<PAGE> 1
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 2000
REGISTRATION NO. 333-30364
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
I.T. TECHNOLOGY, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 5961 98-0200077
<S> <C> <C>
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
34-36 PUNT ROAD
WINDSOR 3181
MELBOURNE, VICTORIA AUSTRALIA
(011) 613 9533-7800
(ADDRESS AND TELEPHONE NUMBER OF
PRINCIPAL EXECUTIVE OFFICES
AND PRINCIPAL PLACE OF BUSINESS)
LEVI MOCHKIN, CHIEF EXECUTIVE OFFICER
I.T. TECHNOLOGY, INC.
34-36 PUNT ROAD
WINDSOR 3181
MELBOURNE, VICTORIA
AUSTRALIA
(011) 613 9533-7800
245 PARK AVENUE, 39TH FLOOR
NEW YORK, NY 10167
(212) 792-4047
(NAME, ADDRESS AND TELEPHONE NUMBER
OF AGENT FOR SERVICE)
COPIES TO:
BARRY L. BURTEN, ESQ.
ROBERT E. BRAUN, ESQ.
JEFFER, MANGELS, BUTLER & MARMARO LLP
2121 AVENUE OF THE STARS, 10TH FLOOR
LOS ANGELES, CALIFORNIA 90067
(310) 203-8080
FAX (310) 203-0567
<PAGE> 2
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED 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
- --------------------------- ---------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.001 per share 5,000,000(2) $ 5.00 $25,000,000 $ 6,600.00(3)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes the reoffer and resale of 500,000 shares of Common Stock held
by Instanz Nominees Pty. Ltd.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
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<PAGE> 3
I.T. TECHNOLOGY, INC.
CROSS REFERENCE SHEET FOR PROSPECTUS UNDER FORM SB-2
<TABLE>
<CAPTION>
FORM SB-2 ITEM NO. AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
<S> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus Outside Front Cover Page; Cross Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus Inside front and Outside Back Cover Pages
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page; Risk Factors; Underwriting
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Inside Front Cover Page; Underwriting
9. Legal Proceedings Business -- Legal Proceedings
10. Directors, Executive Officers Promoters and Control Person Management
11. Security Ownership of Certain Beneficial Owners and Management Principal Shareholders; Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on Management -- Limitation of Liability;
Indemnification for Securities Act Liabilities Underwriting; Management -- Indemnification of
Officers and Directors
15. Organization within Last Five Years Business
16. Description of Business Business
17. Certain Relationships and Related Transactions Certain Relationships and Related Transactions
18. Market for Common Equity and Related Shareholder Matters Risk Factors; Dividend Policy; Description of
Securities; Shares Eligible for Future Sale
19. Executive Compensation Management -- Executive Compensation
20. Financial Statements Financial Statements
21. Changes in and Disagreements with Accountants on Not Applicable
Accounting and Financial Disclosure
</TABLE>
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<PAGE> 4
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION DATED APRIL 19, 2000
PROSPECTUS
UP TO 4,500,000 SHARES
500,000 SHARES BY A SELLING SHAREHOLDER
[LOGO]
I.T. TECHNOLOGY, INC.
COMMON STOCK
This is our initial public offering. The initial offering price is
$5.00. We have applied for listing on the Nasdaq SmallCap market under the
symbol "ITTE." No public market currently exists for our shares of common stock.
We are offering the shares on a best-efforts, minimum-maximum basis.
Unless at least 1,000,000 shares are sold, we will not sell any shares. All
proceeds received for the offering will be deposited in an escrow account with
Comerica Bank, and will not be released unless at least 1,000,000 shares are
sold on or before __________________, 2000 (which may be extended to
________________, 2000 at our option). If we do not sell at least 1,000,000
shares by that time, we will return the investment, with interest, but less
those costs associated with the escrow account. After the 1,000,000 shares are
sold, a selling shareholder will offer and sell 500,000 shares in this offering
at $5.00 a share.
For information on how to subscribe, call Kensington Capital Corp. at
(718) 436-2111 and ask for a representative. Sale of our common stock will only
be made in connection with this prospectus.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM SELLING COMMISSIONS
SHARES SHARES PRICE TO -------------------------------------
OFFERED OFFERED PUBLIC MINIMUM MAXIMUM
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
I.T. Technology, Inc. 1,000,000 4,500,000 $ 5.00 $ 400,000 $ 1,125,000
----------- ----------- ----------- ----------- -----------
Instanz Nominees Pty. Ltd. 0 500,000 $ 5.00 $ 0 $ 125,000
----------- ----------- ----------- ----------- -----------
Combined 1,000,000 5,000,000 $25,000,000 $ 400,000 $ 1,250,000
----------- ----------- ----------- ----------- -----------
<CAPTION>
PROCEEDS TO PROCEEDS TO
SELLERS SELLERS
(MINIMUM) (MAXIMUM)
----------- -----------
<S> <C> <C>
I.T. Technology, Inc. $ 4,600,000 $21,375,000
----------- -----------
Instanz Nominees Pty. Ltd. $ 0 $ 2,375,000
----------- -----------
Combined $ 4,600,000 $23,750,000
----------- -----------
</TABLE>
SEE "RISK FACTORS" ON PAGES 8 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 Kensington Capital Corp. as underwriter to assist in the
distribution of the shares, on a best efforts basis. If necessary, Kensington
Capital Corp. will manage the selected broker-dealers to assist in selling the
shares.
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<PAGE> 5
KENSINGTON CAPITAL CORP.
, 2000.
-5-
<PAGE> 6
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, both 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,
and through its wholly-owned subsidiary, Bickhams Capital, Inc., a 5% equity
interest and an option to acquire an additional 45.1% equity interest in
VideoDome.Com Networks, Inc., a California corporation. Stampville, incorporated
in 1999, is in the process of developing its web-site at www.stampville.com and
intends to specialize in the wholesale and Internet sale of philatelic
memorabilia, including stamps and other collectibles, which may include coins
and sports memorabilia. VideoDome provides a range of Internet video services,
including but not limited to management services, registration of video content
and delivery of the video stream via Internet and operates primarily through an
Internet web site located at www.videodome.com. We maintain executive offices in
Melbourne, Australia and New York, New York.
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<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
SHARES OF COMMON STOCK
OFFERED IN THIS PROSPECTUS MINIMUM.................... 1,000,000 shares
MAXIMUM............................................... 4,500,000 shares
SELLING SHAREHOLDER................................... 500,000 shares
TOTAL SHARES OF COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING MINIMUM............................ 17,500,000 shares
TOTAL SHARES OF COMMON STOCK TO BE OUTSTANDING
AFTER THE MAXIMUM OFFERING............................ 21,350,000 shares
USE OF PROCEEDS BY THE COMPANY........................ $6,250,000 to finance acquisition of a majority interest in
Stampville; $150,000 to finance acquisition of an additional 5%
interest in VideoDome; approximately $3,000,000 for working capital
and other general purposes; approximately $456,000 as of December
31, 1999 will be used to pay off the balance due on the building
housing the company's executive offices located in Melbourne,
Australia; and the remaining proceeds to finance other Internet or
e-commerce acquisitions or ventures by the company.
PROPOSED NASDAQ SMALLCAP SYMBOL....................... ITTE
</TABLE>
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.
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<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. The following table gives
effect to the sale of the common stock offered hereby and the application of the
estimated net proceeds therefrom.
<TABLE>
<CAPTION>
FEBRUARY 2, 1999 (INCEPTION)
THROUGH DECEMBER 31, 1999
---------------------------------------------------------------------
PRO FORMA
HISTORICAL MINIMUM MAXIMUM
------------ ------------ ------------
<S> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS DATA:
Revenues .................................... $ -- $ -- $ --
Net loss .................................... $ (419,443) $ (944,760) $ (3,424,214)
Net loss per share .......................... $ (0.04) $ (0.05) $ (0.16)
Weighted average number of shares outstanding 11,222,139 17,500,000 21,350,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------------------------------------------
PRO FORMA
HISTORICAL MINIMUM MAXIMUM
------------ ------------ ------------
<S> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Working capital ............................. $ 686,158 $ 4,195,348 $ 22,800,946
Total assets ................................ 5,186,623 7,476,746 27,780,384
Total liabilities ........................... 2,534,057 524,180 98,781
Accumulated deficit ......................... (419,443) (419,443) (2,169,443)
Stockholders' equity ........................ $ 2,652,566 $ 6,952,566 $ 23,999,566
</TABLE>
RISK FACTORS
NO OPERATING HISTORY.
We are recently formed and we have no operating history. In addition,
both Stampville and VideoDome are also recently formed entities and have limited
operating histories. We do not know if we will be able to successfully operate
our proposed business, or that either Stampville or VideoDome will be able to
execute its business plan.
DEPENDENCE ON NET PROCEEDS OF THIS OFFERING.
We have very limited resources and we are dependent on the net proceeds
of this offering to implement our plan of operation. Although we believe that we
can fund our acquisition of interests in Stampville and VideoDome, as well as
other potential investments and acquisitions in Australia and the United States
if we raise the maximum amount contemplated in this offering, unless we raise at
least $12,400,000 in this offering, which includes the $2,500,000 from the sale
of shares by one of our shareholders, Instanz Nominees Pty. Ltd., we may not be
able to finance our business plans. The nature of Stampville's business is very
capital intensive. As a result, if we sell only the minimum number of shares
contemplated in this offering, we may have insufficient capital to continue to
run Stampville's business. In turn, Stampville's inability to continue to
operate successfully may also limit its ability to obtain future financing. If
our plans change, or if our assumptions prove to be inaccurate, or our other
capital resources are not sufficient to implement our plan of operation we may
need to seek additional financing or limit our business activities. We do not
know if we will be able to obtain any additional financing or that any financing
we do obtain will be on acceptable terms and conditions.
CONCENTRATION OF AND RELIANCE ON MANAGEMENT; KEY PERSONNEL.
Henry Herzog, Levi Mochkin, Jonathan Herzog and certain other
individuals will make all of our day-to-day management decisions. Your ownership
of our common stock will not give you the right to take part in the day-to-day
management of our operations. If we sell only the minimum number of shares,
Henry Herzog, Levi Mochkin, Jonathan Herzog and other officers and directors
will own approximately 94% of our outstanding shares and the current executive
officers will own approximately 59% of our outstanding shares. You should not
purchase any shares of common stock offered hereby unless you are willing to
entrust all aspects of our day-to-day management to our board of directors and
management. We do not know if our board of directors and officers will be able
to operate or manage our business successfully or that we will be able to
achieve profitable
-8-
<PAGE> 9
operations. We would be seriously affected if Henry Herzog, Levi Mochkin or
Jonathan Herzog becomes unable to perform for any reason. We do not have key man
or other insurance to protect against the death or disability of our key
executives. In addition, our management and directors have limited prior
experience in operating Internet or e-commerce companies.
CONCENTRATION OF SHARE OWNERSHIP.
Our management and affiliates of our management own all of our
outstanding common stock and voting rights. Even if we sell the maximum number
of shares being offered, our management and their affiliates will still
collectively own approximately 75% of our outstanding shares. As a result,
our 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 shareholder approval for the foreseeable future.
YOU WILL EXPERIENCE IMMEDIATE DILUTION WITH RESPECT TO YOUR SHARES. WE MAY NEED
ADDITIONAL CAPITAL AND RAISING ADDITIONAL CAPITAL MAY DILUTE EXISTING
STOCKHOLDERS.
If only the minimum number of shares offered by this prospectus are
subscribed, you will incur immediate and substantial dilution of $4.72 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
hereby, you will incur immediate and substantial dilution of $4.05 per share in
the net tangible book value of your shares as a result of this offering.
Historically, we have financed our business and operations through the
sale of stock.
If we sell only the minimum number of shares, we will have only
approximately $1,250,000 committed for investment in Stampville, $150,000 for an
additional investment in VideoDome, an additional amount of approximately
$1,400,000 for investment in other potential acquisition targets and/or
additional investments in Stampville and VideoDome, and approximately 12 months'
working capital. If we only sell the minimum, we will need significant
additional financing to complete our required investment in Stampville in order
to continue to retain our 50.1% equity ownership of Stampville and to accomplish
our business plan and/or consummate or fund potential acquisitions. These
additional financings may result in significant additional dilution to existing
shareholders. If we sell all 4,500,000 shares being offered by us 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. 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 if obtained will
dilute the existing stockholders' equity interest.
NO FIRM COMMITMENT TO PURCHASE SHARES.
There is no commitment to purchase all or any part of the shares being
offered by this prospectus. 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 (500,000 shares of which are being
sold by a shareholder) 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 the date of this prospectus, or thereafter in our sole
discretion on , 2000, which is 150 days from the date of this prospectus,
all funds received from subscriptions will be promptly returned in full, with
interest thereon, less the costs associated with the escrow account, 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 us 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 our common stock.
After this offering, if all the 5,000,000 shares are sold, 21,350,000
shares of our common stock will be outstanding, or 17,500,000 if the minimum of
1,000,000 shares are sold. Of these shares, the 5,000,000 shares sold in this
offering, or 1,000,000 shares if only the minimum is sold, will be freely
tradeable without restrictions under the Securities Act, except for any shares
purchased by our "affiliates," as defined in Rule 144 under the Securities Act.
Our officers and directors and all stockholders have entered into lock-up
agreements pursuant to which they have agreed not to offer or sell any shares of
our common stock for a period which terminates 90 days after the termination of
this offering, without the prior written consent of Kensington Capital Corp.
These individuals or entities may request that Kensington Capital Corp. consider
an early release from their lock-up agreement. Kensington Capital Corp. may, at
any time and without notice, grant an early release for shares subject to these
lock-up agreements. Upon expiration of this lock-up period, the shares owned by
these persons prior to completion of this offering may be sold into the public
market without registration under the Securities Act in compliance with the
volume limitations and other applicable restrictions of Rule 144 under the
Securities Act. In addition, the holders of 99.1% of our currently outstanding
shares have agreed not to sell any of their shares, other than the sale of
500,000 shares by Instanz Nominees Pty. Ltd., in this offering or through a
registration statement, without the consent of each of the other current
shareholders. In addition, during a period commencing 180 days after the
effective date of this offering and ending no later than three years after the
effective date of this offering, Instanz Nominees Pty. Ltd. shall have the right
to demand that we file a registration statement covering the reoffer and resale
by it of any of its 500,000 shares which are not sold in this offering. This
shareholder agreement will lapse upon the sale of the 500,000 shares in this
offering or the termination of Instanz Nominees Pty. Ltd.'s registration rights.
After the date of this prospectus, we intend to file a registration statement
under the Securities Act to register all shares of common stock issuable upon
the exercise of outstanding stock options and reserved for issuance under our
stock option plans. This registration statement is expected to become effective
immediately upon filing, and subject to the vesting requirements and exercise of
the related options, as well as the terms of the lock-up agreements, shares
covered by this registration statement will be eligible for sale in the public
markets.
WE HAVE NOT COMPLETED THE FILING OF OUR TRADEMARK AND PATENT APPLICATION.
All of our and Stampville's software was acquired from third parties.
Neither we nor Stampville have registered copyrights on any software. We rely
upon confidentiality agreements signed by our employees. Stampville applied on
August 13, 1999 with the United States Patent & Trademark Office for
registration of "Stampville.Com" and three designs, combined with words, letters
and/or numbers as trade and service marks. Stampville has received preliminary
comments from the United States Patent and Trademark Office regarding the
application and is in the process of
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<PAGE> 10
responding to those comments. VideoDome has indicated that it intends to file
several patent claims addressing, among other things, scalable video conversion
processes, dynamic directories, cataloging & administration. There is no
guarantee that either Stampville or VideoDome will successfully complete their
respective trademark and patent applications. In the event Stampville or
VideoDome fails to complete their respective trademark or patent applications,
the companies may suffer the risk of having competing companies making use of
their respective marks and technology. In such a case, both Stampville and
VideoDome would lose the exclusive use of their respective marks and technology,
thereby losing a significant portion of their respective business ground.
FUTURE GROWTH OF OUR OPERATIONS MAY MAKE ADDITIONAL CAPITAL OR FINANCING
NECESSARY.
If we sell only the minimum number of shares, we will have only
approximately $1,250,000 committed for investment in Stampville, $150,000 for an
additional investment in VideoDome, an additional amount of approximately
$1,400,000 for investment in other potential acquisition targets and/or
additional investments in Stampville and VideoDome, and will have approximately
12 months working capital. In such event, we will need significant additional
financing to complete our required investment in Stampville in order to continue
to retain our 50.1% equity ownership of Stampville and to accomplish our
business plan and/or consummate or fund any potential acquisitions. These
additional financings may result in significant additional dilution to existing
shareholders. Assuming the sale of all the shares being offered by 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. We
may need to raise additional funds in order to exercise our remaining option to
purchase 40.1% of the equity interest in VideoDome, if we so desire, and after
24 months 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 if obtained may be dilutive to existing stockholders.
We cannot be certain that we will be able to obtain such additional
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 purchased 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.
USE OF PROCEEDS
We estimate that the maximum net proceeds to us from the sale of the
5,000,000 shares of common stock offered by this prospectus, excluding the
shares being sold on the account of Instanz Nominees Pty. Ltd., will be
approximately $21,000,000, and the minimum net proceeds to be approximately
$4,300,000. This estimate is based on an assumed initial public offering price
of $5.00 per share, and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses. Pursuant to an agreement with
Instanz Nominees Pty. Ltd., the initial $5,000,000 of gross proceeds from the
sale of common stock in this offering will be allocated to us, the next
$2,500,000 of gross proceeds to Instanz Nominees Pty. Ltd., and the remaining
proceeds of up to $17,500,000 of gross proceeds to us. The following table sets
forth the manner in which the proceeds will be allocated, presented in order of
priority, in the event we achieve either a maximum or minimum sales of the
shares being offered in this prospectus.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
USE OF PROCEEDS SUBSCRIPTION SUBSCRIPTION
--------------- ------------ ------------
<S> <C> <C>
Additional investment in Stampville .............................. $ 1,250,000 $ 6,250,000
Additional investment in VideoDome ............................... $ 150,000 $ 150,000
Working capital .................................................. $ 1,500,000 $ 3,000,000
Payment of the balance due as of December 31, 1999
on the building housing our executive offices located in
Melbourne, Australia ............................................. None $ 456,000
Finance additional e-commerce or Internet acquisitions or ventures
or further investments in Stampville or VideoDome ................ $ 1,400,000 $11,219,000
</TABLE>
The proceeds allocated to finance working capital will be used to pay
such items, including but not limited to, wages, rent, insurance, interest,
utilities, traveling expenditures, consulting services, professional fees,
office supplies and maintenance.
If we receive at least $10,000,000 from the sale of common stock in this
offering, we have agreed to go forward with an investment in Stampville of
$5,000,000 within thirty (30) days of receipt of the funds from this offering,
and an investment of an additional $1,250,000 on or before December 8, 2001.
Depending on how much additional proceeds we receive from this offering, we will
retain at least $1,500,000 for working capital purposes and invest the remainder
in Stampville, and possibly VideoDome and/or other Internet companies. 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.
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<PAGE> 11
If we sell only the minimum number of shares, the initial $1,250,000 of
proceeds will be invested in Stampville, an additional $150,000 will be invested
in VideoDome, the next $1,500,000 will be utilized to fund working capital
requirements and the remaining balance may be used to finance other e-commerce
or Internet acquisitions or ventures and/or additional investments in Stampville
and/or VideoDome. If we sell the maximum number of shares, $150,000 will be used
to acquire an additional 5% equity interest in VideoDome and $5,000,000 of the
proceeds may be used to fund the remainder of our investment in VideoDome in
exchange for up to and additional 40.1% equity interest.
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<PAGE> 12
DIVIDEND POLICY
We have never paid cash dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future. We intend to
retain any future earnings, if any, to repay existing debt, if any, and to
finance the growth and expansion of our business.
CAPITALIZATION AND STOCK OWNERSHIP
Our board of directors has authorized the issuance of up to 125,000,000
shares of capital stock, of which 25,000,000 shares are preferred stock and
100,000,000 shares are common stock. In connection with this offering, the board
of directors has authorized the issuance of up to 4,500,000 shares to be issued
to investors.
The following table sets forth as of December 31, 1999 the following
information:
- the actual capitalization of the company,
- the pro forma capitalization of the company adjusted to give
effect to the sale of the minimum offering of 1,000,000 shares
and maximum offering of 4,500,000 shares of common stock offered
by us herein at the initial public offering price of $5.00 per
share and the application of the estimated proceeds therefrom,
and
- if the maximum number of shares are sold, options to purchase
1,600,000 shares of our stock which were granted to Jonathan Y.
Malamud as partial consideration for our 50.1% interest in
Stampville will become exercisable upon the occurrence of both
(a) December 8, 2001 and (b) we make the additional payment of
$5,000,000 to Stampville above the initial aggregate $500,000
investment in Stampville, or raise at least $10,000,000 in this
offering, and then only in increments of 20% per annum.
If only the minimum number of shares are sold, the pro forma adjustments
will exclude the 1,600,000 stock options granted to Jonathan Y. Malumud as
partial consideration for our 50.1% equity interest in Stampville.
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, 1999
ACTUAL MINIMUM MAXIMUM
------------ ------------ ------------
<S> <C> <C> <C>
Payables due to Stampville.Com ......................................... $ 2,009,877 $ --(1) $ --
============ ============ ============
Notes payable -- long term ............................................. 455,848 455,848 --
Stockholders' equity
Preferred stock, par value $.001; authorized 25,000,000 shares;
no shares issued and outstanding actual and pro forma minimum
and maximum ................................................... -- -- --
Common stock, par value $.001; authorized 100,000,000 shares,
issued and outstanding 16,500,000 shares actual; 17,500,000
minimum shares outstanding pro forma and 21,350,000 maximum
shares outstanding pro forma .................................. 16,500 17,500 21,350
Additional paid-in capital .................................... 3,055,509 7,354,509 26,147,659
Deficit accumulated during the development stage ............... (419,443) (419,443) (2,169,443)
------------ ------------ ------------
Total stockholders' equity .................................... $ 2,652,566 $ 6,952,566 $ 23,999,566
============ ============ ============
Total capitalization .......................................... $ 5,118,291 $ 7,408,414 $ 23,999,566
============ ============ ============
</TABLE>
(1) Reflects the payment of additional $1,000,000 investment in Stampville
made subsequent to December 31, 1999.
-12-
<PAGE> 13
PRO FORMA FINANCIAL STATEMENTS
The following unaudited Pro Forma Balance Sheets as of December 31, 1999
and unaudited Pro Forma Statements of Operations from February 2, 1999, our date
of inception, through December 31, 1999, give effect to the acquisition of 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 assume that the company's ownership is reduced to 27.5% of the
outstanding shares of Stampville. The pro forma information is based on the
historical consolidated financial statements of the company giving effect to the
transaction using the purchase method of accounting and the assumptions and
adjustments described in the accompanying notes to the unaudited Pro Forma
Financial Statements. The unaudited Pro Forma Statement of Operations gives
effect to the acquisition as if it occurred at the beginning of the period, or
February 2, 1999, our date of inception. The unaudited Pro Forma Balance Sheet
gives effect to the acquisition as of December 31, 1999.
The unaudited pro forma statements have been prepared by our management
based upon audited financial statements of the company and Stampville, which are
included elsewhere herein. These pro forma statements may not be indicative of
the results that actually would have occurred if the acquisition was completed
on February 2, 1999, or December 31, 1999. The unaudited pro forma statements
should be read in conjunction with the audited financial statements and related
notes of the company and Stampville.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(ASSUMES MINIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
INCOME AND (EXPENSES)
Foreign currency transaction gain ........................ 17,033 -- 17,033
Interest, net ............................................ 9,174 -- 9,174
Legal and professional fees .............................. $ (125,687) -- $ (125,687)
Salaries ................................................. (66,618) -- (66,618)
Travel and entertainment ................................. (33,675) -- (33,675)
Equity in net loss of Stampville ......................... (185,955) 83,884(1) (102,071)
Other .................................................... (33,715) -- (33,715)
Amortization of excess purchase price over equity
Interest in Stampville ................................. -- (609,201)(2) (609,201)
------------ ------------ ------------
Net loss ........................................ $ (419,443) $ (525,317) $ (944,760)
============ ============ ============
Basic loss per common share .................. $ (0.04) $ (0.05)
============ ============
Diluted loss per common share ................ $ (0.04) $ (0.05)
============ ============
Weighted average shares outstanding .......... 11,222,139 17,500,000(3)
============ ============
</TABLE>
NOTES TO PROFORMA STATEMENT OF OPERATIONS (MINIMUM SUBSCRIPTION)
(1) To reduce the company's equity interest in Stampville's loss from
operations from 50.1% to 27.5% (as described in the amended
stock purchase agreement).
(2) The adjustment represents the amortization of the difference between the
company's proportionate share (27.5%) of the total of the underlying
equity in the net assets of Stampville of $1,128,832 plus the $1,250,000
additional investment to be made from the proceeds of this offering (or
$654,179), and the company's total investment in Stampville of
$2,750,000, less the recorded equity investment and net loss of
Stampville of $102,071. The excess purchase price of $1,993,750 is being
amortized on a straight-line basis over a useful life of 36 months.
(3) Assumes that all shares have been outstanding since the beginning of the
period.
-13-
<PAGE> 14
UNAUDITED PRO FORMA BALANCE SHEET
(ASSUMES MINIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSET
Cash ............................................... $ 2,179,998 $ 4,333,682(1) $ 4,263,680
(1,000,000)(2)
(1,250,000)(3)
----------- ----------- -----------
Total current asset ....................... 2,179,998 2,083,682 4,263,680
Property and equipment, net ............................... 649,021 -- 649,021
Investment in Stampville .................................. 2,323,922 240,123(3) 570,295
(1,993,750)(3)
Deferred offering costs ................................... 33,682 (33,682)(1) --
Excess purchase price over
equity interest in Stampville ........................ -- 1,993,750(3) 1,993,750
----------- ----------- -----------
Total assets .............................. $ 5,186,623 $ 2,290,123 $ 7,476,746
=========== =========== ===========
CURRENT LIABILITIES
Accounts payable ................................... $ 28,001 $ -- $ 28,001
Accrued expenses ................................... 40,331 -- 40,331
Payable to Stampville.Com Inc. ..................... 1,425,508 (1,000,000)(2) --
(425,508)(3)
----------- ----------- -----------
Total current liabilities ................. 1,493,840 (1,425,508) 68,332
Payable to Stampville.Com Inc. ............................ 584,369 (584,369)(3) --
Notes payable -- long term ................................ 455,848 -- 455,848
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001, 25,000,000 shares
authorized, no shares issued and
outstanding actual and pro forma ................ -- -- --
Common stock, par value $.001;
100,000,000 shares authorized , 16,500,000
shares issued and outstanding actual and
17,500,000 shares issued and outstanding proforma 16,500 1,000(1) 17,500
Additional paid-in-capital ......................... 3,055,509 4,299,000(1) 7,354,509
Deficit accumulated during the development stage ... (419,443) -- (419,443)
----------- ----------- -----------
Total stockholders' equity ................ 2,652,566 4,300,000 6,952,566
----------- ----------- -----------
Total liabilities and stockholders' equity $ 5,186,623 $ 2,290,123 $ 7,476,746
=========== =========== ===========
</TABLE>
(See Accompanying Notes to Pro Forma Balance Sheet).
-14-
<PAGE> 15
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET (MINIMUM SUBSCRIPTION)
(1) Raising of the minimum subscription of 1,000,000 shares of common stock
and effected through this offering at $5.00 per share, less commissions
of $400,000 and estimated offering costs of $300,000.
(2) To record the February 2000 payment to Stampville.
(3) To record the company's 27.5% equity interest in Stampville and the
excess purchase price over the company's proportionate share of
Stampville's net assets. The excess purchase price is determined by
taking the difference between the company's proportionate share (27.5%)
of the total of the underlying equity in the net assets of Stampville
of $1,128,832 plus the $1,250,000 additional investment to be made from
the proceeds of this offering (or $654,179) and the company's total
investment in Stampville of $2,750,000 less the equity investment and
net loss of Stampville of $102,071.
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
(ASSUMES MAXIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
IT TECHNOLOGY STAMPVILLE.COM PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INCOME AND (EXPENSES)
Revenue ............................ $ -- $ 5,119 $ -- $ 5,119
Cost of goods sold ................. -- (2,482) -- (2,482)
Foreign currency transaction gain .. 17,033 -- -- 17,033
Interest net ....................... 9,174 -- -- 9,174
Legal and professional fees ........ (125,687) (35,755) (1,750,000)(1) (1,911,442)
Salaries ........................... (66,618) (115,384) -- (182,002)
Travel and entertainment ........... (33,675) (23,328) -- (57,003)
Rent ............................... -- (11,000) -- (11,000)
Other .............................. (33,715) (86,642) -- (120,357)
Equity in the net loss of Stampville (185,955) -- 185,955(2) --
Technology expense ................. -- (101,696) -- (101,696)
Amortization of excess purchase
price over assets
acquired............................ -- -- (1,264,771)(3) (1,264,771)
Minority interest in Stampville .... -- -- 185,213(2) 185,213
------------ ------------ ------------ ------------
Net Loss ........................... $ (419,443) $ (371,168) $ (2,643,603) $ (3,434,214)
============ ============ ============ ============
Basic loss per common share ........ $ (0.04) $ (0.16)
============ ============
Diluted loss per common share ...... $ (0.04) $ (0.16)
============ ============
Weighted average shares outstanding 11,222,139 21,350,000(4)
============ ============
</TABLE>
-15-
<PAGE> 16
NOTES TO UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS (MAXIMUM
SUBSCRIPTION)
(1) Recognition of compensation expense of $1,750,000 related to the
issuance of 350,000 shares of restricted common stock to Mendel Mochkin
for consulting services rendered. Mendel Mochkin's consulting services
include the development of the company's operations and other business
infrastructure matters. The restricted shares were valued using the
initial public offering price of $5.00 per share.
(2) Adjustment to remove the company's share of Stampville's loss from
operations recorded while under the equity method of accounting. The
adjustment of $185,213 represents the 49.9% minority interest share in
the net loss of Stampville.
(3) Amortization of goodwill of $4,139,250, which is being amortized on a
straight-line basis over a useful life of 36 months.
(4) Assumes that all shares have been outstanding since the beginning of the
period.
-16-
<PAGE> 17
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(ASSUMES MAXIMUM SUBSCRIPTION)
<TABLE>
<CAPTION>
IT TECHNOLOGY STAMPVILLE.COM PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
------------- -------------- ----------------- -------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash..................................... $ 2,179,998 $ 47,066 $ 21,108,682 (1) $ 22,879,898
(455,848)(2)
Accounts receivable...................... -- 1,370 -- 1,370
Receivable due from shareholder.......... -- 1,000,000 (1,000,000)(4) --
Inventory................................ -- 18,459 -- 18,459
----------- ------------- ------------ -------------
Total current assets.............. 2,179,998 1,066,895 19,652,834 22,899,727
Property and equipment, net....................... 649,021 74,739 723,760
Investment in Stampville.......................... 2,323,922 -- 272,000 (5) --
(2,595,922)(6)
Deposits.......................................... -- 6,160 -- 6,160
Deferred offering costs........................... 33,682 -- (33,682)(1) --
Technology costs.................................. -- 11,487 -- 11,487
Excess purchase price over net -- -- 4,139,250 (6) 4,139,250
assets acquired............................
------------ -------------- ----------------- -------------
Total assets.................. $ 5,186,623 $ 1,159,281 $ 21,434,480 $ 27,780,384
============ ============== ================= =============
CURRENT LIABILITIES
Accounts payable......................... $ 28,001 $ 29,273 -- $ 57,274
Accrued expenses......................... 40,331 1,176 -- 41,507
Payable to Stampville................... (1,000,000)(4)
1,425,508 -- (425,508)(6) --
------------ -------------- ----------------- -------------
Total current liabilities................ 1,493,840 30,449 (1,425,508) 98,781
Notes payable - long term......................... 455,848 -- (455,848)(2) --
Payable to Stampville, less current portion....... 584,369 -- (584,369)(6) --
Minority interest in Stampville................... -- -- 3,682,037(6) 3,682,037
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001, 25,000,000
shares authorized, no shares
issued and outstanding actual and pro forma -- -- -- --
</TABLE>
-17-
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C>
Common stock, par value $.001;
100,000,000 shares authorized, 16,500,000
shares issued and outstanding actual and
21,350,000 shares issued and outstanding
proforma.................................. 16,500 1,000 4,500 (1) 21,350
350 (3)
(1,000)(6)
Additional paid-in-capital ........................ 3,055,509 2,508,877 21,070,500 (1) 26,147,659
1,749,650 (3)
272,000 (5)
(2,508,877)(6)
Receivable due from shareholder ................... -- (1,009,877) 1,009,877 (6) --
Deficit accumulated during the
development stage ........................ (419,443) (371,168) (1,750,000)(3) (2,169,443)
371,168 (6)
------------ ------------ ------------ ------------
Total stockholders' equity ............... 2,652,566 1,128,832 20,218,168 23,999,566
------------ ------------ ------------ ------------
Total liabilities and stock-
holders' equity ........................ $ 5,186,623 $ 1,159,281 $ 21,434,480 $ 27,780,384
============ ============ ============ ============
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (MAXIMUM SUBSCRIPTION)
(1) Raising of the maximum subscription of 4,500,000 shares of common stock
effected through this offering, excluding the shares being offered for
sale by Instanz Nominees Pty. Ltd., less commissions of $1,125,000 and
estimated offering expenses of $300,000.
(2) Repayment of note from offering proceeds.
(3) Recognition of compensation expense related to the issuance of 350,000
shares of restricted common stock to Mendel Mochkin for consulting
services rendered. The restricted shares were valued using an initial
public offering price of $5.00 per share.
(4) To record February 2000 payment to Stampville.
(5) To record 1,600,000 stock options granted to the principal stockholder
of Stampville. The stock options were valued at a fair value of $0.17
per option, using the minimum value method.
(6) To eliminate investment account upon consolidation and record excess
purchase price over net assets acquired. The following table summarizes
the net assets acquired:
<TABLE>
<S> <C>
Cash consideration given:
Cash paid to Stampville as of December 31, 1999 $ 500,000
Cash paid subsequent to December 31, 1999 and
prior to this offering 1,000,000
Cash payable from this offering 6,250,000
----------
Total consideration given $7,750,000
==========
Company's share of the cash invested $3,867,250
Stock options granted 272,000
----------
Purchase price of 50.1% interest in Stampville $4,139,250
==========
</TABLE>
-18-
<PAGE> 19
As the company owned a 50.1% equity interest in Stampville as of December 31,
1999, the net deficit acquired on the date the additional consideration was
tendered was zero.
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of April 6, 2000, there were 16,500,000 shares of common stock which
are deemed to be beneficially owned and outstanding. These shares are set forth
in the following table. These 16,500,000 shares are restricted securities and
are subject to Rule 144 of the Securities Act. They will become eligible for
sale under Rule 144 following expiration of the applicable holding period.
Except for up to 3,400,000 shares which are subject to currently outstanding
agreements or options granted to Mendel Mochkin, Robert Petty and Jonathan Y.
Malamud, as further described below, the shares of common stock which are
currently deemed to be beneficially owned and the 4,500,000 shares which may be
issued in connection with this offering, the company does not have any
outstanding commitments to issue common stock.
BENEFICIAL OWNERSHIP OF COMMON STOCK
<TABLE>
<CAPTION>
CURRENT BENEFICIAL ASSUMES MINIMUM ASSUMES MAXIMUM
OWNERSHIP SUBSCRIPTION SUBSCRIPTION
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Ledger Technologies Pty. Ltd.(2)
Levi Mochkin(2) .............. 6,300,000 38.18% 6,300,000 36.00% 6,300,000 29.51%
Instanz Nominees Pty. Ltd(3)
Helen Abeles(3) .............. 3,700,000 22.42% 3,700,000 21.14% 3,200,000 14.99%
Riccalo Pty. Ltd.(4)
Henry Herzog(4) .............. 2,000,000 12.12% 2,000,000 11.43% 2,000,000 9.37%
Eurolink International Pty. Ltd.(5)
Jonathan Herzog(5) ........... 2,000,000 12.12% 2,000,000 11.43% 2,000,000 9.37%
AtcorAus. Pty. Ltd.(6)
Farrel Meltzer(6) ............ 750,000 4.55 % 750,000 4.29% 750,000 3.51%
Tilbia Nominees Pty. Ltd.(7)
Anthony Davis(7) ............. 1,600,000 9.70% 1,600,000 9.14% 1,600,000 7.49%
Mendel Mochkin(8) ..................... 150,000 0.91% 150,000 0.86% 500,000 2.34%
All Directors and Officers as a Group
(6 Persons) .................. 16,350,000 99.09% 16,350,000 93.43% 15,850,000 74.24%
</TABLE>
(1) Pursuant to the rules promulgated by the SEC, all shares underlying
options which were exercisable on April 6, 2000 or which become
exercisable within 60 days, held by a described person are deemed to be
"beneficially" owned. The SEC rules further require that every person
who has or shares the power to vote or to dispose of shares of common
stock are deemed to be the "beneficial" owner of all of the shares of
common stock over which any such sole or shared power exists.
(2) Lisa Mochkin, spouse of Levi Mochkin, a director and Chief Executive
Officer of the company, is a director of Ledger Technologies Pty. Ltd.
Levi Mochkin is an affiliate of Ledger Technologies Pty. Ltd. and may be
deemed to be a beneficial owner of the shares held by Ledger
Technologies Pty. Ltd. Lisa Mochkin is the daughter of Henry Herzog and
the sister of Jonathan Herzog.
(3) Helen Abeles, a director, is an affiliate of Instanz Nominees Pty. Ltd.
Ms. Abeles exercises shared investment and voting power over these
shares and may be deemed to be a beneficial owner thereof.
(4) Henry Herzog, a director and President of the company and father of
Jonathan Herzog and father-in-law of Levi Mochkin, is a director of
Riccalo Pty. Ltd. Mr. Herzog exercises shared investment and voting
power over these shares and may be deemed to be a beneficial owner
thereof.
(5) Jonathan Herzog, a director, Secretary and Chief Financial Officer of
the company and son of Henry Herzog, is a director of Eurolink
International Pty. Ltd. Mr. Herzog exercises shared investment and
voting power over these shares and may be deemed to be a beneficial
owner thereof.
(6) Wendy Meltzer, spouse of Farrel Meltzer, a director of the company, is a
director of Atcor Aus. Pty. Ltd. Mr. Meltzer is an affiliate of Atcor
Aus. Pty. Ltd. and may be deemed to be a beneficial owner of the shares
held by Atcor Aus. Pty. Ltd.
-19-
<PAGE> 20
(7) Tilbia Nominees Pty. Ltd. holds shares of common stock for Anthony Davis
and his affiliates. Mr. Davis exercises shared investment and voting
power over these shares and may be deemed to be the beneficial owner
thereof.
(8) Mendel Mochkin is the brother of Levi Mochkin. Mendel Mochkin will
receive an additional 350,000 shares of common stock which is contingent
on the company investing an additional $1,000,000 in Stampville in order
to retain no less than 25% of the outstanding shares of common stock.
The preceding table of beneficial ownership does not include options to
purchase 1,600,000 shares of common stock which have been granted to Jonathan Y.
Malamud. These shares will only become exercisable upon the occurrence of both
(a) December 8, 2001 and (b) the company making an additional payment of
$5,000,000 to Stampville above the initial investment of an aggregate amount of
$500,000 in Stampville, or raises at least $10,000,000 in this offering, and
then only in installments of 20% per annum. The beneficial ownership table also
does not include 1,450,000 shares subject to options granted to Robert Petty.
Mr. Petty's options representing an aggregate of 950,000 shares of common stock
will be exercisable at $1.00 per share and Mr. Petty's options representing
500,000 shares will be exercisable at $2.00 per share. Mr. Petty's options shall
become vested and exercisable upon the company reaching certain levels of market
capitalization and the occurrence of certain other events.
DILUTION
Purchasers of common stock in this offering will experience immediate
and substantial dilution in the net tangible book value of the common stock from
the initial public offering price. Net tangible book value per share represents
the amount of our total tangible assets and is reduced by the amount of our
total liabilities, divided by the number of shares of common stock outstanding.
As of December 31, 1999, the net tangible book value of the company was
approximately $2,652,566, or $0.16 per share.
As of December 31, 1999, our pro forma net tangible book value, as
adjusted for the sale of the minimum and maximum shares offered in this offering
and the application of the net proceeds (at the initial public offering price of
$5.00 per share, less the estimated Offering expenses) was $0.28 and $0.95,
respectively. For the maximum subscription, this represents an immediate
increase of $.79 per share to existing stockholders and an immediate and
substantial dilution of $4.05 per share to new investors purchasing common stock
in this offering. If only the minimum subscription is sold, new investors
purchasing common stock in this offering would experience an immediate and
substantial dilution of $4.72 per share, while existing stockholders would have
an immediate increase of $0.12 per share. The following tables illustrate this
per share dilution:
<TABLE>
ASSUMES MINIMUM SUBSCRIPTION
<S> <C> <C>
Initial public offering price ........................... $ 5.00
Net tangible book value as of December 31, 1999 ......... $ 0.16
Increase attributable to new investors .................. $ 0.12
------
Pro forma net tangible book value after the Offering .... $ 0.28
------
Dilution in net tangible book value to new investors .... $ 4.72
======
Percentage dilution to new investors .................... 94.4%
ASSUMES MAXIMUM SUBSCRIPTION
Initial public offering price ........................... $ 5.00
Net tangible book value as of December 31, 1999 ......... $ 0.16
Increase attributable to new investors .................. $ 0.79
------
Pro forma net tangible book value after the Offering .... $ 0.95
------
Dilution in net tangible book value to new investors(1) . $ 4.05
======
Percentage dilution to new investors .................... 81.0%
</TABLE>
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders 16,500,000 78.6% $ 3,158,750 12.9% $ 0.19
New investors ....... 4,500,000 21.4% $21,375,000 87.1% $ 4.75
----------- ------ ----------- ------ ------
Total ...... 21,000,000 100 % $24,533,750 100 % $ 1.17
=========== ====== =========== ====== ======
</TABLE>
-20-
<PAGE> 21
(1) Excludes the 350,000 shares issuable to Mendel Mochkin for consulting
services upon the completion of our investment of an additional $1,000,000 in
Stampville.
The foregoing table is based on the sale of the maximum 5,000,000
shares. If only the minimum 1,000,000 shares were sold, the table would read as
follows:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- ------------------------- AVERAGE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders .. 16,500,000 94.3% $3,158,750 40.7% $ 0.19
New investors .......... 1,000,000 5.7% $4,600,000 59.3% $ 4.60
---------- ------ ---------- ------ ------
Total ......... 17,500,000 100 % $7,758,750 100 % $ 0.44
========== ====== ========== ====== ======
</TABLE>
The above tables do not include options to purchase a total of 3,050,000
shares of common stock at a weighted average exercise price of approximately
$1.30 per share. None of these options are currently exercisable. These options
include options to purchase 1,600,000 shares of the company's common stock which
have been granted to Jonathan Y. Malamud. The remaining options consist of Mr.
Petty's options to purchase 1,450,000 shares.
If these options are exercised in the future it will be further
dilutive to investors who purchase shares at the initial public offering price.
Options available for grant under our stock option plans may be granted at
exercise prices less than the market value of common stock on the grant date. If
we grant options below fair market value it could be dilutive to investors who
purchase shares at the initial public offering price.
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. We are engaged in Internet, e-commerce and other technology
businesses. We expect to add value to operating companies by providing active
and ongoing management infrastructure, support, funding, and expertise.
Our goal is to identify entities that have high growth potential
and can benefit from the commercial and financial expertise of our personnel. We
assist in the development and recruitment of key management to support
accelerated financial and operational growth and enhanced efficiency. Our
practice is to emphasize relationships in which our resources can enhance the
creative and technological skills of our partners.
In mid-1999, we signed an agreement with Stampville.Com Inc., a
newly-formed company. Stampville is being developed to become a global center
for stamp products and services and potentially other collectibles such as coins
and sports memorabilia. We have assisted the founders of Stampville in
developing this enterprise, recruiting key management and implementing systems
to advance its development and prepare it for its full launch later this year.
In December 1999, Stampville became a 50.1% owned subsidiary of ours. Pursuant
to the terms of our agreement with Stampville, as amended, our 50.1% interest
may be reduced in the event we do not complete our funding of up to $7,750,000
in Stampville. Our ownership interest in Stampville may also be reduced in the
event we arrange for third party financing in lieu of our direct investment in
Stampville. To date, we have invested $1,500,000 in Stampville and at this
stage, upon our raising a minimum of $10,000,000 through this offering, we
anticipate contributing up to an additional $6,250,000 million to Stampville.
Stampville plans to use the portion of the offering proceeds
which it will receive from us to continue to develop a portal community Web site
for the collectable postage stamp community that will service a wide range of
areas surrounding the stamp market and possibly other areas of interest, which
may include coins and sports memorabilia. Stampville expects to expand beyond
hobbyists and collectors to the art, entertainment and other targeted specialty
markets and to develop a wholesale distribution channel for sale of its products
as well.
As of March 24, 2000, we entered into an agreement through our
wholly-owned subsidiary, Bickhams Capital, Inc., which agreement granted us an
option to acquire up to a 50.1% equity interest in VideoDome.Com Networks, Inc.,
a provider of streaming video services on the Internet to consumer and corporate
clients. Our option to purchase up to a 50.1% equity interest in VideoDome is
exercisable in three tranches. On April 10, 2000, we exercised the initial
tranche to purchase 5% of the equity interest in VideoDome through the payment
of $150,000. We also intend to invest an additional $150,000 from the proceeds
of this Offering through the exercise of the second tranche to acquire an
additional 5% equity interest in VideoDome. Our exercise of the final tranche
for 40.1% of the equity interest in VideoDome is contingent upon completion to
our satisfaction of complete due diligence regarding VideoDome, receipt from
VideoDome of audited financial statements, and our acquisition through this
offering or through other sources of sufficient funds to complete the potential
investment in VideoDome, to complete our intended investment in Stampville and
to finance our other operations and/or other potential investments. We are under
no obligation to exercise the options to purchase the VideoDome interest.
Therefore, we can offer no guarantee that our potential acquisition of a
majority interest in VideoDome will be realized.
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Beyond the development of Stampville and potential further
investments in VideoDome, we are continually reviewing and considering
e-commerce and other related enterprises and ventures, but have not made any
commitments at this stage.
We do not have any meaningful revenues, and will not generate any
meaningful revenues until after we implement our strategic plan and attract and
retain a significant number of e-commerce and related businesses. We do not
anticipate generating any meaningful revenue until at least several months
following the consummation of this offering, if at all. For the period from
February 2, 1999, our date of inception, to December 31, 1999, we incurred a
cumulative net loss of $419,443. We anticipate that we will continue to incur
significant losses until, at the earliest, we generate sufficient revenues to
offset the substantial up-front expenditures and operating costs associated with
establishing, attracting and retaining a significant business base. There can be
no assurance that we will be able to attract and retain a sufficient number of
e-commerce businesses to generate meaningful revenues or achieve profitable
operations.
Depending upon the level of our business activity, we anticipate
that we will use a portion of the proceeds of this offering to hire several
additional employees over the next twelve months to market our services to
potential businesses and develop the infrastructure of Stampville and
potentially VideoDome.
LIQUIDITY AND CAPITAL RESOURCES
Our primary capital requirements have been to fund our initial
investment in Stampville and VideoDome. Additional capital will be needed to
complete the purchase of Stampville, acquire an additional 45.1% equity interest
in VideoDome, if we so choose, and to pursue other business opportunities, as
well as to fund our working capital requirements, including legal and
professional expenses. To date, we have financed our capital requirements
through the issuance of equity securities and the issuance of long-term debt.
At December 31, 1999, we had working capital of $686,158. Prior
to December 31, 1999, we issued 16,500,000 shares of common stock to various
entities that are affiliates of certain officers and/or directors of the company
and received cash proceeds of $3,151,250 and services of $7,500.
In July 1999, we entered into an agreement to purchase a building
in exchange for cash and a note payable in Australian dollars which as of
December 31, 1999 equaled to approximately $456,000 USD. Such indebtedness bears
interest at the rate of 7.25% per annum and is repayable in July 2001. We will
use a portion of the proceeds of the maximum offering to repay such
indebtedness.
The capital requirements relating to implementation of our
business plan will be significant. During the twelve months following the
consummation of this offering, we intend to finance the acquisition of a
majority interest in Stampville, possibly increase our interest in VideoDome,
finance or acquire interests in other Internet or e-commerce enterprises, and
meet our own working capital needs. Other than as described above, as of the
date of this prospectus, we have no material commitments for capital
expenditures.
We are dependent on the proceeds of this offering or other
financing in order to fully implement our proposed plan of operation. Based on
currently proposed plans and assumptions relating to the implementation of our
business plans in the event we sell all of the shares offered in this offering,
we will retain approximately $3,000,000, which should be sufficient to satisfy
our contemplated working capital requirements for approximately two years
following the consummation of this offering. In addition, we would retain
approximately $11,219,000 for potential investment, acquisition and development
of Internet and e-commerce ventures. If we raise approximately $10,000,000 in
this offering, we would retain approximately $1,500,000, which would be
sufficient to fund our working capital requirements for approximately one year
following this offering. In such event, we would have sufficient funds to
complete our contemplated investment in Stampville but would need to raise
additional capital to invest in, acquire and develop other Internet or
e-commerce ventures. If we raise only the minimum subscription, the initial
$1,250,000 of proceeds would be invested in Stampville, an additional $150,000
would be invested in VideoDome, the next $1,500,000 would be utilized to fund
our working capital requirements, and the remaining $1,400,000 would be used to
finance other e-commerce or Internet acquisitions or ventures and/or additional
investments in Stampville or VideoDome. In the event that our plans change, our
assumptions change or prove to be inaccurate, or if the proceeds of this
offering prove to be insufficient to implement our business plans, we would be
required to seek additional financing sooner than currently anticipated. There
can be no assurance that the proceeds of this offering will be sufficient to
permit us to implement our proposed business plan or that any assumptions
relating to the implementation of such plan will prove to be accurate. To the
extent that the proceeds of this offering are not sufficient to enable us to
generate meaningful revenues or achieve profitable operations, the inability to
obtain additional financing will have a material adverse effect on us. There can
be no assurance that any such financing will be available to us on commercially
reasonable terms, or at all.
RECENT DEVELOPMENTS
Subsequent to December 31, 1999, a number of developments
occurred which have had a significant impact on our business, operations and
results, principally the continued expansion of Stampville's developmental
activities. In addition, as of March 24, 2000, we entered into an agreement
giving us an option to acquire up to a 50.1% equity interest in VideoDome.Com
Networks, Inc. Our option to purchase this 50.1% equity interest in VideoDome is
exercisable in three tranches. On April 10, 2000, we invested an initial
$150,000 and purchased a 5% equity interest in VideoDome. We also intend to
invest an additional $150,000 from the proceeds of this offering through the
exercise of the second tranche to acquire an additional 5% equity interest in
VideoDome. Our exercise of the final tranche for an additional 40.1% equity
interest in VideoDome is contingent upon completion to our satisfaction of
complete due diligence regarding VideoDome, receipt from VideoDome of audited
financial statements, and our acquisition through this offering or through other
sources of sufficient funds to complete the potential investment in VideoDome,
to complete our intended investment in Stampville and to finance our other
operations and/or other potential investments. We are under no obligation to
exercise the options to purchase the equity interest in VideoDome. Therefore, we
can offer no guarantee that our potential acquisition of a majority interest in
VideoDome will be realized.
INFLATION
We have not been materially affected by inflation in the United
States. While we do not anticipate inflation affecting our operations, increases
in labor and supplies could impact our ability to compete.
YEAR 2000 COMPLIANCE AND COSTS
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As has been widely reported, there is worldwide concern that Year
2000 technology problems may materially and adversely impact a variety of
businesses and local, national and global economies. While relatively few
disruptions were reported on and after December 31, 1999, concerns remain that
there will be a delayed effect to computer users. As a newly formed entity, we
have acquired computer hardware and software which is Year 2000 compliant, and
we do not expect future expenses associated with ongoing compliance to be
material to our financial position or future results of operations, although
there can be no assurance that as a result of presently unforeseen computer
programming or future dealing with our vendors or other parties difficulties
will not arise.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, as amended,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards requiring that all derivative
instruments, including certain derivative instruments embedded in other
contracts, be recorded in the balance sheet as either an asset or liability
measured at its fair value. This statement will become applicable to us in
January 2001.
BUSINESS
THE COMPANY
We are a Delaware corporation created for the purpose of engaging
in Internet, e-commerce and technology businesses, directly and through
acquisitions of equity in Internet related and other technology companies. Our
wholly-owned subsidiary, I.T. Technology Pty. Ltd., furthers our operations in
Australia and owns our executive offices located in Melbourne, Australia.
We actively seek investments in and acquisitions of entities with
unique opportunities in the Internet, e-commerce and technology-related areas.
Through our executive officers and directors, we identify companies which have
high growth potential and which can benefit from the commercial and financial
expertise of our personnel. We emphasize relationships in which our resources
can enhance the creative and technological skills of our partners, and we are
open to a variety of potential relationships, including joint ventures and
strategic alliances.
Pursuant to an agreement entered into in June 1999 and amended in
December 1999, we have acquired 50.1% of the equity of Stampville.Com Inc., a
corporation specializing in the business of selling collectible stamps and other
memorabilia through the Internet on a retail basis to the general public and
collectors. Stampville also intends to sell collectible stamps and other
memorabilia through standard business channels on a wholesale basis. Our 50.1%
equity interest may be reduced in the event that we do not complete the funding
of up to $7,750,000 in Stampville. Our ownership interest in Stampville may also
be reduced in the event we arrange for third party financing in lieu of direct
investment in Stampville. As of March 31, 2000, we have invested $1,500,000 in
Stampville.
As of March 24, 2000, we entered into an agreement through our
wholly-owned subsidiary, Bickhams Capital, Inc., which agreement granted us an
option to acquire up to a 50.1% equity interest in VideoDome.Com Networks, Inc.
Our option to purchase this 50.1% equity interest in VideoDome is exercisable in
three tranches. On April 10, 2000 we exercised one of our tranches to purchase
equity in VideoDome by investing $150,000 in exchange for 5% equity interest in
VideoDome. We also intend to invest an additional $150,000 from the proceeds of
this Offering through the exercise of the second tranche to acquire an
additional 5% equity interest in VideoDome. Our exercise of the final tranche
for 40.1% of equity interest in VideoDome is contingent upon completion to our
satisfaction of complete due diligence regarding VideoDome, receipt from
VideoDome of audited financial statements, and our acquisition through this
offering or through other sources of sufficient funds to complete the potential
investment in VideoDome, to complete our intended investment in Stampville and
to finance our other operations and/or other potential investments. We are under
no obligation to exercise the option to purchase the VideoDome interest.
Therefore, we can offer no guarantee that our potential acquisition of a
majority interest in VideoDome will be realized.
We intend to identify other potential Internet or e-commerce
businesses to acquire or in which to invest, in addition to Stampville and
VideoDome. However, we have not at this time entered into substantive
negotiations with any such potential targets and there can be no assurance that
we will be able to successfully locate other investment or acquisition
candidates or ventures, or if located successfully, negotiate a transaction with
such targeted entities.
We currently maintain executive offices in Melbourne, Australia
and New York, New York. It is anticipated that Henry Herzog, our President, will
be relocating to our New York offices prior to the beginning of June 2000.
INDUSTRY BACKGROUND
The Internet
The Internet is a global web of over 50,000 computer networks,
the first of which were developed over 25 years ago. The Internet was originally
installed using UNIX-based computers, a development of AT&T, a telephone
company, which had very sophisticated communications capabilities for its time.
At first, although the Internet served the objectives of the United States
Department of Defense, it was looked upon by others as awkward due to its arcane
commands and inaccessibility to persons without specific technical training.
This hampered its growth for a considerable period of time.
A key breakthrough to the accessibility of the Internet occurred
with the development of the communications transport protocol "TCP/IP," which
made it possible for each Internet computer to pass on packets of information to
different types of computers without using a switchboard. Using TCP/IP, any
computer can link onto the Internet and its conglomeration of networks for a
cost that is fundamentally lower than, and structured differently from, the cost
of linking onto stand-alone networks.
Communication on the Internet occurs primarily between a client
and a server, or so-called host computers. The client computer initiates a
request for information or other activity and the server computer responds to,
or serves, that request. Furthermore, server computers run specialized software
specifically designed to provide a variety of services to client computers.
Notably, many host computers operate as mail servers or file servers that enable
the downloading or transferring of files. The Internet has historically been
used by academic institutions, defense contractors and government agencies
primarily for remote access to host computers and for sending and receiving
electronic-mail and has traditionally been
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subsidized by the United States Federal Government. As an increasing number of
commercial entities have come to rely on the Internet for business
communications and commerce, the level of federal subsidies has significantly
diminished and funding for the Internet infrastructure and backbone operations
has shifted primarily to the private sector and end users. In addition,
according to industry market research, as far back as October 1994 the number of
commercial domains on the Internet surpassed the number of educational domains.
World Wide Web
Much of the recent growth in Internet use by businesses and
individuals has been driven by the emergence of a network of servers and
information available on the Internet called the World Wide Web. The Web, based
on a client/server model and a set of standards for information access and
navigation, can be accessed using software that allows non-technical users to
exploit the capabilities of the Internet. The Web enables users to find,
retrieve and link information on the Internet in a consistent manner which
renders the underlying complexities irrelevant to the lay user. Electronic
documents are published on Web servers in a common format described by Hyper
Text Mark-up Language, or HTML, which is a series of tags or codes added to a
text document to format a document or add links to other documents. Web client
software can retrieve these documents across the Internet by making requests
using a standard protocol called HyperText Transfer Protocol, or HTTP. Browsers
and HTML are an essential part of the success of the Internet and the continuing
growth in the number of users. Browsers allow a user to wander around the
Internet with relative ease while HTML allows the exhibitor of a Web page to
navigate to either some other page at that particular Web site or to a relevant
page at another Web site. The introduction of commercial Web pages introduced a
new and substantial opportunity for users of the Internet.
The proliferation of Web users has created significant demand for
software to enable Internet servers and private servers on corporate networks to
function as Web sites, which are used by content providers to offer their
products and services on the Internet and to publish confidential company
information to employees inside the enterprise.
E-commerce
E-commerce provides companies with the opportunity to serve a
rapidly growing market as consumers increasingly accept the Internet as an
alternative shopping vehicle. Growth in Internet usage has been fueled by a
number of factors, including the large and growing number of personal computers
in the workplace and home, advances in the performance and speed of personal
computers and modems, improvements in network infrastructure, easier and cheaper
access to the Internet and increased awareness of the Internet among businesses
and consumers. The increasing functionality, accessibility and overall usage of
the Internet and online services have made the Internet an attractive commercial
medium. The Internet and other online services are evolving into a unique sales
and marketing channel, just as retail stores, mail-order catalogues and
television shopping evolved. Companies operating online can interact directly
with customers by frequently adjusting their featured selections, editorial
insights, shopping interfaces, pricing and visual presentations. The minimal
cost to publish on the Web, the ability to reach and serve a large and global
group of customers electronically from a central location and the potential for
personalized low-cost customer interaction provide additional economic benefits
for online operators.
The Internet also provides e-commerce companies with an
opportunity to serve a global market. Online operators have the potential to
build large common global customer bases quickly and to achieve superior
economic returns over the long term. International Data Corporation, also known
as IDC, an information technology market research and consulting firm, estimated
that the number of people accessing the Internet had reached approximately 100
million by the end of 1998 and predicted that this number will reach 320 million
by 2002. According to IDC, revenues through the purchase of goods and services
over the Internet in the United States will reach approximately $250 billion in
2002. IDC has also reported that approximately 13% of all United States
households were online in 1996, which figure increased to 20% by early 1998. IDC
estimates that the number of Internet users buying goods and services on the
Internet worldwide will exceed 128 million by 2002, as compared to 18 million in
1997, with the amount of commerce conducted over the Internet exceeding $400
billion by 2002. In addition, IDC estimates that worldwide Internet services
revenues increased by 71% in 1998 to reach $7.8 billion and has forecasted that
such revenues will surpass $78 billion by 2003. IDC has also reported that the
United States accounted for more than 50% of worldwide Internet services
spending at $4.6 billion in 1998. IDC has also estimated that corporate spending
in the United States in the area of Internet-based products and services will
increase from $85 billion in 1999 to over $203 billion by 2002.
BUSINESS STRATEGY
The Company -- Operational Strategy
In addition to our investments in Stampville and VideoDome and
potential further investments in these companies, we intend to utilize the
remaining proceeds from this offering, future income received from such
companies and proceeds from other debt or equity financings to acquire other
Internet or e-commerce related businesses or to invest in Internet related
projects or ventures that appear to have viable commercial prospects. By
investing funds in exchange for equity in Internet-related businesses, we will
in most cases seek to either acquire a majority of the capital stock of such
targets or in certain circumstances to control the targets from the management
level. We may also make small investments in entities without seeking a majority
interest, where this may be either of strategic significance to us or
circumstances warrant a relatively smaller involvement.
Stampville -- Operational Strategy
Stampville plans to develop a "portal community" Web site for the
collectible postage stamps community and for hosting philatelic services to
dealers, collectors, and hobbyists. Stampville believes that doing so would fill
a gap in the stamp-collecting marketplace by establishing an online stamp
network for stamp collectors. Stampville intends to design its services to
satisfy a wide variety of consumers ranging from the casual collector to the
dedicated stamp connoisseur through a comprehensive Web site. The Web site will
merge the traditional hobby of stamp collecting with the technological
advantages of the Internet. Stampville's online stamp community will provide
information, both directly and through links, and make it possible to assemble
an entire stamp collection online. In addition, Stampville plans to make
available philatelists through its Web site to afford personal attention to
customers through e-mail or telephone. Stampville also intends to expand its
business to potentially include other collectibles such as coins and sports
memorabilia.
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.
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We believe the Internet is an ideal medium for selling thematic
and non-thematic collectibles. The natural and worldwide appeal of stamp
collecting and stamp art is particularly conducive to electronic commerce. By
offering high resolution graphic images of products with completely searchable
databases and expert staff assistance, Stampville hopes to become a preeminent
portal Web site.
Investors should note that Stampville has not taken any steps to
protect the technology or other intellectual property it uses and is developing,
and does not know if such technology or intellectual property can, in fact, be
protected from use by others. It is possible that competitors may use
Stampville's technology to compete with it, or develop other types of technology
which allow them to compete effectively with Stampville.
Stampville also plans to engage in wholesale and bulk sales of
framed stamp art in support of Stampville's Internet operations. Stampville
believes there is significant opportunity to generate sales through bulk and
wholesale sales to both national department and specialty stores, as well as
gift shops , including sundry shops located at hotels, small vendors, and other
potential online vendors.
Stampville has entered into a three year supplier's agreement
with Inter-Governmental Philatelic Corporation, also known as IGPC, one of the
world's largest suppliers and dealers of philatelic stamps. IGPC represents
approximately seventy postal administrations throughout the world in matters
relating to the design, production and marketing of their postage stamps. IGPC
also markets their stamps to collectors. Pursuant to its agreement with
Stampville, IGPC has agreed to supply Stampville with stamps that IGPC has made
available for public sale at the lowest pricing structure available to other
dealers. In addition, IGPC has agreed to extend a $2 million line of credit to
Stampville for the purchase of its stamps. The agreement with IGPC also provides
that IGPC will provide content for Stampville's Web site. Unless terminated at
the end of the initial term by either party, the agreement with IGPC will
automatically extend for an additional two year period. IGPC's President is Sam
Malamud, the father of Jonathan Y. Malamud, a director, President and Vice
President of Marketing of Stampville, and the father-in-law of David Eli Popack,
director, Secretary and Director of Dealer Relations of Stampville. Stampville's
agreement with IGPC will allow Stampville to purchase stamp sheets directly from
IGPC. Stampville anticipates that IGPC will be a significant supplier of stamps
to it and will allow Stampville to offer a wide array of stamps at competitive
prices. Stampville is also in the process of seeking to establish an on-demand
purchase system with IGPC, which, if implemented, will reduce Stampville's need
to maintain substantial inventory of the products offered by IGPC, expedite
fulfillment of orders and reduce Stampville's costs of sale.
Currently, Stampville is pursuing business relationships with
various other worldwide philatelic dealers.
Prospects of Stampville
Stampville has chosen to engage in the Internet sale and
distribution of stamps and collectibles because of its belief that the
worldwide, multi-million dollar stamp industry is fragmented and highly
inefficient. Stampville believes there are few worldwide dealers of any size and
that most such dealers specialize in a narrow segment of the stamp collecting
business. Stampville has also observed that individual valuable items and entire
collections are generally sold at auctions, and that retail prices vary from
area to area, which inconsistency, Stampville believes, is due to lack of
information and supply dislocation.
Linns Stamp News, the largest publication in the industry, has
done annual market surveys since 1992. The latest survey for 1998 indicates the
following:
- The total United States market for stamps is $791 million.
- Numbers for the rest of the world are elusive. Nevertheless
it is known that in countries such as Germany, the United
Kingdom, China and Japan, stamp collecting is much more
popular than in the United States.
- Of Linn's readers, 43% had Internet access and 23% had made
purchases of stamps via the Internet.
- 33% of the collectors responding to the survey had a net
worth of $500,000 or more and 34% had household incomes of
$75,000 or more.
Furthermore, in the March 13, 2000 publication of Linns Stamp News, it
was indicated that there were $42 million in online auction sales and $15
million in online stamp sales.
Stampville believes that these conditions make it possible for a firm
providing sales and information through the Internet to provide a valuable
service with meaningful results.
VideoDome - Operational Strategy
VideoDome provides streaming Internet video solutions for
consumer and corporate markets. VideoDome focuses its efforts on providing
accessible technologies that enable users to incorporate video components into
Web sites or promote their video products through VideoDome's services.
VideoDome offers a complete solution, combining the processes of encoding,
delivery, hosting and promotion of video over the Internet. VideoDome uses
VideoDome InstaStream, a system that automates the process of placing orders,
tracking, processing and customer notification of the final version of a video
product. VideoDome's products are compatible with existing streaming media
platforms, which facilitate transmission of videos over the Internet. VideoDome
was founded in 1999. Its founders, Daniel Aharonoff and Vardit Cohen, had been
involved in the business of integrating the different facets of the video
streaming technology for several years prior to its founding. VideoDome is based
in Burbank, California. VideoDome currently has two employees. Although the
company has been advised that VideoDome is currently generating some revenues,
it understands that these revenues are insufficient to fund VideoDome's research
and development and expansion plans. In addition, we cannot state when, if ever,
VideoDome will be able to operate profitably.
VideoDome's services and technology address several markets:
video streaming, encoding, communities and desktop video hardware & software.
VIDEO STREAMING. Video streaming is an emerging segment of the
Internet market. Internet video is typically comprised of several
distinct application segments, including video mail, corporate
training, executive messaging, distance learning, live on-demand
news, entertainment
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and more. These applications are typically provided as separate
products within corporate environments. More recently, video
streaming has emerged as a cost effective means of bringing video
to an individual corporate or consumer user using the Internet as
a network transmission medium.
ENCODING. Until recently, the process of encoding and
transferring of audio or visual material between platforms was
dedicated to converting analog audio or video materials into
digital formats such as MPEG, CDROM, DAT and other archival
methods. Driven by the emergence of streaming video over the
Internet and the increasing availability of bandwidth in both
Intranet and Internet environments, new lower-cost desktop
personal computers and video players have emerged as growth
drivers in the market. The encoding process is an initial step to
cross from analog video to Internet streaming video.
COMMUNITY. Building an environment, or community, where users can
share ideas, ask questions and correspond with each other and
with experts is an increasingly important facet of creating brand
awareness for Internet based companies. A number of companies,
such as The Globe, GeoCities & Xoom, have built business models
around the concept of building Internet communities. VideoDome
believes that combining streaming video combined with an active
community model can become a key factor to the overall experience
of video over the Internet.
DESKTOP VIDEO HARDWARE & SOFTWARE. VideoDome believes the market
for computer-based videos is a precursor to the streaming video
market. This market is currently expanding at a rate of greater
than 40% per year with over 100 capture board and 30 desktop
video editing software vendors in the market, the streaming
market experiences a synergistic boost. VideoDome's solutions and
technology can be combined with an expanding market including
significant entries into compatible computer hardware will be
help build distribution channels.
VIDEODOME TECHNOLOGY
VideoDome has pioneered the development of a completely automated
video conversion process, known as InstaStream, which allows for enhanced
conversions into streaming formats, as well as a video management system
referred to as the Media Manager, which serves to organize and simplify the
process of publishing video into the Internet, compared to the products offered
by VideoDome's competitors. Media Manager technology is being successfully
licensed by television broadcast companies, direct response companies and other
large scale corporations:
NETWORK MANAGEMENT AND INTEGRATION - VideoDome's management
"hooks" allow for performance tracking of video over networks,
remote management of video database, logging of usage
parameters, smart routing, fault tolerance and guaranteed
quality of service.
SYSTEM SCALABILITY - InstaStream allows for seamless processing
of raw video files into encoded files which are then moved to a
video delivery server and automatically notify customers of
their newly available streaming video available online.
STANDARD, FORMAT & PLATFORM INTEROPERABILITY - the company's
solutions will support various emerging multimedia standards and
compression formats, and are portable between Windows, MAC and
UNIX platforms.
INTELLECTUAL PROPERTY - VideoDome has indicated that it intends
to file several patent claims addressing, among other things,
scalable video conversion processes, dynamic directories,
cataloging & administration.
While VideoDome faces competition in the streaming video services
area from companies such as Loudeye.com, InterVu and others, VideoDome believes
it has an advantage in its ability to deliver scalability across its InstaStream
network, which allows for a fully automated level of order conversion, combined
with a comprehensive package of services which provides encoding, delivery and
marketing of streaming video content at the same time and from the same company.
VideoDome also can provide Media Manager technology which simplifies the process
of publishing video over the Internet.
VideoDome has not taken any steps to perfect its ownership of the
technology and other proprietary information it has developed, and may not do so
in the future. Whether or not it undertakes to obtain patents or otherwise
protect its technology and proprietary information, VideoDome cannot be sure
that it will be able to prevent others from using the technology, or other
technology which can produce substantially the same results, all to the
detriment of VideoDome.
VIDEODOME PRODUCTS
PERSONAL ONDEMAND. This product allows consumers to incorporate
personal, typically non-commercial, video modules in an existing
web site. Personal OnDemand allows for a cost-effective and easy
bridge for converting raw or digitized video into Internet
streaming video. Once a customer order is placed, the InstaStream
network automatically notifies the customer by email when the
streaming online version of their video is available, which can
then easily be added to the customer's existing web site.
BUSINESS ONDEMAND. Business OnDemand allows VideoDome's customers
to use InstaStream for business oriented videos such as
infomercials, company overviews, news releases and similar cases,
with additional support for bit rates and promotion via the
VideoDome OnDemand Directory and Guide newsletter. This business
listing, which is similar to a traditional search portal, offers
visitors to VideoDome's website the ability to search and watch
video instead of reading static web pages. It also provides
Business OnDemand customers with instant promotion of their video
to over 200,000 OnDemand Guide readers and over 10,000 new page
impressions every day.
MEDIA MANAGER. This product, which was developed by VideoDome,
allows VideoDome, through a simple web interface, to build global
channels and individual content channels which are then tailored
for individual need. It allows for management of the media and
provides flexibility by enabling functions such as powerful video
search, filtering, customization, interstitial ad placement and
more.
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VideoDome's Media Manager is customizable and can support a
variety of page layout, look and feel on the front end with a
feature set on the interface. The video can also be customized to
display at various sizes and quality of transmission.
Acquisitions of Additional Businesses or Establishment of Ventures.
In addition to the operations of Stampville and our investments
in VideoDome, we plan to seek, investigate, and if such investigation warrants,
consummate an acquisition with one or more targets or establish or develop
e-commerce, Internet or other ventures. At this time, we have no definitive
plan, proposal, agreement, understanding, or arrangement to acquire any specific
business or company other than our arrangements with Stampville and VideoDome.
While we primarily seek opportunities in Internet, e-commerce and technology
based businesses, we will not restrict our search to any specific business,
industry, or geographical location, and may participate in business ventures of
virtually any kind or nature. Any discussion of our proposed plan of operation
and acquisitions in this section and throughout this prospectus is purposefully
general and is not meant to restrict our virtually unlimited discretion to
search for and enter into potential business opportunities.
We may seek an acquisition with an entity which only recently
commenced operations, or a developing company in need of additional funds to
expand into new products or markets or seeking to develop a new product or
service, or an established business which may be experiencing financial or
operating difficulties and needs additional capital which is perceived to be
easier to raise by a public company. In some instances, an acquisition may
involve acquiring a corporation which does not need substantial additional cash
but which desires to establish a public trading market for its common stock. We
may purchase assets and establish wholly-owned subsidiaries in various
businesses or purchase existing businesses as subsidiaries.
Selecting a target is complex and extremely risky. Because of
general economic conditions, increasing public interest and demand, rapid
technological advances being made in the Internet and e-commerce area, our
management believes that there are numerous entities seeking the benefits of a
publicly-traded corporation. Such perceived benefits of a publicly traded
corporation may include facilitating or improving the terms on which additional
equity financing may be sought, providing liquidity for the principals of a
business, creating a means for providing incentive stock options or similar
benefits to key employees, providing liquidity for stockholders, and other
items. Potential targets may exist in many different businesses or market niches
and at various stages of development, all of which will make the task of
comparative investigation and analysis of such targets extremely difficult and
complex.
We may not have sufficient capital with which to provide the
owners of targets significant cash or other assets. Our management believes that
we may offer owners of targets the opportunity to acquire an ownership interest
in a public company at substantially less cost than is required to conduct an
initial public offering. Nevertheless, we have not conducted market research and
are not aware of statistical data that would support the perceived benefits of
an acquisition transaction for the owners of a target.
We will not restrict our search to any specific kind of target
and may acquire an entity which is in its preliminary or developmental stage,
which is already in operation, or in essentially any stage of its corporate
life. It is impossible to predict at this time the status of any business in
which we may become engaged, in that such business may need to seek additional
capital, may desire to have its shares publicly traded, or may seek other
perceived advantages which we may offer.
Selection and Evaluation of Targets
Our management will have complete discretion and flexibility in
identifying and selecting a prospective target. In connection with its
evaluation of a prospective target, our management anticipates that it will
conduct a due diligence review which will encompass, among other things, meeting
with incumbent management and inspection of facilities, as well as a review of
financial, legal and other information which will be made available to us.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, we will only be able to effect an acquisition
with a prospective target that has available audited financial statements or has
financial statements which can be audited.
The time and costs required to select and evaluate a target,
including conducting a due diligence review, and to structure and consummate the
acquisition, including negotiating relevant agreements and preparing requisite
documents for filing pursuant to applicable securities laws and corporation
laws, cannot presently be ascertained with any degree of certainty. While no
current steps have been taken nor agreements reached, we may engage consultants
and other third parties providing goods and services, including assistance in
the identification and evaluation of potential targets. These consultants or
third parties may be paid in cash, stock, options or other of our securities,
and the consultants or third parties may be placement agents or their
affiliates.
We will seek potential targets from all known sources and we
anticipate that various prospective targets will be brought to our attention
from various non-affiliated sources, including securities broker-dealers,
investment bankers, venture capitalists, bankers, other members of the financial
community and affiliated sources, including, possibly, our executive officers,
directors and their affiliates. While we have not yet ascertained how, if at
all, we will advertise and promote our company, we may elect to publish
advertisements in financial or trade publications seeking potential business
acquisitions. While we do not presently anticipate engaging the services of
professional firms that specialize in finding business acquisitions on any
formal basis, we may engage such firms in the future, in which event we may pay
a finder's fee or other compensation.
In analyzing prospective targets, we may consider, among other
factors, such matters as:
(1) the extent to which the targets provide complementary
services or technology or are otherwise synergistic with
our operations;
(2) the available technical, financial and managerial
resources;
(3) working capital and other financial requirements;
(4) history of operation, if any;
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(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 may
then be anticipated to impact our proposed activities;
(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/or
(13) name identification.
Acquisition opportunities in which we may participate will
present certain risks, many of which cannot be adequately identified prior to
selecting a specific opportunity. Our stockholders must, therefore, depend on
our management to identify and evaluate such risks. The investigation of
specific acquisition opportunities and the negotiation, drafting and execution
of relevant agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for accountants,
attorneys and others. If a decision is made not to participate in a specific
acquisition opportunity, the cost therefore incurred in the related
investigation would not be recoverable. Furthermore, even if an agreement is
reached for the participation in a specific acquisition opportunity, the failure
to consummate that transaction may result in the loss of the related costs
incurred.
We cannot be sure that we will find any suitable targets or
ventures.
Structuring and Financing of an Acquisition
As a general rule, Federal and state tax laws and regulations
have a significant impact upon the structuring of acquisitions. We will evaluate
the possible tax consequences of any prospective acquisition and will endeavor
to structure an acquisition so as to achieve the most favorable tax treatment
for us, the target and our respective stockholders, while still accomplishing
our strategic objectives. There can be no assurance that the Internal Revenue
Service or relevant state tax authorities will ultimately assent to our tax
treatment of a particular consummated acquisition. To the extent the Internal
Revenue Service or any relevant state tax authorities ultimately prevail in
recharacterizing the tax treatment of an acquisition, there may be adverse tax
consequences to us, the target and our respective stockholders. Tax
considerations as well as other relevant factors will be evaluated in
determining the precise structure of a particular acquisition.
We may utilize available cash and equity securities in effecting
an acquisition. We may have to effect reverse stock splits prior to certain
potential acquisitions. To the extent that such additional shares are issued,
dilution to the interests of our stockholders will occur. Additionally, a change
in control may occur which may affect, among other things, our ability to
utilize net operating loss, if any.
There currently are no limitations on our ability to borrow funds
to effect an acquisition from institutional lenders. However, our limited
resources and lack of operating history may make it difficult to borrow funds.
The amount and nature of any borrowings by us will depend on numerous
considerations, including our capital requirements, potential lenders'
evaluation of our ability to meet debt service on borrowings and the then
prevailing conditions in the financial markets, as well as general economic
conditions. We have no arrangements with any bank or financial institution to
secure additional financing, and there can be no assurance that such
arrangements, if required or otherwise sought, would be available on terms
commercially acceptable or otherwise in our best interests. Any inability to
borrow funds required to effect or facilitate an acquisition, or to provide
funds for an additional infusion of capital into a target, may have a material
adverse effect on our financial condition and future prospects, including the
ability to effect any future acquisition. To the extent that debt financing
ultimately proves to be available, any borrowings may subject us to various
risks traditionally associated with indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay principal and
interest. Furthermore, a target may have already incurred debt financing and,
therefore, all the risks inherent thereto.
Acquisition of Equity Interest in Stampville
We hold approximately 50.1% equity interest in Stampville,
pursuant to our stock purchase agreement with Stampville.
Under the stock purchase agreement, Stampville agreed to issue to
us an equity interest of 25% in exchange for payment by us of up to $5,000,000,
payable in installments. Pursuant to the amended stock purchase agreement, we
accelerated and increased the payment of the consideration to up to $7,750,000
in exchange for an immediate 50.1% equity interest in Stampville. As of March
31, 2000, we have invested $1,500,000 in Stampville.
We have agreed that if we raise $10,000,000 in this offering, we
will complete the purchase of our 50.1% interest in Stampville through the
payment to Stampville of $5,000,000 within 30 days of our receipt of the funds
from this offering, and an additional $1,250,000 on or before December 8, 2001.
If we do not raise $10,000,000 in this offering, we will consider other
alternatives for the funding of Stampville. If we fail to make or arrange for
the $5,000,000 payment or the $1,250,000 payment in full, we have agreed to
surrender such number of shares of common stock of Stampville so that, upon such
surrender, we shall hold a percentage of the outstanding shares of common stock
of Stampville equal to the lesser of (a) 27.5% of the outstanding shares of
common stock of Stampville, or (b) the total amount invested by us divided by
100,000. Thus, if we invest an aggregate of $2,500,000 in Stampville and do not
make or arrange for the additional payments, our percentage investment in
Stampville shall be 25%. If we arrange for the $5,000,000 payment from some
other source, rather than provide the $5,000,000 ourself, our equity interest in
Stampville
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shall be reduced by the amount required by the party providing the $5,000,000;
provided, however, that our equity interest shall not be reduced below 27.5%,
without a pro rata reduction in the ownership interest of all the other
shareholders of Stampville other than us.
In connection with our investment in Stampville, we and all of
the other shareholders of Stampville entered into a shareholders agreement. This
shareholders agreement, among other things, restricts the ability of the
shareholders of Stampville to transfer their interests in Stampville, grants
Stampville and each shareholder of Stampville a right of first refusal with
respect to any potential sale of shares of Stampville, provides that each
shareholder's interest in Stampville shall be subject to purchase by us and/or
the shareholders of Stampville upon the occurrence of certain events, and grants
to each shareholder a right of co-sale upon a proposed transfer of shares. In
addition, we are entitled to appoint to the board of directors of Stampville
such additional nominees selected by us so that at all times half of the members
of the board of directors of Stampville shall consist of individuals nominated
by us. Our nominees serving on the Stampville board of directors are Levi
Mochkin and Mendel Mochkin. We are also entitled to designate an individual to
serve as the chief operating officer, or such other position as the board of
directors of Stampville may designate. We have designated Robert Petty as
Stampville's Acting Chief Executive and Financial Officer. Our arrangement with
Stampville provides that Mr. Petty shall work predominantly for Stampville out
of Stampville's offices, but may retain a title with and serve in a concurrent
position with us as Vice President -- Business Development. If we fail to make
or arrange for the $5,000,000 payment or the $1,250,000 payment, our management
rights shall be limited to designating one individual to the board of directors
of Stampville. The approval of our designee shall be required for certain
significant corporate transactions. Under any circumstances, our right to any
preferential board and management representation will terminate by no later than
June 18, 2002.
Acquisition of Equity Interest in VideoDome
Through our wholly-owned subsidiary, Bickhams Capital, Inc., as
of March 24, 2000, we entered into a stock option agreement which allows us to
acquire up to a 50.1% equity interest in VideoDome. The stock option agreement
provides that we may exercise our interest in VideoDome in three steps:
- As of April 10, 2000, we acquired 5% of the capital
stock of VideoDome for a price of $150,000.
- We can acquire an additional 5% of the capital stock of
VideoDome for a price of $150,000 between June 1, 2000
and July 31, 2000.
- We can acquire an additional 40.1% of the capital stock
of VideoDome for an exercise price of $5,000,000 after
the exercise of the second step and between August 1,
2000 and October 31, 2000.
The option is structured as a purchase of series A preferred
stock which is convertible into common stock and is senior to all other classes
of VideoDome stock. The preferred stock has voting rights along with VideoDome's
common stock, a liquidation preference of $2.12 per share which is equal to our
average per share exercise price under the option agreement, includes
anti-dilution protection and other protections. The option is also subject to a
number of conditions, including the completion, to our satisfaction, of
business, financial and other due diligence which we believe necessary and
appropriate, and the preparation of audited financial statements for VideoDome.
Consequently, we are not under any legal obligation under the option agreement
to complete the second and final stages of the acquisition of VideoDome's
capital stock.
COMPETITION
I.T. Technology
We are, and will continue for the indeterminate future to be, an
insignificant participant in the Internet and e-commerce business. We expect to
encounter intense competition from other entities having business objectives
similar to ours with respect to the acquisition of additional targets. Many of
these entities, including venture capital partnerships and corporations, blind
pool companies, large industrial and financial institutions, small business
investment companies, "incubators" and wealthy individuals, are well-established
and have extensive experience in identifying and effecting acquisitions directly
or through affiliates. Many of these competitors, such as the Internet Capital
Group Inc., VerticalNet, Comcast Corporation and Safeguard Scientifics, Inc.,
possess far greater financial, technical, human and other resources than we do,
and there can be no assurance that we will have the ability to compete
successfully. Our financial resources will be limited in comparison to those of
many of our competitors. This inherent competitive limitation may compel us to
select certain less attractive prospects. There can be no assurance that such
prospects will permit us to achieve our stated business objectives.
Stampville
All aspects of the Internet market are new, rapidly evolving and
intensely competitive, and we expect competition to intensify in the future.
Barriers to entry are low, and current and new competitors can easily launch new
Web sites, e-commerce concerns, portals and other competitive alternatives at a
relatively low cost using commercially available software. Stampville's present
competitors include companies that have equal access to expertise in computer
and Internet technology such as "Stampfinder.com" and other online stamp
collecting and gift art Internet sites, as well as Internet directories, search
engine providers, shareware archives, content sites and entities that attempt to
establish online communities. Stampville also will compete with a number of
other traditional companies, such as stamp, gift and hobby shops. Other major
companies have the financial and technical ability to compete aggressively in
the stamp collecting market on the Internet. Many, if not all, of these
companies have longer operating histories, larger customer bases, greater brand
name recognition in other businesses and Internet markets and significantly
greater financial, marketing, technical and other resources than we or
Stampville have. Competitive pressures created by any one of these companies, or
by Stampville's competitors collectively, could have a material adverse effect
on Stampville's and our business, results of operations and financial condition,
and we can give no assurance that either we or Stampville will be able to
compete successfully against current and future competitors.
In addition, other major nationally-known companies have the
capability to include stamp-collecting content on their existing well known Web
sites, to market stamp-collecting Web sites through strong distribution channels
and to package their stamp-collecting Web site with other popular Web sites. To
the extent that a significant online market develops for stamp collecting, we
anticipate that both traditional companies and Internet companies will develop
competitive Web sites. All such companies would likely be better known than
Stampville, and would have
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significantly greater resources. In addition, competitive services in the stamp
collecting marketplace may be under development by major Internet companies of
which we are unaware.
We believe that the market for consumers made available through
the Internet is growing due to an increasing use of the Internet as a venue for
sale and purchase of, among other things, consumer goods. Stampville's products
would clearly fall under the consumer goods category. Stampville believes that
its business strategy sets it apart from most Internet companies which target
consumer users. Stampville also believes that the ease of use, speed,
reliability and scalability of its Web site will attract users worldwide.
VideoDome
Like other internet-related businesses, VideoDome faces
competition from a variety of sources, ranging from small companies like
VideoDome to large, well-established companies. Because the barriers to entry
are low and potential competitors can establish competing businesses at
relatively low cost, VideoDome expects to face strong competition, both from
individuals and entities comparable in size to VideoDome as well as large,
well-established and well-funded competitors. Because of the size of the
potential market which VideoDome hopes to serve, VideoDome expects that as it
becomes a more visible and important provider, it will face additional
competition.
INTELLECTUAL PROPERTY
All of our and Stampville's software was acquired from third
parties. Neither we nor Stampville have registered copyrights on any software.
We rely upon confidentiality agreements signed by our employees. Stampville
applied on August 13, 1999 with the United States Patent & Trademark Office for
registration of "Stampville.Com" and three designs, combined with words, letters
and/or numbers as trade and service marks. Stampville has received preliminary
comments from the United States Patent and Trademark Office regarding the
application and is in the process of responding to those comments. VideoDome has
indicated that it intends to file several patent claims addressing, among other
things, scalable video conversion processes, dynamic directories, cataloging &
administration.
ENVIRONMENTAL MATTERS
We believe we are in material compliance with all relevant
federal, state, and local environmental regulations and do not expect to incur
any significant costs to maintain compliance with such regulations in the
foreseeable future.
EMPLOYEES AND LABOR RELATIONS
As of March 31, 2000, we employed one full-time employee, and one
consultant through our offices located in New York. As of the same date, through
our Australian subsidiary, I.T. Technology Pty. Ltd., we employed one full-time
employee, who is an officer and two part time employees. As of the same date,
Stampville employed 21 full-time employees, including consultants working for
one Stampville, also including four executive officers, one part-time employee
and one temporary employee. In addition, Stampville has entered into a one-year
consulting agreement with Petty Consulting, Inc. for the services of Robert
Petty as Acting Chief Executive and Financial Officer and initially for the
services of Jennifer Christopher as Vice President -- Human Resources. None of
our nor Stampville's employees are represented by a labor union, and we believe
that relations with our and Stampville's employees are good. As of March 31,
2000, VideoDome had two full-time employees, one part-time employee and five
independent contractors. VideoDome believes its employee relations are good. If
we raise at least $10,000,000 in the offering, we intend to hire additional
executives on a full time basis.
PROPERTIES
We have entered into an agreement to purchase our executive
offices, located at 34-36 Punt Road, Windsor 3181, Melbourne, Victoria,
Australia, through our wholly-owned subsidiary, I.T. Technology Pty. Ltd. The
office consists of a newly-built stand-alone office and showroom with on-site
parking and approximately 540 square meters of office and showroom space. The
purchase price of these premises was approximately $595,000, of which $132,000
was paid in cash and the remainder was financed through a loan payable in
Australian dollars with the seller secured by the property, bearing interest at
the rate of 7.25% per annum, with interest only payments due monthly and a
single balloon payment of $455,848 as of December 31, 1999, is due on July 9,
2001. Pursuant to the terms of the purchase agreement the owner will register
the title to the property in I.T. Technology Pty. Ltd. upon payment in full of
the balance due on the loan. If we raise $22,500,000 through the sale of all of
the shares offered in this offering, we will pay off this loan. We also have an
office located in 245 Park Avenue, 39th Floor, New York, NY 10167, which we rent
on a month to month basis from Regus Business Centre. Stampville's offices are
located at 456 Fifth Avenue, Suite 200, Brooklyn, N.Y. 11215. Stampville's
telephone and facsimile numbers are (718) 369-8881 and (718) 369-6270,
respectively.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to
claims arising out of our operations in the normal course of business. At this
time, we are not party to any legal proceeding.
RESEARCH AND DEVELOPMENT
STAMPVILLE -- CURRENT DEVELOPMENT STATUS
As of April 6, 2000, Stampville has launched six separate "micro"
Web sites, www.beegeesstamps.com, www.sheldonstamps.com., www.elvisstamps.com,
www.rockystamps.com, www.titanicstamps.com and www.monroestamps.com. Each of the
sites allow a user to view and purchase stamp-related products which relate to
the subject matter of the Web site.
Stampville is currently finalizing the development of its core
Web site and additional "micro" Web sites which it expects to launch during the
first half of 2000. Stampville plans the following key components to the core
Web site:
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- a display of 10,000 stamps available for sale, together
with detailed descriptions of each stamp;
- a news and events section displaying current
information, news and stories relating to stamps and
philatelic-related matters;
- a specialty page displaying new issues of stamps
released globally by country postal services; and
- a calendar of events which will publicize events of
interest to stamp collectors.
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In addition, Stampville is considering the following enhancements for future
versions of its core Web site:
- an auction room;
- increasing the number of images and adding to the
descriptions displayed on the site;
- classified advertisements; and
- additional "micro" sites dedicated to specific topics,
themes and stamp issues.
GOVERNMENTAL MATTERS
Except for usual and customary business and tax licenses and
permits, and the licenses and permits described elsewhere herein, no
governmental approval is required for our principal products/services, nor do we
know of any existing or probable governmental regulations affecting our
activities.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our board of directors consists of six directors, and
Stampville's board of directors consists of four directors, all of whom are
elected for one-year terms at each annual meeting of stockholders. The executive
officers are elected annually by the board of directors. However, they may be
removed from office at any time by our board of directors.
I.T. Technology, Inc.
On October 26, 1999, in connection with Instanz's purchase of
3,700,000 shares of the company's common stock, the board of directors of the
company increased its size from 5 to 6 and added Helen Abeles, an affiliate of
Instanz, to the board. At the same time it passed resolutions stating that the
principal business objectives of the company were to engage in the business of
e-commerce and on the Internet directly or through investment in other entities
satisfying these criteria and required a unanimous vote of all the directors to
change these business objectives, invest in other types of businesses or
increase the number of directors. The board also passed a resolution requiring
the affirmative vote of no less than 5 directors to authorize any investment by
the company in furtherance of these principal business objectives.
The following table sets forth, as of March 31, 2000, the name,
age and position of each of our executive officers and directors. The background
of each of the individuals identified in the table is described following the
table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Levi Mochkin................. 38 Chairman of the Board, Chief Executive Officer and Director
Henry Herzog................. 58 President and Director
Farrel Meltzer............... 35 Director
Jonathan Herzog.............. 28 Secretary, Chief Financial Officer and Director
Anthony Davis................ 40 Director
Helen Abeles................. 45 Director
Robert Petty................. 35 Vice President -- Business Development of the company and
Acting Chief Executive and Financial Officer of Stampville
</TABLE>
HENRY HERZOG
Mr. Henry Herzog headed up a restructuring and reorganization of
Bayou International, a publicly listed company, and served as President and
Chief Executive Officer of that company from May 1986 to March 1988. From March
1988 through June 1999, he served as Vice President of Bayou International, now
Baynet Ltd. He has over thirty-five years of business experience. He was
responsible for the reorganization of the Kingsway Group, which became known as
Australia Wide Industries Ltd. From 1983 to 1988, Mr. Herzog served as a
director of Australia Wide, which has recently been renamed Autogen Limited, a
company listed on the Australian Stock Exchange under the symbol "AGT," and also
served as a director of numerous other publicly listed companies during this
period. Over the past five years he has been employed as a consultant by Sujol
Nominees Pty. Ltd., which is involved in hotel management, consulting and
investment. Mr. Henry Herzog is the father of Jonathan Herzog and father-in-law
of Levi Mochkin.
FARREL A. MELTZER
From 1997 to the present, Mr. Farrel Meltzer has been and is a
Senior Executive with the ANZ Banking Group. ANZ is one of Australia's four
major banks with assets in excess of approximately U.S. $90 billion. Mr.
Meltzer is currently the head of its private banking operations throughout
Australia. ANZ Private Bank is Australia's leading private bank. Prior to
joining ANZ, from 1996 to 1997, Mr. Meltzer served as acting Chief Executive
Officer of Atcor S.A., a South African education and training group, which is
now a member of the publicly listed Acumen Holdings Group on the Johannesburg
Stock Exchange.
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Between 1994 and 1996, Mr. Meltzer was an Assistant General
Manager of the Mercantile Lisbon Banking Group in South Africa, prior to which
he spent a number of years in Audit, Tax & Corporate Advisory positions with
Grant Thornton and Pannell Kerr Forster in Johannesburg, South Africa.
Mr. Meltzer is a chartered accountant. He has a Bachelor of
Commerce and a Bachelor of Accounting, cum laude, from the University of the
Witwaterstand, Johannesburg, and a Diploma in Advanced Banking, cum laude, from
Rand Afrikaans University, Johannesburg.
Mr. Meltzer was one of a team of five individuals who established
one of South Africa's first private university campuses, where he was Finance
Director and Dean of the Faculty of Commerce. This is now part of the publicly
listed EDUCOR Group. In December 1998, Mr. Meltzer was selected by the Business
Review Weekly as one of Australia's future business leaders.
LEVI MOCHKIN
Mr. Levi Mochkin is known in both the Australian stock brokerage
industry and in the wider business community. Mr. Mochkin has thirteen years of
business experience. For over ten years, Mr. Mochkin has been an executive
director and key leader of the Ledger Holdings Pty. Ltd. Group, located in
Melbourne, Australia. During this period, the Ledger Holdings Pty. Ltd. Group
has been engaged in equity and capital market activities, including many highly
complex corporate transactions and fund raisings. From 1995 to 1999, Ledger was
contracted with Bell Securities Limited and was instrumental in the development
of Bell's stock brokerage business. In late 1997, Bell, through Mr. Mochkin and
his Ledger Group, acted on behalf of one of Australia's largest gold mining
companies, Great Central Mines Limited, and carried out two simultaneous
on-market takeover bids on the Australian Stock Exchange, worth a combined total
value of $330 million in Australian dollars. As of December 1999, Mr. Mochkin
has joined Barton Capital Securities as a securities dealer. Mr. Levi Mochkin is
the son-in-law of Mr. Henry Herzog, the brother-in-law of Jonathan Herzog and
the brother of Mr. Mendel Mochkin, who has been engaged by us to provide certain
services relating to our operations.
JONATHAN HERZOG
Mr. Jonathan Herzog is a founding director of the Company and has
served as our Chief Financial Officer since February 1999. Between 1995 and
1999, Mr. Herzog was a securities dealer and consultant with the Ledger Holdings
Group at Bell Securities Limited, a member of the Australian Stock Exchange. He
has been actively involved in the Australian financial markets for over ten
years. He attended the Rothberg School at Hebrew University in Jerusalem in
1991. Mr. Herzog is a Fellow of the Australian Institute of Company Directors
since 1993, and holds a Bachelor of Economics Degree from Monash University in
Melbourne, Australia. Mr. Jonathan Herzog is the son of Henry Herzog and the
brother-in-law of Levi Mochkin.
ANTHONY L. DAVIS
Mr. Anthony Davis has occupied senior roles in institutional
equity sales for nearly 15 years, covering all major international financial
centers. Mr. Davis is one of the largest shareholders and was a significant seed
capitalist in Neighborhood Cable Limited, a start-up company providing a
broadband network in regional Australia, which recently listed on the Australian
Stock Exchange under the symbol "NCA." Since February 1998, he has been an
institutional dealer with Burdett, Buckeridge and Young in Melbourne, Australia
and prior to this, he occupied a similar position at ABN AMRO. From 1985 to
1989, Mr. Davis served as a director of Institutional Equity Sales at McIntosh
Securities both in London and Australia. From 1989 through September 1996, he
was a director of Prudential Bache Securities in Australia and was the Global
Manager of Australian equity sales, managing the institutional desks of
Melbourne, Sydney, London, New York and Paris. During this time he also served
as a member of Prudential's Executive Management Committee. Between September
1996 and 1997, Mr. Davis was the joint head of Prudential's Equity Capital
Markets Division in Melbourne. Mr. Davis holds a Bachelor of Commerce Degree
from the University of Canterbury, New Zealand and a Graduate Diploma in Applied
Finance from the Securities Institute of Australia.
HELEN ABELES
For more than five years, Ms. Abeles has been a private investor.
She is currently a major shareholder in JGL Investments Pty., one of Australia's
largest private companies. She actively participates in the management of a
number of subsidiary companies of JGL Investments Pty. Ms. Abeles is a director,
major shareholder and board member in a number of other private companies, which
include Seek Communications Ltd. and the Lounge.com.au Pty. Ltd. She invests in
both domestic and offshore equity markets. She also provides venture capital
funding for small to medium size enterprises. Ms. Abeles holds a Bachelor of
Science Degree from Melbourne University, Australia.
ROBERT PETTY
Robert Petty has an extensive background in management and
operations across the manufacturing, retail, and Internet e-commerce industries.
Since October 1999, he has been engaged by us and our subsidiaries as a
consultant in various capacities. He has served as our Vice President --
Business Development since January 2000, and has been the Acting Chief Executive
and Chief Financial Officer of Stampville since January 2000. Prior to
consulting for us, Mr. Petty, from December 1997 to March 1999, was engaged in a
number of capacities by Telstra Corp., one of the world's largest
telecommunications companies, where he was the senior Business Development
Manager responsible for the company's electronic business solution products as
well as the Manager of Electronic Business Services on a global scale,
responsible for marketing and strategizing Telstra Corp.'s global product roll
out of e-commerce products. In the role of Manager of Electronic Business
Services, Mr. Petty worked with some of the world's leading technology and
Internet e-commerce companies, such as IBM, Hewlett Packard, Intelilsys, Web
Methods, Motorola and many others. Previously, from 1995 through 1998, Mr. Petty
was employed with Brashs Pty. Ltd., a large Australian consumer electronics and
music retailer, in a number of capacities, most recently as the national Product
Merchandiser, responsible for product selection and purchasing, marketing,
merchandising, budgeting and general business planning for the departments of
computers, home office and mobile phone departments nationally.
Mr. Petty holds a CBS in Accounting from Swinburne University of
Technology.
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<PAGE> 34
BOARD COMMITTEES
Our board of directors met or acted through unanimous written
consent 13 times during fiscal 1999. All members attended at least 75% of the
board of director meetings during 1999. On the effective date of this offering,
the board of directors will have a compensation committee and an audit
committee. The audit committee will consist of two members, Anthony Davis and
Farrel Meltzer. The compensation committee will consist of three members,
Anthony Davis, Farrel Meltzer and Levi Mochkin, our chief executive officer, who
shall serve in an ex officio capacity. Since both committees will be established
during our fiscal year ended December 31, 2000, they did not meet in our fiscal
year ended December 31, 1999.
Stampville
The following table sets forth, as of March 31, 2000, the name,
age and position within Stampville of each of its executive officers and
directors. The background of each of the individuals identified in the table is
described following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jonathan Y. Malamud................. 26 Director, President and Vice President of Marketing
David Eli Popack.................... 24 Director and Director of Dealer Relations
Levi Mochkin........................ 38 Director and Chairman of the Board
Mendel Mochkin...................... 26 Director
Robert Petty........................ 35 Acting Chief Executive and Financial Officer
Jennifer Christopher................ 29 Vice President of Human Resources
</TABLE>
JONATHAN Y. MALAMUD
Mr. Malamud is the founder of Stampville and has served as its
President since June 1999. Since December 1999 he has also served as
Stampville's Vice President of Marketing. Previously, from July 1998 to April
1999, he was Manager of the Telemarketing Division of Sports Stamps Collectible
Association located in New York, New York. From May 1995 to February 1998, he
was Philatellic Show and Exhibit Coordinator for IGPC. Prior to joining IGPC, he
served as Campaign Manager for a mayoral candidate of the City of Beverly Hills,
California. Mr. Malamud also worked briefly in 1998 as a securities trader for
Precision Edge Securities Company located in New York, New York. Mr. Jonathan
Malamud is the son of Sam Malamud, the President and a major shareholder of IGPC
and the brother-in-law of David Eli Popack.
DAVID ELI POPACK
Mr. Popack has served as director, Secretary and Director of
Dealer Relations at Stampville since June 1999. Prior to co-founding Stampville
in June 1999, Mr. Popack was the personal assistant to the President of
Inter-Continental Trade and Finance Corporation, Toronto, Canada from September
1997 to May 1998. Previously, he studied Philosophy and Judaic Law at Rabbinical
College in Sydney Australia and completed his Rabbinical studies receiving a
Masters and Rabbinical ordination at the Rabbinical College of Canada in
September 1997. Mr. Popack also served in the summer Peace Corps in Shanghai,
China in 1996. Mr. Popack is the son-in-law of Sam Malamud the President and a
major shareholder of IGPC and the brother-in-law of Jonathan Y. Malamud.
MENDEL MOCHKIN
Since June 1999, Mr. Mochkin has served in various capacities at
Stampville, such as the Director of Marketing Sales. Presently, he serves as
manager of Internet development in our New York offices. Mr. Mochkin was
instrumental in the establishment of and the development of the business
relationship between us and Stampville. From August 1998 through April 1999, Mr.
Mochkin was a Sales Manager for D&M Furnitures Distributors Inc. In February
2000, Mr. Mochkin was appointed a director of Stampville. Mr. Mochkin is also
the brother of Levi Mochkin. Prior to 1998, Mr. Mochkin was a student.
ROBERT PETTY
Robert Petty has an extensive background in management and
operations across the manufacturing, retail, and Internet e-commerce industries.
Since October 1999, he has been engaged by us and our subsidiaries as a
consultant in various capacities. He has served as our Vice President --
Business Development since January 2000, and has been the Acting Chief Executive
and Chief Financial Officer of Stampville since January 2000. Prior to
consulting for us, Mr. Petty, from December 1997 to March 1999, was engaged in a
number of capacities by Telstra Corp., one of the world's largest
telecommunications companies, where he was the senior Business Development
Manager responsible for the company's electronic business solution products as
well as the Manager of Electronic Business Services on a global scale,
responsible for marketing and strategizing Telstra Corp.'s global product roll
out of e-commerce products. In the role of Manager of Electronic Business
Services, Mr. Petty worked with some of the world's leading technology and
Internet e-commerce companies, such as IBM, Hewlett Packard, Intelilsys, Web
Methods, Motorola and many others. Previously, from 1995 through 1998, Mr. Petty
was employed with Brashs Pty. Ltd., a large Australian consumer electronics and
music retailer, in a number of capacities, most recently as the national Product
Merchandiser, responsible for product selection and purchasing, marketing,
merchandising, budgeting and general business planning for the departments of
computers, home office and mobile phone departments nationally.
-34-
<PAGE> 35
Mr. Petty holds a CBS in Accounting from Swinburne University of
Technology.
JENNIFER CHRISTOPHER
Ms. Christopher joined Stampville as Vice President -- Human
Resources in January 2000. Previously, from March 1999 to January 2000, she was
an Executive Recruiter at Olsten Corporation, a New York based executive search
firm. Ms. Christopher was an Account Executive at Schenker International,
Italian Division, from June 1997 to August 1998, where she managed all ocean and
air traffic from Italy to the United States. From August 1998 to March 1999, she
was an Account Executive at Volt Services Group, a division of Volt Information
Services where she was responsible for generating new clients for their
temporary staffing division. Previously, from 1995 to 1997, Ms. Christopher was
Business Manager at Chanel, Inc., Cosmetic Division. She was also Sales Manager
at Limited, Inc. where she trained and developed over 100 employees and managed
over $10 million in sales from 1993 to 1995.
COMPENSATION OF DIRECTORS AND OFFICERS
Effective as of December 6, 1999, we agreed to pay Jonathan
Herzog, our Chief Financial Officer and Secretary, an annual salary of $80,000
retroactive to November 1, 1999, and also agreed to pay to Robert Petty's
consulting company, Petty Consulting, Inc., $12,000 per annum for the services
of Robert Petty as our Vice President -- Business Development. In addition, Mr.
Petty was granted options to purchase up to 1,450,000 shares of our common
stock. 950,000 of Mr. Petty's options will become exercisable at $1.00 per
share, and the remaining 500,000 options will be exercisable at $2.00 per share.
Portions of Mr. Petty's options vest and become exercisable upon our reaching
certain levels of market capitalization or the occurrence of certain other
events. Except as set forth above, we have not made any payments to our officers
or directors, other than reimbursing an aggregate of approximately $65,000 of
loans from an affiliate of Levi Mochkin and business expenses primarily incurred
after September 30, 1999, which have not exceeded $50,000. Further, as of the
effective date of this offering, we have agreed to pay Levi Mochkin, our Chief
Executive Officer, an amount of $35,000 for past services rendered. The board
and Henry Herzog, our President, have agreed that Mr. Herzog should relocate to
New York for up to twelve months. Mr. Herzog anticipates relocating prior to the
end of May 2000. We intend providing Mr. Herzog with a compensation package
(including salary and a housing allowance) of approximately $150,000 per year
and reimbursing Mr. Herzog's travel expenses equivalent to the value of four
round trip business class tickets to New York. We may, subject to our financial
condition and resources, compensate our other senior officers or directors.
During the period ended December 31, 1999, other than as stated
above, none of our other executive officers or directors received a salary.
Stampville has entered into a one year consulting agreement with
Petty Consulting Inc. for the services of Robert Petty as Acting Chief Executive
and Financial Officer and initially for the services of Jennifer Christopher as
Vice President -- Human Resources. The consulting agreement provides for the
payment of an aggregate amount of approximately $14,000 per month by Stampville
to Petty Consulting, Inc. for the services of Mr. Petty and Ms. Christopher.
Under the consulting agreement, Stampville has agreed to reimburse Mr. Petty for
certain relocation and legal expenses in connection with his move from Australia
to New York. These expenses are currently estimated to be approximately $30,000.
Stampville has employed Jonathan Y. Malamud, a director and Vice President --
Marketing, at an annual salary of $38,000. Mr. Malamud is also the beneficial
owner of 33.26% of Stampville's common stock. Stampville has employed David Eli
Popack, a director of Stampville and its Director of Dealer Relations, at an
annual salary of $38,000. Mr. Popack is also the beneficial owner of 16.64% of
Stampville's common stock.
Mendel Mochkin, who was previously employed by Stampville at an
annual salary of approximately $31,200.00, is currently on the board of
directors of Stampville and is employed by us under the same terms of his
previous employment arrangement with Stampville.
CERTAIN TRANSACTIONS
On October 26, 1999, we raised $2,500,000 in a private placement
through the sale of 2,500,000 shares of our common stock to Instanz Nominees
Pty. Ltd. At the same time, Instanz Nominees Pty. Ltd. acquired an additional
1,200,000 shares of common stock from Ledger Technologies Pty. Ltd. for an
aggregate amount of $12,000. Helen Abeles, who was subsequently named to our
board of directors, is an affiliate of Instanz Nominees Pty. Ltd. In connection
with its purchase of shares of our common stock, we agreed to allow Instanz
Nominees Pty. Ltd. to offer to sell 500,000 shares in this offering, provided
that such shares are offered and sold only after we have received proceeds of
$5,000,000. In addition, to the extent that Instanz Nominees Pty. Ltd. is unable
to receive a total of $2,500,000 from the sale of shares in this offering, we
agreed to grant it registration rights to sell a sufficient amount of additional
shares to make up the difference. If applicable, the registration period shall
commence 120 days after the effective date of this registration statement and
will expire on the first to occur of three years from the effective date or the
date when Instanz Nominees Pty. Ltd. is able to otherwise sell such amount of
shares under Rule 144 promulgated under the Securities Act. Until such
registration right period terminates, Instanz Nominees Pty. Ltd. and all of the
other 10% or greater holders of our common stock and our directors have agreed
not to sell any of their shares without the consent of the other 10% holders and
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not Applicable.
OPTION GRANTS IN LAST FISCAL YEAR
The company was formed in 1999 and consequently we did not grant
any options prior to our most recently concluded fiscal year. The following
table sets forth certain information with respect to stock options granted to
each of the named executive officers in the fiscal year ended December 31, 1999.
The figures representing percentages of total options granted to employees in
the last fiscal year are based on an aggregate of 1,600,000 options granted
during the fiscal year ended December 31, 1999, to our employees, including the
named executive officers.
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<PAGE> 36
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 and are not intended to forecast future
appreciation, if any, of our common stock. Actual gains, if any, on stock option
exercises will be dependent on the future performance of the common stock.
<TABLE>
<CAPTION>
APPRECIATED APPRECIATED
OPTIONEE DATE OF GRANT NUMBER OF SHARES EXERCISE PRICE VALUE AT 5% VALUE AT 10%
-------- ------------- ---------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Jonathan Y. Malamud........... 12/8/99 1,600,000(1) $ 1.25 $ 8,210,252 $10,884,080
</TABLE>
(1) These options shall only become exercisable upon the occurrence of both
of (a) December 8, 2001 and (b) our raising at least $10,000,000 in this
offering or investing an additional $5,000,000 in Stampville above the
initial investment of an aggregate of $500,000. The options will be
exercisable in increments of 20% per annum commencing two years after
they initially become exercisable. Mr. Malamud's options will have a
five year term commencing on the date the initial installment becomes
exercisable.
EMPLOYMENT AGREEMENTS
CONSULTING AGREEMENT WITH MENDEL MOCHKIN
We have entered into a consulting agreement dated as of June 18,
1999, amended as of February 24, 2000, with Mendel Mochkin, pursuant to which we
have agreed to compensate Mendel Mochkin with shares of our common stock, in
part subject to the completion of all stages of our investment in Stampville.
Upon execution of his consulting agreement, we issued 150,000 shares of our
common stock to Mendel Mochkin and we have agreed to issue up to an additional
350,000 shares if we raise at least $10 million in this offering or invest in or
arrange for additional financing in Stampville in an amount such that we retain
no less than 25% of the equity of Stampville. Pursuant to Mr. Mochkin's
consulting agreement, as amended, so long as Mr. Mochkin remains an employee or
consultant to us or Stampville and we continue to own at least ten (10%) of
Stampville's outstanding common stock, Mr. Mochkin is entitled to additional
distributions from us equal to 1% of distributions or payments to Stampville's
shareholders by way of cash or property distributions, other than by way of
stock splits, stock dividends or similar distributions, or in the event of the
sale or other disposition of the Stampville stock as a result of certain
business combinations or transactions by its shareholders. These bonus payments
to Mr. Mochkin shall be of the same kind and shall occur at the same time as the
distributions to Stampville shareholders and shall be subject to adjustment to
reflect certain prior distribution to Stampville's shareholders.
Mendel Mochkin is the brother of Levi Mochkin, a director and our
Chief Executive Officer.
CONSULTING AGREEMENT WITH PETTY CONSULTING, INC. FOR THE SERVICES OF ROBERT
PETTY
On January 17, 2000, we entered into a one-year consulting
agreement with Petty Consulting, Inc., pursuant to which Robert Petty agreed to
provide consulting services with annual compensation payable to his consulting
corporation in the amount of $12,000, to be paid in accordance with our general
compensation practices.
Robert Petty was granted options to purchase up to a total of
1,450,000 shares of our common stock as of the date of the execution of the
consulting agreement. These options vest upon the occurrence of the following
events; provided, however, that none of Mr. Petty's options may vest after the
termination of Mr. Petty's employment or consulting arrangement with us:
1. 250,000 of Mr. Petty's options shall vest upon our
reaching a market capitalization of $150,000,000 for
thirty consecutive business days within three years of
the date of grant;
2. 350,000 of Mr. Petty's options shall vest upon our
reaching a market capitalization of $300,000,000 for
sixty consecutive business days within three years of
the date of grant;
3. 175,000 of Mr. Petty's options shall vest upon the
successful sale of equity securities of one of our
subsidiaries (other than Stampville) in an initial
public offering through the means of a registration
statement which has been declared effective by the SEC
within three years of the date of grant, or the sale of
all or any portion of the shares or assets of such
subsidiary for no less than $50,000,000;
4. 175,000 of Mr. Petty's options shall vest upon the
successful sale of equity securities of Stampville in an
initial public offering through the means of a
registration statement which has been declared effective
by the SEC within three years of the date of grant; and
5. 500,000 of Mr. Petty's options shall vest upon our
reaching a market capitalization of $700,000,000 for
sixty consecutive business days within three years of
the date of grant.
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<PAGE> 37
The term of Mr. Petty's options is the lesser of (i) two years
from the date the options vest, (ii) five years from the date of grant, or (iii)
30 days after the termination of Mr. Petty's employment or consulting
arrangement with us. The options described in items 1 to 4 above each have an
exercise price of $1.00 per option share. The options described in item 5 above
have an exercise price of $2.00 per option share.
2000 STOCK OPTION PLAN
Our board of directors has authorized the issuance of up to
1,650,000 shares of common stock in connection with the grant of options
pursuant to our 2000 stock option plan. The 2000 stock option plan shall become
effective on the effective date of the registration statement with respect to
this offering. Options may be granted under the stock option plan to officers,
directors, employees and consultants of ours and our subsidiaries. To date we
have not granted any options under the 2000 stock option plan.
1999 PRIVATE PLACEMENTS
On October 26, 1999, we consummated the sale, in a private
placement, of 2,500,000 shares of our common stock for $1.00 per share to
Instanz Nominees Pty. Ltd., for which we received proceeds of $2,500,000. A
portion of the proceeds from this sale was used to complete a portion of our
investment in Stampville.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the
beneficial ownership of our common stock as of April 6, 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 April 6, 2000 pursuant to the exercise of options
are deemed to be outstanding for the purpose of computing the percentage
ownership of such person or group, but are not deemed outstanding for the
purpose of calculating the percentage owned by any other person listed.
Beneficial Ownership Of Common Stock
<TABLE>
<CAPTION>
ASSUMES MINIMUM ASSUMES MAXIMUM
SUBSCRIPTION SUBSCRIPTION
------------------------ --------------------------
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
SHARES(1) OF CLASS SHARES(1) OF CLASS
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Ledger Technologies Pty. Ltd.(2)
Levi Mochkin(2) ................... 6,300,000 36.00% 6,300,000 29.51%
Instanz Nominees Pty. Ltd(3)
Helen Abeles(3) ................... 3,700,000 21.14% 3,200,00 14.99%
Riccalo Pty. Ltd.(4)
Henry Herzog(4) ................... 2,000,000 11.43% 2,000,000 9.37%
Eurolink International Pty. Ltd.(5)
Jonathan Herzog(5) ................ 2,000,000 11.43% 2,000,000 9.37%
AtcorAus. Pty. Ltd.(6)
Farrel Meltzer(6) ................. 750,000 4.29% 750,000 3.51%
Tilbia Nominees Pty. Ltd.(7)
Anthony Davis(7) .................. 1,600,000 9.14% 1,600,000 7.49%
All Directors and Officers as a Group (6
Persons) .......................... 16,350,000 93.43% 15,850,000 74.24%
</TABLE>
(1) Pursuant to the rules promulgated by the SEC, all shares underlying
options which were exercisable on April 6, 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.
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<PAGE> 38
(2) Lisa Mochkin, spouse of Levi Mochkin, a director and our Chief Executive
Officer, is a director of Ledger Technologies Pty. Ltd. Levi Mochkin is
an affiliate of Ledger Technologies Pty. Ltd. and may be deemed to be a
beneficial owner of the shares held by Ledger Technologies Pty. Ltd.
Lisa Mochkin is the daughter of Henry Herzog and the sister of Jonathan
Herzog.
(3) Helen Abeles, a director, is an affiliate of Instanz Nominees Pty. Ltd.
Ms. Abeles exercises shared investment and voting power over these
shares and may be deemed to be a beneficial owner thereof.
(4) Henry Herzog, a director and our President and father of Jonathan Herzog
and father-in-law of Levi Mochkin, is a director of Riccalo Pty. Ltd.
Mr. Herzog exercises shared investment and voting power over these
shares and may be deemed to be a beneficial owner thereof.
(5) Jonathan Herzog, a director and our Secretary and Chief Financial
Officer and son of Henry Herzog, is a director of Eurolink International
Pty. Ltd. Mr. Herzog exercises shared investment and voting power over
these shares and may be deemed to be a beneficial owner thereof.
(6) Wendy Meltzer, spouse of Farrel Meltzer, a director, is a director of
Atcor Aus. Pty. Ltd. Mr. Meltzer is an affiliate of Atcor Aus. Pty. Ltd.
and may be deemed to be a beneficial owner of the shares held by Atcor
Aus. Pty. Ltd.
(7) Tilbia Nominees Pty. Ltd. holds shares of common stock for Anthony Davis
and his affiliates. Mr. Davis exercises shared investment and voting
power over these shares and may be deemed to be the beneficial owner
thereof.
(8) Does not include 1,450,000 shares subject to options granted to Robert
Petty.
The preceding table of beneficial ownership also does not include
options to purchase 1,600,000 shares of our common stock which have been granted
to Jonathan Y. Malamud. These shares will only become exercisable upon the
occurrence of both (a) December 8, 2001 and (b) we make the additional payment
of $5,000,000 to Stampville above the initial aggregate $500,000 investment in
Stampville, or raise at least $10,000,000 in this offering, and then only in
increments of 20% per annum.
DESCRIPTION OF CAPITAL STOCK
I.T. TECHNOLOGY
General
Our certificate of incorporation authorizes our board of
directors to issue up to one hundred million (100,000,000) shares of common
stock and twenty-five million (25,000,000) shares of preferred stock. The board
of directors has the authority to divide the preferred stock into one or more
series and has broad authority to determine the relative rights and preferences
of the shares within each series, including voting rights. Prior to this
offering, the board of directors has authorized the issuance of up to 16,500,000
shares of common stock. The board of directors has also authorized the issuance
of (i) up to 350,000 shares of common stock to Mendel Mochkin, which is
contingent on the company raising at least $10,000,000 in this offering or
investing an additional $1,000,000 in Stampville in order to retain no less than
25% of the outstanding shares of common stock; (ii) up to 1,600,000 shares
relating to options granted to Jonathan Y. 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; and (vi) 2,500,000 shares of common stock in connection
with the exercise of warrants which may at our sole discretion be issued to
underwriters in connection with this offering. No other shares of common stock
will be issued prior to the issuance of the common stock in connection with this
offering.
Dividends
Holders of common stock will be entitled to receive, when, as and
if declared by the board of directors out of legally available funds, cash
dividends. The common stock will not have priority as to dividends over any
other series or class of our stock that ranks senior as to dividends to the
common stock.
Voting Rights
Holders of common stock shall have the right to one vote per
share upon all matters presented for the vote of holders of the common stock.
STAMPVILLE
As of the date of this prospectus, the capitalization of
Stampville consists of 100,000 common shares, each with a par value of $0.01:
50,100 common shares held by us, 16,634 shares beneficially held by David Eli
Popack and 33,266 shares beneficially held by Jonathan Y. Malamud. Our interest
in Stampville is subject to reduction if we do not complete our planned
investment in Stampville.
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
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<PAGE> 39
Upon the closing of this offering, we will be subject to the
provisions of Section 203 of the Delaware General Corporation Law. Subject to
specific exceptions, Section 203 prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless:
- the transaction in which such stockholder became an
"interested stockholder" is approved by the board of
directors prior to the date the "interested stockholder"
attained that status;
- upon consummation of the transaction that resulted in
the stockholder becoming an "interested stockholder,"
the "interested stockholder" owned at least 85% of the
voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned
by persons who are directors and also officers; or
- on or subsequent to the date, the "business combination"
is approved by the board of directors and authorized at
an annual or special meeting of stockholders by the
affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the
"interested stockholder."
"Business combinations" include mergers, acquisitions, asset
sales and other transactions resulting in a financial benefit to the "interested
stockholder." Subject to various exceptions, an "interested stockholder" is a
person who, together with his or her affiliates and associates, owns, or within
three years did own, 15% or more of the corporation's voting stock. The
restrictions in this statute could prohibit or delay the accomplishment of
mergers or other takeover or change-in-control attempts with respect to us and,
therefore, may discourage attempts to acquire us.
In addition, various provisions of our certificate of
incorporation and bylaws, which are summarized in the following paragraphs, may
be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.
Cumulative Voting
Our certificate of incorporation expressly denies stockholders
the right to cumulate votes in the election of directors.
Stockholder Action; Special Meeting of Stockholders
Our certificate of incorporation limits stockholder actions to
resolutions passed at annual or special meetings of stockholders, and it
prohibits stockholders from acting by written consent. Additionally, our bylaws
provide that special meetings of our stockholders may be called only by the
board of directors or a committee of the board of directors which has been duly
designated and authorized by the board of directors.
Limitations On Liability and Indemnification of Directors and Officers
The Delaware General Corporation Law authorizes corporations to
limit or eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breaches of directors' applicable duties.
Our certificate of incorporation includes a provision that eliminates the
personal liability of our directors for monetary damages for actions taken as a
director, except for liability:
- for any breach of the director's duty of loyalty to us
or our stockholders;
- for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation
Law regarding unlawful dividends and stock purchases;
and
- for any transaction from which the director derived an
improper personal benefit.
Our certificate of incorporation also includes the following
provisions regarding indemnification of our directors and officers:
- we must indemnify our directors and officers to the
fullest extent permitted by Delaware law, subject to
very limited exceptions;
- we may indemnify our other employees and agents to the
same extent that we indemnify our directors and
officers; and
- we must advance expenses, as incurred, to our directors
and officers in connection with legal proceedings to the
fullest extent permitted by Delaware law, subject to
very limited exceptions.
Prior to the closing of this offering, we intend to supplement
our existing directors' and officers' insurance to provide indemnification for
certain securities matters. We believe that these indemnification provisions in
our certificate of incorporation and insurance are necessary to attract and
retain qualified directors and executive officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation may discourage stockholders from bringing a lawsuit
against directors for breach of their fiduciary duty. These provisions may also
have the effect of reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. Furthermore, a stockholder's
investment may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers pursuant to these
indemnification provisions.
-39-
<PAGE> 40
At present, there is no pending litigation or proceeding
involving any of our directors, officers or employees for which indemnification
is sought. We are unaware of any threatened litigation that may result in claims
for indemnification.
Authorized but Unissued Shares
The authorized but unissued shares of common stock and preferred
stock are available for future issuance without stockholder approval. We may use
these additional shares for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority interest of the shares entitled to vote on any
matter is required to amend a corporation's certificate of incorporation or
bylaws, unless a corporation's certificate of incorporation or bylaws, as the
case may be, requires a greater percentage. Following this offering, our
executive officers and directors on their own, as the beneficial owners of at
least 75% of the voting power of the outstanding common stock on a fully-diluted
basis, will be able to cause us to amend our certificate of incorporation and
bylaws.
SELLING SHAREHOLDER
An aggregate of 500,000 shares of common stock may be offered for
resale by the following selling shareholder. These shares of common stock
include shares issued to the selling shareholder pursuant to a private placement
of shares consummated on October 26, 1999.
Except for the sale of 1,200,000 shares of common stock
transferred by Ledger to Instanz Nominees Pty. Ltd. in connection with its
purchase of 2,500,000 shares of common stock from us on October 26, 1999, in a
private placement and as set forth below, there are no material relationships
between any of the selling shareholders and us or any of our predecessors or
affiliates, nor have any such material relationships existed within the past
three years.
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF AMOUNT OF
SHARES OF SHARES OF SHARES OF
NUMBER OF SHARES OF COMMON STOCK COMMON STOCK COMMON STOCK
COMMON STOCK COVERED BY THIS AFTER OFFERING (MAXIMUM
SELLING SHAREHOLDER BENEFICIALLY OWNED PROSPECTUS (MINIMUM SOLD) 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 Nominees Pty. Ltd.
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.
NASDAQ STOCK MARKET LISTING
We have applied to have our Common Stock quoted on the NASDAQ
SmallCap Market under the trading symbol "ITTE."
REGISTRATION RIGHTS
After this offering, Instanz Nominees Pty. Ltd., currently the
holder of 3,700,000 shares of our common stock, will be entitled to registration
rights to the extent that it is unable to receive at least $2,500,000 from the
sale of its shares in this offering. In such event, we have agreed to grant to
Instanz Nominees Pty. Ltd. registration rights to sell a sufficient amount of
shares to cover such shortfall. In addition, Instanz Nominees Pty. Ltd. may also
require us to "piggy-back" or include its unsold shares in future registration
statements that we file. Upon registration, such unsold shares will be freely
tradable in the public market without restriction.
If applicable, the registration period shall commence 180 days
after the date the registration statement relating to this prospectus becomes
effective and will expire on the first to occur of three years from the
effective date of this offering or when Instanz Nominees Pty. Ltd. is able to
otherwise sell such amount of shares under Rule 144 promulgated under the
Securities Act. Except for such unsold shares, until such registration right
period terminates, Instanz nominees Pty. Ltd. and all of the other 10% or
greater holders of our common stock and our directors have agreed not to sell
any other shares without the consent of the other 10% holders and directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 21,350,000 shares
of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option or outstanding options. Of this amount, the 5,000,000
shares offered by this prospectus will be available for immediate sale in the
public market as of the date of this prospectus. Assuming all of the 500,000
shares being offered for sale by Instanz Nominees Pty. Ltd. in the offering are
sold, approximately 12,800,000 additional shares will be available for sale in
the public market following the expiration of the lock-up agreements with the
representatives of our underwriters. All of such shares will be subject to
compliance with the volume and other limitations of Rule 144.
-40-
<PAGE> 41
<TABLE>
<CAPTION>
APPROXIMATE SHARES
ELIGIBLE FOR APPROXIMATE SHARES
DAYS AFTER THE DATE FUTURE SALE ELIGIBLE FOR FUTURE
OF THIS PROSPECTUS (MINIMUM SOLD) SALES (MAXIMUM SOLD) COMMENT
- ------------------- ------------------ -------------------- -------
<S> <C> <C> <C>
Upon Effectiveness.................. 1,000,000 5,000,000 Freely tradable shares sold
in Offering
90 days beginning after the
termination of this Offering........ 12,800,000 12,800,000 Lock-up released; shares saleable
under Rule 144
October 26, 2000 3,700,000 3,200,000 Shares saleable under Rule 144
</TABLE>
In general, under Rule 144 as currently in effect, a person who
has beneficially owned shares for at least one year is entitled to sell within
any three-month period commencing 90 days after the date of this prospectus a
number of shares that does not exceed the greater of (a) 1% of the then
outstanding shares of common stock (approximately 210,000 shares immediately
after the offering) or (b) the average weekly trading volume during the four
calendar weeks preceding the sale, subject to the filing of a Form 144 with
respect to the sale. A person who is not deemed to have been an affiliate of the
company at any time during the 90 days immediately preceding the sale and who
has beneficially owned his or her shares for at least two years is entitled to
sell these shares under Rule 144(k) without regard to the limitations described
above. Persons deemed to be affiliates must always sell under Rule 144, even
after the applicable holding periods have been satisfied.
We are unable to estimate the number of shares that will be sold
under Rule 144, since this will depend on the market price for our common stock,
the personal circumstances of the sellers and other factors. Prior to this
offering, there has been no public market for the common stock, and there can be
no assurance that a significant public market for the common stock will develop
or be sustained after the offering. Any future sale of substantial amounts of
the common stock in the open market may adversely affect the market price of the
common stock offered by this prospectus.
All of our shareholders have agreed that they will not sell any
common stock without the prior written consent of Kensington Capital Corp. for a
period terminating 90 days after the termination of this offering. We will file
a "sticker amendment" to this prospectus if five percent (5%) of the shares
subject to the foregoing restrictions are released prior to the expiration of
the lock up period. In addition, we shall file a post-effective amendment to
this prospectus if more than ten percent (10%) of the shares subject to the
foregoing restrictions are released prior to the expiration of the lock up
period.
As of the effective date of this offering, we have agreed to
grant options to purchase an aggregate of 3,050,000 shares of common stock to
Jonathan Y. Malamud and Robert Petty. The board of directors has also approved
the 2000 stock option plan which provides for the issuance of options to
purchase up to 1,650,000 shares of our common stock. We intend to file a
registration statement on Form S-8 under the Securities Act shortly after the
completion of this offering to register 2,700,000 shares which are issuable upon
the exercise of options by Messrs. Malamud and Petty, plus 1,650,000 shares
issuable under the 2000 stock option plan, which will permit the resale of these
shares in the public market without restriction after the lock-up period
expires.
In addition, Instanz Nominees Pty. Ltd. has both 'demand' and
'piggyback' registration rights, to the extent that the sale of the shares
offered by it in this offering does not generate proceeds to it of $2,500,000.
Registration of these securities under the Securities Act would result in the
shares being registered becoming freely tradable without restriction under the
Securities Act unless the shares were purchased by any of our affiliates, in
which case they would be subject to certain restrictions under Rule 144 of the
Act.
UNDERWRITING
The underwriter named below, Kensington Capital Corp., has agreed
with us, subject to the terms and conditions of the underwriting agreement, to
sell on our behalf on a 'best effort basis' the number of shares of common stock
indicated opposite their names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Kensington Capital Corp. ................
---------
Total.................................... 5,000,000
=========
</TABLE>
We have been advised that the underwriter will offer the shares
of common stock to the public at the public offering price located on the cover
page of this prospectus.
The 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.
Proceeds from the Offering Underwriters Commission*
-------------------------- ------------------------
At least $5,000,000 but less than $6,000,000 8.0%
At least $6,000,000 but less than $7,000,000 7.9%
At least $7,000,000 but less than $8,000,000 7.8%
-41-
<PAGE> 42
<TABLE>
<S> <C>
At least $8,000,000 but less than $9,000,000 7.7%
At least $9,000,000 but less than $10,000,000 7.6%
At least $10,000,000 but less than $11,000,000 7.5%
At least $11,000,000 but less than $12,000,000 7.4%
At least $12,000,000 but less than $13,000,000 7.3%
At least $13,000,000 but less than $14,000,000 7.2%
At least $14,000,000 but less than $15,000,000 7.1%
At least $15,000,000 but less than $16,000,000 7.0%
At least $16,000,000 but less than $17,000,000 6.8%
At least $17,000,000 but less than $18,000,000 6.6%
At least $18,000,000 but less than $19,000,000 6.4%
At least $19,000,000 but less than $20,000,000 6.2%
At least $20,000,000 but less than $21,000,000 6.0%
At least $21,000,000 but less than $22,000,000 5.8%
At least $22,000,000 but less than $23,000,000 5.6%
At least $23,000,000 but less than $24,000,000 5.4%
At least $24,000,000 but less than $25,000,000 5.2%
$25,000,000 or more 5.0%
</TABLE>
- -------------------
* The percentage of the proceeds raised designated as the Underwriters
commission set forth opposite the various amounts of proceeds set forth below
shall be payable on the entire amount of proceeds raised in the Offering. So
that if $20,000,000 is raised the Underwriters commission shall be $1,200,000
and if $25,000,000 is raised the Underwriters commission shall be $1,250,000.
In addition to the commission described above, we may in our sole
discretion issue to the underwriter warrants to purchase up to 2,500,000 shares
of the company's common stock at exercise prices of $6 per share during the
first year, $7 per share during the second year and $8 per share during the
third year. Such warrants have a term of three years from the date of grant.
The price will not change for any of the 5,000,000 shares being
offered by this prospectus. All of the up to 5,000,000 shares sold in this
offering will be sold for $5.00 per share. The expenses of this offering are
estimated at $300,000 and are payable entirely by us. Kensington Capital Corp.
expects to deliver the shares of common stock to purchasers as soon as
practicable after the sale to the purchaser occurs and once $5,000,000 has been
raised in the offering.
THE OFFERING
We must receive your executed stock order form together with your
payment of $5.00 per share for each share which you wish to purchased by 5:00
p.m., Los Angeles time, on , 2000. These funds will be placed in an escrow
account with Comerica Bank-California and will earn interest from the date of
their receipt until completion or termination of this offering. In the event
that the minimum number of shares required to be sold for the closing of this
offering, or 1,000,000 shares at $ 5.00 per share, are not sold on or before 120
days after the effective date of this offering (which may be extended until 150
days after the effective date of this offering at our sole discretion), this
offering will be terminated and all of your funds held in the escrow account
will be returned to you along with interest, thereon less your pro-rata share of
the costs of the escrow account. In the event of an oversubscription, the shares
being sold will be allocated pro rata among the subscribers in this offering,
based on the amount of their respective subscriptions.
WARRANTS TO UNDERWRITERS
We may in our sole discretion issue to the underwriter warrants
to purchase up to 2,500,000 shares of the company's common stock at exercise
prices of $6 per share during the first year, $7 per share during the second
year and $8 per share during the third year. Such warrants have a term of three
years from the date of grant.
INDEMNITY
The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of representation
and warranties contained in the underwriting agreement.
FUTURE SALES
Each of our executive officers, directors and other significant
stockholders of record has agreed with the underwriter, for a period terminating
90 days after the termination of this offering, not to offer to sell, contract
to sell or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of common stock, any options or warrants to purchase any
shares of common stock, or any securities convertible into or exchangeable for
shares of common stock owned as of the date of this prospectus or acquired
directly from us by these holders or with respect to which they have or may
acquire the power of disposition, without the prior written consent of
Kensington Capital, Corp. However, Kensington Capital, Corp. may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to lock-up agreements. There are no agreements between the
representatives and any of our stockholders providing consent by the
representatives to the sale of shares prior to the expiration of the lock-up
period. In addition, we have generally agreed that, during the lock-up period,
we will not, without the prior written consent of Kensington Capital Corp., (a)
consent to the disposition of any shares held by stockholders prior to the
expiration of the 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.
-42-
<PAGE> 43
The underwriters do not intend to confirm sales to any accounts
over which they exercise discretionary authority.
No Prior Public Market
Prior to this offering, there has been no public market for the
common stock. Consequently, the initial public offering price for the common
stock offered by this prospectus has been determined through negotiations
between us and the representatives. Among the factors considered in these
negotiations were prevailing market conditions, our financial information,
market valuations of other companies that we and the representatives believe to
be relevant to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
Stabilization
The representatives have advised us that, under Regulation M
under the Securities Exchange Act, some participants in the offering may engage
in transactions, including stabilizing bids, syndicate covering transactions or
the imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of the common stock on behalf of the underwriters for the purpose
of fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by the underwriter or syndicate member is purchased by the
representatives in a syndicate covering transaction and has therefore not been
effectively placed by the underwriter or syndicate member. The representatives
have advised us that these transactions may be effected on the Nasdaq SmallCap
Market or otherwise and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the shares of common stock offered by this
prospectus will be passed upon for us by Jeffer, Mangels, Butler & Marmaro LLP,
Los Angeles, California.
EXPERTS
The financial statements of the company as of December 31, 1999,
and for the period from February 2, 1999, date of inception, through December
31, 1999 and the financial statements of Stampville as of December 31, 1999 and
for the period from April 14, 1999, date of inception, through December 31,
1999, have been included herein and in the registration statement in reliance
upon the reports of Grant Thornton LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2, including exhibits, schedules and
amendments to that registration statement, under the Securities Act with respect
to the shares of common stock to be sold in this offering. This prospectus does
not contain all the information included in our registration statement. For
further information with respect to us and the shares of common stock to be sold
in this offering, we refer you to the registration statement. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to are not necessarily complete, and in each instance we
refer you to the copy of that contract, agreement or other document to the
extent filed as an exhibit to the registration statement.
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.
No dealer, salesman or any other person has been authorized to
give any information which is not contained in this prospectus or to make any
representation in connection with this offering other than those which are
contained in the prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized by us.
This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities which are offered hereby
to any person in any jurisdiction where such offer or solicitation would be
unlawful. Neither the delivery of this prospectus nor any sale hereunder shall
under any circumstances create any implications that there has been no change in
our affairs or the facts which are herein set forth since the date hereof.
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK, INCLUDING OVER ALLOTMENT, ENTERING STABILIZATION BIDS, EFFECTING
SYNDICATE COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE
IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE OTC BULLETIN
BOARD IN ACCORDANCE WITH RULE 103 OF REGULATION M OF THE SECURITIES ACT.
-43-
<PAGE> 44
I.T. TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
I.T. Technology,Inc. Consolidated Financial Statements
Report of Independent Certified Public Accountants................... F-2
Consolidated Balance Sheet........................................... F-3
Consolidated Statement of Operations................................. F-4
Consolidated Statement of Stockholders' Equity....................... F-5
Consolidated Statement of Cash Flows................................. F-6
Notes to Consolidated Financial Statements........................... F-7
Stampville.Com Inc.
Report of Independent Certified Public Accountants................... F-12
Balance Sheet........................................................ F-13
Statement of Operations.............................................. F-14
Statement of Stockholders' Equity.................................... F-15
Statement of Cash Flows.............................................. F-16
Notes to Financial Statements........................................ F-17
F-1
<PAGE> 45
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
I.T. Technology, Inc.
We have audited the accompanying consolidated balance sheet of I.T. Technology,
Inc. (the "Company") (a development stage enterprise) as of December 31, 1999,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the period from February 2, 1999 (inception) through December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of I.T.
Technology, Inc. as of December 31, 1999, and the consolidated results of its
operations and its consolidated cash flows for the period from February 2, 1999
(inception) through December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Grant Thornton LLP
Los Angeles, California
March 10, 2000
F-2
<PAGE> 46
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED BALANCE SHEET
December 31, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSET
Cash $ 2,179,998
PROPERTY AND EQUIPMENT, net 649,021
INVESTMENT IN STAMPVILLE.COM INC 2,323,922
DEFERRED OFFERING COSTS 33,682
-----------
Total assets $ 5,186,623
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 28,001
Accrued expenses 40,331
Payable due to Stampville.Com Inc. 1,425,508
-----------
Total current liabilities 1,493,840
PAYABLE TO STAMPVILLE.COM INC. - less current portion 584,369
NOTE PAYABLE 455,848
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001; authorized 25,000,000 shares,
no shares issued and outstanding -
Common stock, par value $.001; authorized 100,000,000 shares,
issued and outstanding 16,500,000 shares 16,500
Additional paid-in capital 3,055,509
Deficit accumulated during the development stage (419,443)
-----------
Total stockholders' equity 2,652,566
-----------
$ 5,186,623
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE> 47
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
Period from February 2, 1999 (inception) through December 31, 1999
<TABLE>
<S> <C>
Income and (expenses)
Foreign currency transaction gain $ 17,033
Interest, net 9,174
Legal and professional fees (125,687)
Salaries (66,618)
Travel and entertainment (33,675)
Equity in loss of Stampville.Com Inc. (185,955)
Other expense (33,715)
------------
NET LOSS $ (419,443)
============
Basic and diluted loss per common share $ (0.04)
============
Weighted average shares outstanding 11,222,139
============
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE> 48
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period from February 2, 1999 (inception) through December 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock during the
-------------------------- ------------------------- Additional development
Shares Amount Shares Amount paid-in capital stage Total
------------ ----------- ----------- ---------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at (inception)
February 2, 1999 - $ - - $ - $ - $ - $ -
Issuance of shares to
founders for cash - - 4,000,000 4,000 16,000 - 20,000
Issuance of shares for cash, net
of $27,210 issuance costs - - 9,850,000 9,850 594,190 - 604,040
Issuance of shares for
services - - 150,000 150 7,350 - 7,500
Issuance of shares in a
private placement,
net of $59,531 issuance costs - - 2,500,000 2,500 2,437,969 - 2,440,469
Net loss for the period - - - - - (419,443) (419,443)
------------ ----------- ----------- ---------- ------------ ----------- ------------
Balance at December 31, 1999 - $ - 16,500,000 $ 16,500 $ 3,055,509 $ (419,443) $ 2,652,566
============ =========== =========== ========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 49
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
Period from February 2, 1999 (inception) through December 31, 1999
<TABLE>
<S> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss $ (419,443)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 14,852
Equity in losses of Stampville.Com Inc. 185,955
Increase in accounts payable 28,001
Increase in accrued expenses 40,331
Nonmonetary compensation 7,500
-----------
Net cash flows used in operating activities (142,804)
-----------
Cash flows from investing activities:
Investment in Stampville.Com Inc. (500,000)
Purchase of property and equipment (208,025)
-----------
Net cash flows used in investing activities (708,025)
-----------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,064,509
Increase in deferred offering costs (33,682)
-----------
Net cash flows provided by financing activities 3,030,827
-----------
Net increase in cash 2,179,998
Cash at beginning of period -
-----------
Cash at end of period $ 2,179,998
===========
Supplemental disclosures of noncash investing and financing activities:
Property acquired by issuance of note payable $ 455,848
===========
Investment in Stampville.Com Inc. acquired through a liability $ 2,009,877
===========
Issuance of Common Stock for Services $ 7,500
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE> 50
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE A - COMPANY BACKGROUND AND BUSINESS PLAN
I.T. Technology, Inc. (ITT) was incorporated on February 2, 1999 to engage in
businesses related to the internet, e-commerce and technology ventures,
directly and through the acquisition of equity ownership in internet related
and other technology companies. ITT has a wholly-owned subsidiary, I.T.
Technology Pty. Ltd. (collectively referred to as the "Company"), which
furthers its operations in Australia.
The Company is in the development stage, and its efforts through December 31,
1999 have been principally devoted to organizational activities, raising
capital, acquiring an equity interest in Stampville.Com Inc., and other
development efforts. Management anticipates incurring substantial additional
losses as it pursues its strategies. Additionally, the Company will require
substantial capital to fund further development and operations of
Stampville.Com Inc. (See Note D). The Company intends to meet further capital
funding requirements through an Initial Public Offering ("IPO"). On February
14, 2000, the Company filed a registration statement on Form SB-2 with the
Securities and Exchange Commission. The Company expects that the proceeds of
the IPO will be sufficient to fund its activities and investments over the
near term. There can be no assurance that the Company will be able to
complete the offering, or make further investments in Stampville.Com Inc. to
retain its 50.1 percent interest (See Note E).
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The consolidated financial statements include the accounts of ITT and its
wholly-owned subsidiary. All material intercompany accounts and transactions
have been eliminated.
2. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for using
the straight-line method of accounting over the estimated useful lives
ranging from 5 to 25 years.
4. Investment in Stampville.Com Inc.
The investment in Stampville.Com Inc. consists of a 50.1 percent equity
interest and is accounted for using the equity method because of the
remaining contingent payment of $5,000,000. If this payment is not completed,
the Company's interest will be reduced. (Note E).
5. Income Taxes
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for when there is a temporary difference in recording such items for
financial reporting and income tax reporting. The temporary differences that
give rise to deferred tax assets primarily are depreciation and accrual to
cash adjustments which were reduced by a like amount because of the
uncertainty that the deferred tax assets will not be realized.
F-7
<PAGE> 51
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. Foreign Currency
The functional currency of the subsidiary, which has no ongoing revenue
producing operations and is entirely dependent on the Company for its
financing, is considered to be the U.S. dollar. Transaction gains and losses
arise primarily from cash maintained in an Australian bank and a note payable
that will be settled in Australian dollars. Accordingly, transaction gains
and losses are included in the determination of net loss for the period.
7. Year End
The Company's fiscal year ends on December 31.
8. Deferred Offering Costs
Deferring offering costs include expenses incurred in connection with the
Company's registration statement on Form SB-2, filed on February 14, 2000.
These costs will be charged against stockholders' equity upon successful
completion of the respective offering. If the offering is not consummated,
the deferred offering costs will be charged to expense.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31, 1999:
<TABLE>
<S> <C>
Land $ 150,000
Building 451,630
Office equipment 62,243
---------
663,873
Less accumulated depreciation (14,852)
---------
$ 649,021
=========
</TABLE>
NOTE D - CAPITALIZATION
1. Preferred Stock
The Company has authorized the issuance of 25,000,000 shares of preferred
stock, par value $.001 per share. The Board of Directors of the Company has
the right to create one or more series of preferred stock and to determine
the rights, preferences and privileges of any such series.
2. Common Stock
The Company issued 4,000,000 shares of common stock to the founders through
controlled companies at a purchase price of $0.005 per share (aggregate of
$20,000).
The Company issued 10,000,000 shares of common stock to various companies
that are affiliates of certain officers of the Company at purchase prices
between $0.05 and $0.125 per share (aggregate of $631,250), excluding
offering costs of $27,120.
On October 26, 1999, the Company issued 2,500,000 shares of common stock at a
purchase price of $1.00 per share, excluding offering costs of $59,531.
F-8
<PAGE> 52
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE E - INVESTMENT IN STAMPVILLE.COM INC.
Pursuant to the terms of a Stock Purchase Agreement dated June 18, 1999, the
Company acquired a 6% equity interest in the common stock of Stampville.Com
Inc., an unrelated party, and had an option to acquire additional shares
representing up to 19% (for a total of 25%) of Stampville.Com Inc. common
stock at its sole discretion in various amounts up to an aggregate of
$5,000,000 over the next three years. Stampville.Com Inc. is newly formed
(April 14, 1999) to engage in the business of selling collectible stamps and
other memorabilia on the Internet and on a wholesale basis to chain stores
and small businesses, and on a retail basis to the general public.
Stampville.Com Inc. is a development stage enterprise and its activities
through December 31, 1999 have been principally devoted to organizational and
development activities.
On December 8, 1999, the Stock Purchase Agreement was amended to accelerate
the payment terms contained in the original Stock Purchase Agreement, which
would allow the Company to own an immediate 50.1 percent of Stampville.Com
Inc.'s common stock. The amended agreement includes payments terms as
follows:
1. Cash payment of $500,000.
2. Cash payment of $1,000,000 payable within 60 days from the date of the
amended agreement.
3. Eight equal quarterly installments of $156,250 ($1,250,000) payable
commencing upon the execution of the amended agreement. (First quarterly
payment due no later than May 8, 2000). The installment payable was
discounted $240,123 using a discount rate of 20%. The discount is being
amortized over the term of the payable using the effective interest
method.
4. The Company agrees to use commercially reasonable efforts to make a
further payment, or otherwise cause a party or parties designated by the
Company to invest an additional $5,000,000 in Stampville.Com Inc. The
additional payment is payable no later than twelve (12) months from the
date of the amended agreement; or alternatively within 30 days following
the closing of the Company's IPO that raises a minimum amount of
$10,000,000.
If the Company fails to make or have a third party make the further payment
of $5,000,000 (as noted in point 4 above), its ownership percentage would be
reduced to the lesser of 1) 27.5% of Stampville's common stock or 2)
the total invested by the Company pursuant to the purchase agreement divided
by $100,000.
The following summarizes the investment in Stampville.Com Inc. for the period
ended December 31, 1999.
<TABLE>
<S> <C>
Cash payment of $250,000 (paid under original agreement) $ 250,000
Cash payment of $250,000 (paid prior to December 31, 1999) 250,000
Cash payment of $1,000,000 (paid on or about February 14, 2000) 1,000,000
Installment payable, less discount of $240,123 1,009,877
Equity in losses in Stampville.Com Inc. (185,955)
-----------
$ 2,323,922
===========
</TABLE>
In connection with the amended Stock Purchase Agreement, the Company granted
to individuals nominated by the current shareholders of Stampville.Com Inc.,
other than the Company, options to purchase 1,600,000 shares of the Company's
common stock at an exercise price equal to $1.25 per share. Upon completion
of the additional $5,000,000 payment mentioned above, the options become
exercisable commencing two years from the date of grant in increments of 20
percent per year.
F-9
<PAGE> 53
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE E - INVESTMENT IN STAMPVILLE.COM INC. - Continued
In addition, the Company has entered into a shareholders agreement with
Stampville.Com Inc. and its shareholders that, among other things, restricts
the ability of the shareholders of Stampville.Com Inc. to transfer their
interests; provides that at least one board of director of Stampville.Com
Inc. be designated by the Company and requires that the Company-designated
director approve of certain significant corporate transactions; and provides
that at least one of the executive officers of Stampville.Com Inc. be an
individual selected by the Company and that the Company representative have
the right to approve certain corporate transactions. The Company's right to
any preferential board and management representation will terminate at the
earlier of the cancellation of the Stock Purchase Agreement or on June 18,
2002. Stampville.Com Inc.'s continuance is dependent on its ability to obtain
funds from the Company pursuant to the Stock Purchase Agreement and its
continued agreement with IGPC. There can be no assurance that the Company or
Stampville.Com Inc. will obtain the financing to develop or to sustain the
operations of Stampville.Com Inc.
Stampville.Com Inc. entered into an agreement dated December 1, 1999, with
the Inter-Governmental Philatelic Corporation (IGPC), of which the president
is a related party to certain officers of Stampville.Com Inc., whereby IGPC
will provide stamp sheets as well as additional services, including website
content, to Stampville.Com Inc.
The agreement with IGPC has a term of three years with an automatic renewal
to extend for an additional two years, unless terminated at the end of the
initial term by either party. In addition, IGPC extended a line of credit not
to exceed $2,000,000 to Stampville.Com Inc. for the purchase and shipping of
stamps from IGPC. Amounts outstanding under the credit line are payable
within 120 days from the date of such credit.
Should Stampville.Com Inc. not be able to renew its contract with IGPC on
favorable terms, or require a change in stamp providers, this could cause
significant service disruptions, which may have an adverse affect on the
Company.
The Company has entered into a consulting agreement with an individual
affiliated with the Company, who has provided services to the Company in
connection with its investment in Stampville.Com Inc. Pursuant to the
agreement, the Company issued 150,000 shares of its common stock to the
individual. As a result, the Company recorded compensation expense of $7,500.
The Company will issue up to an additional 350,000 shares of Common Stock if
it raises at least $10,000,000 through an initial public offering or invests
additional funds in Stampville.Com, Inc. in an amount such that it retains a
minimum of no less than a 25% equity interest in Stampville.Com, Inc.
Pursuant to an amended agreement, the individual is further entitled to
payments of 1% of cash distributions (i.e. initial public offering or sale)
made to Stampville's shareholders.
NOTE F - NOTES PAYABLE
Long-term debt at December 31, 1999 consists of a loan to purchase property
on 34-36 Punt Road in Melbourne Australia, collateralized by the building and
bearing interest at a rate of 7.25% per annum. The loan requires monthly
payments of interest with the principal balance due in July 2001. The loan is
guaranteed by a shareholder of the Company. Pursuant to the terms of the
purchase agreement, title to the property will transfer when the principal
balance is paid in full.
F-10
<PAGE> 54
I.T. Technology, Inc.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE G - LOSS PER COMMON SHARE
Basic loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding. Common stock equivalents were
excluded from the diluted calculation, as they were anti-dilutive.
<TABLE>
<CAPTION>
Period from February 2, 1999
(inception)
Through
December 31, 1999
--------------------------------------
Weighted-
Average Per share
Net loss Shares Amount
---------- ---------- ----------
<S> <C> <C> <C>
Basic loss per share
Net loss available to common
shareholders $ 419,443 11,222,139 $ 0.04
========== ========== ==========
Diluted loss per share
Net loss available to common
shareholders $ 419,443 11,222,139 $ 0.04
========== ========== ==========
</TABLE>
NOTE H - CONCENTRATION OF CREDIT RISK
At December 31, 1999, the Company's cash was held primarily by a financial
institution in the United States of America. The Company is exposed to credit
loss for the amount of cash equivalents in the event of nonperformance by the
financial institution, however; the Company has not experienced any losses in
these accounts and believes it is not exposed to any significant credit risk
on cash equivalents.
NOTE I - SUBSEQUENT EVENT
On January 17, 2000, the Company entered into a one-year Consulting Agreement
with Petty Consulting, Inc. pursuant to which Robert Petty agreed to provide
consulting services with annual compensation payable to his consulting
corporation in the amount of $12,000, to be paid in accordance with the
Company's general compensation practices.
Under the consulting agreement, the Company granted stock options to acquire
up to 1,450,000 shares of common stock at an exercise price ranging from $1
to $2. The stock options vest upon reaching certain market capitalization
objectives or selling equity securities of one or more of the Company's
subsidiaries in an initial public offering or through a third-party sale. The
stock option term is the lesser of (i) two years from the vesting date, (ii)
five years from the date of the consulting agreement, or (iii) 30 days after
the termination of Robert Petty's employment or consulting arrangement for
the Company.
In January 2000, the Company's board of directors authorized the issuance of
up to 1,650,000 shares of common stock in connection with the Company's 2000
Stock Option Plan). The 2000 Stock Option Plan will become effective in
connection with the registration statement filed on February 14, 2000. The
Company intends to grant options under the Stock Option Plan to officers,
directors, employees and consultants of the Company and its subsidiaries. The
Company has not granted any options under the 2000 Stock Option Plan.
F-11
<PAGE> 55
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Stampville.Com Inc.
We have audited the accompanying balance sheet of Stampville.Com Inc. (the
"Company") (a development stage enterprise) as of December 31, 1999, and the
related statements of operations, stockholders' equity, and cash flows for the
period from April 14, 1999 (inception) through December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly in
all material respects, the financial position of Stampville.Com Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
period from April 14, 1999 (inception) through December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
/s/ Grant Thornton LLP
Los Angeles, California
March 10, 2000
F-12
<PAGE> 56
Stampville.Com Inc.
(a development stage enterprise)
BALANCE SHEET
December 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $ 47,066
Accounts receivable 1,370
Receivable due from shareholder 1,000,000
Inventories 18,459
-----------
Total current assets 1,066,895
EQUIPMENT, net 74,739
DEPOSITS 6,160
TECHNOLOGY COSTS 11,487
-----------
$ 1,159,281
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable to IGPC $ 29,273
Accrued expenses 1,176
-----------
Total current liabilities 30,449
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 100,000 shares,
issued and outstanding 100,000 shares 1,000
Additional paid-in capital 2,508,877
Receivable due from shareholder (1,009,877)
Deficit accumulated during the development stage (371,168)
-----------
Total stockholders' equity 1,128,832
-----------
$ 1,159,281
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-13
<PAGE> 57
Stampville.Com Inc.
(a development stage enterprise)
STATEMENT OF OPERATIONS
Period from April 14, 1999 (inception) through December 31, 1999
<TABLE>
<S> <C>
Revenues $ 5,119
Cost of goods sold (2,482)
---------
Gross profit 2,637
General and administrative expenses
Salaries (115,384)
Legal and professional fees (35,755)
Rent (11,000)
Travel and entertainment (23,328)
Technology expense (101,696)
Other (86,642)
---------
NET LOSS $(371,168)
=========
</TABLE>
The accompanying notes are an integral part of this statement.
F-14
<PAGE> 58
Stampville.Com Inc.
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
Period from April 14, 1999 (inception) through December 31, 1999
<TABLE>
<CAPTION>
Deficit
accumulated
Common Stock Receivable during the
---------------------------- Additional due from development
Shares Amount paid-in capital shareholder stage Total
----------- ----------- --------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at (inception)
April 14, 1999 - $ - $ - $ - $ - $ -
Issuance of shares to founders 49,900 - - - - -
Issuance of shares for cash
and receivables 50,100 1,000 2,508,877 $(1,009,877) - 1,500,000
Net loss for the period - - - - (371,168) (371,168)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 100,000 $ 1,000 $ 2,508,877 $(1,009,877) $ (371,168) $ 1,128,832
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-15
<PAGE> 59
Stampville.Com Inc.
(a development stage enterprise)
STATEMENT OF CASH FLOWS
Period from April 14, 1999 (inception) through December 31, 1999
<TABLE>
<S> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss $ (371,168)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 6,249
Increase in accounts receivable (1,370)
Increase in inventories (18,459)
Increase in deposits (6,160)
Increase in accounts payable and accrued expenses 30,449
-----------
Net cash flows used in operating activities (360,459)
-----------
Cash flows from investing activities:
Purchase of equipment (80,988)
Increase in technology costs (11,487)
-----------
Net cash flows used in investing activities (92,475)
-----------
Cash flows from financing activities:
Proceeds from issuance of common stock 500,000
-----------
Net increase in cash 47,066
Cash at beginning of period -
-----------
Cash at end of period $ 47,066
===========
Non cash financing activity:
Issuance of common stock for receivables due from shareholders
Amount classified as an asset $ 1,000,000
Amount classified as an offset to equity 1,009,877
-----------
$ 2,009,877
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-16
<PAGE> 60
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE A - DESCRIPTION OF BUSINESS
Stampville.Com Inc. (the "Company") was incorporated on April 14, 1999 to
engage in the business of selling collectible stamps and other memorabilia on
the Internet and on a wholesale basis to chain stores and small businesses,
and on a retail basis to the general public and collectors.
Pursuant to the terms of a Stock Purchase Agreement dated June 18, 1999, I.T.
Technology, Inc. ("ITT") acquired a 6% equity interest in the Company's
common stock and had an option to acquire additional shares representing up
to 19% (for a total of 25%) of the Company's common stock at ITT's sole
discretion in various amounts up to an aggregate of $5,000,000, over the next
three years.
On December 8, 1999, the Stock Purchase Agreement was amended to accelerate
the payment terms contained in the original Stock Purchase Agreement, which
would allow ITT to own an immediate 50.1 percent of the Company's common
stock. The amended agreement includes payment terms as follows:
1. Cash payment of $500,000.
2. Cash payment of $1,000,000 payable within 60 days from the date of the
amended agreement.
3. Eight equal quarterly installments of $156,250 ($1,250,000) payable
commencing upon the execution of the amended agreement. (First quarterly
payment due no later than May 8, 2000). The receivable was discounted
$240,123 using a discount rate of 20%. The discount is being amortized
over the term of the receivable using the effective interest method.
4. ITT agrees to use commercially reasonable efforts to make a further
payment, or otherwise cause a party or parties designated by ITT to invest
an additional $5,000,000 in the Company. The additional payment is payable
no later than twelve (12) months from the date of the amended agreement;
or alternatively within 30 days following the closing of ITT's initial
public offering that raises a minimum amount of $10,000,000.
If ITT fails to make or have a third party make the further payment of
$5,000,000 (as noted in point 4 above), its ownership percentage would be
reduced to the lesser of 1) 27.5% of the Company's common stock or 2) the
total invested by ITT pursuant to the purchase agreement divided by $100,000.
In addition, ITT has entered into a shareholders agreement with the Company
and its shareholders that, among other things, restricts the ability of the
Company's shareholders to transfer their interests; provides that at least
one board of director of the Company be designated by ITT and requires that
the ITT-designated director approve of certain significant corporate
transactions; and provides that at least one of the executive officers of the
Company be an individual selected by ITT and that the ITT representative have
the right to approve certain corporate transactions. ITT's right to any
preferential board and management representation will terminate at the
earlier of the cancellation of the Stock Purchase Agreement or on June 18,
2002. The Company's continuance is dependent on its ability to obtain funds
from ITT pursuant to the Stock Purchase Agreement.
The Company is in the development stage, and its efforts through December 31,
1999 have been principally devoted to the organizational activities. As a
result, the Company has experienced operating losses since its inception. To
finance its strategic plans and development, the Company is highly dependent
on ITT's ability to render the accelerated payment. Subsequent to December
31, 1999, in connection with the Stock Purchase Agreement, the Company
received an additional $1,000,000. ITT intends to raise the additional
required financing through an initial public offering. There can be no
assurance that ITT will be successful with its offering, or that the Company
or ITT will be able to obtain additional financing to develop or sustain
further investment or operations of the Company.
1. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-17
<PAGE> 61
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES - Continued
2. Income Taxes
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for when there is a temporary difference in recording such items for
financial reporting and income tax reporting. The temporary differences that
give rise to deferred tax assets primarily are depreciation and accrual to
cash adjustments which were reduced by a like amount because of the
uncertainty that the deferred tax asset will not be realized.
3. Year End
The Company's fiscal year ends on December 31.
4. Technology Costs
Technology costs are generally expensed as incurred, except for certain costs
relating to the development of internal-use software incurred during the
application stage that are capitalized and depreciated over the estimated
useful life of three years.
5. Equipment
Equipment is comprised primarily of computer equipment and is stated at cost.
Depreciation is provided for using the straight-line method of accounting
over the estimated useful lives ranging from 3 to 7 years.
NOTE C - CAPITALIZATION
The Company issued shares of common stock to the founders at a nominal
purchase price per share.
Through December 1999, the Company issued 50.1% of its shares of common stock
to ITT at an aggregate purchase price of up to $7,750,000, of which $500,000
was received by December 31, 1999 and another $1,000,000 was received in full
on or about February 14, 2000. The $1,000,000 was reflected as a receivable
from shareholder as of December 31, 1999. In addition, the Company recorded a
non-interest bearing receivable of $1,250,000 which is payable in eight equal
installments of $156,250. The first payment commences no later than 150 days
from the date of the agreement, which is May 8, 2000. The receivable was
recorded at its discounted value of $1,009,877 using a discount rate of 20%
and is reflected as a contra to equity.
The remaining payment of $5,000,000 is an optional payment and is payable
upon ITT closing an initial public offering and raising a minimum of
$10,000,000. If such payment is not rendered, ITT's ownership would be
reduced. A receivable was not recorded for this payment, as collectibility is
not reasonably assured as of December 31, 1999.
In January 2000, the Company modified its articles of incorporation to
increase the authorized shares of common stock to 100,000 shares at a par
value of $.01 per share. All references to number of shares have been
restated to reflect the change.
NOTE D - COMMITMENTS
The Company has entered into a supplier's agreement on December 1, 1999 with
the Inter-Governmental Philatelic Corporation ("IGPC"), of which the
president is a related party to certain officers of the Company. IGPC, one of
the world's largest suppliers and dealers of philatelic stamps, represents
approximately seventy postal administrations throughout the world in matters
relating to the design, production and marketing of their postage stamps.
Pursuant to its agreement with the Company, IGPC has agreed to supply the
Company with stamps at the lowest pricing structure available to other
dealers and that IGPC makes available for public sale.
F-18
<PAGE> 62
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
NOTE D - COMMITMENTS - Continued
The agreement with IGPC has a term of three years with an automatic renewal
to extend for an additional two years unless terminated at the end of the
initial term by either party. In addition, IGPC extended a line of credit not
to exceed $2,000,000 to the Company for the purchase and shipping of stamps
from IGPC. Amounts outstanding under the credit line are payable within 120
days from the date of such credit. On December 31, 1999, the Company had
$29,273 outstanding under this line of credit.
Should the Company not be able to renew its contract with IGPC on
favorable terms, or require a change in stamp providers, this could cause
significant service disruptions, which may have an adverse affect on the
Company.
The Company has also entered into an agreement with an unrelated party to
assist in the development of its website, including the implementation of an
electronic ordering system for the stamp market. A total of $180,000 is
committed for this project. As of December 31, 1999, no amount has been
expended on this project.
In addition, the Company entered into an agreement with an unrelated party in
connection with the scanning and cataloguing of stamp images. A total of
$114,000 was committed to this project. As of December 31, 1999, $22,800 has
been expended on this project.
NOTE E - LEASES
The Company leases office facilities and equipment under non-cancelable lease
arrangements that expire at various dates through November 2001. Rental
commitments for non-cancelable operating leases are payable as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
2000 $48,000
2001 44,000
-------
$92,000
=======
</TABLE>
F-19
<PAGE> 63
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER I.T. TECHNOLOGY, INC. NOR ANY UNDERWRITER HAS AUTHORIZED
ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF THESE SECURITIES.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE U.S. TO PERMIT A PUBLIC
OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN
ANY OF THESE JURISDICTIONS. PERSONS WHO COME INTO POSSESSION OF THIS PROSPECTUS
IN JURISDICTIONS OUTSIDE THE US AND CANADA ARE REQUIRED TO INFORM THEMSELVES
ABOUT AND TO OBSERVE THE RESTRICTIONS OF THAT JURISDICTION RELATED TO THIS
OFFERING AND THE DISTRIBUTION OF THIS PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................................... 6
Risk Factors................................................................ 8
Use of Proceeds............................................................. 10
Dividend Policy............................................................. 12
Capitalization and Stock Ownership.......................................... 13
Selected Financial Data.....................................................
Dilution....................................................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 21
Business.................................................................... 23
Management.................................................................. 32
Transactions with Management and Others.....................................
Principal Stockholders...................................................... 37
Description of Capital Stock................................................ 38
Selling Shareholders........................................................
Registration Rights.........................................................
Shares Eligible for Future Sale.............................................
Underwriting................................................................ 41
Legal Matters............................................................... 43
Experts..................................................................... 43
Where You Can Find More Information......................................... 43
Index to Financial Statements............................................... F-1
DEALER PROSPECTUS DELIVERY OBLIGATION:
</TABLE>
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
-44-
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses to be incurred in connection with the
Offering described in this Registration Statement, all of which will be paid by
the Company. All amounts are estimates, other than the Securities and Exchange
Commission registration fee, the National Association of Securities Dealers,
Inc. fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................... $ 6,600.00
National Association of Securities Dealers, Inc. fee.............................. $
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> 65
The limitation of liability and indemnification provisions in our Certificate of
Incorporation may discourage stockholders from bringing a lawsuit against
directors for breach of their fiduciary duty. These provisions may also have the
effect of reducing the likelihood of derivative litigation against directors and
officers, even though such an action, if successful, might otherwise benefit us
and our stockholders. Furthermore, a stockholder's investment may be adversely
affected to the extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification provisions.
The Company's Certificate of Incorporation provides that the directors will not
be liable to the Company or to any Stockholder for monetary damages for breach
of fiduciary duty as a director, to the full extent that such limitation or
elimination of liability is permitted under Delaware law.
The Company's Bylaws provide that the Company will indemnify its directors and
officers to the fullest extent permitted under Delaware law. Pursuant to the
Bylaws and Delaware law, the Company will indemnify each director and officer
against any liability incurred in connection with any action, suit, proceeding
or investigation in which he or she may be involved by reason of serving in such
capacity at the request of the Company.
Each director and officer is also entitled to indemnification against costs and
expenses (including attorneys' fees) incurred in defending or investigating any
action, suit, proceeding or investigation in which he or she may be involved by
reason of serving in such capacity at the request of the Company. The Bylaws
authorize the Company to advance funds to a director or officer for such costs
and expenses (including attorneys' fees) upon receipt of an undertaking in
writing by such director or officer to repay such amounts if it is ultimately
determined that he or she is not entitled to be indemnified. Notwithstanding the
foregoing, no advance shall be made by the Company if a determination is
reasonably and promptly made by the Board by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs) by independent legal
counsel, that based upon the facts known to the Board or counsel at the time
such determination is made: (i) the director or officer acted in bad faith or
deliberately breached his duty to the Company or its stockholders; and (ii) as a
result of such actions by the director or officer, it is more likely than not
that it will ultimately be determined that such director or officer is not
entitled to indemnification.
The indemnification and advancement of expenses provided by the Bylaws are not
exclusive of any other rights to which a director or officer seeking
indemnification or advancement of expenses may be entitled under the Bylaws, any
agreement or any vote of stockholders or disinterested directors or otherwise.
The indemnification and advancement of expenses provided by the Bylaws continue
as to a person who has ceased to be a director or officer and inure to the
benefit of the heirs, executors and administrators of such a person.
The Company has purchased a directors' and officers' liability insurance policy
insuring directors and officers of the Company against any liability asserted
against such person and incurred by such person in any such capacity, whether or
not the Company would have the power to indemnify such person against such
liability under the Bylaws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1. Form of Underwriting Agreement.(**)
2. None.
3.1 Certificate of Incorporation of the Company filed February
2, 1999.(*)
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.(**)
10.1(a) Stock Purchase Agreement between the Company and
Stampville.Com Inc. dated June 18, 1999.(*)
10.1(b) Amendment to Stock Purchase Agreement between the Company
and Stampville.Com Inc. dated December 8, 1999.(*)
10.2 Real Property Purchase Agreement between Rococo Holdings
Pty. Ltd. And I.T. Technology Pty. Ltd. Dated July 7, 1999.(*)
10.3(a) Lease Agreement between Stampville.Com Inc. and RDL Realty,
LLC dated June 18, 1999.(*)
10.3(b) Rider to Lease Agreement between Stampville.Com Inc. and RDL
Realty, LLC dated November 28, 1999.(*)
10.4 Suppliers' Agreement between Stampville.Com Inc. and Inter
Governmental Philatelic Corporation dated December 1, 1999.(*)
10.5(a) Consulting Agreement between Robert Petty and the Company
dated January 17, 2000.(*)
10.5(b) Consulting Agreement between Robert Petty and Stampville.Com
Inc. dated January 10, 2000.(*)
10.5(c) Consulting Agreement between Mendel Mochkin and the Company
dated June 18, 1999.(*)
10.5(d) Amendment No. 1 to the Consulting Agreement between Mendel Mochkin
</TABLE>
II-2
<PAGE> 66
<TABLE>
<S> <C>
the Company dated February 24, 2000.
10.6(a) Option Agreement between Robert Petty and I.T. Technology,
Inc. dated January 17, 2000.(*)
10.6(b) Option Agreement between Jonathan Y. Malamud and the Company
dated December 8, 1999.(*)
10.7 Stock Option Agreement between Bickhams Capital, Inc. and
VideoDome.Com Networks, Inc. dated March 24, 2000.
10.8 Registration Rights Agreement between the Company and Instanz
Nominees Pty Ltd. dated October 26, 1999.
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 securities
offered therein, and the Offering of such securities at that time
shall be deemed to be the initial bona fide Offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the Offering.
(4) To file a "sticker amendment" to this Prospectus if up to five
percent (5%) of the shares subject to lock up agreements are
released from the restriction relating to such agreements prior to
the expiration thereof, and to file a post-effective amendment to
this Prospectus if more than ten percent (10%) of the shares subject
to such agreements are released prior to the expiration thereof.
Insofar as indemnification for liabilities arising from the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers, and controlling persons of the Registrant, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final
adjudication of such issue.
For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the Offering of such securities at that time shall be deemed to be the
initial bona fide Offering thereof.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Since February 2, 1999, we issued the following securities
without registration under the Securities Act of 1933, as amended.
II-3
<PAGE> 67
1. In February 1999, we issued 5,000,000 shares of common
stock to Ledger Technologies Pty. Ltd., 2,000,000 shares
of common stock to Riccalo Pty. Ltd., and 2,000,000
shares of common stock to Eurolink International Pty.
Ltd., in connection with the formation of the Company.
The consideration for such shares was $.05 per share
$.005 per share, respectively, and we received an
aggregate of $270,000 for this issuance. The issuance of
such shares was exempt from the registration
requirements of the Securities Act pursuant to Section
4(2) thereof.
2. In May 1999, we issued an additional 2,500,000 shares of
common stock to Ledger Technologies Pty. Ltd. for $.05
per share, receiving a total of $125,000 as the
consideration for such issuance. The issuance of such
shares was exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof.
3. In June and August 1999, we issued 500,000 shares of
common stock for $.05 per share and 250,000 shares of
common stock for $.125 per share to Atcor Aus. Pty.
Ltd., for an aggregate amount of $56,250 as the
consideration for such issuance. The issuance of such
shares was exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof.
4. In June 1999, we issued 150,000 shares of common stock
to Mendel Mochkin as consideration for entering into a
Consulting Agreement with the Company, pursuant to which
Mr. Mochkin would be involved in the establishment of
and the development of the business relationship between
Stampville and us. Pursuant to this Consulting
Agreement, we have agreed to issue an additional 350,000
shares of common stock to Mendel Mochkin in the event
certain conditions pertaining to this Offering and the
financing of Stampville are met. The issuance of such
shares was exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof.
5. In August 1999, we issued 1,600,000 shares of common
stock for $.125 per share to Tilbia Nominees Pty. Ltd.
for an aggregate amount of $200,000 as the consideration
for such issuance. The issuance of such shares was
exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) and Rule 903 of
Regulation S thereof.
6. In October 1999, in connection with the private
placement of common stock, we issued 2,500,000 shares of
common stock at $1.00 per share. We raised $2,500,000
through the sale of all of the 2,500,000 shares of
common stock to Instanz Nominees Pty. Ltd. The issuance
of such shares was exempt from the registration
requirements of the Securities Act pursuant to Rule 903
of Regulation S and Rule 506 of Regulation D promulgated
thereunder.
7. In December 1999, we granted Jonathan Y. Malamud options
to purchase 1,600,000 shares of common stock at an
exercise price of $1.25 per share as partial payment for
our acquisition of 50.1% equity interest in
Stampville.Com Inc. The grant of such options was exempt
from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof.
8. In January 2000, we granted Robert Petty options to
purchase up to a total of 1,450,000 shares of common
stock as consideration for entering into a Consulting
Agreement between Petty Consulting, Inc. and us. The
options vest upon the occurrence of various conditions
and each have an exercise price of either $1.00 or
$2.00. The grant of such options was exempt from the
registration requirements of the Securities Act pursuant
to Section 4(2) thereof.
Except as otherwise set forth above, no underwriters were engaged
in connection with the foregoing sales of securities.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 3 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Melbourne,
Victoria, Australia, on April 19, 2000.
I.T. TECHNOLOGY, INC.
By: /s/ LEVI MOCHKIN
-----------------------------------
Levi Mochkin
Chairman of the Board, Chief
Executive Officer and Director
II-4
<PAGE> 68
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.
SIGNATURE TITLE DATE
--------- ----- ----
Henry Herzog Director
/s/ Henry Herzog* Attorney-in-Fact April 19, 2000
- --------------------
Levi Mochkin Chief Executive Officer
and
/s/ Levi Mochkin Director April 19, 2000
-----------------------
Jonathan Herzog Chief Financial Officer
and
Director
/s/ Jonathan Herzog Attorney-in-Fact April 19, 2000
- --------------------
Anthony Davis Director
/s/ Anthony Davis* Attorney-in-Fact April 19, 2000
- --------------------
Farrel Meltzer Director
/s/ Farrel Meltzer* Attorney-in-Fact April 19, 2000
- --------------------
Helen Abeles Director
/s/ Helen Abeles* Attorney-in-Fact April 19, 2000
- --------------------
*By: /s/ Levi Mochkin
------------------------------
Levi Mochkin, Attorney-in-Fact
II-5
<PAGE> 1
Exhibit 10.5(d)
AMENDMENT NO. 1
TO
CONSULTING AGREEMENT
THIS AMENDMENT NO. 1 is made and entered into as of February 24, 2000, by
and between I.T. Technology, Inc., a Delaware corporation (the "Company") and
Mendel Mochkin, an individual ("Consultant") (the "Amendment") to the Consulting
Agreement dated as of June 18, 1999 between the Company and Consultant (the
"Agreement") .
NOW, THEREFORE, in consideration of the mutual promises contained herein
the parties hereto to amend the Agreement as follows:
1. Definitions. Unless otherwise defined in this Agreement, all capitalized
terms used in this Agreement shall have the meanings set forth in the Agreement.
2. Paragraph 3(b) of the Agreement is hereby deleted in its entirety and
shall be of no further force of effect in lieu thereof is replaced with the
following:
" (b) In addition to the foregoing issuance of shares of common stock
of the Company, in the event that the Company's current interest in
Stampville.Com, Inc. ("Stampville") of 50.1% is not reduced to less than
27.5% pursuant to the Company's agreement with Stampville as a result of
its failure to invest at least $2,750,000 in Stampville and further so long
as: (i) thereafter the Company owns no less than 10% of the outstanding
common stock of Stampville and (ii) Consultant remains as a consultant to
or employee of the Company or Stampville, Consultant shall receive from the
Company:
(i) the "Consultant's Percentage", as hereinafter defined, of the
aggregate amount of "Dividends", as hereinafter defined, paid or
distributed to the shareholders of Stampville during any fiscal year
(the "Consultant Profit Share");
(ii) the Consultant Profit Share shall only be payable to the
Consultant in the event the Stampville makes a payment in cash or
property (but not in stock of Stampville) to its shareholders in
general as a dividend or distribution (the "Dividend"); in which case
the Consultant Profit Share due for such year will be payable at the
same time and in the same manner as the Dividend;
1
<PAGE> 2
(iii) in the event no Dividend is paid to Stampville's
shareholders during any year, Consultant's rights to any Consultant
Profit Share for that year shall be null and void and shall not be
added to or aggregated with any Consultant Profit Share paid in a
subsequent year;
(iv) in the event Consultant's employment with or consulting for
the Company and Stampville terminates during any fiscal year, for any
reason (the "Termination"), Consultant shall only be entitled to a
Consultant Profit Share Payable thereafter during such fiscal year
equal to the product of the full Consultant Profit Share for the
period during such fiscal year for which the Dividend is payable (the
"Dividend Period") multiplied by a fraction the numerator of which is
the number of days during such Dividend Period prior to the
Termination and the denominator of which is the full number of days in
the Dividend Period;
(v) in addition to the Consultant Profit Share, Consultant shall
be entitled to receive from the Company the "Consultant's Pro-Rata
Share", as hereinafter defined, of the proceeds actually received by
the Stampville shareholders from a "Sale Transaction", as hereinafter
defined. For the purposes hereof the "Consultant's Pro-Rata Share"
shall be equal to the product of the total consideration distributed
to the holders of common stock of Stampville in connection with such
Sale Transaction multiplied by the product of the "Consultant's
Percentage", as hereinafter defined, multiplied by a fraction the
numerator of which is equal to the number of shares of Stampville
common stock outstanding as of the date hereof or 100,000 shares and
the denominator of which is equal to the number of shares of
Stampville common stock outstanding immediately preceding the
consummation of the Sale Transaction (excluding any shares that have
been issued or retired as a result of stock splits or reverse stock
splits);
(vi) in the event of a Sale transaction where the shareholders of
Stampville receive consideration other than cash, Consultant shall
receive, at the Company's discretion, either such consideration or its
value in cash;
2
<PAGE> 3
(vii) for the purposes hereof a "Sale Transaction" shall be
defined as a transaction or a series of related transactions pursuant
to which: (aa) all or substantially all of the outstanding capital
stock of Stampville is sold; or (bb) Stampville's merger with or into
a another entity the result of which is that the holders of
Stampville's outstanding capital stock immediately prior to the
consummation of the transaction(s) do not own a majority of the
capital stock in the surviving entity immediately following the
transaction. Notwithstanding anything to the contrary contained
elsewhere herein, no transaction shall be considered a Sale
Transaction unless the definitive agreement with respect to such
transaction is entered into during the term of Consultant's engagement
as a consultant to or employee of the Company or Stampville or solely
in the case of Consultant's involuntary termination without cause,
within thirty (30) days after such termination;
(viii) for the purposes of hereof, the Consultant's Percentage
shall initially be one percent (1%)(the "Initial Percentage");
provided however, in the event Consultant has received of any prior
payments of Consultant's Pro- Rata Share, the Consultant's Percentage
shall, prior to any subsequent payment of a Consultant's Pro-Rata
Share, be adjusted to reflect such payments, so that the Consultant's
Percentage then in effect shall be equal to the product of the Initial
Percentage multiplied by a fraction the numerator of which is the
percentage of the Company's ownership of the Common Stock of
Stampville immediately prior to the last Sale Transaction and the
denominator of which is 50.1% (excluding the effects of prior stock
splits, stock dividends, reverse stock splits and like transactions) ;
and
(vi) for the purposes of hereof, the determination by the Company
of the Consultant Profit Share or the Consultant's Pro-Rata Share
shall be final and binding on the Consultant. In addition, nothing
contained herein shall require Stampville to declare of pay a Dividend
during any year in which a Consultant Profit Share would thereupon
become due; the determination as to whether or not Stampville shall
declare or pay a Dividend shall remain within the sole discretion of
Stampville's Board of Directors.
3
<PAGE> 4
3. Paragraph 3(c) of the Agreement is hereby deleted to add at the end of
the first line thereof the following:
" on compensation due under Paragraph 3(a)."
4. Survival of Provisions. Except as specifically provided in this
Amendment, all of the terms and conditions contained in the Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date and at the place first above written.
I.T. TECHNOLOGY, INC.
By: /s/ HENRY HERZOG
----------------------------
Its: President
/s/ MENDEL MOCHKIN
--------------------------------
Mendel Mochkin
4
<PAGE> 1
Exhibit 10.7
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT is entered into this 29th day of March, 2000
(the "Agreement") by and between Bickhams Capital, Inc., a corporation
incorporated under the laws of the state of Delaware, located at 34-36 Punt
Road, Windsor 3181, Melbourne, Victoria, Australia ("Bickhams") and
VideoDome.Com Networks, Inc., a corporation incorporated under the laws of the
state of California, located at 17003 Ventura Boulevard, Suite 400, Encino,
California 91316 ("VideoDome").
WHEREAS, VideoDome is engaged in the business of providing state-of-the-art
Internet video product;
WHEREAS, Bickhams is in the business of locating, financing and supporting
Internet and e-commerce companies;
WHEREAS, VideoDome requires an additional $5,300,000 of financing to
implement its business plan; and
WHEREAS, Bickhams and VideoDome have agreed that subject to the terms of
this Agreement Bickhams shall acquire options to invest up to $5,300,000 in
VideoDome in return for a 50.1 % equity interest in VideoDome;
NOW, THEREFORE, the parties have agreed as follows:
1. Grant of Options to Bickhams. Subject to the terms and conditions set
forth below and effective as of the date hereof, VideoDome hereby grants to
Bickhams options to purchase shares of its newly issued "Preferred Stock", as
hereinafter defined, representing the following percentages of VideoDome's
capital stock on a "fully-diluted basis", as hereinafter defined (collectively,
the "Options"):
a. Initial Option. The initial option shall be for 5% of the capital
stock at an exercise price of $150,000 (US)(the "Initial
Option"). The Initial Option shall be exercisable for a period
commencing as of the date hereof and terminating thirty days from
the date hereof or on April 30, 2000 (the "Initial Option
Period");
b. Second Option. The second option shall be for an additional 5% of
the capital stock at an exercise price of $150,000 (US)(the
"Second Option"). The Second Option shall be exercisable only:
(i) in the event Bickhams exercises the Initial Option during the
Initial Option Period and (ii) during the period commencing as of
June 1, 2000 and terminating on July 31, 2000 (the "Second Option
Period");
c. Final Option. The final option shall be for an additional 40.1%
of the capital stock at an exercise price of $5,000,000 (US)(the
"Final Option"). The Final Option shall be exercisable only (i)
in the
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<PAGE> 2
event Bickhams exercises the Initial Option and the Second Option
during the Initial Option Period and Second Option Period,
respectively and (ii) during the period commencing as of August
1, 2000 and terminating on October 31, 2000 (the "Final Option
Period");
d. Preferred Stock. The Options shall be exercisable into shares of
a newly issued class of VideoDome's preferred stock (the
"Preferred Stock"). As a condition to the exercise of the Initial
Option by Bickhams, VideoDome shall amend its certificate of
incorporation to authorize Preferred Stock which: (i) except as
set forth below, shall vote along with the common stock and any
other classes of preferred stock of VideoDome on all matters;
(ii) shall have a liquidation preference equal to the exercise
price of such shares plus accrued and unpaid dividends thereon
(the "Liquidation Preference"); (iii) shall contain provisions
which would entitle the holder of the Preferred Stock to receive
a distribution pro-rata with the holders of the common stock of
VideoDome after payment of the Liquidation Preference; (iv) shall
be senior to that of all other classes of common or preferred
stock of VideoDome; (v) shall to the extent of the Liquidation
Preference, shall have a priority over the payment of any
dividend or distributions to any other class of common or
preferred stock; and (vi) shall contain such other terms and
conditions, including class voting rights and anti-dilution
provisions, as may be necessary to protect the rights of the
holders of the Preferred Stock;
e. Fully-Diluted Basis. For the purposes of this Agreement on a
"fully-diluted basis" shall include all shares of capital stock
of VideoDome which are authorized or which have been issued and
outstanding or which may issuable at any time as a result of any
agreement, understanding, instrument or right which is in effect
as of the date hereof or at any time prior to the expiration or
termination of the Options, including but not limited to capital
stock of VideoDome which may be issued upon the exercise of any
warrant, option or other security or the conversion of any note
or other instrument. Capital stock shall include all classes or
series of common stock and preferred stock which may be
authorized for issuance by VideoDome,;
f. Restrictions on the Issuance of Capital Stock. Prior to the
exercise or the expiration or termination of the Final Option:
(i) VideoDome may not issue, authorize for issuance enter into
any agreement for the issuance of any other shares of its capital
stock or agree to issue any instrument or security which is
convertible or exercisable into its capital stock without the
expressed written agreement of Bickhams or (ii) the current
shareholders of
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<PAGE> 3
VideoDome may not sell, transfer, pledge, assign or distribute or
agree to do any of the foregoing with respect to any shares or
rights to acquire capital stock of VideoDome owned or controlled
by them; and
g. Due Diligence; Audit. Prior to the exercise or expiration or
termination of the Final Option, Bickhams shall be entitled to
undertake such business, financial and other due diligence on
VideoDome as it deems necessary and appropriate and VideoDome
agrees to cooperate fully with such due diligence; including but
not limited to allowing Bickhams and its representatives or
agents access to VideoDome's books and records, personnel,
accountants and legal representatives. In addition, during this
period Bickhams shall, at its expense, be entitled to have the
financial books and records of VideoDome audited by an
independent certified accounting firm of its choice; provided
however, in the event Bickhams exercises the Initial Option, it
shall be entitled to deduct the fees and expenses of such
accounting firm from the exercise price of the Initial Option.
2. Oren Arial Participation. Subject to the exercise by Bickhams of the
Final Option, VideoDome agrees to pay to Oren Arial ("Arial") in exchange for
and in lieu of any rights to common stock or equity in VideoDome a "Distribution
Share" and a "Sale Bonus" , as defined below (the "Arial Distributions"). The
terms of the Arial Distributions shall be as follows:
a. Arial shall receive a "Distribution Share", as hereinafter
defined, in the event any "Dividends", as hereinafter defined,
are hereinafter paid or distributed to the shareholders of
VideoDome;
b. the Distribution Share shall only be payable to Arial in the
event VideoDome makes a payment in cash or property (but not in
stock of VideoDome) to its shareholders in general as a dividend
or distribution after the exercise by Bickhams of any of its
Options (the "Dividend"); in which case the Distribution Share
due Arial will be payable at the same time and in the same manner
as the Dividend;
c. in the event no Dividend is paid to VideoDome's shareholders
during any year, Arial's rights to any Distribution Share for
that year shall be null and void and shall not be added to or
aggregated with any Distribution Share paid in a subsequent year;
d. in addition to the Distribution Share, Arial shall be entitled to
receive from VideoDome the "Pro-Rata Share", as hereinafter
defined, of the proceeds actually received by its shareholders
from a "Sale Transaction", as hereinafter defined. For the
purposes
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<PAGE> 4
hereof the "Pro-Rata Share" shall be equal to the product of the
total consideration distributed to the holders of capital stock
of VideoDome in connection with such Sale Transaction multiplied
by the "Applicable Percentage", as hereinafter defined;
e. for the purposes of this Agreement, the Distribution Share shall
be equal to the Applicable Percentage multiplied by the aggregate
amount of the Dividend being distributed to all of the
shareholders of VideoDome;
f. for the purposes of this Agreement the Applicable Share shall
initially be four percent (4%)(the "Initial Percentage");
provided however, in the event Arial has received of any prior
payments of the Pro-Rata Share, the Applicable Share shall prior
to any subsequent payment of any subsequent Distribution Share or
Pro-Rata Share, be adjusted to reflect such payments, so that the
Applicable Share then in effect shall be equal to the product of
the Initial Percentage multiplied by a fraction the numerator of
which is the number of shares of VideoDome capital stock
outstanding as of the date hereof plus such additional shares as
may be applicable to include the exercise of the Options (with
each share of Preferred Stock, other preferred stock and common
stock each being treated as one share) (the "Initial Shares") and
the denominator of which is equal to the number of shares of
VideoDome capital stock outstanding at the time of the Dividend
or immediately preceding the consummation of next Sale
Transaction, as the case may be (excluding any shares that have
been issued or retired as a result of stock splits, stock
dividends, reverse stock splits or similar transactions) (the
"Outstanding Shares"). In the event the shareholders of VideoDome
receive consideration other than cash, Arial shall receive, at
the VideoDome's discretion, either such consideration or its
value in cash;
g. for the purposes hereof a "Sale Transaction" shall be defined as
a transaction or a series of related transactions pursuant to
which: (aa) all or substantially all of the outstanding capital
stock of VideoDome is sold; or (bb) VideoDome's merger with or
into a another entity the result of which is that the holders of
VideoDome's outstanding capital stock immediately prior to the
consummation of the transaction(s) do not own a majority of the
capital stock in the surviving entity immediately following the
transaction. Notwithstanding anything to the contrary contained
elsewhere herein, no transaction shall be considered a Sale
Transaction unless the definitive agreement with respect to such
transaction is entered.
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h. for the purposes of this Agreement, the determination by
VideoDome of the Distribution Share or the Pro-Rata Share shall
be final and binding on Arial. In addition, nothing contained
herein shall require VideoDome to declare or pay a Dividend
during any year in which a Distribution Share would thereupon
become due; the determination as to whether or not VideoDome
shall declare or pay a Dividend shall remain within the sole
discretion of VideoDome's Board of Directors.
i. Arial hereby agrees that his rights to the Arial Distributions as
set forth in this Section 2 shall be in exchange for and in lieu
of any rights Arial may have against VideoDome to common stock,
equity securities or other form of ownership in VideoDome, or any
royalties, bonuses or any other form of compensation which has
been earned or accrued from VideoDome, through the date of the
exercise of the Final Option. Arial agrees to execute a full
release of such rights at such time as Bickhams exercises the
Final Option.
3. Bickham's Right of First Negotiation and First Refusal. In the event
Bickhams exercises the Final Option, Bickhams shall have a right of "first
negotiation" as hereinafter defined and "first refusal" as hereinafter defined
in connection with any future (a) sale, transfer or assignment of equity
securities by the current shareholders of VideoDome (the "Transfer") or (b)
financing or capital infusion (of debt and/or equity) of VideoDome or any of its
subsidiaries (the "Financing"). For the purposes hereof, in the event the
applicable party(ies) desires to initiate solicitation of offers for a Transfer
or Financing or such party(ies) receives an unsolicited offer for and Transfer
or Financing, such party(ies) shall first submit to Bickhams in writing a term
sheet outlining material terms and conditions of such Transfer or Financing or a
copy of the unsolicited offer. In addition, the applicable party(ies) agrees to
negotiate in good faith with Bickhams for a period of no less than 30 days to
reach a commitment from Bickhams for the Transfer or Financing acceptable to
them. In the event the parties are unable to reach such commitment within 30
days, the party(ies) shall thereafter be entitled to negotiate the terms of a
Transfer or Financing with third parties (the "Right of First Negotiation").
Thereafter, in the event such party(ies) receives definitive written agreement
binding a third party with respect to any Transfer or Financing, they shall
submit a copy of such written agreement or offer to Bickhams and Bickhams shall
have a period of 30 days during which it may elect to agree to such Transfer or
Financing on the terms and conditions set forth in the written agreement
(subject only to such modification as may be necessary to reflect the passage of
time and the commitment by Bickhams in lieu of the original party) (the "Right
of First Refusal"). In the event Bickhams fails to exercise its Right of First
Refusal, the applicable party(ies) may proceed to consummate the proposed
Transfer or Financing with the offeror; provided that the Transfer or Financing
transaction is consummated on substantially identical terms as submitted to
Bickhams and within a period of no less than 60 days after the expiration of the
Right of First Refusal.
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<PAGE> 6
4. Management and Board of Directors. In the event Bickhams exercises its
Second Option:
a. the VideoDome Board of Directors ("Board") shall be reconstituted
so that there are four members, two of whom shall be designated
by Bickhams and two of whom shall be designated by the other
shareholders of VideoDome; , provided however, in the event that
the Board of Directors is deadlocked on any matter, any Director
may upon no less than 10 days prior notice call a meeting of the
Board to elect a neutral Director and during the 10 day period
the parties would diligently seek to agree on a mutually
acceptable Director. If one cannot be agreed upon prior to the
meeting the provisions of section 7 below shall prevail. Any
neutral Director selected pursuant to this subsection a, shall
serve for a term ending upon his vote in all then pending
deadlocked matters.
b. the parties shall enter into a voting trust agreement in form and
substance reasonably acceptable to Bickhams and its counsel which
shall provide that the Board shall continue to consist of four
members, two of whom are elected by Bickhams and two of whom are
elected by the remaining shareholders of VideoDome until the
first to occur of either of the following: (i) Bickhams fails to
exercise the Final Option; or (ii) additional shares of voting
securities of VideoDome are issued, except as a result of stock
split, stock dividends, reverse stock splits and similar
transactions or upon the exercise of employee stock options;
c. VideoDome shall enter into three year employment agreements with
Daniel and Vardit Aharonoff (collectively, the "Aharonoffs") in
form and substance acceptable to Bickhams which shall provide for
aggregate monthly compensation to the Aharonoffs not to exceed
$15,000 and a covenant not to compete and stock buy-back option;
and following the exercise of the Final Option, this aggregate
monthly compensation to the Aharonoffs shall be increased to not
more than $23,000.
d. So long as Bickhams or its affiliates own or control at least ten
percent (10%) of VideoDome's voting stock, VideoDome agrees to
provide it with: (i) financial statements as of and for its
fiscal year ended December 31 which have been audited by an
independent certified public accountant (the "Accountant")
reasonable acceptable to Bichkams (the "Audited Financials") and
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<PAGE> 7
(ii) financial statements as of and for its fiscal quarters ended
March 31, June 30 and September 30 on an unaudited basis which
have been reviewed by the Accountant (the "Quarterly
Financials"). The Audited Financials shall be provided to
Bickhams no later than sixty days after the end of VideoDome's
fiscal year and the Quarterly Financials no later than 30 days
after the end of each fiscal quarter.
5. Australian Joint Venture. In the event Bickhams exercises the Second
Option, VideoDome agrees to allow Bickhams or its designee to establish an
Australian corporation which shall be owned 50% by the Aharonoffs and 50% by
Bickhams or its designee (the "Australian JV"). Videodome further agrees that
the Australian JV shall be granted a full and perpetual license to market
VideoDome's services and products in Australia and the South Pacific Ocean
region, to utilize any VideoDome trademarks, service marks, and/or patents in
such region and to further develop VideoDome products and concepts for marketing
and sale in this region. The parties hereto, agree that Bickhams (or its
designee) and the Aharonoffs shall be equally responsible for providing the
necessary capital and/or financing required for the Australian JV.
6. I.T. Technology Board Approval. The effectiveness of this Agreement
shall be subject to and conditioned upon the approval of Bickham's parent
company's I.T. Technology, Inc., Board of Directors.
7. Adjudication of Disputes. Any controversy, dispute or claim arising out
of or relating to this Agreement (including, but not limited to, any claim
regarding the scope or effect of this Section and any claim that this Section is
invalid or unenforceable), or the breach hereof or thereof or for tortious
actions or any other action or failure to act under common law or statute
(collectively, hereinafter the "Dispute"), shall be adjudicated in the United
States District Court for Central District of California located in the County
of Los Angeles (the "Federal Court"). The parties hereto expressly consent to
submit too the jurisdiction of such Federal Court and expressly acknowledge,
understand and agree to waive any claim to a jury trial with respect to
resolution of any Dispute under this Agreement. The Federal Court shall be
entitled to award the legal and other professional fees and costs incurred in
connection with such proceedings in accordance with its view of the merits of
the parties' respective positions in the Dispute.
8. Representations and Warranties of VideoDome.
a. The authorized capital stock of VideoDome consists of 10,000
shares of ____ par value Common Stock of which 2,000 shares are
outstanding. Each outstanding share of Common Stock has been duly
authorized, validly issued, fully paid, and nonassessable, has
not been issued and is not owned or held in violation of any
preemptive rights of stockholders, and are owned of record and
beneficially by Daniel and Vardit Aharonoff free and clear of all
liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts. There is no
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commitment, plan, or arrangement to issue, and no outstanding
option, warrant, or other right calling for the issuance of, any
share of capital stock of VideoDome or any security or other
instrument which by its terms is convertible into, exercisable
for, or exchangeable for capital stock of the VideoDome, except
as may be contemplated by this Agreement. There is outstanding no
security or other instrument, which by its terms is convertible
into or exchangeable for capital stock of VideoDome.
b. VideoDome is a corporation duly organized, validly existing, and
in good standing under the laws of California. VideoDome is duly
qualified to do business and is in good standing in every
jurisdiction in which its ownership, leasing, licensing, or use
of property and assets or the conduct of its business makes such
qualification necessary.
c. VideoDome has all requisite power and authority to execute,
deliver, and perform this Agreement. All necessary corporate
proceedings of VideoDome have been duly taken to authorize the
execution, delivery, and performance of this Agreement by it.
This Agreement has been duly authorized, executed, and delivered
by VideoDome, is the legal, valid, and binding obligation of
VideoDome, and is enforceable as to VideoDome in accordance with
its terms.
9. Injunctive Relief; Specific Performance. Anything to the contrary
contained herein, the parties hereto expressly acknowledge and agree that any
breach of Sections 1,3,4 or 5 of this Agreement may subject Bickhams to
irrevocable harm in an amount which would be impossible to determine;
accordingly, VideoDome hereby expressly agrees that Bickhams shall be entitled
to seek injunctive relief and or specific performance in the event or anticipate
breach by VideoDome of such provisions.
10. Miscellaneous.
a. This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable against the parties and their
respective successors and assigns.
b. This Agreement is made and entered into in the State of
California and shall be interpreted and enforced under and
pursuant to the laws of said jurisdiction without regard to the
principles of conflicts of laws.
c. Wherever in this Agreement the context may require, the masculine
gender shall be deemed to include the feminine and/or neuter, and
the singular to include the plural.
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d. All notices and other communications required to be given under
the terms of this Agreement or which any of the parties may
desire to give hereunder shall be in writing and delivered
personally or sent by express delivery, or by facsimile, or by
registered or certified mail, with proof of receipt, postage and
expenses prepaid, return receipt requested, addressed as follows:
If to the Bickhams: Bickhams, Inc,
c/o I.T. Technology Pty., Ltd.
34-36 Punt Road
Windsor 3181
Melbourne, AUSTRALIA
Attention: Jonathan Herzog
Fax No.: 011-613-9533-7900
with a copy to: Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Fl.
Los Angeles, California 90067
Attention: Barry L. Burten, Esq.
Fax No.: (310) 203-0567
If to VideoDome: VideoDome Com Networks, Inc.
17003 Ventura Blvd.
Suite 400
Encino, CA 91316
Attention: Daniel Aharonoff
Its Chief Executive Officer
Fax No.: (818) 986-4163
or to such other address or addresses and to the attention of
such other person or persons as any of the above parties may from
time to time designate through notice as set forth in this
Section 10 (d). Any notice given in accordance with this Section
10 (d) shall be deemed to have been given when delivered
personally, or on the next business day if sent via express or
overnight delivery, or upon electronic confirmation if sent via
facsimile, or upon receipt of return receipt if sent via U.S.
registered or certified mail, return receipt requested.
e. This Agreement has, in all respects, been voluntarily and
knowingly executed by the parties hereto on advice and with
approval of their respective legal counsel. All parties have
participated in the drafting of this Agreement. Accordingly, no
rule of construction shall apply against any party or in favor of
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any party, and any uncertainty or ambiguity shall not be
interpreted against any party and in favor of another.
f. VideoDome shall not make a public announcement of the terms of
this Agreement without approval of the other parties, unless
required by law or by applicable stock exchange requirements, and
in any event VideoDome shall provide notice accompanied by a copy
of all proposed announcements to Bickhams.
g. This Agreement represents the entire contract, agreement and
understanding between the parties with respect to the subject
matter hereof and, except as expressly provided herein, supersede
all offers, proposals, statements, representations and agreements
with respect to the subject matter hereof.
h. The captions to the Sections contained in this Agreement are for
reference only, do not form a substantive part of this Agreement
and shall not restrict nor enlarge any substantive provision of
this Agreement.
i. The invalidity or unenforceability of any provision of this
Agreement shall not affect the other provisions hereof, and the
Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted. Furthermore, upon the
request of any party hereto, the parties to this Agreement shall
add, in lieu of such invalid or unenforceable provisions,
provisions as similar in terms to such invalid or unenforceable
provisions as may be possible with altering the substantive
rights of any party and which are legal, valid and enforceable.
j. This Agreement may not be modified, amended or supplemented
except by mutual written agreement of the each of the parties
hereto. Notwithstanding the foregoing, any of the parties hereto
may waive in writing any term or condition contained in this
Agreement that are intended to be for such party(ies) own
benefit; provided, however, that no waiver by any party, whether
by conduct or otherwise, in any one or more instances, shall be
deemed or construed as a further or continuing waiver of any such
term or condition or a waiver with respect to any other party who
has not agreed in writing to such waiver.
k. The Section headings contained in this Agreement are solely for
convenience and shall not be considered in its interpretation.
l. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument,
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provided that all such counterparts, in the aggregate, shall
contain the signatures of all parties hereto.
m. VideoDome acknowledges that Bickhams has advised VideoDome to
seek the advice of counsel in connection with VideoDome's rights
with respect to this Agreement. In connection with the foregoing,
VideoDome and Bickhams acknowledge that the Company has been
represented by its outside counsel, the firm of Jeffer, Mangels,
Butler & Marmaro LLP ("JMBM") in connection with the negotiation,
documentation and execution of this Agreement. The VideoDome
further acknowledges and agrees that JMBM has represented only
the interests of the Bickhams in connection with this Agreement
and has not represented the VideoDome.
n. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of VideoDome or by any merger,
reorganization or other transaction in which VideoDome is not the
surviving or resulting corporation or upon any transfer of all or
substantially all of the assets of VideoDome in the event of any
such merger, or transfer of assets. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of
the surviving business entity or the business entity to which
such assets shall be transferred in the same manner and to the
same extent that VideoDome would be required to perform it if no
such transaction had taken place.
o. A waiver by either party of any term or condition of this
Agreement or any breach thereof, in any one instance, shall not
be deemed or construed to be a waiver of such term or condition
or of any subsequent breach thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement as of the day and year first written above.
BICKHAMS CAPITAL, INC.
/s/ JONATHAN HERZOG
----------------------------------
By: Jonathan Herzog
-------------------------------
Its Chief Financial Officer
------------------------------
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VIDEODOME.COM NETWORKS, INC.
/s/ DANIEL AHARONOFF
--------------------------------
By: Daniel Aharonoff
Its: Chief Executive Officer
SOLELY AS TO SECTION 2 ABOVE:
AGREED TO AND ACCEPTED THIS 21st
DAY OF MARCH, 2000.
/s/ OREN ARIAL
--------------------------------
By: Oren Arial
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EXHIBIT 10.8
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of October 26, 1999, by and between I.T. TECHNOLOGY, INC., a
Delaware corporation (the "Company"), and INSTANZ NOMINEES PTY. LTD., an
Australian corporation ("Instanz"), with reference to the following facts:
W I T N E S S E T H:
WHEREAS, on the date hereof, Instanz purchased 3,700,000 shares of
Common Stock of the Company (the "Shares"), 2,500,000 shares pursuant to the
Subscription Agreement with respect to the Company's Confidential Private
Placement Memorandum dated August 30, 1999 and 1,200,000 shares pursuant to
[the Stock Purchase and Transfer Agreement, dated today's date, by and among
Instanz and existing shareholders (the "Purchase Agreement")];
WHEREAS, the Company has agreed with Instanz to grant certain
registration rights to Instanz with respect to a portion of the Shares.
NOW, THEREFORE, in consideration of the mutual representations,
covenants and agreements contained herein, the parties hereto agree as follows:
1. Securities Subject to this Agreement.
(a) Registrable Securities: The term "Registrable Securities"
means an amount of Shares (and any other securities resulting from any stock
split or reverse split, stock dividend, reclassification of the capital stock
of the Company, consolidation or reorganization of the Company, and any shares
or other securities of the Company or of any successor company which may be
received by Instanz or its successors or assigns by virtue of its or their
ownership of Registrable Securities or by virtue of the terms of any
reorganization agreement) which when multiplied by their sales price (net of
the underwriter's discount if any) is in the equal to the remainder of
$2,500,000 less the proceeds from any prior sale of such shares by Instanz or
any affiliate thereof (the "Unrecouped Investment"); provided, however, that
such securities shall be treated as Registrable Securities only if and so long
as they have not been (i) previously sold or disposed of pursuant to a
registration statement covering such Registrable Securities which has been
declared effective pursuant to the Securities Act of 1933, as amended (the
"Act"), or (ii) sold or disposed of to the public pursuant to Rule 144 (or any
similar provision then in force) promulgated under the Act; or (ii) sold or
disposed of to the public pursuant to Rule 144 (or any similar provision then
in force) promulgated under the Act; or (iii) sold or disposed of to any entity
other than a wholly-owned subsidiary of Instanz.
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(b) Holders of Registrable Securities. A person is deemed to be
a holder of Registrable Securities whenever such person (i) is the record holder
of Registrable Securities or (ii) is any other person permitted under Section
1(a) which the record holder has advised the Company has become the holder of
such securities.
2. Demand Registration.
(a) Right to Demand.
(i) Subject to the terms and conditions contained
herein, and except as otherwise provided in Section 4(a), Instanz may make one
written request (the "Demand Request") to the Company to effect a registration
or qualification to permit the public transfer of all or part of the Registrable
Securities; provided, in no event shall the number of Registrable Securities
included in such request be fewer than the greater of (i) 50% of the Registrable
Securities outstanding at the time of the Demand Request or (ii) 250,000 shares
(a "Demand Registration").
(ii) The Demand Request shall specify the aggregate
amount or number of the Registrable Securities to be registered and shall also
specify the intended methods of disposition thereof.
(iii) Notwithstanding the foregoing, the Company shall
not be obligated to effect a Demand Registration if Jeffer, Mangels, Butler &
Marmaro LLP, the Company's outside legal counsel or other any firm or counsel
representing the Company (reasonably acceptable to Instanz), render an opinion
in writing to the Company and Instanz stating Instanz may sell or transfer the
Registrable Securities for which registration is requested to the public without
registration under the Act in a single transaction in which such shares, after
sale, shall be freely tradeable and non-restricted.
(iv) The Company shall not be deemed to have effected
a Demand Registration unless and until such Demand Registration is declared
effective.
(v) Instanz shall not be deemed to have exhausted
its Demand Request if such request does not result in an effective Demand
Registration.
(b) Demand Period. The registration rights granted by the
Company under this section shall be exercisable only during the period in which
there remains at least 250,000 Shares (or such amount of Registrable Securities
which such Shares have been converted into) which are Registrable Securities
eligible for sale pursuant hereto, commencing upon the later to occur of both:
(i) 180 days after the date the registration statement filed by the Company in
connection with its initial public offering ("IPO") has been declared effective
(the "Effective Date") and (ii) 90 days after the termination of the IPO and
terminating on the first to occur of either of the following events: (x) three
years from the Effective Date or (y) the date upon which Instanz may sell to
the public any remaining Registrable Securities without volume or nature of
sale restrictions under Rule 144 promulgated under the Securities Act.
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(c) Priority on Demand Underwritten Registrations. If the managing
underwriter or underwriters of a Demand Registration shall advise the Company
and Instanz in writing that in its or their opinion the number of securities
proposed to be sold in such Demand Registration exceeds the number of
securities which can be sold in such offering without an Adverse Distribution
Effect (as defined below), the Company shall include in such registration only
the number of securities which, in the opinion of such underwriter or
underwriters can be sold without any such Adverse Distribution Effect, selected
first from Instanz and then to the extent that additional shares may be
included in the registration statement from such other parties as have requested
registration, allocated between such other parties in such manner as the
Company shall deem appropriate. "Adverse Distribution Effect" in respect of a
sale of securities means an adverse effect on the timing or manner of such sale
or the price expected to be realized therefrom.
(d) Selection of Underwriters and Counsel. If any Demand
Registration is an underwritten offering, Instanz shall be entitled to select
the investment banker or bankers and manager or managers to administer the
offering and to act as underwriters and one counsel to Instanz in such
offering; provided that such investment bankers and managers are of nationally
recognized standing (in the United States) and reasonably satisfactory to the
Company.
3. Piggyback Registration.
(a) Notice of Registration. In the event that, at any time or from
time to time after the IPO, the Company proposes to file a registration
statement to register under the Act, other than pursuant to Section 2 above, the
sale or other transfer of any class of securities of which the Registrable
Securities are a part or into which the Registrable Securities are convertible
(the "Registration Securities") by the Company (the "Company Registration
Securities") or by any present or future holder of Registration Securities (the
"Holder Registration Securities") the Company shall mail or deliver to Instanz,
at least twenty (20) days prior to the filing with the Commission of the
Registration Statement covering such Registration Securities (the "Piggyback
Registration Statement") a written notice (a "Registration Notice") of its
intention to so register such offering of Registration Securities and the manner
in which such Registration Securities are proposed to be sold.
(b) Supplemental Notice. In the event that a Registration Notice
shall have been delivered, Instanz may elect to include all or a portion of the
Registrable Securities in the offering covered by the Piggyback Registration
Statement by delivering notice to the Company (a "Supplemental Notice") on or
before the fifteenth day after delivery of the Registration Notice (i)
specifying the number of shares of Registrable Securities (collectively, the
"Supplemental Registration Securities") proposed to be sold or otherwise
transferred by Instanz, and (ii) describing the proposed manner of sale or
other transfer thereof (which if the Registration Notice indicates that the
registration statement referred to in such Registration Notice covers
Registration Securities to be sold to the public for cash on a firm commitment
basis by underwriter(s) shall be to such underwriter(s) on terms no less
favorable to Instanz than those on which the Company or the holders of
Registration Securities shall sell Registration Securities).
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(c) Registration Supplemental Registration Securities. Subject to the
provisions of Section 3(d) hereof, from and after receipt of a Supplemental
Notice, the Company shall, subject to the sale or other transfer of some or all
of the Supplemental Registration Securities prior to the effectiveness of the
Piggyback Registration Statement, use its best commercially reasonable efforts
to cause the Supplemental Registration Securities to be registered under the Act
pursuant to the Piggyback Registration Statement and to effect and to comply
with all such qualifications, compliances and requirements as may be necessary
to permit the sale or other transfer of the Supplemental Registration Securities
in the manner described in the Supplemental Notice, including, without
limitation, qualifications under the applicable blue sky or other state
securities laws subject to the limitations set forth in Sections
5(a)(iv)(A)-(D)).
Notwithstanding the foregoing, the Company shall have the option, in lieu
of registering the Supplemental Registration Securities in an underwritten
offering, to purchase the Supplemental Registration Securities from Instanz at
a price per share (the "Public Offering Price") equal to the price per share at
which the Registration Securities are sold in the public offering to which the
Supplemental Notice relates (the "Piggyback Offering"). The closing of the
purchase of the Supplemental Registration Securities shall take place
simultaneously with the closing of the Piggyback Offering. If the Piggyback
Offering is not an underwritten offering, the Company shall not have the right
to purchase the Supplemental Registration Securities.
If the Company decides to exercise this options it shall deposit with an
escrow agent (the "Escrow Agent"), reasonably acceptable to Instanz, no later
than the close of business on the twelfth Business Day (as used herein, the term
"Business Day" shall mean days other than Saturday, Sunday and any other day on
which banks are required or permitted to be closed in the City of Melbourne,
Australia) following the date on which the Registration Notice was sent (the
"Escrow Date"), in immediately available funds (the "Escrow Funds"), the average
of the high and low sales prices per share of Common Stock on each of the five
(5) trading days immediately preceding the Escrow Date (the "Average Price")
multiplied by the number of Supplemental Registration Securities. Upon delivery
of the Escrow Funds to the Escrow Agent, the Company shall deliver to Instanz a
notice (the "Purchase Notice") stating that the Company has exercised its option
and stating the Average Price used to determine the deposit required. The
Purchase Notice shall be accompanied by a certificate, executed by the Company
and the Escrow Agent, certifying the amount of the Escrow Funds and its receipt
by the Escrow Agent and a copy of the escrow agreement between the Company and
the Escrow Agent. If a Purchase Notice is not received by Instanz at the time
set forth above, the Company shall include the Supplemental Registration
Securities in the Piggyback Offering.
The Company shall deliver to the Escrow Agent and to Instanz, no later
than two (2) Business Days prior to the closing of the Piggyback Offering, a
certificate, on which the Escrow Agent and Instanz may rely, certifying the
Public Offering Price. If the Public Offering Price is greater than the Average
Price, the Company shall deposit with the Escrow Agent in immediately available
funds as additional Escrow Funds an amount equal to the difference per share
between the Public Offering Price and the Average Price multiplied by the
number of Supplemental Registration Securities being purchased (the "Additional
Escrow Funds").
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The Escrow Funds shall be deposited pursuant to an escrow agreement, in
form reasonably acceptable to Instanz, executed by the Company and the Escrow
Agent. The Escrow Agreement shall provide that the Escrow Agent shall pay to
Instanz, in immediately available funds, simultaneously with the closing of the
sale of the Registration Securities in the Piggyback Offering, the Public
Offering Price multiplied by the number of shares of Supplemental Registration
Securities to be sold to the Company by Instanz. If the Public Offering Price is
less than the Average Price, the Escrow Agent shall deliver to the Company,
after payment is made to Instanz, the excess of the Escrow Funds (plus any
income thereon) over the aggregate Public Offering Price for all of the
Supplemental Registration Securities.
(d) Piggyback Period. The registration rights granted by the Company
under this section shall only be exercisable during the period in which the
demand rights granted by the Company under this Agreement would have been
exercisable.
(e) Priorities.
(i) Underwritten Offerings by the Company. If, in the case of an
underwritten public offering of securities proposed to be made by the Company,
the managing underwriter shall advise the Company and Instanz that inclusion of
some or all of the Supplemental Registration Securities together with Holder
Registration Securities, if any, would, in such managing underwriter's
reasonable opinion, have an Adverse Distribution Effect on the proposed minimum
distribution of the Company Registration Securities in such public offering,
then the Company shall, upon written notice to Instanz and to all other holders
of securities which otherwise were to have been included in such registration,
include in such registration only the number of securities, other than Company
Registration Securities, which in the reasonable opinion of the managing
underwriter can be sold without any such Adverse Distribution Effect. The
Company shall select the securities to be registered in connection with such
public offering first from Instanz up to the full amount and second, if any,
from Holder Registration Securities on a pro rata basis in proportion to the
number of securities sought by each of such parties to be registered.
(ii) Underwritten Offerings by Holders. In the event that the
Company shall have delivered a Supplemental Notice with respect to an
underwritten offering of Holder Registration Securities, and the managing
underwriter shall advise the Company, Instanz and holders of Holder Registration
Securities to be included in the offering in writing that inclusion of some or
all of the Supplemental Registration Securities would, in such managing
underwriter's reasonable opinion, have an Adverse Distribution Effect on the
proposed sale of Holder Registration Securities, then the Company shall, upon
written notice to Instanz and to all other holders of securities which otherwise
were to have been included in such registration, include in such registration
only the number of securities which can be sold without an Adverse Distribution
Effect on the proposed sale of the Holder Registration Securities, selected
first from the holder of the Registration Securities who initiated the
registration and then from Instanz and other holders of Registration Securities
requested to be included in such registration on a pro rata basis in proportion
to the number of securities sought to be registered.
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(iii) Non-Underwritten Offerings. Instanz shall have the right to
piggy-back onto registrations of non-underwritten offerings of securities of the
Company without limitation as to number of securities to be sold.
(f) Underwriters. In the case of piggyback registrations, the
underwriter designated by the initiating party shall serve as the managing
underwriter for the entire offering. Instanz shall be entitled to utilize any
other underwriter in connection with the sale of its securities unless the
managing underwriter reasonably determines that participation by such
underwriter in the offering would delay or otherwise be adverse to the
transaction.
(g) Exceptions. The provisions of this Section 3 shall not apply to
any registration statement relating to (i) a registration statement on Form S-8
or Form S-4, or any successor form, or (ii) any registration statement covering
only securities proposed to be issued in exchange for securities or assets of
another corporation.
4. Holdback Agreements.
(a) Restrictions on Public Sale by Holders of Registrable Securities.
To the extent not inconsistent with applicable law, if Instanz has been notified
in writing of the filing of a registration statement for an underwritten public
offering of securities of the Company, for so long as the Registrable Securities
constitute more than two percent (2%), on a fully diluted basis, of the class of
securities of which the Registrable Securities are a part, Instanz agrees not to
effect any public sale or distribution of the issue being registered or a
similar security of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the fifteen (15) days
prior to, and during the 90-day period beginning on, the effective date of such
registration statement, except as otherwise permitted by this Agreement or for a
sale pursuant to such registration, if permitted with respect to an underwritten
public offering, or from the date the Company delivers a Registration Notice to
Instanz, until the earlier of (i) 90 days following the effective date of the
registration statement to which such demand request or Registration Notice, as
the case may be, relates or (ii) the termination or abandonment of such
registration statement.
(b) Restrictions on Public Sale by the Company. To the extent not
inconsistent with applicable law, (i) if Instanz is participating in a Piggyback
Offering, the Company shall not effect any public sale or distribution of any
securities similar to those being registered, or any securities convertible into
or exchangeable or exercisable for such securities, during the fifteen (15) days
prior to, and during the 90-day period beginning on, the effective date of the
registration statement relating to the Piggyback Offering (except for a
registration of securities (A) on Form S-4 or Form S-8, or any form substituting
therefor, (B) in respect of the exercise of any option or conversion of any
convertible security issued prior to the receipt by the Company of the demand
request to initiate the Piggyback Offering, (C) pursuant to a registration right
granted in a Prior Agreement or (D) consented to be holders of a majority of the
shares subject to the Piggyback Offering (excluding shares subject to any
overallotment option), and (ii) if the Company receives a Demand Request with
respect to an underwritten public offering (which has not been terminated or
abandoned), the Company shall not file a Registration Statement to register
Company Registration Securities until the earlier of (A) 90 days following
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the effective date of the registration statement to which the Demand Request
relates or the (B) termination or abandonment of such registration.
(c) Restrictions on Public Sale by Others. The Company agrees that
any agreement entered into after the date of this Agreement pursuant to which
the Company issues or agrees to issue any privately placed securities similar
to any issue of the Registrable Securities shall contain a provision pursuant
to which holders of such securities agree (i) for so long as the securities of
the Company held by such holders constitute more than two percent (2%) of such
class (on a fully diluted basis), not to effect any public sale or distribution
of any such securities during the fifteen (15) days prior to, and during the
90-day period beginning on, the effective date of any registration statement in
respect of an underwritten public offering in which the holders of Registrable
Securities are participating pursuant to Section 2 hereof or (ii) not to
require the Company to file a registration statement with respect to securities
of the Company from the date the Company receives a Demand Request with respect
to an underwritten public offering until the earlier of (A) 90 days following
the effective date of the registration statement to which such Demand Request
relates or (B) the termination or abandonment of such registration (except as
part of any such registration, if permitted or when prevented by applicable law
from entering into such an agreement).
5. Registration Procedures.
(a) Whenever Istanz has made a Demand Request, the Company shall use
its best reasonable efforts to effect the registration and the sale of the
Registrable Securities subject to such Demand Request (the "Covered Registrable
Securities") in accordance with the intended method of disposition thereof as
quickly as practicable and, in connection with any such request, the Company
shall, as expeditiously as possible:
(i) prepare and file with the Commission a registration
statement relating to the registration on any appropriate form under the Act,
which form shall be available for sale of the Covered Registrable Securities in
accordance with the intended method of distribution thereof, and use its best
reasonable efforts to cause such registration statement to become effective;
provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by reference
after the initial filing of the registration statement, the Company shall
furnish to Instanz, counsel for the selling stockholders and the underwriters,
if any, draft copies of all such documents proposed to be filed at least five
(5) Business Days prior thereto (or such shorter period as Instanz shall
approve), which documents will be subject to the reasonable review of Instanz
and underwriters, and, unless in the reasonable judgment of the Company required
by law, the Company shall not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference) or (for a period of not more than ten (10) Business
Days) any request for effectiveness, withdrawal or termination to which sellers
holding a majority amount of the securities covered by such registration
statement (a "Majority Amount") or the underwriters, if any, shall reasonably
object;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the registration statements as may be necessary to
keep the
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registration statement effective following the effective date for such period
as may be required to meet the prospectus delivery and all other requirements
under the Act, but not longer than one hundred eighty (180) days; cause the
prospectus to be supplemented by any required prospectus supplement, and, as so
supplemented, to be filed pursuant to Rule 424 under the Act; and comply
with the provisions of the Act applicable to it with respect to the disposition
of all securities covered by such registration statement during the applicable
period in accordance with the intended methods of disposition by sellers
thereof set forth in such registration statement or supplement to the
prospectus.
(iii) furnish to Instanz and the underwriter or underwriters, if
any, without charge, at least one signed copy of the registration statement and
all post-effective amendments thereto, including financial statements and
schedules, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference) as soon as such documents become
available to the Company, and such number of conformed copies thereof and such
number of copies of the Prospectus (including each preliminary Prospectus) and
any amendment or supplements thereto, and any documents incorporated by
reference therein, as such seller or underwriter may request as soon as such
documents become available to the Company in order to facilitate the disposition
of the Covered Registrable Securities (it being understood that the Company
consents to the use of the prospectus and any amendment or supplement thereto by
Instanz and the underwriter or underwriters, if any, in connection with the
offering and sale of the Covered Registrable Securities);
(iv) on or prior to the date on which the registration statement is
declared effective, use its best reasonable efforts to register or qualify the
Covered Registrable Securities under such other securities or blue sky laws of
such jurisdictions as the managing underwriter, if any, or Instanz, if there is
no underwriter, reasonably requests, keep each such registration or
qualification effective during the period such registration statement is
required to be kept effective and do any and all other acts and things which may
be reasonably necessary or advisable to consummate the disposition in such
jurisdictions of the Covered Registrable Securities; provided that the Company
shall not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
clause (iv), (B) subject itself to general taxation in any such jurisdiction;
(C) consent to general service of process in any such jurisdiction; or (D)
undertake compliance with substantive requirements of the blue sky laws or
regulations of a jurisdiction which are unreasonably burdensome or onerous,
including escrow requirements. Notwithstanding the provisions of clause (D)
above, and except as set forth in clauses (A), (B) and (C) above, the Company
shall use its reasonable best efforts to comply with the requirements of all
states designated by the managing underwriter in an underwritten offering as
necessary or desirable for completing the sale of the Covered Registrable
Securities;
(v) use its best reasonable efforts to cause the Covered Registrable
Securities to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company to consummate the disposition of the Covered
Registrable Securities;
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(vi) (A) promptly notify the managing underwriters, if
any, or Instanz, if there is no underwriter (and if requested by any such
person, confirm such advice in writing) when a prospectus relating to the sale
of the Covered Registrable Securities required to be delivered under the Act and
(B) promptly notify the managing underwriters, if any, or Instanz, if there is
no underwriter, of the happening of any event as a result of which the
prospectus included in the registration statement relating to the sale of
Covered Registrable Securities contains an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading and prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of the Covered Registrable Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading:
(vii) enter into customary agreements (including, in the
case of an underwritten offering, an underwriting agreement in customary form
with customary indemnity provisions) and make such representations and
warranties to the underwriters or Instanz, if there is no underwriter, as in
form and substance and scope are customarily made by issuers to underwriters in
secondary underwritten offerings and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of the Covered
Registrable Securities;
(viii) otherwise use its best reasonable efforts to
comply with all applicable rules and regulations of the Commission, and make
available to its security holders as soon as reasonably practicable, earnings
statements which need not be audited, covering a period of twelve (12) months,
beginning within three (3) months after the effective date of the registration
statement, which earnings statements shall satisfy the provisions of Section
11(a) of the Act;
(ix) notify the managing underwriter, if any, or
Instanz, if there is no underwriter, of any stop order or other suspension of
effectiveness of the registration statement;
(x) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible moment;
(xi) cooperate with the managing underwriter, if any,
and counsel for the underwriters, or Instanz, if there is no underwriter, and
its counsel, in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD");
(xii) if requested by the managing underwriter if any,
or Instanz, if there is no underwriter, promptly incorporate in a prospectus
supplement or post-effective amendment such information relating to the
distribution of securities and the timing thereof as the managing underwriter or
underwriters, if any, or Instanz, if there is no underwriter, reasonably
requests to be included therein, including, without limitation, the number of
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Registrable Securities being sold by Instanz to the underwriter or
underwriters, and purchase price being paid therefor by such underwriter or
underwriters and any other terms of the underwritten offering of the Covered
Registrable Securities; and make all required filings of such prospectus
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
(xiii) as promptly as practicable after filing with the
Commission of any document which is incorporated by reference into a
registration statement, deliver a copy of such document to Instanz;
(xiv) cooperate with the managing underwriter or
underwriters, if any, or Instanz, if there is no underwriter, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing securities to be sold under the registration statement and
enable such securities to be in such denominations or amounts, as the case may
be, and registered in such names as the managing underwriter or underwriters, if
any, may reasonably request;
(xv) notify the managing underwriters, if any, or
Instanz, if there is no underwriter, promptly (and if requested by any such
person, confirm such advice in writing) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Covered
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(xvi) cause the subsidiaries of the Company, if any, to
take all action necessary to effect the registration of the Covered Registrable
Securities contemplated hereby, including filing any required financial
information; and
(xvii) cause the Covered Registrable Securities to be
listed on each securities exchange or quoted on the NASDAQ National Market on
which similar securities issued by the Company are then listed or quoted and
provide that the applicable listing or quotation requirements are satisfied; and
(b) Instanz shall furnish to the Company such information
regarding the distribution of the Covered Registrable Securities and such other
information relating to Instanz and its ownership of securities of the Company
as the Company may from time to time reasonably request in writing.
(c) Notwithstanding anything contained herein to the contrary,
the Company, by written notice to all holders of securities to be covered by a
registration statement, given within ten (10) days following receipt by the
Company of a request for a Demand Registration, may defer the filing of a
registration statement pursuant to such request for up to six (6) months
following the date of such request if the Company shall certify to such holders
that the effect of a filing without such delay would materially adversely
affect the Company, its business or its stockholders. In the event that the
Company delays the filing of a registration statement pursuant to such a
determination, the period during which Instanz may exercise its
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registration rights under this Agreement shall be extended by the same number of
days that the Company defers the filing of the registration statement.
(d) Instanz agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 5(a)(vi)
hereof, it will forthwith discontinue disposition of the Covered Registrable
Securities until Instanz receives the copies of the supplemented or amended
prospectus contemplated by Section 5(a)(vi) hereof and, if so directed by the
Company, Instanz will deliver to the Company (at the expense of the Company) all
copies, other than permanent file copies then in Instanz's possession, of the
prospectus relating to the sale of the Covered Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any such
notice, the Company shall extend the period during which such registration
statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from and including the date of the giving of such
notice pursuant to Section 5(a)(vi) hereof to and including the date when
Instanz shall have received the copies of the supplemented or amended prospectus
contemplated by Section 5(a)(vi) hereof. In the event that the Company shall not
have delivered to Instanz copies of the supplemented or amended prospectus
within ten (10) Business Days following the date of the notice referred to in
the first sentence of this paragraph, Instanz shall have the option to
discontinue the registration and sale of the Covered Registrable Securities and,
if such registration is a Demand Registration, Instanz shall be entitled to an
additional Demand Registration hereunder (with all Registration Expenses (as
hereinafter defined) relating to such additional Demand Registration to be borne
by the Company) on the same terms and conditions as would have applied to
Instanz had such earlier Demand Registration not been made.
6. Registration Expenses
All expenses incident to the Company's performance of or
compliance with this Agreement including, without limitation (i) all
registration and filing fees, all fees and expenses associated with filings
required to be made with the NASD, as may be required by rules and regulations
of the NASD (other than fees required in excess of fees which would otherwise
pertain in the event that Instanz is a member of the NASD), fees and expenses of
compliance with securities or blue sky laws (including fees and disbursements of
counsel in connection with blue sky qualifications for the Registrable
Securities), rating agency fees, printing expenses (including expenses of
printing certificates for the Registrable Securities in a form eligible for
deposit with the Depository Trust Company and of printing prospectuses,
messenger and delivery expenses, (ii) internal expenses (including, without
limitation, all salaries and expenses of their officers and employees performing
legal or accounting duties), securities acts liability insurance (if the Company
elects to obtain such insurance), (iii) fees and expenses of counsel for the
Company and its independent certified public accountants (including the expenses
of any special audit or "cold comfort" letters required by or incident to such
performance), (iv) the fees and expenses of any special experts retained by the
Company in connection with such registration, (v) fees and expenses of other
persons retained by the Company, and (vi) fees (up to $10,000) and expenses of
counsel for the Seller (all such expenses being herein called "Registration
Expenses") will be borne by the Company, provided that in no event shall
Registration Expenses include any underwriting discounts or commissions
attributable to the sale of the Registrable Securities or any direct
out-of-pocket expenses of Instanz. Registration Expenses shall also
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include all fees and expenses related to the purchase of Supplemental
Registration Securities pursuant to a Purchase Notice, including but not
limited to the escrow arrangements related thereto.
In the event that following effectiveness of a registration statement
pursuant to which Instanz is a selling stockholder, it becomes necessary for
the Company to prepare and file a supplemental prospectus or amended
prospectus in order to maintain the effectiveness of such registration
statement during the period referred to in Section 5(a)(ii) hereof, the Company
shall pay all printing costs associated with the printing of such supplemental
or amended prospectus to be distributed in connection with sales of their
securities pursuant thereto.
7. Indemnification; Contribution
(a) Indemnification by the Company. The Company agrees to indemnify,
to the full extent permitted by law, Instanz and any investment advisor thereof
or agent therefor against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and legal fees and expenses whether
or not a lawsuit is filed, and if filed, at all trial and appellate levels)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any registration statement, prospectus or
preliminary prospectus, or any amendment thereof or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus or preliminary prospectus, in light of the circumstances under which
they are made) not misleading, except insofar as such losses, claims, damages
arise out of or are based upon an untrue statement or omission contained in
information with respect to Instanz furnished in writing to the Company by
Instanz or its representative expressly for use therein. The Company also agrees
to reimburse Instanz and each such investment advisor and agent for any legal or
other expenses reasonably incurred by such holder or such officer, director,
partner or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action to the extent that the same are
not incurred in connection with the provision of the preceding sentence. The
indemnity provided in this Section 7(a) will be in addition to any liability
which the Company may otherwise have.
(b) Indemnification by Instanz. In connection with any registration
statement in which Instanz is a selling stockholder, Instanz agrees to
indemnify, to the extent permitted by law, the Company, its directors,
officers, employees and agents and each person who controls the Company (within
the meaning of the Act), and any investment advisor thereof or agent therefor
against any losses, claims, damages, liabilities and expenses resulting from
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in or
failed to be contained in any information with respect to Instanz furnished in
writing by Instanz or its representative specifically for inclusion therein. In
no event shall the liability of Instanz hereunder be greater in
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amount than the dollar amount of the proceeds received by Instanz upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such person of any written notice of the
commencement of any action, suit or proceeding against such person or
investigation thereof made in writing or for which such person will claim
indemnification or contribution pursuant to this Agreement and, permit the
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to such indemnified party. If the indemnifying party is not
entitled to, or does not, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one counsel with respect to
such claim. No indemnified party will be required to consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. The
indemnifying party will not be subject to any liability for any settlement made
without its consent, which shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in this Section
7 from the indemnifying party is unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
therein other than by reason of the exception in the first sentence of Section
7(a) hereof, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions or
inactions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relevant intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, shall be deemed to include, subject to the limitations set forth in
Section 7(c), any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7(d), an indemnified holder shall
not be required to contribute any amounts in excess of the amount by which the
total price at which the Registrable Securities were sold by such indemnified
holder and distributed to the public exceeds the amount of any damages which
such indemnified holder has otherwise been required to pay be reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the
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meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
In indemnification is available under this Section 7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 7(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 7(d).
In the event that any provision of any indemnification clause in the
underwriting agreement to which the Company and Instanz are parties in
connection with the registration statement or prospectus in question differs
from a provision in this Section 7, such provision in the underwriting agreement
shall determine Instanz's rights in respect thereof.
8. Participation in Underwritten Registrations.
Instanz may not participate in any underwritten registration hereunder
unless it (a) agrees to sell the Registrable Securities on the basis provided in
any underwriting arrangements approved by it, (b) completes and executes all
questionnaires, powers of attorneys, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and (c) agrees to pay all underwriting discounts and commissions on
the Registrable Securities sold under such underwriting arrangements on the same
basis as the Company or other selling stockholders participating in such
underwritten offering.
9. Covenants; Rule 144.
(a) The Company covenants that it will file all reports required to
be filed by it under the Act and the Securities Exchange Act of 1934 and the
rules and regulations adopted by the Commission thereunder (and, if it is not
required to file such reports, it will deliver, no later than 30 days after the
end of each fiscal quarter of the Company and 60 days after the end of each
fiscal year, to the representative of the holders of Registrable Securities
financial statements of the Company including balance sheets, income statements
and the footnotes related thereto, which shall be audited for the end of each
fiscal year); and it will take such further action as Instanz may reasonably
request, all to the extent required from time to time to enable Instanz to sell
Registrable Securities without registration under the Act within the limitation
of the exemptions provided by (a) Rule 144 under the Act, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission.
(b) As promptly as applicable after filing with the Commission of any
document, the Company will deliver to Instanz a copy of such document.
10. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into an agreement granting registration rights with respect to its securities
unless (i) the
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<PAGE> 15
registration rights are not otherwise in conflict or inconsistent with the
rights of Instanz in this Agreement, and (ii) the rights of Instanz under this
Agreement to register all of the Registrable Securities shall be prior to the
rights of the holders under such agreement. Instanz acknowledges the Company has
entered into a Prior Agreement under which certain individuals may have
registration rights prior to those granted under this Agreement.
(b) Remedies. Instanz, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action of specific performance that a remedy at law
would be adequate.
(c) Waiver. Any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto or
(ii) waive compliance with any of the agreements of any other party or with any
conditions to its own obligations. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party making the
waiver or granting the extension. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
(d) Assignment and Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, transferees, assigns, representatives, and agents and no other
person shall have any right, benefit or obligation hereunder.
(e) Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(f) Choice of Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
California, without regard to the conflicts of law principles thereof.
(g) Entire Agreement. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supercedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties.
(h) Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
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<PAGE> 16
(i) Titles. The titles, captions or headings of the Articles and
Sections herein are for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
(j) Attorney's Fees. Should any party institute any action to
enforce any provision of this Agreement, including, without limitation, an
action for declaratory relief, damages by reason of an alleged breach of any
provision of this Agreement, equitable relief or otherwise in connection with
this Agreement, or any provision hereof, the court or the arbitrator, as the
case may be, shall allocate all of the attorneys' fees and costs for services
rendered in such action between the parties based on their view of the merits
of the parties' respective positions in the action.
(k) Arbitration.
(i) Any dispute, controversy or claim arising out of,
relating to, or in connection with, this Agreement, or the breach, termination
or validity thereof, except for claims for equitable, including injunctive,
relief, shall be finally settled by arbitration conducted in accordance with
this Section. The arbitration shall be conducted in accordance with the rules of
the American Arbitration Association (the "AAA") in effect at the time of the
arbitration, except as they may be modified herein or by mutual agreement of
the parties. The seat of the arbitration shall be Los Angeles, California. Each
party hereby irrevocably submits to the jurisdiction of the arbitrator in Los
Angeles, California and waives any defense in an arbitration based upon any
claim that such party is not subject personally to the jurisdiction of such
arbitrator, that such arbitration is brought in an inconvenient forum or that
such venue is improper.
(ii) The arbitration shall be conducted by one arbitrator,
who shall be appointed by the AAA. The arbitrator shall have the authority only
to enforce the legal and contractual rights of the parties and shall not add
to, modify, disregard, or refuse to enforce any contractual provision. There
shall be no pre-arbitration discovery. The parties acknowledge and agree that
by entering into this Agreement they are agreeing to this arbitration provision
and are waiving all rights to a trial by Jury. The arbitral award shall be in
writing and shall be final and binding on the parties. The award shall include
and award of costs, including the fees and costs of the arbitrators and
reasonable attorneys' fees and disbursements in accordance with Section 10(j).
Except upon a finding of actual fraud, intentional or knowing misrepresentation,
willful and knowing omissions of material fact or willful misconduct, no such
award shall include punitive damages. Judgment upon the award may be entered by
any governmental authority having jurisdiction thereof or having jurisdiction
over the parties or their assets.
(l) Multiple Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
(m) Notices. Unless applicable law requires different method of
giving notice, any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing. Assuming that
the contents of a notice meet the
16
<PAGE> 17
requirements of the specific Section of this Agreement which mandates the
giving of that notice, a notice shall be validly given or made to another party
if served either personally or if deposited in the United States mail, certified
or registered, postage prepaid, or if transmitted by telegraph, telecopy or
other electronic written transmission device or if sent by overnight courier
service, and if addressed to the applicable party as set forth below. If such
notice, demand or other communication is served personally, service shall be
conclusively deemed made at the time of such personal service. If such notice,
demand or other communication is given by mail, service shall be conclusively
deemed given seventy-two (72) hours after the deposit thereof in the United
States mail. If such notice, demand or other communication is given by
overnight courier, or electronic transmission, service shall be conclusively
made at the time of confirmation of delivery. The addresses for the parties are
as follows:
If to the Company:
34-36 Punt Road
Windsor 3181
Melbourne, Victoria
AUSTRALIA
Attention: Mr. Jonathan Herzog
Telecopier No.: 011-613-9533-7900
with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067
Attention: Barry L. Burten, Esq.
Telecopier No.: (310) 203-0567
If to Instanz:
Level 9 South
161 Collins Street
Melbourne 3000, Victoria
AUSTRALIA
Attention: Helen Abeles
Telecopier No.: 011-613-9650-3550
Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided, by a written notice given
in the aforesaid manner to the other parties hereto.
(n) Choice of Forum. In the event any claim, demand, action,
proceeding, litigation, hearing, motion or lawsuit arising herefrom or with
respect hereto may properly be commenced outside of arbitration as contemplated
by Section 10(k) hereof, such proceeding shall be commenced or prosecuted in
State or Federal court in the County of Los
17
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Angeles, State of California, and each party hereby irrevocable consents to the
jurisdiction of the state and federal courts in the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
I.T. TECHNOLOGY, INC., a Delaware corporation
By: /s/ LEVI MOCHKIN
------------------------------------
Name: Levi Mochkin
------------------------------------
Title: Chief Executive Officer
------------------------------------
INSTANZ NOMINEE PTY, LTD., an Australian
corporation
By: /s/ HELEN ABELES
------------------------------------
Name: Helen Abeles
------------------------------------
Title: Director
------------------------------------
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SCHEDULE A
None.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 10, 2000, accompanying the
consolidated financial statements of I.T. Technology, Inc., contained in
Amendment No. 3 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
April 14, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 10, 2000 accompanying the
financial statements of Stampville.Com Inc., contained in Amendment No. 3 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
April 14, 2000
