the public market following the
expiration of 180-day 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 APPROXIMATE SHARES
DAYS AFTER THE DATE ELIGIBLE FOR FUTURE ELIGIBLE FOR FUTURE SALE
OF THIS PROSPECTUS SALES (MAXIMUM SOLD) (MINIMUM SOLD) COMMENT
------------------- -------------------- ------------------------ -----------------------------------
<S> <C> <C> <C>
Upon Effectiveness... 5,000,000 1,000,000 Freely tradable shares sold in
Offering
180 days............. 12,800,000 12,800,000 Lock-up released; shares saleable
under Rule 144
[October 26, 2000] 3,200,000 3,700,000 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 the 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 for a period of 180
days from the date of this Prospectus. We have also agreed not to issue any
shares during the lock-up period without the consent of except
that we may, without this consent, grant options and sell shares under our stock
incentive and purchase plans although the shares may not be resold into the
public market during the lock-up period.
As of the effective date of this Offering, the Company has agreed to grant
options to purchase an aggregate of 3,050,000 shares of Common Stock to C.
Jonathan 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 the Common Stock. We intend to file a registration
statement on Form S-8 under the Securities Act shortly after the completion of
the 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 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 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 at least $2,500,000. See "Registration Rights".
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.
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<PAGE> 57
UNDERWRITING
The underwriters named below, acting through their representatives,
, , and , have
severally 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>
Total....................................................... 5,000,000
=========
</TABLE>
We have been advised that the underwriters propose to offer the shares of
Common Stock to the public at the public offering price located on the cover
page of this Prospectus and to dealers at that price less a concession of not in
excess of $ per share, of which $ may be re-allowed to other
dealers. After the initial public offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
reduction in this price will change the amount of proceeds to be received by us
as indicated on the cover page of this Prospectus.
OVER-ALLOTMENT OPTION
We have granted to the underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the same price per share as
we will receive for the 5,000,000 Shares that the underwriters have agreed to
purchase. To the extent that the underwriters exercise this option, each of the
underwriters will have a firm commitment to purchase approximately the same
percentage of additional shares that the number of shares of Common Stock to be
purchased by it shown in the above table represents as a percentage of the
5,000,000 Shares offered by this Prospectus. If purchased, the additional shares
will be sold by the underwriters on the same terms as those on which the
5,000,000 Shares are being sold. We will be obligated, under this option, to
sell shares to the extent the option is exercised. The underwriters may exercise
the option only to cover over-allotments made in connection with the sale of the
5,000,000 Shares of Common Stock offered by this Prospectus.
The following table shows the per share and total underwriting discounts
and commissions to be paid by us to the underwriters. This information is
presented assuming either no exercise or full exercise by the underwriter of
their over-allotment option.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price.................................. $-- $ -- $ --
Underwriting discounts and commissions................. $-- $ -- $ --
Proceeds, before expenses, to us....................... $-- $ -- $ --
</TABLE>
The expenses of the Offering are estimated at $ and are payable
entirely by us. expects to deliver the shares of Common Stock to
purchasers on , 2000.
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 representatives, for a period of 180
days after the date of this Prospectus, 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
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<PAGE> 58
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 . However, 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 180-day
lock-up period. In addition, we have generally agreed that, during the 180-day
lock-up period, we will not, without the prior written consent of
, (a) consent to the disposition of any shares held by
stockholders prior to the expiration of the 180-day lock-up period or (b) 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. See "Shares Eligible for
Future Sale."
Directed Shares
We have requested that the underwriters reserve up to
percent of the Shares of Common Stock for sale at the initial public offering
price to directors, officers, employees and other individuals designated by the
Company. All of our directors, executive officers and five percent (5%) or
greater stockholders have received allocations in the directed share program.
The number of shares reserved for these persons ranges from to
Shares.
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 comparable 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
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<PAGE> 59
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 the Company and Stampville as of September 30,
1999, have been included herein and in the registration statement in reliance
upon the report 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.
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. Upon approval of the
Common Stock for quotation on the Nasdaq SmallCap Market those reports, proxy
statements and other information may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006. 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.
54
<PAGE> 60
February 11, 2000
IT Tech FS99
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
I.T. TECHNOLOGY, INC.
(a development stage enterprise)
September 30, 1999
<PAGE> 61
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 September 30, 1999,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the period from February 2, 1999 (inception) through September
30, 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 generally accepted auditing standards.
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 September 30, 1999, and the consolidated results of its
operations and its consolidated cash flows for the period from February 2, 1999
(inception) through September 30, 1999, in conformity with generally accepted
accounting principles.
Los Angeles, California
December 30, 1999 (except for Note H,
as to which the date is January 17, 2000)
<PAGE> 62
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED BALANCE SHEET
September 30, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSET
Cash $ 172,682
Deferred offering costs 59,147
-----------
Total current assets 231,829
PROPERTY AND EQUIPMENT, net 643,938
INVESTMENT IN STAMPVILLE.COM INC 245,669
-----------
Total assets $ 1,121,436
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 50,206
Accrued expenses 25,000
Notes payable - current portion 65,300
-----------
Total current liabilities 140,506
NOTES PAYABLE, less current portion 457,098
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 14,000,000 shares 14,000
Additional paid-in-capital 617,540
Deficit accumulated during the development stage (107,708)
-----------
Total stockholders' equity 523,832
-----------
$ 1,121,436
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-2
<PAGE> 63
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
Period from February 2, 1999 (inception) through September 30, 1999
<TABLE>
<S> <C>
Income and (expenses)
Foreign currency transaction gain $ 15,858
Other income 3,760
Legal and professional fees (67,336)
Salaries (25,000)
Interest (5,504)
Travel and entertainment (3,783)
Equity in loss of Stampville.com, Inc. (4,331)
Other expense (21,372)
------------
NET LOSS $ (107,708)
============
Basic loss per common share $ (0.01)
============
Weighted average shares outstanding $ 10,157,292
============
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE> 64
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Period
from February 2, 1999 (inception) through September 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock during the
--------------- -------------------------- Additional development
Shares Amount Shares Amount paid-in capital stage Total
------ ------ --------------------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at (inception)
February 2, 1999 -- $-- -- $ -- $ -- $ -- $ --
Issuance of shares to
founders for cash -- -- 4,000,000 4,000 16,000 -- 20,000
Issuance of shares for cash, net
of $27,210 issuance costs -- -- 9,850,000 9,850 594,190 -- 604,040
Issuance of shares for
services -- -- 150,000 150 7,350 -- 7,500
Net loss -- -- -- -- -- (107,708) (107,708)
--- --- ---------- ---------- ---------- ---------- ----------
Balance at September 30, 1999 -- $-- 14,000,000 $ 14,000 $ 617,540 $ (107,708) $ 523,832
=== === ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE> 65
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS Period from
February 2, 1999 (inception) through September 30, 1999
<TABLE>
<S> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss $(107,708)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 7,170
Equity in losses of Stampville.Com Inc. 4,331
Increase in accounts payable 50,206
Increase in accrued expenses 25,000
Nonmonetary compensation 7,500
---------
Net cash flows used in operating activities (13,501)
---------
Cash flows from investing activities:
Investment in Stampville.Com Inc. (250,000)
Purchase of property and equipment (194,010)
---------
Net cash flows used in investing activities (444,010)
---------
Cash flows from financing activities:
Proceeds from short-term borrowing 65,300
Proceeds from issuance of common stock 624,040
Increase in deferred offering costs (59,147)
---------
Net cash flows provided by financing activities 630,193
---------
Net increase in cash 172,682
Cash at beginning of period --
---------
Cash at end of period $ 172,682
=========
Supplemental disclosures of noncash investing activities:
Property acquired by issuance of note payable $ 457,098
=========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 66
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
NOTE A - COMPANY BACKGROUND AND BUSINESS PLAN
I.T. Technology, Inc. ("ITT") was incorporated on February 2, 1999 to engage
in businesses related to the Internet, e-commerce and technology ventures,
directly and through the acquisition of equity ownership in Internet related
and other technology companies. ITT has a wholly-owned subsidiary, I.T.
Technology Pty. Ltd. (collectively referred to as the "Company"), which
furthers its operations in Australia.
The Company is in the development stage, and its efforts through September
30, 1999 have been principally devoted to organizational activities, raising
capital, acquiring an equity interest in Stampville.Com Inc., acquiring
executive offices in Australia and other development efforts. Management
anticipates incurring substantial additional losses as it pursues its
strategies. Additionally, the Company will require substantial capital to
fund the development and operations of Stampville.Com Inc. (See Note D).
Subsequent to September 30, 1999, the Company successfully completed a
private placement of 2,500,000 shares of common stock for $2,500,000. The
Company intends to meet further capital funding requirements through an
initial public offering ("IPO"). The Company expects that the proceeds of the
IPO will be sufficient to fund its activities and investments. There can be
no assurance that the Company will be able to complete the offering, or make
further investments in Stampville.Com Inc.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The consolidated financial statements include the accounts of ITT and its
wholly-owned subsidiary. All material intercompany accounts and transactions
have been eliminated.
2. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for over
the assets' estimated useful lives ranging from 5 to 25 years using the
straight-line method of accounting.
F-6
<PAGE> 67
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
4. Investment in Stampville.Com Inc.
The investment in Stampville.Com Inc. consists of an equity interest and is
accounted for using the equity method because management believes it has the
ability to exercise significant influence over the financial and operating
policies of Stampville.Com Inc.
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 U.S. dollar is considered to be the functional currency of the subsidiary
and 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. Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130, which is effective for fiscal periods beginning after December
15, 1997 and requires restatement of earlier periods presented, establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. The impact of SFAS No. 130 is not
significant to the consolidated financial statements.
9. Deferred Offering Costs
Costs incurred in connection with the Company's private placement (which
closed subsequent to September 30, 1999) and an anticipated public offering
are deferred and will be charged against stockholders' equity upon successful
completion of the respective offering. If either offering is not consummated,
the related deferred offering costs will be charged to expense.
F-7
<PAGE> 68
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of September 30, 1999:
Land and building $601,307
Office equipment 49,806
--------
651,113
Less accumulated depreciation (7,175)
--------
$643,938
========
NOTE D - CAPITALIZATION
1. Preferred Stock
The Company has authorized the issuance of 25,000,000 shares of preferred
stock, par value $.001 per share. The board of directors of the Company has
the right to create one or more series of preferred stock and to determine
the rights, preferences and privileges of any such series.
2. Common Stock
The Company issued 4,000,000 shares of Common Stock to the founders through
controlled companies at a purchase price of $0.005 per share (aggregate of
$20,000).
The Company issued 10,000,000 shares of Common Stock to various companies
that are affiliates of certain officers of the Company at a purchase price of
between $0.05 and $0.125 per share (aggregate of $631,250), excluding stock
offering costs of $27,120.
NOTE E - INVESTMENT IN STAMPVILLE.COM INC.
The Company paid $250,000 cash to acquire approximately a 6% equity interest
in the common stock of Stampville.Com Inc. (a New York corporation formed on
April 14, 1999). Stampville.Com Inc. is newly formed to engage in the
business of selling collectible stamps and other memorabilia on the Internet
and on a wholesale basis to large chain stores and small businesses, and on
a retail basis to the general public. Stampville.Com Inc. is a development
stage enterprise and its activities through September 30, 1999 have been
principally devoted to organizational and development activities. As of
September 30, 1999, the assets of Stampville.Com Inc. consisted principally
of $97,000 in cash and $52,000 in software development costs. The excess
purchase price over the Company's proportionate share of Stampville's net
assets is $235,000. Such amount will be amortized over a 36 month period.
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.
Pursuant to the terms of a Stock Purchase Agreement, the Company had an
option to acquire additional shares of Stampville.Com Inc. common stock at
its sole discretion in various amounts
F-8
<PAGE> 69
' I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
NOTE E - INVESTMENT IN STAMPVILLE.COM INC. - Continued
up to an aggregate of $5,000,000 over the next three years. On December 8,
1999, the Company amended the Stock Purchase Agreement to accelerate the
payment terms contained in the original Stock Purchase Agreement, which would
allow the Company to own 50.1 percent of Stampville.Com Inc.'s Common Stock.
The amended agreement includes payment terms as follows:
1. Cash payment of $500,000 ($250,000 of which has been paid prior to and
$250,000 subsequent to September 30, 1999).
2. Cash payment of $1,000,000 payable within 60 days from the date of the
amended agreement (paid subsequent to September 30, 1999).
3. Eight equal quarterly installments of $156,250 commencing upon the
execution of the amended agreement.
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 an initial public offering "IPO" by the Company, 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 percentage of Common Stock owned would be
reduced to no less than 27.5 percent, as defined in the agreement.
In connection with the amended stock purchase, 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 and then in
increments of 20 percent per annum thereafter.
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.
F-9
<PAGE> 70
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
NOTE E - INVESTMENT IN STAMPVILLE.COM INC. - Continued
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.
The Company has entered into a consulting agreement with an affiliate which
would provide services related to the Company's investment in Stampville.Com
Inc. Pursuant to the agreement, the Company issued 150,000 shares of its
common stock to the affiliate. As a result, the Company recorded compensation
expense of $7,500. Upon the successful completion of an IPO which raises no
less than $10,000,000 of net proceeds or the investment of no less than an
additional $6,250,000 in Stampville.Com Inc., the Company will issue up to
an additional 350,000 shares of its common stock to such affiliate. The
Company's interest in Stampville.Com Inc. may be reduced by up to one
percent (1%) pursuant to its consulting agreement with such affiliate if the
Company consummates its 50.1 percent acquisition of Stampville.Com Inc.
NOTE F - NOTES PAYABLE
Long-term debt is as follows at September 30, 1999:
<TABLE>
<S> <C>
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. $457,098
Note payable to Daccar Pty Ltd., an affiliate of the
Company, payable on demand and bearing interest at the
National Australia Bank Ltd. bill rate plus 1.5%. The note
was repaid in November 1999. 65,300
----------
522,398
Less - current portion (65,300)
----------
$457,098
==========
</TABLE>
F-10
<PAGE> 71
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 1999
NOTE G - LOSS PER COMMON SHARE
Basic loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding. Common stock equivalents were
excluded from the diluted calculation, as they were antidilutive.
<TABLE>
<CAPTION>
Period from February 2, 1999 (inception)
through
September 30, 1999
----------------------------------------
Weighted-
Average Per share
Net loss Shares Amount
-------- --------- ----------
<S> <C> <C> <C>
Basic loss per share
Net loss available to common
shareholders $107,708 10,157,292 $ 0.01
======== ========== ========
Diluted loss per share
Net loss available to common
shareholders $107,708 10,157,292 0.01
======== ========== ========
</TABLE>
NOTE H - CONCENTRATION OF CREDIT RISK
As of September 30, 1999, the Company maintained primarily all of its cash in
an Australian bank. Subsequent to September 30, 1999, the Company transferred
primarily all of its cash to an American financial institution. The Company
is exposed to credit loss for the amount of cash equivalents in the event of
nonperformance by the financial institution, however; the Company has not
experienced any losses in these accounts and believes it is not exposed to
any significant credit risk on cash equivalents.
NOTE I - SUBSEQUENT EVENT
On October 26, 1999, the Company completed a private placement of 2,500,000
shares of common stock for $1.00 per share net of offering costs of $59,600
in costs.
On November 11, 1999, the Company repaid the Daccar Pty. Ltd. Note payable of
$65,300 plus accrued interest of approximately $1,400.
On January 17, 2000, the Company entered into a one-year consulting agreement
with a Consultant to serve as its Vice President of Business Development.
The Company will pay the Consultant $12,000 per year and has granted the
Consultant 1,450,000 stock options to purchase its common stock at an
exercise price of between $1.00 and $2.00. The options vest at various times
upon the Company reaching certain levels of market capitalization of the
occurrence of certain other events. The term of these options is the lesser
of (i) two years from the vesting date, and (ii) five years from the grant
date.
F-11
<PAGE> 72
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
STAMPVILLE.COM INC.
SEPTEMBER 30, 1999
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-13
FINANCIAL STATEMENTS
BALANCE SHEET............................................. F-14
STATEMENT OF OPERATIONS................................... F-15
STATEMENT OF STOCKHOLDERS' EQUITY......................... F-16
STATEMENT OF CASH FLOWS................................... F-17
NOTES TO FINANCIAL STATEMENTS............................. F-18
</TABLE>
F-12
<PAGE> 73
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Stampville.Com Inc.
We have audited the balance sheet of Stampville.Com Inc. (the "Company")
(a development stage enterprise) as of September 30, 1999, and the related
statements of operations, stockholders' equity, and cash flows for the period
from April 14, 1999 (inception) through September 30, 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 generally accepted auditing
standards. 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
September 30, 1999, and the results of its operations and its cash flows
for the period from April 14, 1999 (inception) through September 30, 1999, in
conformity with generally accepted accounting principles.
Los Angeles, California
December 30, 1999
F-13
<PAGE> 74
STAMPVILLE.COM INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash...................................................... $ 97,279
Other assets.............................................. 487
--------
Total current assets.............................. 97,766
EQUIPMENT, net.............................................. 17,643
CAPITALIZED SOFTWARE COSTS.................................. 52,000
--------
Total assets...................................... $167,409
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses.......................................... $ 4,035
STOCKHOLDERS' EQUITY
Common stock, no par value; authorized 200 shares, issued
and outstanding 160 shares............................. 250,000
Deficit accumulated during the development stage.......... (86,626)
--------
Total stockholders' equity........................ 163,374
--------
$167,409
========
</TABLE>
The accompanying notes are an integral part of this statement.
F-14
<PAGE> 75
STAMPVILLE.COM INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
PERIOD FROM APRIL 14, 1999 (INCEPTION) THROUGH SEPTEMBER 30, 1999
<TABLE>
<S> <C>
Expenses
Salaries.................................................. $52,361
Legal and professional fees............................... 16,849
Rent...................................................... 5,000
Travel and entertainment.................................. 3,000
Other..................................................... 9,416
-------
NET LOSS.......................................... $86,626
=======
</TABLE>
The accompanying notes are an integral part of this statement.
F-15
<PAGE> 76
STAMPVILLE.COM INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM APRIL 14, 1999 (INCEPTION) THROUGH SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK DURING THE
----------------- DEVELOPMENT
SHARES AMOUNT STAGE TOTAL
------ -------- ----------- --------
<S> <C> <C> <C> <C>
Balance at (inception) April 14, 1999.................. -- $ -- $ -- $ --
Issuance of shares to founders......................... 150 -- -- --
Issuance of shares for cash............................ 10 250,000 -- 250,000
Net loss............................................... -- -- (86,626) (86,626)
--- -------- -------- --------
Balance at September 30, 1999.......................... 160 $250,000 $(86,626) $163,374
=== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-16
<PAGE> 77
STAMPVILLE.COM INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
PERIOD FROM APRIL 14, 1999 (INCEPTION) THROUGH SEPTEMBER 30, 1999
<TABLE>
<S> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss.................................................. $ (86,626)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization.......................... 2,023
Increase in other assets............................... (487)
Increase in capitalized software costs................. (52,000)
Increase in accrued expenses........................... 4,035
---------
Net cash flows used in operating activities....... (133,055)
---------
Cash flows from investing activities:
Purchase of equipment -- net cash flows used in
investing activities................................... (19,666)
---------
Cash flows from financing activities:
Proceeds from issuance of common stock -- net cash flows
provided by financing activities....................... 250,000
---------
Net increase in cash.............................. 97,279
Cash at beginning of period................................. --
---------
Cash at end of period....................................... $ 97,279
=========
</TABLE>
The accompanying notes are an integral part of this statement.
F-17
<PAGE> 78
STAMPVILLE.COM INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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 large chain stores and small
businesses, and on a retail basis to the general public and collectors.
On July 18, 1999, I.T. Technology, Inc. ("ITT") entered into an agreement
to purchase an equity interest of 25% in the Company in exchange for payment of
up to $5,000,000, payable in installments. On December 8, 1999, the agreement
was amended to enable ITT to accelerate and increase the payments up to
$7,750,000 in exchange for an immediate 50.1 percent of the Company's common
stock. If ITT fails to make the payments in full, its ownership would be reduced
to the lesser of 1) 27.5 percent of the Company's common stock, or 2) the total
invested by ITT pursuant to the purchase agreement divided by $100,000.
The Company also entered into a Shareholders Agreement (the "Shareholders
Agreement") with ITT. The Shareholders Agreement, among other things, restricts
the ability of the shareholders of the Company to transfer their interests and
grants a right of first refusal with respect to any potential sale of shares of
the Company. In addition, pursuant to the amended agreement, ITT is entitled to
appoint one-half of the members of the board of directors of the Company. ITT is
also entitled to designate an individual to serve as the chief operating
officer, or such other position as the board of directors of the Company may
designate. Under any circumstances, 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 is in the development stage, and its efforts through September
30, 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 September 30,
1999, in connection with the stock agreement, the Company received $250,000. 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 growth in the Company's revenue will begin or that the Company
or ITT will be able to obtain additional financing to develop or sustain
further investments in or operations of the Company.
NOTE B -- 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.
F-18
<PAGE> 79
STAMPVILLE.COM INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3. YEAR END
The Company's fiscal year ends on December 31.
4. CAPITALIZED SOFTWARE COSTS
The Company has deferred and capitalized software cost related to its web
site development. As of September 30, 1999, the website is still under
development. Once the website is complete and has been placed in service, the
capitalized cost will be amortized using the straight line method over the
estimated useful life of two years.
5. EQUIPMENT
Equipment is stated at cost. Depreciation is provided for over the
estimated useful life ranging from 3 to 7 years using the straight-line method
of accounting. Equipment is comprised primarily of computer equipment.
NOTE C -- CAPITALIZATION
The Company issued 150 shares of common stock to the founders at a nominal
purchase price per share.
Through September 1999, the Company issued 10 shares of common stock to ITT
at an aggregate purchase price of $250,000.
NOTE D -- COMMITMENTS
The Company has entered into a supplier's agreement on December 1, 1999
with the Inter-Governmental Philatelic Corporation ("IGPC"), of which the
president is a related party to certain officers of the Company. IGPC, one of
the world's largest suppliers and dealers of philatelic stamps, represents
approximately seventy postal administrations throughout the world in matters
relating to the design, production and marketing of their postage stamps.
Pursuant to its agreement with the Company, IGPC has agreed to supply the
Company with stamps at the lowest pricing structure available to other dealers
and that IGPC makes available for public sale.
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.
The Company has also entered into an agreement with Dimension 11 to assist
in the development of its web site including the implementation of an electronic
ordering system for the stamp market. A total of $180,000 was committed to the
first phase of this project of which $130,000 remains to be incurred.
F-19
<PAGE> 80
STAMPVILLE.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
NOTE E -- LEASES
The Company leases office facilities and equipment under non-cancelable
lease arrangements that expire at various dates through November 2001. Rental
commitments for non-cancelable leases are payable as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
Three months to December 31, 1999.................. $ 6,000
2000............................................... 48,000
2001............................................... 44,000
-------
$98,000
=======
</TABLE>
NOTE F -- SUBSEQUENT EVENTS
Subsequent to September 30, 1999, the Company amended its certificate of
incorporation to change and increase the capitalization from 200 shares without
par to 100,000 shares with a $.01 par value.
F-20
<PAGE> 81
- ------------------------------------------------------
- ------------------------------------------------------
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 US 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.......................... 4
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Selected Financial Data............... 15
Dilution.............................. 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 28
Management............................ 38
Transactions with Management and
Others.............................. 43
Principal Stockholders................ 45
Description of Capital Stock.......... 47
Selling Shareholders.................. 49
Registration Rights................... 50
Shares Eligible for Future Sale....... 51
Underwriting.......................... 52
Legal Matters......................... 54
Experts............................... 54
Where You Can Find More Information... 54
Index to Financial Statements......... F-1
</TABLE>
------------------------
DEALER PROSPECTUS DELIVERY OBLIGATION:
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
5,000,000 SHARES
[LOGO]
I.T. TECHNOLOGY, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses to be incurred in connection
with the Offering described in this Registration Statement, all of which will be
paid by the Company. All amounts are estimates, other than the Securities and
Exchange Commission registration fee, the National Association of Securities
Dealers, Inc. fee and the [Nasdaq] listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $
National Association of Securities Dealers, Inc. fee........ $
[Nasdaq] listing fee........................................ $
Accounting fees and expenses................................ $
Legal fees and expenses..................................... $
Director and officer insurance expenses..................... $
Printing and engraving expenses............................. $
Transfer agent and registrar fees and expenses.............. $
Blue Sky fees and expenses (including counsel fees)......... $
Miscellaneous expenses...................................... $
-------
Total............................................. $
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Limitations on liability and indemnification of directors and officers. The
Delaware General Corporation Law authorizes corporations to limit or eliminate
the personal liability of directors to corporations and their stockholders for
monetary damages for breaches of directors' applicable duties. Our certificate
of incorporation includes a provision that eliminates the personal liability of
our directors for monetary damages for actions taken as a director, except for
liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; and
- for any transaction from which the director derived an improper personal
benefit.
Our certificate of incorporation also includes the following provisions
regarding indemnification of our directors and officers:
- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law, subject to very limited exceptions;
- we may indemnify our other employees and agents to the same extent that
we indemnify our directors and officers; and
- we must advance expenses, as incurred, to our directors and officers in
connection with legal proceedings to the fullest extent permitted by
Delaware law, subject to very limited exceptions.
Prior to the closing of this Offering, the Company intends to amend its
existing directors' and officers' insurance to provide indemnification to
certain securities matters. We believe that these indemnification provisions in
our certificate of incorporation and insurance are necessary to attract and
retain qualified directors and executive officers.
II-1
<PAGE> 83
The limitation of liability and indemnification provisions in our
Certificate of Incorporation may discourage stockholders from bringing a lawsuit
against directors for breach of their fiduciary duty. These provisions may also
have the effect of reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. Furthermore, a stockholder's
investment may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers pursuant to these
indemnification provisions.
The Company's Certificate of Incorporation provides that the directors will
not be liable to the Company or to any Stockholder for monetary damages for
breach of fiduciary duty as a director, to the full extent that such limitation
or elimination of liability is permitted under Delaware law.
The Company's Bylaws provide that the Company will indemnify its directors
and officers to the full extent permitted under Delaware law. Pursuant to the
Bylaws and Delaware law, the Company will indemnify each director and officer
against any liability incurred in connection with any action, suit, proceeding
or investigation in which he or she may be involved by reason of serving in such
capacity at the request of the Company.
Each director and officer is also entitled to indemnification against costs
and expenses (including attorneys' fees) incurred in defending or investigating
any action, suit, proceeding or investigation in which he or she may be involved
by reason of serving in such capacity at the request of the Company. The Bylaws
authorize the Company to advance funds to a director or officer for such costs
and expenses (including attorneys' fees) upon receipt of an undertaking in
writing by such director or officer to repay such amounts if it is ultimately
determined that he or she is not entitled to be indemnified. Notwithstanding the
foregoing, no advance shall be made by the Company if a determination is
reasonably and promptly made by the Board by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs) by independent legal
counsel, that based upon the facts known to the Board or counsel at the time
such determination is made: (i) the director or officer acted in bad faith or
deliberately breached his duty to the Company or its stockholders; and (ii) as a
result of such actions by the director or officer, it is more likely than not
that it will ultimately be determined that such director or officer is not
entitled to indemnification.
The indemnification and advancement of expenses provided by the Bylaws are
not exclusive of any other rights to which a director or officer seeking
indemnification or advancement of expenses may be entitled under the Bylaws, any
agreement or any vote of stockholders or disinterested directors or otherwise.
The indemnification and advancement of expenses provided by the Bylaws continue
as to a person who has ceased to be a director or officer and inure to the
benefit of the heirs, executors and administrators of such a person.
The Company has purchased a directors' and officers' liability insurance
policy insuring directors and officers of the Company against any liability
asserted against such person and incurred by such person in any such capacity,
whether or not the Company would have the power to indemnify such person against
such liability under the Bylaws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1. Form of Underwriting Agreement.(**)
2. None.
3.1 Certificate of Incorporation of the Company filed February
2, 1999.(*)
3.2 By-laws of the Company dated February 2, 1999.(*)
4. Stock Certificate specimen of the Company.
5. Opinion of Jeffer, Mangels, Butler & Marmaro LLP.(**)
</TABLE>
II-2
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.1(a) Stock Purchase Agreement between the Company and
Stampville.Com Inc. dated June 18, 1999.(*)
10.1(b) Amendment to Stock Purchase Agreement between the Company
and Stampville.Com Inc. dated December 8, 1999.(*)
10.2 Real Property Purchase Agreement between Rococo Holdings
Pty. Ltd. And I.T. Technology Pty. Ltd. Dated July 7, 1999.(*)
10.3(a) Lease Agreement between Stampville.Com Inc. and RDL Realty,
LLC dated June 18, 1999.(*)
10.3(b) Rider to Lease Agreement between Stampville.Com Inc. and RDL
Realty, LLC dated November 28, 1999.(*)
10.4 Suppliers' Agreement between Stampville.Com Inc. and Inter
Governmental Philatelic Corporation dated December 1, 1999.(*)
10.5(a) Consulting Agreement between Robert Petty and the Company
dated January 17, 2000.(*)
10.5(b) Consulting Agreement between Robert Petty and Stampville.Com
Inc. dated January 10, 2000.(*)
10.5(c) Consulting Agreement between Mendel Mochkin and the Company
dated June 18, 1999.(*)
10.6(a) Option Agreement between Robert Petty and I.T. Technology,
Inc. dated January 17, 2000.(*)
10.6(b) Option Agreement between C. Jonathan Malamud and the Company
dated December 8, 1999.(*)
11. Statement regarding computation of per share earnings.(**)
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Grant Thornton LLP.
23.3 Consent of Jeffer, Mangels, Butler & Marmaro LLP (included
as part of Exhibit 5).
24. Power of attorney.(*)
</TABLE>
- ---------------
(*) Previously filed.
(**) To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually, or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) (? 230.424(b) of this
Chapter) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate Offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the
II-3
<PAGE> 85
securities offered therein, and the Offering of such securities at that
time shall be deemed to be the initial bona fide Offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
Insofar as indemnification for liabilities arising from the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the Offering of such securities at that time shall be deemed to be
the initial bona fide Offering thereof.
II-4
<PAGE> 86
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Melbourne, Victoria, AUSTRALIA, on February 14, 2000.
I.T. TECHNOLOGY, INC.
By: /s/ LEVI MOCHKIN
--------------------------------------
Levi Mochkin
Chairman of the Board, Chief
Executive Officer and Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Levi Mochkin and Henry Herzog, or either of them, as his or her true and lawful
attorney-in-fact and agent, acting alone, with full powers of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) and additions to this Registration Statement, any Amendments thereto
and any Registration Statement for the same Offering which is effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent, each acting alone, full powers and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all said attorney-in-fact and agent,
acting alone, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Company in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ LEVI MOCHKIN Director February 14, 2000
- ------------------------------------------------
Henry Herzog
/s/ LEVI MOCHKIN Chief Executive Officer and February 14, 2000
- ------------------------------------------------ Director
Levi Mochkin
/s/ LEVI MOCHKIN Chief Financial Officer and February 14, 2000
- ------------------------------------------------ Director
Jonathan Herzog
/s/ LEVI MOCHKIN Director February 14, 2000
- ------------------------------------------------
Anthony Davis
/s/ LEVI MOCHKIN Director February 14, 2000
- ------------------------------------------------
Farrel Meltzer
/s/ LEVI MOCHKIN Director February 14, 2000
- ------------------------------------------------
Helen Abeles
</TABLE>
II-5
<PAGE> 1
EXHIBIT 4
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES OR BLUE SKY LAWS OF CALIFORNIA OR ANY OTHER STATE AND
MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE
RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES OR BLUE SKY LAWS OR IF AN
EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE
NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SHARES
C1 FEBRUARY 2, 1999 7,500,000
I.T. TECHNOLOGY, INC.
100,000,000 SHARES COMMON STOCK 25,000,000 SHARES PREFERRED STOCK
$.001 PAR VALUE EACH $.001 PAR VALUE EACH
THIS CERTIFIES THAT IS THE REGISTERED HOLDER OF SHARES OF
THE COMMON STOCK OF
I.T. TECHNOLOGY, INC.
HEREINAFTER DESIGNATED "THE CORPORATION," TRANSFERABLE ON THE SHARE REGISTER OF
THE CORPORATION UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED OR
ASSIGNED.
This certificate and the shares represented thereby shall be held subject
to all of the provisions of the Certificate of Incorporation and the By-laws of
said Corporation, a copy of each of which is on file at the office of the
Corporation, and made a part hereof as fully as though the provisions of said
Certificate of Incorporation and By-laws were imprinted in full on this
certificate to all of which the holder of this certificate, by acceptance
hereof, assents and agrees to be bound.
Any stockholder may obtain from the principal office of the Corporation,
upon request and without charge, a statement of the number of shares
constituting each class or series of stock and the designation thereof; and a
copy of the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights and the By-laws.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED
OFFICERS.
DATED:
_____________________________ _______________________
CHIEF EXECUTIVE OFFICER SECRETARY
<PAGE> 1
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated December 30, 1999 (except for Note I, as to
which the date is January 17, 2000), accompanying the consolidated financial
statements of I.T. Technology, Inc., contained in Amendment No. 1 to
Registration Statement on Form SB-2. We consent to the use of the aforementioned
report in the Registration Statement, and to the use of our name as it appears
under the caption "Experts".
/s/ GRANT THORNTON LLP
Los Angeles, California
February 14, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated December 30, 1999 accompanying the
financial statements of Stampville.Com Inc., contained in Amendment No. 1 to
Registration Statement on Form SB-2. We consent to the use of the aforementioned
report in the Registration Statement, and to the use of our name as it appears
under the caption "Experts".
/s/ GRANT THORNTON LLP
Los Angeles, California
February 14, 2000
