FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 2001
REGISTRATION NO. 333-30364
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
I.T. TECHNOLOGY, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 5961 98-0200077
(STATE OR JURISDICTION OF (CLASSIFICATION (I.R.S.EMPLOYER
INCORPORATION OR ORGANIZATION) CODE NUMBER) IDENTIFICATION NO.)
.
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
456 FIFTH AVENUE
BROOKLYN, NY 11215
(718) 499-2138
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
KENNETH G. EADE
827 STATE STREET, SUITE 12
SANTA BARABARA, CALIFORNIA 93101
(805) 560-9828
FAX (310) 560-3608
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.
2<PAGE>
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CALCULATION OF REGISTRATION FEE
___________________________________________________________________________________________
___________________________________________________________________________________________
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TITLE OF EACH DOLLAR PROPOSED PROPOSED AMOUNT OF
CLASS OF SECURITIES AMOUNT TO MAXIMUM AGGREGATE MAX. AGGREGATE REGISTRATION FEE
<C> <C> <C> <C> <C>
Common Stock, par value
$.0002 per share 25,000,000(1) $2,500,000 $2,500,000 $6,600(2)
(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) 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.
</TABLE>
3<PAGE>
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I.T. TECHNOLOGY, INC.
CROSS REFERENCE SHEET FOR PROSPECTUS UNDER FORM SB-2
FORM SB-2 ITEM NO. AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
------------------------------------------- ------------------------------------------------
1. Front of Registration Statement and Outside Outside Front Cover Page; Cross Reference Sheet;
Outside Front Cover Page of Prospectus Front Cover of Prospectus
2. Inside Front and Outside Back Cover Inside front and Outside Back Cover Pages
Pages of Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page; Risk Factors; Underwriting
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Inside Front Cover Page; Underwriting
9. Legal Proceedings Business -- Legal Proceedings
10. Directors, Executive Officers Management
Promoters and Control Person
11. Security Ownership of Certain Beneficial Principal Shareholders; Management
Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position on
Management -- Limitation of Liability;
Indemnification for Securities Act Liabilities Underwriting; Management -- Indemnification of
Officers and Directors
15. Organization within Last Five Years Business
16. Description of Business Business
17. Certain Relationships and
Related Transactions Certain Relationships and Related Transactions
18. Market for Common Equity and Risk Factors; Dividend Policy; Description of
Related Shareholder Matters Securities; Shares Eligible for Future Sale
19. Executive Compensation Management -- Executive Compensation
20. Financial Statements Financial Statements
21. Changes in and Disagreements with Accountants Not Applicable
on Accounting and Financial Disclosure
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4<PAGE>
[CAPTION]
Prospectus
I.T. TECHNOLOGY, INC.
Up to 25,000,000 shares common stock
This prospectus covers the offer for sale of up to 25,000,000 common shares of
I.T. Technology common stock. The Offering Price is $.10 per share. There is no
established public market for the company's common stock, and the offering
price has been arbitrarily determined. This offering is self-underwritten.
Shares will be sold by officers of the company, without the use of an
underwriter. This offering will terminate on October 31, 2001. The minimum
purchase is 1000 Shares. The purchase limitations described herein are subject
to increase or decrease at our sole discretion.
For information on how to subscribe, call the Company at 011-613-9533-7800.
Sale of our common stock will only be made in connection with this prospectus.
----------------------------------
The Common Stock offered is speculative and involves a high degree of risk and
substantial dilution. See "Risk Factors" on pages 6 to 8 of this prospectus.
----------------------------------
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission, nor has the Commission
or any state securities commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offence.
The date of this prospectus is January _____, 2001
5<PAGE>
[CAPTION]
TABLE OF CONTENTS
-----------------
PAGE
----
Prospectus Summary
Risk Factors
Forward-Looking Statements
Use of Proceeds.
Dividend Policy.
Dilution
Capitalization
Selected Financial Data.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Business
Management
Certain Transactions
Description of Capital Stock
Shares Eligible for Future Sale.
Plan of Distribution
Legal Matters.
Experts.
Additional Information
Index to Financial Statements
6<PAGE>
[CAPTION]
PROSPECTUS SUMMARY
THE COMPANY
I.T. Technology, Inc. is a Delaware corporation formed on February 2, 1999 for
the purpose of engaging in businesses related to the Internet, e-commerce and
technology, directly and through acquiring a majority interest in Internet
related and other technology companies. To date, the Company has acquired a
50.1% interest in Stampville.com, Inc., its wholly-owned subsidiary, Bickhams
Capital, Inc., has acquired an 11.5% equity interest in VideoDome.Com Networks,
Inc., and an option to initially acquire up to an additional 13.5% equity
interest in VideoDome.Com Networks, Inc. Stampville, incorporated in 1999, is
in the process of developing its web-site at www.stampville.com, and intends to
specialize in the wholesale and Internet sale of philatelic memorabilia,
including stamps and other collectibles, which may include coins and sports
memorabilia. Stampville's main executive offices and our New York offices are
located at 456 Fifth Avenue, Brooklyn , NY 11215. Stampville's telephone
number is (718)369-8881 and our telephone number is (718)499-2138. VideoDome
provides a range of Internet video services, including but not limited to
management services, registration and delivery of the video stream via
Internet, and operates primarily through an Internet web site located at
www.videodome.com. Our Internet Web site is located at www.ittechinc.com.
THE OFFERING
SHARES OF COMMON STOCK
OFFERED IN THIS PROSPECTUS 25,000,000 shares
TOTAL SHARES OF COMMON STOCK
TO BE OUTSTANDING AFTER THE OFFERING 140,783,356 shares
USE OF PROCEEDS BY THE COMPANY:
$900,000 to finance the acquisition of a further 13.5% interest in
VideoDome; approximately $250,000 will be used to pay off the balance owed to
affiliates ; $750,000 will be advanced as a loan to Stampville; $360,000 for
working capital and other general purposes; approximately $190,000 will be used
to pay off a part of the balance due on the building housing the company's
executive offices in Melbourne, Australia.
---------
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.
7<PAGE>
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FEBRUARY 2, 1999 (INCEPTION) NINE MONTHS ENDED
THROUGH DECEMBER 31, 1999 SEPTEMBER 30, 2000
--------------------------- -------------------
SELECTED STATEMENT OF
OPERATIONS DATA:
Revenues $ - -
Net loss $(419,443) (1,218,748)
Net loss per share $ (0.04) (0.07)
Weighted average number of shares outstanding 56,110,695 82,500,000
SELECTED BALANCE SHEET DATA: SEPTEMBER 30, 2000
------------------
Working capital $ (1,336,178)
Total assets 3,247,460
Total liabilities 1,813,642
Accumulated deficit (1,638,191)
stockholders' equity $ 1,433,818
</TABLE>
8<PAGE>
RISK FACTORS
We have no operating history and therefore cannot ensure the successful
operation of our proposed business or the execution of our business plan.
We are recently formed and we have no operating history. In addition, both
Stampville and VideoDome are also recently formed and have limited operating
histories. We do not know if we will be able to successfully operate our
proposed business, or that either Stampville or VideoDome will be able to
execute its business plan.
Because of our dependence on the net proceeds of this offering, and because
there can be no guarantee that other future financing will be available to us,
we cannot ensure that we will be able to obtain the capital necessary to
implement our plan of operations.
We have limited resources and will be dependent on the net proceeds of this
offering to implement our plan of operation, including the funding of our
acquisition of further interests in VideoDome, as well as other potential
investments and acquisitions in the United States and Australia. Unless we
raise at least $2,000,000 in this offering, we may not be able to fully finance
our business plans as described in this prospectus, and Stampville may have to
curtail aspects of its operations. If we do not raise sufficient funds in this
offering and in the absence of alternative funding, Stampville would reduce its
workforce, limit its activities to establishing and operating its web site, and
curtail research and development activities, cataloging efforts and expansion
plans, and instead focus on the sale of stamps. The shares in this offering are
being offered on a self-underwritten basis. Therefore, we cannot guarantee that
this offering will raise sufficient capital to enable us to finance an
implement our plan of operation, or any capital at all. Consequently, we may
still need to seek additional financing. Furthermore, even if we raise
sufficient funds in this offering, we may still need to seek future additional
financing if our assumptions prove inaccurate or if our capital requirements
vary from those currently planned, or to further fund potential ongoing
operating expenses such as the enhancement of our services and products, the
development of strategic marketing alliances and/or the acquisition of
complementary businesses, technologies, content or products.
We cannot guarantee that we will be able to obtain any additional financing or
that such additional financing, if available, will be on terms and conditions
acceptable to us.
Our management owns a majority of our outstanding voting shares and we rely on
our management for all business decisions, and consequently your investment in
us will not give you the right to take part in day-today management of our
operations.
Our management, including Henry Herzog, Levi Mochkin and Jonathan Herzog, and
affiliates of our management currently own 79.27% of our outstanding stock and
voting rights. Even if we sell all 25,000,000 shares in this offering, our
management and their affiliates will still collectively own approximately 65%
of our outstanding shares. In addition, we rely on our management to make all
of our business decisions. Consequently, your ownership of our common stock
will not give you the right to take part in the day-to-day management of our
9<PAGE>
operations, and you should not participate in this offering unless you are
willing to entrust all aspect of our business and operations to our board of
directors and management.
After this offering, a large number of our outstanding shares of common stock
may be freely tradeable and eligible for sale, and this could adversely effect
the price of our common stock.
The market price of our common stock could drop due to the sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of our common stock.
After this offering, if all the 25,000,000 shares are sold, 140,783,356 shares
of our common stock will be outstanding. Of these shares, the 25,000,000 shares
sold in this offering, 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 majority
stockholders, with the exception of Instanz Nominees Pty Ltd., have entered
into lock-up agreements pursuant to which they have agreed not to offer or sell
any shares of our common stock without first obtaining the written consent of
the other officers, directors and majority shareholders. 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, 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 its shares until such time
as Instanz has received $2,500,000. Instanz Nominees' registration rights will
lapse upon the sale of shares that results in Instanz receiving $2,500,000 in
net proceeds, or upon the termination of Instanz Nominees Pty. Ltd.'s
registration rights. After the date of this prospectus, we intend to file a
registration statement under the Securities Act to register all shares of
common stock issuable upon the exercise of outstanding stock options and
reserved for issuance under our stock option plans. This registration statement
is expected to become effective immediately upon filing, and subject to the
vesting requirements and exercise of the related options, as well as the terms
of the lock-up agreements, shares covered by this registration statement will
be eligible for sale in the public markets.
Our business may be harmed because we have not completed the filing of our
trademark and patent applications and we do not have any registered copyrights.
All of our and Stampville's software was acquired from third parties. Neither
we nor Stampville have registered copyrights on any software. We rely upon
confidentiality agreements signed by our employees. Stampville applied on
August 13, 1999 with the United States Patent & Trademark Office for
registration of "Stampville.Com" and three designs, combined with words,
letters and/or numbers as trade and service marks. Stampville has received
preliminary comments from the United States Patent and Trademark Office
regarding the application and is in the process of responding to those
comments. VideoDome has indicated that it intends to file several patent claims
addressing, among other things, scalable video conversion processes, dynamic
10<PAGE>
directories, cataloging and administration. There is no guarantee that either
Stampville or VideoDome will successfully complete their respective trademark
and patent applications. In the event Stampville or VideoDome fails to complete
their respective trademark or patent applications, the companies may suffer the
risk of having competing companies making use of their respective marks and
technology. In such a case, both Stampville and VideoDome would lose the
exclusive use of their respective marks and technology, thereby losing a
significant portion of their respective business ground.
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the 25,000,000 shares
of common stock offered by this prospectus, will be approximately $2,450,000,
if 100% of the shares offered are sold, or 1,200,000 if 50% of the shares
offered are sold. This estimate is based on an assumed initial public offering
price of $.10 per share, and after deducting the additional estimated offering
expenses. This does not include $613,781 in expenses associated with this
offering in its prior form, which have been paid by the company. The following
table shows the Company's use of proceeds if 25%, 50%, 75%, or 100% of the
shares are sold. Further, there can be no assurance that any shares will be
sold in this offering.
10% 25% 50% 75% 100%
-------- -------- -------- ------- ------
Additional Investment
in VideoDome $0 $100,000 $300,000 $500,000 $900,000
Loan Advance
to Stampville $0 $115,000 $500,000 $650,000 $750,000
Payment of debt to
affiliates $0 $ 0 $ 40,000 $250,000 $250,000
Partial payment of
balance owed on
building housing
executive offices
in Melbourne
Australia $0 $ 0 0 $65,000 $190,000
Working Capital $200,000 $360,000 $360,000 $360,000 $360,000
-------- -------- -------- ------- --------
Totals $200,000 $575,000 $1,200,000 $1,825,000 $2,450,000
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 $2,000,000 from the sale of common stock in this
offering, we have agreed to provide an unsecured loan to Stampville of
$750,000. We may also continue to make further payments under our amended
agreement with VideoDome. Depending on how much additional proceeds we receive
from this offering, we will retain at least $360,000 for working capital
purposes, we may repay up to $250,000 owed to affiliates and part of the
11<PAGE>
balance owed on the building housing our executive offices and invest the
remainder in VideoDome. At this time, there are no plans, proposals,
arrangements or understandings for the acquisition of other companies.
Additional investments in VideoDome are not mandatory and will be subject to
the availability of additional funding to complete our entire investment in
VideoDome. Pending use, the net proceeds will be invested in short-term
investment-grade instruments, certificates of deposit or direct or guaranteed
obligations of the United States government.
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 525,000,000 shares
of capital stock, of which 25,000,000 shares are preferred stock and
500,000,000 shares are common stock. The amount of capital stock stated above
has been restated to account for a five-for-one stock split approved by
shareholders on November 6, 2000. In connection with this offering, the board
of directors has authorized the issuance of up to 25,000,000 shares to be
issued to investors.
The following table sets forth the following information as of the date stated:
- the actual capitalization of the company:
SEPTEMBER 30, 2000
------------------
Payables due to Stampville.com $ 360,000
===========
Notes payable -long term $ 381,850
Stockholders'equity ===========
Preferred stock, par value $.001;
authorized 25,000,000 shares; no shares
issued and outstanding actual and pro forma -
Common stock, par value $.0002; authorized
500,000,000 shares, issued and
outstanding 82,500,000 shares actual;
146,533,356 shares outstanding pro forma 16,500
Additional paid-in capital 3,055,509
Deficit accumulated during the
development stage (1,638,191)
----------
Total stockholders' equity $ 1,433,818
==========
Total capitalization $ 2,175,668
===========
PRO FORMA FINANCIAL STATEMENTS
The following unaudited Pro Forma Balance Sheet as of September 30, 2000 and
unaudited Pro Forma Statements of Operations from February 2, 1999, our date of
inception, through December 31, 1999, and for the nine months ended September
30, 2000 give effect to the acquisition of equity interests in Stampville and
VideoDome assuming that all of the shares in the offering are sold. The pro
forma information is based on the historical consolidated financial statements
of the company giving effect to the transaction using the purchase method of
accounting and the assumptions and adjustments described in the accompanying
notes to the unaudited Pro Forma Financial Statements. The unaudited Pro Forma
Statements of Operations gives effect to the acquisition as if it occurred at
the beginning of the period, or February 2, 1999, our date of inception. The
unaudited Pro Forma Balance Sheet gives effect to the acquisition as of
September 30, 2000.
The unaudited pro forma statements have been prepared by our management based
upon audited financial statements of the company and Stampville, which are
included elsewhere herein. These pro forma statements may not be indicative of
the results that actually would have occurred if the acquisition was completed
on February 2, 1999, or September 30, 2000. The unaudited pro forma statements
should be read in conjunction with the audited financial statements and related
notes of the company and Stampville.
13<PAGE>
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
IT Technology Stampville Pro Forma Pro Forma
Historical Historical Adjustments Consolidated
12/31/99 12/31/99 12/31/99
------------- ---------- ----------- ------------
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) - (161,442)
Salaries and consultants (66,618) (115,384) (175,000) (1) (357,002)
Travel and entertainment (33,675) (23,328) - (57,003)
Rent - (11,000) - (11,000)
Other (33,715) (86,642) - (120,357)
Loss on investment in Stampville (185,955) - 185,955 (2) -
Technology costs - (101,696) - (101,696)
Amortization of excess purchase price
over net assets acquired - - (622,628) (3) (622,628)
Minority interest - - 185,213 (2) 185,213
------------- ---------- ----------- ------------
Net loss $ (419,443) $(371,168) $(426,460) $ (1,217,071)
============== ========== =========== ==============
Basic loss per common share $ (0.01) $ (0.01)
============== ==============
Diluted loss per common share $ (0.01) $ (0.01)
============== ==============
Weighted average shares outstanding 56,110,695 121,533,356 (4)
============== =============
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14<PAGE>
[CAPTION]
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF 0PERATIONS
1) Recognition of compensation expense of $175,000 related to the issuance of
1,750,000 shares of restricted common stock to Mendel Mochkin for consulting
services. The restricted shares were valued at the initial public offering
price of $0.10 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 percent minority interest share in the loss of
Stampville.
3) Amortization of goodwill of $1,867,884, which is being amortized on a
straight-line basis over a useful life of 36 months.
4) Assumes that all shares issued during the fiscal years 1999 and 2000 and
shares issued in this offering have been outstanding since the beginning of the
period.
15<PAGE>
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
IT Technology Stampville Pro Forma
Historical Historical Adjustments Consolidated
09/30/00 09/30/00 09/30/00
------------- ---------- ----------- ------------
INCOME AND EXPENSES
Revenue $ - $ 13,162 $ - $ 13,162
Cost of goods sold - (7,818) - (7,818)
Foreign currency transaction gain 62,654 - - 62,654
Interest,net (173,135) 144,887 - (28,248)
Salaries and consultants (152,840) (993,425) (175,000) (1) (1,321,265)
Legal and professional fees (74,351) (64,560) - (138,911)
Travel and entertainment (39,666) (48,978) - (88,644)
Rent - (83,470) - (83,470)
Technology costs - (233,223) - (233,223)
Advertising and promotion - (139,088) - (139,088)
Other (47,118) (190,823) - (237,941)
Equity in the net loss of Stampville (803,271) - 803,271 (2) -
Amortization of excess purchase price
over net assets acquired - - (466,971) (3) (466,971)
Other income 8,979 - 8,979
Minority interest in Stampville - - 800,064 (2) 800,064
------------- ---------- ----------- ------------
Net loss (1,218,748) (1,603,336) $ 961,364 $(1,860,720)
============= =========== =========== ============
Basic loss per common share $ (0.01) $ (0.02)
============= ============
Diluted loss per common share $ (0.01) $ (0.02)
============= ============
Weighted average shares outstanding 82,500,000 121,533,356 (4)
============= ============
</TABLE>
16<PAGE>
[CAPTION]
Notes to Unaudited Pro Forma Consolidated Statement of 0perations
1) Recognition of compensation expense related to the issuance of 1,750,000
shares of restricted common stock to Mendel Mochkin for consulting
services. The restricted shares were valued at the initial public offering
price of $0.10 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 $800,064 represents the minority interest share of 49.9
percent of the loss from operations of Stampville.
3) Amortization of goodwill of $1,867,884, which is being amortized on a
straight-line basis over a useful life of 36 months.
4) Assumes that all shares issued during the fiscal year 2000 and shares
issued in this offering have been outstanding since the beginning of the
period.
17<PAGE>
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IT TECHNOLOGY, INC UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
IT Technology Stampville Pro Forma Pro Forma
Historical Historical Adjustments Consolidated
09/30/00 09/30/00 09/30/00
------------- ---------- ----------- ------------
CURRENT ASSETS
Cash $ 82,224 $ 7,594 $ 180,000 (4) $ 619,818
(100,000)(6)
450,000 (7)
Accounts and other receivables - 1,367 1,367
Inventory - 39,611 - 39,611
Prepaid expenses 13,390 13,931 - 27,321
------------- ---------- ----------- ------------
Total current assets 95,614 62,503 530,000 688,117
Property and equipment, net 631,630 140,594 - 772,224
Investment in Stampville.com, Inc. 1,606,435 - 500,000 (2) -
(2,106,435)(3) -
Investment in VideoDome 300,000 - 100,000(6) 400,000
Deposits - 8,300 - 8,300
Deferred offering costs 613,781 - - 613,781
Technology costs - 168,237 - 168,237
Excess purchase price over
net assets acquired - - 1,867,884 (3) 1,867,884
------------- ---------- ----------- ------------
Total assets $3,247,460 $379,634 $ 891,449 $4,518,543
============= ========== =========== ============
CURRENT LIABILITIES
Accounts payable $27,463 $ 73,840 $ - $101,303
Accrued expenses 69,329 43,320 (23,801)(5) 88,848
Notes payable 975,000 - 180,000 (4) 250,000
18<PAGE>
(905,000)(5)
Payable to Stampville 360,000 - (360,000)(3) -
Capital lease obligations - 1,317 - 1,317
------------- ---------- ----------- ------------
Total current liabilities 1,431,792 118,477 (1,108,801) 441,468
Notes payable - long term 381,850 - - 381,850
Minority interest in Stampville - - 382,606(3) 382,606
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.001 - - - -
Common stock, par value $0.0002 16,500 1,000 350 (1) 66,217
1,000 (2)
(1,000)(3)
46,567 (5)
1,800 (7)
Additional paid-in-capital 3,055,509 2,594,661 174,650 (1) 5,059,593
499,000 (2)
(2,594,661)(3)
882,234 (5)
448,200 (7)
Receivable due from shareholder - (360,000) 360,000 (3) -
Deficit accumulated during
the development stage (1,638,191) (1,974,504) (175,000)(1) (1,813,191)
1,974,504 (3)
-
----------- -------- ----------- ------------
Total Stockholders' equity 1,433,818 261,157 1,617,644 3,312,619
----------- -------- ----------- ------------
Total Liabilities and
Stockholders' Equity $3,247,460 $379,634 $ 891,449 $ 4,518,543
========== ======== =========== ===========
(1) Recognition of compensation expense related to the issuance of 1,750,000 shares of restricted
common stock to Mendel Mochkin for consulting services. The restricted shares were valued at the
initial public offering price of $0.10 per share.
(2) To record 5,000,000 restricted shares issued to the principal stockholder of Stampville
subsequent to September 30, 2000. The restricted shares were valued at $0.10 per share.
(3) To eliminate the investment account upon consolidation and record excess purchase price over net
assets acquired.
</TABLE>
<TABLE>
<S> <C> <C>
The following table summarizes the net assets acquired:
Cash consideration given:
Cash paid to Stampville as of September 30, 2000 $ 2,381,250
Cash paid subsequent to September 30, 2000
and prior to this Offering 173,000
Cash payable per Amended stock purchase agreement 187,000
----------
Total consideration given $ 2,741,250
==========
Company's share of the cash given $ 1,367,884
Shares issued 500,000
----------
Purchase price of 50.1% interest in Stampville $ 1,867,884
==========
(4) To record $180,000 additional loan from Ledger subsequent to September 30, 2000
(5) To record the conversion of Note and accrued interest through September 30, 2000 to Ledger into
equity subsequent to September 30, 2000 (23,283,356 shares at $.04 per share).
(6) To record $100,000 investment in Videodome made subsequent to September 30, 2000.
(7) To record the proceeds from a private placement of 9,000,000 shares @ $0.05 per share subsequent
to September 30, 2000
</TABLE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of November 6, 2000, there were 115,783,356 post-split shares of common
stock which are deemed to be beneficially owned and outstanding. These shares
are set forth in the following table. These 115,783,356 post-split 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 5,000,000 post-split shares which
are subject to currently outstanding agreements or options granted to Robert
Petty, up to 1,750,000 post-split shares which may be issued to Mendel Mochkin,
4,000,000 post-split shares reserved for issuance to Jonathan Malamud, in
addition to 200,000 pre-split (1,000,000 post-split) shares issued on November,
pursuant to amendment no. 2 to the stock purchase agreement between the company
and Stampville, and the 25,000,000 shares which may be issued in connection
with this offering, the company does not have any outstanding commitments to
issue common stock.
<TABLE>
<S> <C> <C>
NUMBER OF SHARES NUMBER OF SHARES
BEFORE OFFERING AFTER OFFERING
---------------- ----------------
Ledger Technologies Pty. Ltd.(2)
Sunswipe Australasia Pty. Ltd.(2)
Levi Mochkin(2) . . . . . . . . . . 63,783,356 55.09% 63,783,356 45.31%
Instanz Nominees Pty. Ltd(3)
Helen Abeles(3) . . . . . . . . . . 18,500,000 15.98% 18,500,000 13.14%
Riccalo Pty. Ltd.(4)
Henry Herzog(4) . . . . . . . . . . 10,000,000 8.64% 10,000,000 7.10%
Eurolink International Pty. Ltd.(5)
Jonathan Herzog(5). . . . . . . . . 10,000,000 8.64% 10,000,000 7.10%
Tilbia Nominees Pty. Ltd.(6)
David Landauer(6)
Anthony Davis(6). . . . . . . . . . 8,000,000 6.91% 8,000,000 5.68%
Jonathan Y. Malamud(7) . . . . . . . . 1,000,000 0.86% 1,000,000 0.71%
Atcor Aus. Pty Ltd . . . . . . . . . . 3,750,000 3.24% 3,750,000 2.7%
Mendel Mochkin . . . . . . . . . . . . 750,000 0.01% 750,000 0.01%
All Directors and
Officers as a Group (5 Persons). . . . 91,783,356 79.27% 91,783,356 65.19%
</TABLE>
(1) Pursuant to the rules promulgated by the SEC, all shares underlying
options which were exercisable on November 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 our Chief Executive
Officer, is a director of Ledger Technologies Pty. Ltd. and Sunswipe
Australasia Pty. Ltd. Levi Mochkin is an affiliate of Ledger Technologies Pty.
Ltd. and Sunswipe Australasia Pty. Ltd. and may be deemed to be a beneficial
owner of the 54,783,356 shares held by Ledger Technologies Pty. Ltd. and the
9,000,000 shares held by Sunswipe Australasia Pty. Ltd. Lisa Mochkin is the
daughter of Henry Herzog and the sister of Jonathan Herzog.
(3) Helen Abeles, a former 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) Tilbia Nominees Pty. Ltd. hold shares of common stock for Anthony Davis,
David Landauer and their affiliates. Mr. Davis and Mr. Landauer exercise shared
investment and voting power over these shares and may be deemed to be the
beneficial owner
thereof.
(7) Does not include 4,000,000 shares in addition to 200,000 pre-split
(1,000,000 post-split) shares issued on November 1, 2000, reserved for
issuance to Jonatahan Malamud, pursuant to the second amended stock purchase
agreement between the Company and Stampville.
(8) Does not include 5,000,000 shares subject to options granted to Robert
Petty.
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 September 30, 2000, the net tangible book value of the
company was approximately $820,037, or $0.01 per share.
The following table assumes the sale of 100% of all the shares offered in this
offering. As of September 30, 2000, our pro forma net tangible book value, as
adjusted for the subsequent private placement of 9,000,000 shares of common
stock, the subsequent conversion of notes payable to affiliates in to
23,283,356 shares of common stock, the subsequent issuance of 1,000,000 shares
of common stock to Jonathan Y. Malamud and the sale of 25,000,000 shares of
common stock offered in this offering at an offering price of $0.10 per share
and the application of the net sale proceeds, after deducting offering expenses
of $50,000, would increase from $0.01 to $0.02 per share. This represents an
immediate increase in net tangible book value of $0.01 per share to the current
shareholders, and immediate dilution of $0.08 per share to new investors:
THE FOLLOWING TABLE ASSUMES 100% OF THE SHARES SOLD
Initial public offering price $ 0.10
Net tangible book value as of September 30, 2000 $ 0.01
Increase attributable to new investors $ 0.01
-------
Pro forma net tangible book value after the Offering $ 0.02
-------
Dilution in net tangible book value to new investors $ 0.08
=======
Percentage dilution to new investors 79.0%
THE FOLLOWING TABLE ASSUMES 50% OF THE SHARES SOLD
Initial public offering price $ 0.10
Net tangible book value as of September 30, 2000 $ 0.01
Increase attributable to new investors $ 0.00
-------
Pro forma net tangible book value after the Offering $ 0.01
-------
Dilution in net tangible book value to new investors $ 0.09
=======
Percentage dilution to new investors 86.0%
<TABLE>
<S> <C> <C> <C> <C> <C>
THE FOLLOWING TABLE ASSUMES 100% OF THE SHARES SOLD
SHARES PURCHASED TOTAL CONSIDERATION
------------------------------ ------------------------------ AVERAGE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ------------ ----------- ---------
Existing shareholders ......... 121,533,356 82.9% $ 4,540,084 78.4% $ 0.04
New investors ................. 25,000,000 17.1% $ 2,500,000 21.6% $ 0.10
----------- ----------- ------------ ----------- ---------
Total ................ 146,533,356 100.0% $ 7,040,084 100.0% $ 0.05
=========== =========== ============ =========== =========
</TABLE>
<TABLE>
THE FOLLOWING TABLE ASSUMES 50% OF THE SHARES SOLD
<S> <C> <C> <C> <C>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------------ ------------------------------ AVERAGE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ------------ ----------- ---------
Existing shareholders ......... 121,533,356 90.7% $ 4,540,084 78.4% $ 0.04
New investors ................. 12,500,000 9.3 % $ 1,250,000 21.6% $ 0.10
----------- ----------- ------------ ----------- ---------
Total ................ 134,033,356 100.0% $ 5,790,084 100.0% $ 0.04
=========== =========== ============ =========== =========
</TABLE>
The above tables do not include options granted to Robert Petty to purchase
5,000,000 post-split shares of common stock over th next three years at a price
of $0.10 per share.
If these options are exercised or the shares are issued 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
OVERVIEW AND PLAN OF OPERATIONS
The company was formed in February 1999 and is in the early stage of
development. We are engaged in Internet, e-commerce and other technology
businesses. We expect to add value to operating companies by providing active
and ongoing management infrastructure, support, funding, and expertise. Our
goal is to identify entities that have high growth potential and can benefit
from the commercial and financial expertise of our personnel. We assist in the
development and recruitment of key management to support accelerated financial
and operational growth and enhanced efficiency. Our practice is to emphasize
relationships in which our resources can enhance the creative and technological
skills of our partners.
We do not have any meaningful revenues, and will not generate any
meaningful revenues until after we implement our strategic plan and attract and
retain a significant number of e-commerce and related businesses. We do not
anticipate generating any meaningful revenue for at least several months, if at
all.
Depending upon the level of our business activity, we anticipate that we
will use a portion of the proceeds of this offering to hire several additional
employees over the next twelve months to market our services to potential
businesses and develop the infrastructure of Stampville and potentially
VideoDome. Beyond the development of Stampville and potential
further investments in VideoDome, we are continually reviewing and considering
e-commerce and other related enterprises and ventures, but have not made any
commitments at this stage. At this time, there are no plans, proposals,
arrangements or understandings for the acquisition of other companies.
A portion of the proceeds from this offering will be loaned to Stampville.
Subject to the availability of financing, Stampville's business plans
contemplate a continuance of development of a portal community Web site for the
collectable postage stamp community that will service a wide range of areas
surrounding the stamp market and possibly other areas of interest, which may
include coins and sports memorabilia. These plans contemplate expansion beyond
hobbyists and collectors to the art, entertainment and other targeted specialty
markets and to develop a wholesale distribution channel for sale of its
products as well.
We have generated losses from our inception and anticipate that we will
continue to incur significant losses until, at the earliest, we generate
sufficient revenues to offset the substantial up-front expenditures and
operating costs associated with establishing, attracting and retaining a
significant business base. Since our inception through September 30, 2000 our
cumulative net losses were $1,638,191. There can be no assurance that we will
be able to attract and retain a sufficient number of e-commerce businesses to
generate meaningful revenues or achieve profitable operations.
Nine months ended September 30, 2000
For the nine months ended September 30, 2000, total payments to Stampville
were $1,881,250. Through September 30, 2000, we invested a total of $2,381,250
in Stampville. In particular we established business infrastructure, launched
the web site and continued development of our database of stamp information
involving scanning and data entry on each stamp.
On July 28, 2000, we exercised our option to purchase an additional 5% of
the equity interest in VideoDome for $150,000, through our wholly owned
subsidiary, Bickhams Capital, Inc., pursuant to our agreement from March 24,
2000. On October 31, 2000 the agreement with VideoDome was amended, granting us
an option to acquire up to a 50.1% equity interest in VideoDome.Com Networks,
Inc., a provider of streaming video services on the Internet to consumer and
corporate clients. The amended agreement provides for us to increase our equity
interests in VideoDome to 25% by payment of the sum of $1,000,000 in ten equal
monthly payments. It further gives us the option to purchase up to a 50.1%
equity interest in VideoDome at a price of $4,000,000, for the period
commencing November 2, 2000 and terminating on August 31, 2001, and a final
option to purchase an additional 25% equity interest in VideoDome for
$20,000,000 provided certain other conditions are met.
As a result of these activities, we incurred a net loss of $1,218,748 for
the nine month period. As we made our initial investment in Stampville on June
18, 1999, our activities during the third quarter of 1999 were essentially
limited to that of assisting in the establishment of Stampville and preparing
to raise capital, our net loss in that quarter was $62,823.
On June 6, 2000, Ledger Technologies Pty. Ltd entered into a loan
agreement with us, which resulted in us receiving a total of $825,000 in
advances as at September 30, 2000 to fund our working capital needs, including
quarterly payments to Stampville. Ledger Technologies, Inc. is one of our
stockholders. Lisa Mochkin, a director of Ledger Technologies, Inc., is the
wife of Levi Mochkin, our Chief Executive Officer and director. On November 6,
2000, this loan was converted to common stock at $0.04 per share (post-split).
In addition, on or about August 1, 2000, Instanz Nominees Pty. Ltd. lent us
$150,000 to supplement our working capital needs and additional payments to
Stampville through the month of August, 2000. Instanz Nominees is also a
stockholder and Helen Abeles, an affiliate of Instanz, is a former director of
the company. This loan bears interest at the rate of ten percent (10%) per
year.
Fiscal Year ended December 31, 1999
During 1999 our principal activities consisted of initial formation
activities, the assembly of our current management team, the raising of capital
through private placements and our location of and acquiring interests in
Stampville.Com Inc. Prior to December 31, 1999, we issued 16,500,000 shares
(82,500,000 post-split shares) of common stock to various entities that are
affiliates of certain officers and/or directors of the company and received
cash proceeds of $3,151,250 and services of $7,500. In mid-1999, we signed an
agreement with Stampville.Com Inc., a newly-formed company. Stampville is being
developed to become a global center for stamp products and services and
potentially other collectibles such as coins and sports memorabilia. We have
assisted the founders of Stampville in developing this enterprise, recruiting
key management and implementing systems to advance its development and prepare
it for the initial launch of its main web site during the second quarter of
2000. In December 1999, Stampville became a 50.1% owned subsidiary of ours.
Pursuant to the terms of our agreement with Stampville, as initially amended,
our 50.1% interest may be reduced in the event we do not complete our funding
of up to $7,750,000 in Stampville. Our ownership interest in Stampville may
also be reduced in the event we arrange for third party financing in lieu of
our direct investment in Stampville. For the period from February 2, 1999, our
date of inception, to December 31, 1999, we incurred a net loss of $419,443.
The terms of this agreement have since been changed.
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 maintain the
operations of Stampville, acquire an additional 13.5% 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 and loans from
our affiliates. Until such time as we raise additional funds in this offering,
we will seek to obtain additional financing through loans from our affiliates,
at their discretion, and or debt or equity financing (in private placements) to
finance our operations. At September 30, 2000, we had working capital deficit
of $1,336,178, which deficit included an $825,000 loan payable to Ledger
Technologies, Pty Ltd, which was converted to common stock, and a $150,000 loan
payable to Instanz Nominees Pty Ltd, which Instanz and we agree will be paid
after we receive additional financing and at that time upon our mutual
agreement. Accordingly, although this loan may not be paid in the next 12
months, we have earmarked some of the net proceeds of this offering for payment
of this and other loans to affiliates.
In July 1999, we entered into an agreement to purchase a building in
exchange for cash and a note payable in Australian dollars which as of
September 30, 2000 equaled to approximately $381,850 USD. Such indebtedness
bears interest at the rate of 7.25% per annum and is repayable in July 2001. We
will use a portion of the proceeds of the maximum offering to repay such
indebtedness. In the event the exchange rate of Australian dollars to U.S.
dollars increases, the amount of U.S. dollars required to settle this
obligation, as well as any other obligations we have in Australia to be paid in
Australian dollars, will increase.
The capital requirements relating to implementation of our business plan
will be significant. During the twelve months following the consummation of
this offering, we intend to loan Stampville the sum of $750,000, and possibly
increase our interest in VideoDome with an investment of up to $900,000, 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. Depending on how long
it takes for us to raise additional capital, we may borrow additional funds for
our working capital requirements through loan transactions with parties related
or affiliated with us, which may be repaid out of the proceeds of the offering
or debt or equity financing (through private placements to a limited number of
accredited investors.) 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 $360,000,
which should be sufficient to satisfy our contemplated working capital
requirements for approximately one year following the consummation of this
offering.
If we receive at least $2,000,000 from the sale of common stock in this
offering, we have agreed to provide an unsecured loan to Stampville of
$750,000. If we or Stampville do not obtain additional financing, Stampville
will reduce its work force, curtail research and development activities,
cataloging efforts and expansion plans, and instead will focus its operations
principally on the sale of stamps. Accordingly, we believe that with our
continued support, together with Stampville's significant reduction in
activities and operating expenses discussed above, Stampville will be able to
operate for at least twelve months, even if Stampville does not generate
material revenues from the sale of stamps.
As previously noted, we intend to retain $360,000 for working capital,
which we believe to be sufficient to support our operations for at least twelve
months. In the event that our plans change, our assumptions change or prove to
be inaccurate, or if the proceeds of this offering prove to be insufficient to
implement our business plans, we would be required to seek additional financing
sooner than currently anticipated. There can be no assurance that the proceeds
of this offering will be sufficient to permit us to implement our proposed
business plan or that any assumptions relating to the implementation of such
plan will prove to be accurate. To the extent that the proceeds of this
offering are not sufficient to enable us to generate meaningful revenues or
achieve profitable operations, the inability to obtain additional financing
will have a material adverse effect on us. There can be no assurance that any
such financing will be available to us on commercially reasonable terms, or at
all.
RECENT DEVELOPMENTS
On October 13, 2000, we entered into an amended stock purchase agreement
with Stampville, which maintained our right to an equity interest of 50.1% in
Stampville, in exchange for the reduced sum of $2,741,250; of which a remaining
$94,000 was paid on or about November 29, 2000, and the issue of 5,000,000
post-split shares to Jonathan Y. Malamud or his nominee.
On November 6, 2000, our shareholders approved a five-for-one split of our
common shares, which increased our authorized capital to 500,000,000 common
shares.
On October 31, 2000, our previous option to acquire an additional 40.1% of
VideoDome expired. On the same date we entered into a newly amended and
restated stock option agreement with VideoDome, granting us the right to
increase our previous holdings of 10% of VideoDome and initially acquire up to
25% of the outstanding capital stock of VideoDome at an exercise price of
$1,000,000; payable in ten monthly installments, with subsequent options to
move to a 50.1% equity interest and potentially beyond. On November 9, 2000, we
paid the first monthly installment of $100,000, increasing our holdings in
VideoDome to 11.5%. We are under no obligation to exercise the options to
purchase the further interests in VideoDome.
From June 6, 2000 through October 20, 2000, Ledger Technologies Pty. Ltd.
loaned us $905,000, which was used to make further quarterly payments to
Stampville, for working capital, and to exercise the second tranche to purchase
an additional 5% of the equity interest in VideoDome. Ledger Technologies is
one of our stockholders. Lisa Mochkin, a director of Ledger Technologies, is
the wife of Levi Mochkin, our Chief Executive Officer and director. On October
24, 2000, the Board of Directors offered Ledger and Instanz the right to
convert their debts to common stock, and, as of November 6, 2000, Ledger
accepted, and was issued 23,283,356 post-split shares of common stock which
paid in full the debt of $905,000 plus $26,334.25 in interest.
As of December 5, 2000, Ledger Technologies Pty Ltd loaned us an
additional $200,000 for working capital, which was used in the performance of
our revised and restated stock option agreement with VideoDome. This loan also
bears interest at the rate of ten percent (10%) and is payable in equivalent
Australian dollars.
INFLATION
We have not been materially affected by inflation in the United States.
While we do not anticipate inflation affecting our operations, increases in
labor and supplies could impact our ability to compete.
YEAR 2000 COMPLIANCE AND COSTS
As has been widely reported, there has been worldwide concern that Year
2000 technology problems would materially and adversely impact a variety of
businesses and local, national and global economies. While relatively few
disruptions were reported on and after December 31, 1999, concerns remain that
there will be a delayed effect to computer users. As a newly formed entity, we
have acquired computer hardware and software which has been represented to us
as Year 2000 compliant, and we do not expect future expenses associated with
ongoing compliance to be material to our financial position or future results
of 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, and October 13, 2000, 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. As of November 29, 2000, we have invested $2,741,250, in
order to complete our obligation under the agreement.
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 was exercisable
in three tranches. On April 10, 2000 and July 28, 2000, we exercised the first
two of our tranches to purchase equity in VideoDome by investing an aggregate
of $300,000 in exchange for 10% equity interest in VideoDome. On or about
October 31, 2000, our option expired and we entered into an amended and
restated stock option agreement with VideoDome, which changes the terms of our
option to purchase up to a 50.1% equity interest in VideoDome. The terms of the
new agreement provides us initially with an option to purchase an amount of
shares in VideoDome which will bring our equity interest in VideoDome up to 25%
of the outstanding common stock, upon the payment of $1,000,000, payable in ten
equal monthly installments commencing November 15, 2000; and a further option
upon completion of this, to purchase additional shares such that our equity
ownership in VideoDome may increase to a 50.1% equity interest by the payment
of an additional $4,000,000,on or before August 31, 2001. Beyond this, we have
a further option to acquire an additional 25% equity interest for approximately
$20,000,000, with an escalating exercise price clause in the event of certain
conditions. We currently have an 11.5% equity interest in VideoDome.
We currently maintain executive offices in Melbourne, Australia and
Brooklyn, New York.
INDUSTRY BACKGROUND
The Internet
The Internet is a global web of over 50,000 computer networks, the first
of which were developed over 25 years ago. The Internet was originally
installed using UNIX-based computers, a development of AT&T, a telephone
company, which had very sophisticated communications capabilities for its time.
At first, although the Internet served the objectives of the United States
Department of Defense, it was looked upon by others as awkward due to its
arcane commands and inaccessibility to persons without specific technical
training. This hampered its growth for a considerable period of time.
A key breakthrough to the accessibility of the Internet occurred with the
development of the communications transport protocol "TCP/IP," which made it
possible for each Internet computer to pass on packets of information to
different types of computers without using a switchboard. Using TCP/IP, any
computer can link onto the Internet and its conglomeration of networks for a
cost that is fundamentally lower than, and structured differently from, the
cost of linking onto stand-alone networks.
Communication on the Internet occurs primarily between a client and a
server, or so-called host computers. The client computer initiates a request
for information or other activity and the server computer responds to, or
serves, that request. Furthermore, server computers run specialized software
specifically designed to provide a variety of services to client computers.
Notably, many host computers operate as mail servers or file servers that
enable the downloading or transferring of files. The Internet has historically
been used by academic institutions, defense contractors and government agencies
primarily for remote access to host computers and for sending and receiving
electronic-mail and has traditionally been subsidized by the United States
Federal Government. As an increasing number of commercial entities have come to
rely on the Internet for business communications and commerce, the level of
federal subsidies has significantly diminished and funding for the Internet
infrastructure and backbone operations has shifted primarily to the private
sector and end users. In addition, according to industry market research, as
far back as October 1994 the number of commercial domains on the Internet
surpassed the number of educational domains.
World Wide Web
Much of the recent growth in Internet use by businesses and individuals
has been driven by the emergence of a network of servers and information
available on the Internet called the World Wide Web. The Web, based on a
client/server model and a set of standards for information access and
navigation, can be accessed using software that allows non-technical users to
exploit the capabilities of the Internet. The Web enables users to find,
retrieve and link information on the Internet in a consistent manner which
renders the underlying complexities irrelevant to the lay user. Electronic
documents are published on Web servers in a common format described by Hyper
Text Mark-up Language, or HTML, which is a series of tags or codes added to a
text document to format a document or add links to other documents. Web client
software can retrieve these documents across the Internet by making requests
using a standard protocol called HyperText Transfer Protocol, or HTTP. Browsers
and HTML are an essential part of the success of the Internet and the
continuing growth in the number of users. Browsers allow a user to wander
around the Internet with relative ease while HTML allows the exhibitor of a Web
page to navigate to either some other page at that particular Web site or to a
relevant page at another Web site. The introduction of commercial Web pages
introduced a new and substantial opportunity for users of the Internet.
The proliferation of Web users has created significant demand for software
to enable Internet servers and private servers on corporate networks to
function as Web sites, which are used by content providers to offer their
products and services on the Internet and to publish confidential company
information to employees inside the enterprise.
E-commerce
E-commerce provides companies with the opportunity to serve a rapidly
growing market as consumers increasingly accept the Internet as an alternative
shopping vehicle. Growth in Internet usage has been 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
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.
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 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
Media Manager - This product, which was developed by VideoDome, allows
VideoDome, through a simple web interface, to build global channels and
individual content channels which are then tailored for individual need. It
allows for management of the media and provides flexibility by enabling
functions such as powerful video search, filtering, customization, interstitial
ad placement and more.
VideoDome's Media Manager is customizable and can support a variety of
page layout, look and feel on the front end with a feature set on the
interface. The video can also be customized to display at various sizes and
quality of transmission.
ACQUISITION OF EQUITY INTEREST IN STAMPVILLE
We hold a 50.1% equity interest in Stampville, pursuant to our stock
purchase agreement, as amended on October 13, 2000 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 first 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. Pursuant to
the second amended stock purchase agreement, Stampville agreed to decrease the
payment to $2,741,250, plus 5,000,000 post-split shares of common stock to
Jonathan Y. Malamud or his nominee. As of November 29, 2000, we have completed
our obligation under the agreement and invested $2,741,250 in Stampville.
As part of the second amended stock purchase agreement, we have agreed
that if we raise at least $2,000,000 in this offering, we will make an
unsecured loan to Stampville of $750,000.
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 Robert Petty. 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.
ACQUISITION OF EQUITY INTEREST IN VIDEODOME
Through our wholly-owned subsidiary, Bickhams Capital, Inc., as of March
24, 2000, we entered into a stock option agreement which allows us to acquire
up to a 50.1% equity interest in VideoDome. The stock option agreement provides
that we may exercise our interest in VideoDome in three steps:
- As of April 10, 2000, we acquired 5% of the capital stock of
VideoDome for a price of $150,000.
- On July 28, 2000, we acquired an additional 5% of the capital
stock of VideoDome for an additional $150,000.
- We can acquire an additional 40.1% of the capital stock of
VideoDome for an exercise price of $5,000,000 after the exercise of the second
step and between August 1, 2000 and October 31, 2000.
On or about October 31, 2000, we entered into an amended and restated
stock option agreement with VideoDome, which changes the terms of our option to
purchase up to a 50.1% equity interest in VideoDome. The terms of the new
agreement provide us initially with an option to purchase an amount of shares
in VideoDome which will bring our equity interest in VideoDome up to 25% of the
outstanding common stock, upon the payment of $1,000,000, payable in ten equal
monthly installments commencing November 15, 2000; and a further option upon
completion of this, to purchase additional shares such that our equity
ownership in VideoDome may increase to a 50.1% equity interest by the payment
of an additional $4,000,000, on or before August 31, 2001. Beyond this, we have
a further option to acquire an additional 25% equity interest for approximately
$20,000,000, on the following terms and conditions:
- In the event VideoDome becomes a publicly traded company with a market
capitalization of at least $100 million, the exercise price increases by
$2,000,000 for each $10,000,000 of market capitalization of VideoDome in excess
of $100 million.
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. 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 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 September 30, 2000, we employed one full time employee in our
offices 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 four part time employees, including two who are officers. As of
November 1, 2000, Stampville employed 12 full-time employees and two part-time
employees, including consultants working for Stampville, also including three
executive officers. In addition, Robert Petty serves as Acting Chief Executive
and Financial Officer. 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 the same date, VideoDome had four full-time
employees, including two officers, four full time independent contractors, and
two part-time outside consultants.
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 $381,850 as of September 30, 2000, is due on July 9, 2001.
Pursuant to the terms of the purchase agreement the owner will register the
title to the property in I.T. Technology Pty. Ltd. upon payment in full of the
balance due on the loan. If we raise $2,500,000 through the sale of all of the
shares offered in this offering, we will pay off a part of this loan.
Stampville's offices and our New York office are located at 456 Fifth Avenue,
Suite 200, Brooklyn, N.Y. 11215. The telephone and facsimile numbers for our
New York office are (718) 499-2138 and (718) 499-2168, respectively. The
telephone and facsimile numbers for Stampville are (718) 369-8881 and (718)
369-6270, respectively.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims
arising out of our operations in the normal course of business. At this time,
we are not party to any legal proceeding.
RESEARCH AND DEVELOPMENT
STAMPVILLE - CURRENT DEVELOPMENT STATUS
As of October 30, 2000, Stampville has launched 17 separate "micro" Web sites,
www.beegeesstamps.com, www.elvisstamps.com, www.rockystamps.com,
www.monroestamps.com, www.baseballstamps.com, www.japanstamps.com,
www.popestamps.com, www.olympicstamps.com, www.inspacestamps.com,
www.thedianastamps.com, www.thejfkstamps.com, www.queenstamps.com,
www.titanicstamps.com, www.apollostamps.com, www.dinosaurstamps.com,
www.martialartsstamps.com, and www.startrekstamps.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 has launched its core web site and is launching additional "micro"
Web sites. Stampville's core site includes the following key components:
- a home page at www.stampville.com that focuses on relating Stamps to
current events.
- a data base of 30,000 stamps and a display of 10,000 stamps available for
sale, together with detailed descriptions of each stamp;
- the ability for collectors to add stamps to a personal wish list.
- 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.
- a microsites section that hosts all of the microsites created to date.
In addition, Stampville is considering the following enhancements for future
versions of its core Web site:
- an auction room;
- an extensive database of a large selection of stamps produced throughout the
world with images and key descriptive data.
- a fully capable trading site for collectors
- a business to business capable wholesale site.
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 five 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, the board of directors 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 75% of the board to
authorize any investment by the company in furtherance of these principal
business objectives.
The following table sets forth, as of November 1, 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.
NAME AGE POSITION
------------- --- --------
Levi Mochkin 39 Chairman of the Board, Chief
Executive Officer and Director
Henry Herzog 58 President and Director
Jonathan Herzog 29 Secretary, Chief Financial
Officer and Director
Anthony Davis 40 Director
Robert Petty 36 Vice President -- Business
Development of the company and
Acting Chief Executive and
Financial Officer of Stampville
and President of VideoDome
David Landauer 40 Director
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 Bay
Resources 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.
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.
DAVID LANDAUER
Mr. David Landauer has held seniors role in institutional equity sales both in
Europe and Australia, for over 21 years. From 1985 through 1989, he was an
associate director of Australian Equity Sales at McIntosh Hoare Govett. From
1989 through 1997, he served as head of European sales for Prudential Bache
Australia. Between 1997 and 1998 he was employed as director, head of European
sales, for ABN-AMRO Hoare Govett Australia. Since 1998, Mr. Landauer has been
the head of European sales for Burdett, Buckeridge & Young. From 1995 through
2000, he has also served as a director on the Eyres Reed Resources Fund, and,
since 1998, he has been a director of Golden Prospect Plc, a publicly traded
company in the United Kingdom.
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.
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 1999-2000. 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 of the board of directors and the
compensation committee will consist of three members. Since both of these
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 September 30, 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.
NAME AGE POSITION
------------------- --- --------------------------
Jonathan Y. Malamud 26 Director, President and
Vice President of Marketing
David Eli Popack 24 Director and Director of
Dealer Relations
Levi Mochkin 39 Director and Chairman of
the Board
Robert Petty 36 Acting Chief Executive
and Financial Officer
JONATHAN MALAMUD
Mr. Malamud is the founder of Stampville and has served as its President since
June 1999. Since December 1999 he has also served as Stampville's Vice
President of Marketing. Previously, from July 1998 to April 1999, he was
Manager of the Telemarketing Division of Sports Stamps Collectible Association
located in New York, New York. From May 1995 to February 1998, he was
Philatellic Show and Exhibit Coordinator for IGPC. Prior to joining IGPC, he
served as Campaign Manager for a mayoral candidate of the City of Beverly
Hills, California. Mr. Malamud also worked briefly in 1998 as a securities
trader for Precision Edge Securities Company located in New York, New York. Mr.
Jonathan Malamud is the son of Sam Malamud, the President and a major
shareholder of IGPC and the brother-in-law of David Eli Popack.
DAVID ELI POPACK
Mr. Popack has served as director, Secretary and Director of Dealer Relations
at Stampville since June 1999. Prior to co-founding Stampville in June 1999,
Mr. Popack was the personal assistant to the President of Inter-Continental
Trade and Finance Corporation, Toronto, Canada from September 1997 to May 1998.
Previously, he studied Philosophy and Judaic Law at Rabbinical College in
Sydney Australia and completed his Rabbinical studies receiving a Masters and
Rabbinical ordination at the Rabbinical College of Canada in September 1997.
Mr. Popack also served in the summer Peace Corps in Shanghai, China in 1996.
Mr. Popack is the son-in-law of Sam Malamud the President and a major
shareholder of IGPC and the brother-in-law of Jonathan Y. Malamud.
ROBERT PETTY
Robert Petty has an extensive background in management and operations across
the manufacturing, retail, and Internet e-commerce industries. Since October
1999, he has been engaged by us and our subsidiaries as a consultant in various
capacities. He has served as our Vice President -- Business Development since
January 2000, and has been the Acting Chief Executive and Chief Financial
Officer of Stampville since January 2000. Prior to consulting for us, Mr.
Petty, from December 1997 to March 1999, was engaged in a number of capacities
by Telstra Corp., one of the world's largest telecommunications companies,
where he was the senior Business Development Manager responsible for the
company's electronic business solution products as well as the Manager of
Electronic Business Services on a global scale, responsible for marketing and
strategizing Telstra Corp.'s global product roll out of e-commerce products. In
the role of Manager of Electronic Business Services, Mr. Petty worked with some
of the world's leading technology and Internet e-commerce companies, such as
IBM, Hewlett Packard, Intelilsys, Web Methods, Motorola and many others.
Previously, from 1995 through 1998, Mr. Petty was employed with Brashs Pty.
Ltd., a large Australian consumer electronics and music retailer, in a number
of capacities, most recently as the national Product Merchandiser, responsible
for product selection and purchasing, marketing, merchandising, budgeting and
general business planning for the departments of computers, home office and
mobile phone departments nationally.
Mr. Petty holds a CBS in Accounting from Swinburne University of Technology.
COMPENSATION OF DIRECTORS AND OFFICERS
Effective as of December 6, 1999, we agreed to pay Jonathan Herzog, our Chief
Financial Officer and Secretary, an annual salary of $80,000 retroactive to
November 1, 1999, and also agreed to pay to Robert Petty's consulting company,
Petty Consulting, Inc., $12,000 per annum for the services of Robert Petty as
our Vice President -- Business Development. Since October 9, 2000, we have
agreed to adjust this amount to approximately $3,800 per month. In addition,
Mr. Petty was granted options to purchase up to 5,000,000 post-split shares of
our common stock, exercisable at $.10 per share. Mr.Petty's options vest and
become exercisable at various dates over a three year period, provided,
however, that none of Mr. Petty's options may vest after the termination of Mr.
Petty's employment or consulting arrangement with us. These options replace a
pervious option agreement that Mr.Petty had with us, which was cancelled as of
October 20, 2000. Petty Consulting, Inc. had also previously entered into a one
year consulting agreement with Stampville, which provided for the payment of an
aggregate amount of approximately $8,000 per month by Stampville for the
services of Mr. Petty, which agreement was terminated on October 6, 2000 by
mutual consent, although Mr. Petty still serves as Stampville's Chief Executive
and Financial Officer. As of October 9, 2000, Mr. Petty entered into a one
year consulting agreement with VideoDome for the services of Robert Petty as
President. The consulting agreement provides for the payment of an aggregate
amount of approximately $15,000 per month by VideoDome.
Henry Herzog, our President, temporarily relocated to New York from May until
August of 2000, during which time he received compensation of approximately
$21,000 and travel expenses.
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 $150,000. Further,
upon us raising sufficient funds in this offering, we have agreed to pay Levi
Mochkin, our Chief Executive Officer, an amount of $35,000 for past services
rendered. 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 employed Jonathan Y. Malamud, a director and Vice President
Marketing, at an annual salary of $41,600. 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 $41,600. 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 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 (12,500,000 post-split 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, an
affiliate of Instanz Nominees, Pty Ltd., joined our board of directors at this
time. In connection with its purchase of shares of our common stock, we agreed
to allow Instanz Nominees Pty. Ltd. registration rights to sell a sufficient
amount of shares to receive a total of $2,500,000 in net proceeds. 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, with
the exception of Instanz Nominees Pty. Ltd. all of the other 10% or greater
holders of our common stock have agreed not to sell any of their shares without
the consent of the other 10% holders.
From June 6, 2000 through October 20, 2000, Ledger Technologies Pty. Ltd. has
loaned us $905,000, which was used to make further quarterly payments to
Stampville for working capital, and to exercise the second tranche to purchase
an additional 5% of the equity interest in VideoDome. Ledger Technologies is
one of our stockholders. Lisa Mochkin, a director of Ledger Technologies is the
wife of Levi Mochkin, our Chief Executive Officer and director. In addition, on
July 27, 2000, Instanz Nominees Pty. Ltd. lent us $150,000 to supplement our
working capital needs through the month of August 2000. Instanz Nominees Pty.
Ltd. Is also a stockholder and Helen Abeles, an affiliate of Instanz, was a
former director on our board. These loans bear interest at the rate of ten
percent (10%) per year. As of November 6, 2000, we issued 23,283,356 post-split
shares to Ledger Technologies Pty. Ltd., in order to pay off our long term loan
to Ledger in the amount of $931,334.25 including interest.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Not Applicable.
OPTION GRANTS IN LAST 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 pre-split options granted during the fiscal year ended December 31,
1999, to our employees, including the named executive officers.
Pursuant to the stock purchase agreement, as amended, between us and
Stampville, Jonathan Y. Malamud was granted 1,600,000 pre-split options to
purchase shares of our common stock. The second amended agreement resulted in
a termination of his options, and an agreement to issue him 5,000,0000
post-split shares over the next two years, as
follows:
- 1,000,000 post-split shares which have already been issued;
- 1,000,000 post-split shares on April 13, 2001;
- 1,500,000 post-split shares on October 13, 2001; and
- 1,500,000 post-split shares on October 13, 2002.
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. Upon execution of
his consulting agreement, we issued 750,000 post-split shares of our common
stock to Mendel Mochkin and we have agreed to potentially issue up to an
additional 1,750,000 post-split shares on completion of all stages of our
investment in 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. Since October 9, 2000, we have agreed to adjust this amount to
approximately $3,800 per month. It is anticipated that our consulting agreement
with Petty Consulting, Inc., will be continued on the same terms beyond January
17, 2001.
Previously, Robert Petty had been granted options to purchase up to a total of
the equivalent of 7,250,000 post-split shares of our common stock as of the
date of the execution of the consulting agreement. These options were to vest
upon us reaching certain levels of market capitalization and the occurrence of
certain other events. As of October 20, 2000, this option agreement was
cancelled and Mr. Petty was subsequently granted options to purchase up to
5,000,000 post-split shares of our common stock, exercisable at $.10 per share.
Mr. Petty's options vest and become exercisable at various dates over a three
year period as follows:
- Options to purchase One Million (1,000,000) Option Shares shall vest on
December 31, 2000.
- Options to purchase Two Hundred and Fifty Thousand (250,000) Option Shares
shall vest on June 30, 2001.
- Options to purchase Two Hundred and Fifty Thousand (250,000) Option Shares
shall vest on September 30, 2001.
- Options to purchase Two Hundred and Fifty Thousand (250,000) Option Shares
shall vest on December 30, 2001.
- Options to purchase Seven Hundred and Fifty Thousand (750,000) Option Shares
shall vest on June 30, 2002.
- Options to purchase Five Hundred Thousand (500,000) Option Shares shall vest
on September 30, 2002.
- Options to purchase Five Hundred Thousand (500,000) Option Shares shall vest
on December 31, 2002.
- Options to purchase Five Hundred Thousand (500,000) Option Shares shall vest
on March 31, 2003.
- Options to purchase Five Hundred Thousand (500,000) Option Shares shall vest
on June 30, 2003.
- Options to purchase Five Hundred Thousand (500,000) Option Shares shall vest
on December 30, 2003.
The term of Mr. Petty's options is the lesser of
years from the date the options vest,
-five years from the date of grant, or
- upon after the termination of Mr. Petty's employment or consulting
arrangement with us.
None of Mr. Petty's options may vest after the termination of Mr. Petty's
employment or consulting arrangement with us.
2000 STOCK OPTION PLAN
Our board of directors has authorized the issuance of up to 8,250,000
post-split 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 AND 2000 PRIVATE PLACEMENTS
On October 26, 1999, we consummated the sale, in a private placement, of the
equivalent of 12,500,000 post-split shares of our common stock for $0.20 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.
On October 11, 2000, we consummated the sale of the equivalent of 9,000,000
post-split shares of our common stock for $.05 per share to Sunswipe
Australasia Pty Ltd., for which we received proceeds of $450,000. A portion of
the proceeds of 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 November 6, 2000, and as adjusted to
reflect the sale of the shares of common stock offered under this prospectus,
by the following:
- each person who we know owns beneficially more than 5% of
our common stock;
- each of our directors individually;
- each of our executive officers individually; and
- all of our executive officers and directors as a group.
Unless otherwise indicated, to our knowledge, all persons listed below have
sole voting and investment power with respect to their shares of common stock.
Shares of common stock that an individual or group has the right to acquire
within 60 days of November 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.
<TABLE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
<S> <C> <C> <C> <C>
NUMBER OF SHARES PERCENT BEFORE NUMBER OF SHARES PERCENT AFTER
BEFORE OFFERING OFFERING AFTER OFFERING OFFERING
---------------- -------------- ---------------- -------------
Ledger Technologies Pty. Ltd.(2)
Sunswipe Australasia Pty. Ltd.(2)
Levi Mochkin(2) 63,783,356 55.09% 63,783,356 45.31%
Instanz Nominees Pty. Ltd(3)
Helen Abeles(3) 18,500,000 15.98% 18,500,000 13.14%
Riccalo Pty. Ltd.(4)
Henry Herzog(4) 10,000,000 8.64% 10,000,000 7.10%
Eurolink International Pty. Ltd.(5)
Jonathan Herzog(5) 10,000,000 8.64% 10,000,000 7.10%
Tilbia Nominees Pty. Ltd.(6)
Anthony Davis(6) 8,000,000 6.91% 8,000,000 5.68%
David Landauer(6)
Jonathan Y. Malamud(7) 1,000,000 0.86% 1,000,000 0.71%
All Directors and Officers as a
Group (5 Persons) 91,783,356 79.27% 91,783,356 65.19%
</TABLE>
(1) Pursuant to the rules promulgated by the SEC, all shares underlying
options which were exercisable on November 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 our Chief Executive
Officer, is a director of Ledger Technologies Pty. Ltd. and Sunswipe
Australasia Pty. Ltd. Levi Mochkin is an affiliate of Ledger Technologies Pty.
Ltd. and Sunswipe Australasia Pty. Ltd. and may be deemed to be a beneficial
owner of the 54,783,356 shares held by Ledger Technologies Pty. Ltd. and the
9,000,000 shares held by Sunswipe Australasia Pty. Ltd. Lisa Mochkin is the
daughter of Henry Herzog and the sister of Jonathan Herzog.
(3) Helen Abeles, a former 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) Tilbia Nominees Pty. Ltd. hold shares of common stock for Anthony Davis,
David Landauer and their affiliates. Mr. Davis and Mr. Landauer exercise shared
investment and voting power over these shares and may be deemed to be the
beneficial owners thereof.
(7) Does not include 4,000,000 shares reserved for issuance to Jonathan
Malamud, pursuant to the second amended stock purchase agreement between the
Company and Stampville.
(8) Does not include 5,000,000 shares subject to options granted to Robert
Petty.
DESCRIPTION OF CAPITAL STOCK
I.T. TECHNOLOGY
GENERAL
Our certificate of incorporation, as amended after our five-for- one split,
authorizes our board of directors to issue up to five hundred million
(500,000,000) 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 115,783,356 shares of post-split common stock.
The board of directors has also authorized the issuance of the following number
of shares of common stock:
- up to 1,750,000 post-split shares which may be issued to Mendel
Mochkin.
- up to 4,000,000 post-split shares to be issued to Jonathan Y. Malamud
pursuant to the second amended stock purchase Agreement with
Stampville;
- up to 5,000,000 post-split shares relating to options granted to
Petty Consulting Inc.;
- up to 25,000,000 post-split shares pursuant to this offering; and
- up to 8,250,000 post-split shares pursuant to the 2000 stock option
plan;
No other shares of common stock will be issued prior to the issuance of the
common stock in connection with this offering.
DIVIDENDS
Holders of common stock will be entitled to receive, when, as and if declared
by the board of directors out of legally available funds, cash dividends. The
common stock will not have priority as to dividends over any other series or
class of 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 are
held by us, 16,634 shares are beneficially held by David Eli Popack and 33,266
shares are beneficially held by Jonathan Y. Malamud in Stampville.
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Upon the closing of this offering, we will be subject to the provisions of
Section 203 of the Delaware General Corporation Law. Subject to specific
exceptions, Section 203 prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless:
- the transaction in which such stockholder became an "interested
stockholder" is approved by the board of directors prior to the date the
"interested stockholder" attained that status;
- upon consummation of the transaction that resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned at
least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding those shares owned by persons who are
directors and also officers; or
- on or subsequent to the date, the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least two-thirds of the outstanding
voting stock that is not owned by the "interested stockholder."
"Business combinations" include mergers, acquisitions, asset sales and other
transactions resulting in a financial benefit to the "interested stockholder."
Subject to various exceptions, an "interested stockholder" is a person who,
together with his or her affiliates and associates, owns, or within three years
did own, 15% or more of the corporation's voting stock. The restrictions in
this statute could prohibit or delay the accomplishment of mergers or other
takeover or change-in-control attempts with respect to us and, therefore, may
discourage attempts to acquire us.
In addition, various provisions of our certificate of incorporation and bylaws,
which are summarized in the following paragraphs, may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider in its best interest, including those
attempts that might result in a premium over the market price for the shares
held by stockholders.
CUMULATIVE VOTING
Our certificate of incorporation expressly denies stockholders the right to
cumulate votes in the election of directors.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our certificate of incorporation, as amended after our November 6, 2000
special meeting of shareholders, permits shareholders to act 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.
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 65%
of the voting power of the outstanding common stock on a fully-diluted basis,
will be able to cause us to amend our certificate of incorporation and bylaws.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is American Stock
Transfer and Trust Company. Its address is 40 Wall, New York, NY 10005, and its
telephone number at that location is (212) 936-5100.
REGISTRATION RIGHTS
After this offering, Instanz Nominees Pty. Ltd., currently the holder of
18,500,000 post-split shares of our common stock, will be entitled to
registration rights to raise at least $2,500,000 in net proceeds from the sale
of shares of our common stock. We have agreed to grant to Instanz Nominees
Pty. Ltd. registration rights to sell a sufficient amount of shares to raise
$2,500,000. 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, with
the exception of Instanz nominees Pty. Ltd. , all of the other 10% or greater
holders of our common stock have agreed not to sell any other shares without
the consent of the other 10% holders.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 140,783,356 shares of common
stock outstanding. Of this amount, the 25,000,000 shares offered by this
prospectus will be available for immediate sale in the public market as of the
date of this prospectus. After the closing of this offering, approximately
92,000,000 additional shares will be available for sale in the public market
following the expiration of the lock-up agreements. All of such shares will be
subject to compliance with the volume and other limitations of Rule 144.
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 a number of shares that does not exceed the greater of:
- 1% of the then outstanding shares of common stock (approximately 1,410,000
shares immediately after the offering) or
- 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.
We have agreed to grant options to purchase an aggregate of 5,000,000
post-split shares of common stock to 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 8,250,000 post-split shares of our common stock,
which will permit the resale of these shares in the public market, in
accordance with Rule 144.
In addition, Instanz Nominees Pty. Ltd. has both 'demand' and 'piggyback'
registration rights, to 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.
NO PUBLIC MARKET
There is no public market for our common stock. The initial public offering
price for the common stock offered by this prospectus has been arbitrarily
determined by us. There can be no assurance that a public market will ever
develop in our common stock.
PLAN OF DISTRIBUTION
The Shares shall be offered on a self underwritten basis. The offering is self
underwritten by the Company, which offers the Shares directly to investors
through officers and directors, who will offer the Shares by prospectus and
sales literature filed with the SEC, to friends, former business associates and
contacts, and by direct mail to investors who have indicated an interest in the
Company. The offering is a self underwritten offering, which means that it does
not involve the participation of an underwriter or broker.
The offering of the Shares shall terminate on October 31, 2001.
We reserve the right to reject any subscription in whole or in part, or to
allot to any prospective investor less than the number of Shares subscribed for
by such investor.
We have not applied for a listing, but have an oral agreement with National
Capital, LLC to file a Form 211 with the NASD for a quotation of our
securities. There is no established public market for I.T.'s common stock, and
the offering price has been arbitrarily determined. There can be no assurance
that a public market for the common stock will ever develop.
The first $50,000 in capital raised from this offering will be used to pay our
estimated costs of the offering. We have already incurred and paid $613,781 in
costs associated with this offering in its prior form. Funds received in the
offering will be immediately available to us for use and will not be placed in
an escrow or trust account. There is no minimum number of shares that must be
sold in order for us to use any of the proceeds of this offering.
The offering is made without the participation of an underwriter or broker.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for us
Company by Kenneth G. Eade, Attorney at Law, of Santa Barbara, California.
EXPERTS
The financial statements of I.T. Technology, Inc. as of December 31, 1999, and
for the period from February 2, 1999, date of inception, through December 31,
1999 and the financial statements of Stampville as of December 31, 1999 and for
the period from April 14, 1999, date of inception, through December 31, 1999,
have been included herein and in the registration statement in reliance upon
the reports of Grant Thornton LLP, independent certified public accountants,
appearing elsewhere herein and upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2, including exhibits, schedules and amendments to that
registration statement, under the Securities Act with respect to the shares of
common stock to be sold in this offering. This prospectus does not contain all
the information included in our registration statement. For further information
with respect to us and the shares of common stock to be sold in this offering,
we refer you to the registration statement. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and in each instance we refer you to
the copy of that contract, agreement or other document to the extent filed as
an exhibit to the registration statement.
You may read and copy all or any portion of the registration statement or any
other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by
writing to the Securities and Exchange Commission. Please call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information on the
operation of the public reference room. Our Securities and Exchange Commission
filings, including the registration statement, are also available to you over
the Internet on the Securities and Exchange Commission's web site located at
http://www.sec.gov. As a result of this offering, we will become subject to the
information and reporting requirements of the Exchange Act and, in accordance
with the Exchange Act, we will file periodic reports, proxy statements and
other information with the Securities and Exchange Commission. We intend to
furnish our stockholders with annual reports containing audited financial
statements and with quarterly reports for the first three quarters of each
fiscal year containing unaudited interim financial information.
No dealer, salesman or any other person has been authorized to give any
information which is not contained in this prospectus or to make any
representation in connection with this offering other than those which are
contained in the prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized by us.
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities which are offered hereby to any person in
any jurisdiction where such offer or solicitation would be unlawful. Neither
the delivery of this prospectus nor any sale hereunder shall under any
circumstances create any implications that there has been no change in our
affairs or the facts which are herein set forth since the date hereof.
I.T. TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE
------------------------------------------ ----
I.T. Technology, Inc.
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statement of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
Stampville.Com Inc.
Report of Independent Certified Public Accountants F-16
Balance Sheets F-17
Statements of Operations F-18
Statement of Stockholders' Equity F-19
Statements of Cash Flows F-20
Notes to Financial Statements F-21
[CAPTION]
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. (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 IT Technology's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of I.T.
Technology, Inc. as of December 31, 1999, and the consolidated results of its
operations and its consolidated cash flows for the period from February 2, 1999
(inception) through December 31, 1999, in conformity with accounting principles
generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Los Angeles, California
March 10, 2000
F-1
<TABLE>
<CAPTION>
<S> <C> <C>
I.T. Technology, Inc.
(a Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
December 31,1999 September 30, 2000
(Unaudited)
---------------- ------------------
ASSETS
CURRENT ASSET
Cash and cash equivalents . . . . . . . . . . $ 2,179,998 $ 82,224
Prepaid expenses . . . . . . . . . . . . . . - 13,390
----------- ----------
2,179,998 95,614
PROPERTY AND EQUIPMENT, net . . . . . . . . . . 649,021 631,630
INVESTMENT IN STAMPVILLE.COM INC . . . . . . . 2,323,922 1,606,435
INVESTMENT IN VIDEO DOME . . . . . . . . . . . - 300,000
DEFERRED OFFERING COSTS . . . . . . . . . . . . 33,682 613,781
----------- ----------
Total assets . . . . . . . . . . . . . . $ 5,186,623 $ 3,247,460
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . $ 28,001 $ 27,463
Accrued expenses . . . . . . . . . . . . . . 40,331 69,329
Payables due to affiliates. . . . . . . . . . - 975,000
Payable due to Stampville.Com Inc . . . . . . 1,425,508 360,000
----------- ----------
Total current liabilities . . . . . . . . 1,493,840 1,431,792
PAYABLE TO STAMPVILLE.COM INC.-less current
Portion . . . . . . . . . . . . . . . . . 584,369 -
NOTE PAYABLE . . . . . . . . . . . . . . . . . 455,848 381,850
COMMITMENTS AND CONTINGENCIES . . . . . . . . . - -
STOCKHOLDERS' EQUITY . . . . . . . . . . . . .
Preferred stock, par value $.001; . . . . . .
authorized 25,000,000 shares, no . . . .
shares issued and outstanding . . . . . . - -
Common stock, par value $.0002; authorized. .
500,000,000 shares issued and . . . . . .
outstanding 82,500,000 share respectively 16,500 16,500
Additional paid-in capital. . . . . . . . . . 3,055,509 3,055,509
Deficit accumulated during the development .
Stage . . . . . . . . . . . . . . . . . . (419,443) (1,638,191)
----------- ----------
2,652,566 1,433,818
----------- ----------
$ 5,186,623 $3,247,460
=========== ==========
The accompanying notes are an integral part of these statements
</TABLE>
F-2
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
Period from Period from
February 2, February 2,
1999(inception) Nine Months Ended 1999(inception)
through December September 30, through
31, 1999 ----------------- September
2000 1999 30,2000
------------ ---------- ------- -------------
(Unaudited) (Unaudited) (Unaudited)
Income and (expenses) . . . . . . . .
Foreign currency translation gain . $ 17,033 $ 62,654 $ 15,858 $ 79,687
Other income . . . . . . . . . . . - 8,979 3,760 8,979
Interest, net . . . . . . . . . . . 9,174 (173,135) (5,504) (163,961)
Legal and professional fees . . . . (125,687) (74,351) (67,336) (200,038)
Salaries . . . . . . . . . . . . . (66,618) (152,840) (25,000) (219,458)
Travel and entertainment . . . . . (33,675) (39,666) (3,783) (73,341)
Equity in loss of Stampville.Com Inc. (185,955) (803,271) (4,331) (989,226)
Other expense . . . . . . . . . . . (33,715) (47,118) (21,372) (80,833)
------------ ---------- ------- -------------
NET LOSS (419,443) $(1,218,748) $(107,708) $(1,638,191)
============ ========== ======= =============
Basic and diluted loss per common share $ (0.01) $(0.02) $(0.01)
============ ========== =======
Weighted-average shares outstanding 56,110,695 82,500,000 50,786,460
============ ========== =======
The accompanying notes are an integral part of these statements.
</TABLE>
F-3
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period from February 2, 1999 (inception) through December 31, 1999
and nine months ended September 30, 2000 (Unaudited)
Deficit
Accumulated
Preferred Stock Common Stock Additional during the
--------------- -------------- paid-in development
Shares Amount Shares Amount capital stage Total
------ ------ ---------- ------ ---------- ---------- --------
Balance at (inception)
February 2, 1999 -- $ -- -- $ -- $ -- $ -- $ --
Issuance of shares to
founders for cash -- -- 20,000,000 4,000 16,000 -- 20,000
Issuance of shares
for cash, net
of $27,210 issuance costs -- -- 49,250,000 9,850 594,190 -- 604,040
Issuance of shares for
services -- -- 750,000 150 7,350 -- 7,500
Issuance of shares in
a private placement,
net of $59,531
issuance costs -- -- 12,500,000 2,500 2,437,969 -- 2,440,469
Net loss for the period -- -- -- -- -- (419,443) 419,443)
------ ------ ---------- ------ ---------- ---------- ---------
Balance at December 31, 1999 -- -- 82,500,000 16,500 3,055,509 (419,443) 2,652,566
Net loss for the period -- -- -- -- -- (1,218,748) (1,218,748)
------ ------ ---------- ------ ---------- ---------- ---------
Balance at
September 30, 2000 -- $ -- $82,500,000 $16,500 $3,055,509($1,638,191)$1,433,818
(Unaudited) ====== ====== ========== ======= ========== ========== =========
The accompanying notes are an integral part of this statement.
</TABLE>
F-4
<TABLE>
<CAPTION>
I.T. Technology, Inc.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C> <C>
Period from Period from
February 2, February 2,
1999 (inception) Nine Months Ended 1999
through September 30 through
December 31, ----------------- September 30,
1999 2000 1999 2000
---------- ------------ ---------- ------------
(Unaudited) (Unaudited) (Unaudited)
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . $(419,443) $(1,218,748) $(107,708) $(1,638,191)
Adjustments to reconcile met loss to net .
cash used in operating activities . . . .
Depreciation and amortization . . . . . . 14,852 25,631 7,170 40,483
Amortization of debt discount . . . . . . - 143,065 - 143,065
Equity in losses of Stampville.Com Inc. . 185,955 803,271 4,331 989,226
Increase in prepaid expenses . . . . . . - (13,223) - (13,223)
Increase in other receivables . . . . . . - (167) - (167)
Decrease in accounts payable . . . . . . 28,001 (538) 50,206 27,463
Increase in accrued expenses. . . . . . . 40,331 31,522 25,000 71,853
Nonmonetary compensation. . . . . . . . . 7,500 - 7,500 7,500
---------- ------------ ---------- ------------
Net cash used in operating activities . (142,804) (229,187) (13,501) (371,991)
---------- ------------ ---------- ------------
Cash flows from investing activities . . . .
Investment in Stampville.Com Inc. . . . . (500,000) (1,881,250) (250,000) (2,381,250)
Investment in Video Dome. . . . . . . . . - (300,000) - (300,000)
Purchase of property plant & equipment. . (208,025) (8,240) (194,010) (216,265)
---------- ------------ ---------- ------------
Net cash used in investing activities . (708,025) (2,189,490) (444,010) (2,897,515)
---------- ------------ ---------- ------------
Cash flows from financing activities . . . .
Proceeds from issuance of common stock. . 3,064,509 - 624,040 3,064,509
Proceeds from Note payable. . . . . . . . - 975,000 65,300 975,000
Increase in deferred offering costs . . . (33,682) (580,099) (59,147) (613,781)
---------- ------------ ---------- ------------
Net cash used in (provided by). . . . .
financing activities . . . . . . . . 3,030,827 394,901 630,193 3,425,728
---------- ------------ ---------- ------------
Effect of exchange rate changes on cash. . . - (73,998) - (73,998)
---------- ------------ ---------- ------------
Net (decrease) increase in cash . . . . 2,179,998 (2,097,774) 172,682 82,224
Cash at beginning of period . . . . . . . . - 2,179,998 - -
---------- ------------ ---------- ------------
Cash at end of period .. . . . . . . . . . . $2,179,998 $82,224 $172,682 $ 82,224
========== ============ ========== ============
Supplemental disclosures of noncash . . . .
investing activities . . . . . . .
Property acquired by issuance of note payable $455,848 $ - $457,098 $455,848
========== ============ ========== ============
Investment in Stampville.Com Inc, acquired .
through a liability . . . . . . . $2,009,877 $ - $ - $2,009,877
========== ============ ========== ============
Issuance of Common Stock for Services . . . $7,500 $ - $ - $7,500
========== ============ ========== ============
The accompanying notes are an integral part of these statements
</TABLE>
F-5
[CAPTION]
I.T. Technology, Inc. and Subsidiaries
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - COMPANY BACKGROUND AND BUSINESS PLAN
I.T. Technology, Inc. (I.T.) was incorporated on February 2, 1999 to engage in
businesses related to the internet, e-commerce and technology ventures,
directly and through the acquisition of equity ownership in internet related
and other technology companies. I.T. has two wholly-owned subsidiaries, I.T.
Technology Pty. Ltd., which furthers its operations in Australia, and Bickhams
Capital, Inc. (collectively referred to as the "Company").
IT Technology is in the development stage, and its efforts through September
30, 2000 have been principally devoted to organizational activities, raising
capital, acquiring equity interests in Stampville.Com Inc. and VideoDome.com
Networks, Inc and other development efforts. Management anticipates incurring
substantial additional losses as it pursues its strategies. Additionally, IT
Technology will require additional capital to fund further development and
operations of Stampville.Com Inc. (See Note F). IT Technology intended to meet
its current anticipated capital funding requirements principally through
proceeds from the sale of up to 4.5 million of its shares of common stock in an
Initial Public Offering ("IPO"). On August 4, 2000, IT Technology's
registration statement filed on Form SB-2 with the Securities and Exchange
Commission covering the offer and sale of these shares was declared effective.
Prior to the disbursement to IT Technology of any proceeds from the sale of
shares in the IPO, IT Technology must receive a minimum of $5 million of
proceeds. To date this minimum has not been reached and IT Technology's Board
of Directors has approved a management proposal to restructure the share
capital of IT Technology to a five-for-one forward split, and to amend the IPO
to offer 25,000,000 post-split shares of common stock at $.10 per share. As
part of its restructuring proposal, the Board of Directors also approved a
$450,000 private placement of restricted common shares to an affiliate.
Depending upon how long it takes for IT Technology to raise capital from the
sale of shares in the IPO, it will rely on loans from affiliates, at their
discretion, and/or debt or equity financing through subsequent private
placements to finance its operations.
NOTE B - UNAUDITED INTERIM FINANCIAL STATEMENTS
The consolidated financial data as of and for the nine months and the three
months ended September 30, 2000 included in the accompanying financial
statements have been derived from our unaudited financial statements, pursuant
to the rules and regulations of the Securities and Exchange Commission ("the
Commission"). In the opinion of management, the unaudited financial statements
and condensed notes have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations. The results for the nine- month and the
three-month periods ended September 30, 2000 are not necessarily indicative of
the results to be expected for the entire year.
F-6
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The consolidated financial statements include the accounts of I.T. and its
wholly-owned subsidiaries. All material intercompany accounts and transactions
have been eliminated.
2. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for using
the straight-line method of accounting over the estimated useful lives ranging
from 5 to 25 years.
4. Investment is Stampville.Com, Inc.
The investment in Stampville.Com, Inc. consists of a 50.1 percent equity
interest and is accounted for using the equity method because of the remaining
contingent payment of $5,000,000. (See Note F and Note K).
5. Income Taxes
Deferred income taxes are recorded using enacted tax laws and rates for the
years in which the taxes are expected to be paid. Deferred income taxes are
provided for when there is a temporary difference in recording such items for
financial reporting and income tax reporting. The temporary differences that
give rise to deferred tax assets primarily are depreciation and accrual to cash
adjustments which were reduced by a like amount because of the uncertainty that
the deferred tax assets will not be realized.
6. Foreign Currency
The functional currency of the subsidiary, which has no ongoing revenue
producing operations and is entirely dependent on IT Technology 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.
F-7
7. Deferred Offering Costs
Deferred offering costs include expenses incurred in connection with IT
Technology's registration statement on Form SB-2, which was declared effective
on August 4, 2000. These costs will be charged against stockholders' equity
upon successful completion of the offering. If the offering is not consummated,
the deferred offering costs will be charged to expense.
8. Restated Number of Shares
All number of shares and per share amounts have been restated to reflect the
five-for-one stock split.
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of:
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
Land $ 150,000 $ 150,000
Building 451,630 451,630
Office equipment 70,483 62,243
------------- ------------
672,113 663,873
Less accumulated depreciation (40,483) (14,852)
------------- ------------
$ 631,630 $ 649,021
============= ============
NOTE E - CAPITALIZATION
1. Preferred Stock
IT Technology has authorized the issuance of 25,000,000 shares of preferred
stock, par value $.001 per share. The Board of Directors of IT Technology 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
IT Technology issued 20,000,000 post-split shares of common stock to the
founders through controlled companies at a purchase price of $0.001 per share
(aggregate of $20,000).
IT Technology issued 50,000,000 post-split shares of common stock to various
companies that were affiliates of certain officers of IT Technology at purchase
prices between $0.01 and $0.025 per share (aggregate of $631,250), excluding
offering costs of $27,120.
F-8
On October 26, 1999, IT Technology issued 12,500,000 post-split shares of
common stock to Instanz Nominees Pty. Ltd., a related party, at a purchase
price of $0.20 per share, excluding offering costs of $59,531.
On September 28, 2000, the Board of Directors approved a restructuring plan,
including a five-to-one forward split of IT Technology's common stock.
Shareholders approved this stock split on November 6, 2000. The number of
shares outstanding and loss per share amounts have been restated in this report
for the split.
NOTE F - INVESTMENT IN STAMPVILLE.COM INC.
Pursuant to the terms of a Stock Purchase Agreement dated June 18, 1999, IT
Technology acquired a 6% equity interest in the common stock of Stampville.Com
Inc., an unrelated party, and had an option to acquire additional shares
representing up to 19% (for a total of 25%) of Stampville.Com Inc. common stock
at its sole discretion in various amounts up to an aggregate of $5,000,000 over
the next three years. Stampville.Com Inc. is newly formed (April 14, 1999) to
engage in the business of selling collectible stamps and other memorabilia on
the Internet and on a wholesale basis to chain stores and small businesses, and
on a retail basis to the general public. Stampville.Com Inc. is a development
stage enterprise and its activities through September 30, 2000 have been
principally devoted to organizational and development activities, including the
continued development of its database of stamp information and the initial
launch of its website and various micro websites.
On December 8, 1999, the Stock Purchase Agreement was amended to accelerate the
payment terms contained in the original Stock Purchase Agreement, which would
allow IT Technology to own an immediate 50.1 percent of Stampville.Com Inc.'s
common stock. The amended agreement included payments terms as follows:
1. Cash payment of $500,000.
2. Cash payment of $1,000,000 payable within 60 days from the date of the
amended agreement.
3. Eight equal quarterly installments of $156,250 ($1,250,000) payable
commencing upon the execution of the amended agreement. The installment payable
was discounted $240,123, using a discount rate of 20%. Through September 30,
2000, quarterly payments including advanced quarterly payments of $881,250 were
made. The discount is being amortized over the term of the payable using the
effective interest method.
4. IT Technology agrees to use commercially reasonable efforts to make a
further payment, or otherwise cause a party or parties designated by IT
Technology 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
IT Technology's IPO that raises a minimum amount of $10,000,000.
If IT Technology fails to make or have made the further payment of $5,000,000
(as noted in point 4 above), its ownership percentage would be reduced to the
lessor of (a) 27.5% of Stampville's Common Stock or (b) the total invested by
IT Technology pursuant to the purchase agreement divided by $100,000.
F-9
In October, 2000, IT Technology entered into a revised agreement with
Stampville, which significantly changed the terms of the agreement as recited
above. (See Note K).
The following summarizes the investment in Stampville.Com Inc.
Cash payment of $250,000 (paid under original agreement) $ 250,000
Cash payment of $250,000 (paid prior to December 31, 1999) 250,000
Cash payment of $1,000,000
(paid on or about February 14, 2000) 1,000,000
Installment payable, less discount of $240,123 1,009,877
---------
Total Contribution 2,509,877
Equity in losses in Stampville.Com Inc. for the
period ended December 31, 1999 (185,955)
---------
Balance as at December 31, 1999 2,323,922
Equity in losses in Stampville.Com Inc.
for the 9 months ended September 30, 2000 (unaudited) (803,271)
Adjustment to installment payable
per revised agreement (See Note K) 85,784
---------
Balance as at September 30, 2000 (unaudited) $1,606,435
=========
In connection with the amended Stock Purchase Agreement, IT Technology granted
to individuals nominated by the current shareholders of Stampville.Com Inc.,
other than IT Technology, options to purchase 8,000,000 post-split shares of IT
Technology's common stock at an exercise price equal to $.25 per share. Upon
completion of the additional $5,000,000 payment mentioned above, the options
become exercisable commencing two years from the date of grant in increments of
20 percent per annum. (See Note K).
In addition, IT Technology 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 IT Technology and requires that IT Technology-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 IT Technology and that IT Technology representative have
the right to approve certain corporate transactions. IT Technology'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 IT Technology pursuant to the Stock Purchase Agreement and its
continued agreement with the Inter-Governmental Philatelic Corporation. There
can be no assurance that IT Technology 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.
F-10
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 IT
Technology. Stampville is presently pursuing business relationships with
various other worldwide philatelic dealers.
IT Technology has entered into a consulting agreement with an individual, who
is affiliated with IT Technology who has provided services to IT Technology in
connection with its investment in Stampville.Com Inc. Pursuant to the
agreement, IT Technology issued 750,000 post-split shares of its common stock
to the individual. As a result, IT Technology recorded compensation expense of
$7,500. IT Technology will potentially issue up to an additional 1,750,000
post-split shares of Common Stock upon completion of all stages of its
investment in Stampville. Pursuant to an amended agreement, the individual is
further entitled to payments of 1% of cash distributions (i.e. initial public
offering or sale) made to Stampville's shareholders.
NOTE G - INVESTMENT IN VIDEODOME.COM NETWORKS INC.
On March 24, 2000, IT Technology entered into an option agreement to acquire up
to a 50.1% equity interest in VideoDome.Com Networks, Inc. (VideoDome). On
April 10, 2000, IT Technology invested an initial $150,000 for a 5% equity
interest in VideoDome. On July 28, 2000 IT Technology invested a further
$150,000 for an additional 5% equity interest. An option to acquire a further
40.1% equity interest for approximately $5,000,000 upon completion of due
diligence, receipt from VideoDome of audited financial statements, and the
raising of sufficient funds to complete the potential investment in VideoDome
expired on October 31, 2000.
0n October 31, 2000, IT Technology entered into a revised agreement with
VideoDome, which significantly changed the terms of the agreement as recited
above. Management is under no obligation to either continue or discontinue the
Videodome acquisition (See Note K).
NOTE H - NOTES PAYABLE
Long-term debt at September 30, 2000 consists of:
(i) 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 IT
Technology. Pursuant to the terms of the purchase agreement, title to the
property will transfer when the principal balance is paid in full.
F-11
(ii) Note payable to Ledger Technologies Pty. Ltd., a related party. As at
September 30, 2000, Ledger Technologies Pty. Ltd. has advanced IT Technology
$825,000 to fund its working capital needs, including potential quarterly
payments to Stampville. The loan bears interest at the rate of ten percent
(10%) per annum and is payable in equivalent Australian dollars.
(iii) On August 1, 2000, IT Technology borrowed $150,000 from Instanz Nominees
Pty. Ltd., a related party. The loan bears interest at the rate of ten percent
(10%) per annum.
Notes Payable consists of the following as of:
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
Property loan - 34-36 Punt Road
Melbourne Australia $ 381,850 $ 455,848
Loan from affiliate -
Ledger Technologies Pty. Ltd 825,000 -
Loan from affiliate
- Instanz Nominees Pty Ltd 150,000 -
------------- ------------
$1,356,850 $ 455,848
============= ============
NOTE I - STOCK OPTION PLAN
In January 2000, IT Technology's board of directors authorized the issuance of
up to 8,250,000 post-split shares of common stock in connection with IT
Technology's 2000 Stock Option Plan. The 2000 Stock Option Plan will become
effective in connection with the registration statement filed on February 14,
2000. IT Technology intends to grant options under the Stock Option Plan to
officers, directors, employees and consultants of IT Technology and its
subsidiaries. IT Technology has not granted any options under the 2000 Stock
Option Plan.
NOTE J - CONSULTING AGREEMENT WITH PETTY CONSULTING, INC.
On January 17, 2000, IT Technology 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 IT
Technology's general compensation practices.
Under the consulting agreement, IT Technology granted stock options to acquire
up to 7,250,000 post-split shares of common stock at an exercise price ranging
from $0.20 to $0.40. The stock options vest upon reaching certain market
capitalization objectives or selling equity securities of one or more of IT
Technology's subsidiaries in an initial public offering or through a
third-party sale. (See Note K.)
F-12
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 IT Technology. (See Note K).
NOTE K - SUBSEQUENT EVENTS
On September 28, 2000, the Board of Directors approved a restructuring plan,
which it implemented by resolutions of the Board on October 20, 2000. Pursuant
to the restructuring plan, which was approved by shareholders on November 6,
2000, IT Technology increased its share capital to 500,000,000 common shares
in a five-for-one share split. IT Technology further accepted a private
placement subscription for 9,000,000 post-split shares of its common stock at
$.05 per share, for total proceeds of $450,000, from Sunswipe Australasia Pty.
Ltd., a company affiliated with Lisa Mochkin, the spouse of Levi Mochkin, our
Chief Executive Officer and director. The Board also authorized the conversion
of $975,000 in Notes Payable to affiliates outstanding at September 30, 2000
and an additional $80,000 advanced by Ledger Technologies Pty Ltd on October 3,
2000 (plus accrued interest) at the rate of $.04 per post split shares, at the
option of the creditors, who were given until November 6, 2000 to accept the
offer. Ledger Technologies, Inc., who was owed $905,000 plus accrued interest
of $26,334.25 exercised its option and was issued 23,283,356 shares in lieu
of the debt.
As of November 8, 2000, IT Technology has entered into a new Loan Agreement
with Ledger Technologies Pty Ltd, pursuant to which it has borrowed $100,000.
The loan bears interest at the rate of ten percent (10%) per annum and is
payable in equivalent Australian dollars.
Subsequent to September 30, 2000, IT Technology made additional payments to
Stampville of approximately $266,000.
As of October 13, 2000, IT Technology entered into an amended stock purchase
agreement with Stampville.com, Inc, pursuant to the terms of which IT
Technology retains a 50.1 percent equity investment in Stampville in return for
the $2,461,250 already paid including an additional $80,000 payment on October
3, 2000, and additional payments totaling $280,000. Two additional payments of
$93,000 each were made on October 16 and October 30, 2000, and $94,000 was paid
on or about November 29, 2000. In addition, the options granted to nominees of
the current shareholders of Stampville.com, Inc. were canceled, and IT
Technology agreed to issue outright 5,000,000 post-split shares of company
common stock over a two year period, in place of the options, of which 200,000
pre-split(1,000,000 post-split)shares were issued on November 1, 2000. The
financial statements of Stampville.com will be consolidated with IT Technology
going forward.
On or about October 4, 2000, Helen Abeles (affiliated with Instanz Nominees)
resigned as a director of IT Technology.
Subsequent to September 30, 2000, IT Technology has also canceled all previous
options outstanding to Robert Petty and has approved granting Mr. Petty an
option to purchase up to five million (5,000,000) post-split shares of IT
Technology's common stock over the next three years at an exercise price of
$0.10 per share.
F-13
On October 31, 2000 IT Technology's previous option to acquire an additional
40.1% of VideoDome expired. IT Technology and VideoDome subsequently entered
into a newly amended and restated Stock Option Agreement, granting IT
Technology the right to increase its present holding of 10% of VideoDome and
initially acquire up to 25% of the outstanding capital stock of VideoDome at an
exercise price of $1,000,000 payable in ten monthly installments, with
subsequent options to move to 50.1% and potentially beyond. The first payment
of $100,000 was made on November 9, 2000. IT Technology is under no obligation
to exercise the options to purchase the further interests in VideoDome.
Management believes that given the significant level of uncertainty, the
consummation of the proposed acquisition is currently not probable.
F-14
[CAPTION]
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 IT Technology's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stampville.Com Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
period from April 14, 1999 (inception) through December 31, 1999, in conformity
with accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
------------------
Los Angeles, California
March 10, 2000
F-15
[CAPTION]
Stampville.Com Inc.
(a development stage enterprise)
BALANCE SHEETS
December 31, September 30,
1999 2000
----------- -----------
(Unaudited)
ASSETS
------
CURRENT ASSETS
Cash $ 47,066 $ 7,594
Accounts receivable 1,370 1,367
Receivable due from shareholder 1,000,000 -
Inventories 18,459 39,611
Prepaid expenses -- 13,931
----------- -----------
Total current assets 1,066,895 62,503
PROPERT AND EQUIPMENT, net 74,739 140,594
DEPOSITS 6,160 8,300
TECHNOLOGY COSTS 11,487 168,237
----------- -----------
$ 1,159,281 $ 379,634
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to IGPC $ 29,273 $ 14,963
Accounts payable -- 58,877
Accrued expenses 1,176 43,320
Capitalized lease obligation -- 1,317
----------- -----------
Total current liabilities 30,449 118,477
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common stock, par value $0.01;
authorized 100,000 shares,
issued and outstanding 100,000
shares, respectively 1,000 1,000
Additional paid-in capital 2,508,877 2,594,661
Receivable due from shareholder (1,009,877) (360,000)
Deficit accumulated during the
development stage (371,168) (1,974,504)
----------- -----------
Total stockholders' equity 1,128,832 261,157
----------- -----------
TOTAL $ 1,159,281 $ 379,634
=========== ===========
The accompanying notes are an integral part of these statements
F-16
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Stampville.Com Inc.
(a development stage enterprise)
STATEMENTS OF OPERATIONS
Period from April 14,
1999 (inception)
through December 31, Nine months ended Cumulative to
1999 September 30, 2000 September 30, 2000
--------------------- ------------------ -----------------
(Unaudited) (Unaudited)
Revenues $ 5,119 $ 13,162 $ 18,281
Cost of goods sold (2,482) (7,818) (10,300)
--------- --------- ---------
Gross profit 2,637 5,344 7,981
General and administrative expenses
Salaries and consultants (115,384) (993,425) (1,108,809)
Legal and professional fees (35,755) (64,560) (100,315)
Rent (11,000) (83,470) (94,470)
Travel and entertainment (23,328) (48,978) (72,306)
Technology expense (101,696) (233,223) (334,919)
Advertising and promotion - (139,088) (139,088)
Other (86,642) (190,823) (277,465)
Interest, net - 144,887 144,887
--------- ---------- ---------
NET LOSS $(371,168) $(1,603,336) $(1,974,504)
========= =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
F-17
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Stampville.Com Inc.
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
Period from April 14, 1999 (inception) through December 31, 1999
and nine months ended September 30, 2000 (Unaudited)
Deficit
accumulated
Common Stock Additional Receivable during the
---------------------- paid-in due from development
Shares Amount capital shareholder stage Total
----------- ----------- ----------- ----------- ----------- -----------
Balance at (inception)
April 14, 1999 -- $ -- $ -- $ -- $ -- $ --
Issuance of shares
to founders 49,900 -- -- -- -- --
Issuance of
shares for cash
and receivable 50,100 1,000 2,508,877 (1,009,877) -- 1,500,000
Net loss for the period -- -- -- -- (371,168) (371,168)
----------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31, 1999 100,000 1,000 2,508,877 (1,009,877) (371,168) 1,128,832
Principal portion
of payments
from shareholder -- -- -- 735,661 -- 735,661
Adjustment to installment
receivable per revised
agreement -- -- 85,784 (85,784) -- --
Net loss for the period -- -- -- -- (1,603,336) (1,603,336)
----------- ----------- ----------- ---------- ----------- -----------
Balance at September
30, 2000 (Unaudited) 100,000 $ 1,000 $2,594,661 $(360,000) $(1,974,504) $261,157
=========== =========== ========== ========== =========== ==========
The accompanying notes are an integral part of this statement.
</TABLE>
F-18
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Stampville.Com Inc.
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
Period from April
14, 1999 (inception) Nine months
through December ended September Cumulative to
31, 1999 30, 2000 September 30, 2000
-------------------- --------------- ------------------
(Unaudited) (Unaudited)
Increase (decrease) in cash:
Cash flows from operating activities:
Net loss $ (371,168) $(1,603,336) $(1,974,504)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 6,249 78,947 85,196
Amortization of Debt Discount
(Interest Income) - (145,589) (145,589)
Changes in accounts receivable (1,370) 3 (1,367)
Changes in inventories (18,459) (21,152) (39,611)
Changes in prepaid expenses
and other current assets -- (13,931) (13,931)
Changes in other Assets (6,160) (2,140) (8,300)
Changes in accounts payable
and accrued expenses 30,449 86,711 117,160
----------- ----------- -----------
Net cash flows used in operating activities (360,459) (1,620,487) (1,980,946)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (80,988) (91,011) (171,999)
Increase in capitalized technology costs (11,487) (196,750) (208,237)
----------- ----------- -----------
Net cash flows used in investing activities (92,475) (287,761) (380,236)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 500,000 1,881,250 2,381,250
Receivable from shareholder -- (12,474) (12,474)
----------- ----------- -----------
Net cash flows provided by
financing activities 500,000 1,868,776 2,368,776
----------- ----------- -----------
Net (decrease) increase in cash
and cash equivalents 47,066 (39,472) 7,594
Cash and cash equivalents at
beginning of period -- 47,066 --
----------- ----------- -----------
Cash and cash equivalents at end of period $ 47,066 $ 7,594 $ 7,594
=========== =========== ===========
Non-cash financing activity:
Issuance of common stock for receivables
due from shareholders
Amount classified as an asset $ 1,000,000 $ -- $ 1,000,000
Amount classified as an offset to equity 1,009,877 -- 1,009,877
----------- ----------- -----------
$ 2,009,877 $ -- $ 2,009,877
=========== =========== ===========
Equipment acquired through
capital lease obligation $ -- $ 13,792 $ 13,792
=========== =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
F-19
[CAPTION]
Stampville.Com Inc.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 (Unaudited) and December 31, 1999
NOTE A - DESCRIPTION OF BUSINESS
Stampville.Com Inc. (the "Company") was incorporated on April 14, 1999 to
engage in the business of selling collectible stamps and other memorabilia on
the Internet and on a wholesale basis to chain stores and small businesses, and
on a retail basis to the general public and collectors.
Pursuant to the terms of a Stock Purchase Agreement dated June 18, 1999, I.T.
Technology, Inc. ("ITT") acquired a 6% equity interest in IT Technology's
common stock and had an option to acquire additional shares representing up to
19% (for a total of 25%) of IT Technology's common stock at ITT's sole
discretion in various amount sup to an aggregate of $5,000,000, over the next
three years.
On December 8, 1999, the Stock Purchase Agreement was amended to accelerate the
payment terms contained in the original Stock Purchase Agreement, which would
allow ITT to own an immediate 50.1 percent of IT Technology'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 IT Technology. 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 IT Technology's common stock or 2) the
total invested by ITT pursuant to the purchase agreement divided by $100,000.
On October 13, 2000, the Stock Purchase Agreement was further amended to allow
ITT to retain 50.1% of IT Technology's common stock in return for $2,741,250
already paid. In addition, ITT has agreed to loan IT Technology $750,000 upon
the ITT closing of an initial public offering and raising a minimum of
$2,000,000.
F-20
In addition, ITT has entered into a Shareholders Agreement with IT Technology
and its shareholders that, among other things, restricts the ability of IT
Technology's shareholders to transfer their interests; provides that at least
one board of director of IT Technology 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 IT
Technology 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. IT
Technology's continuance is dependent on its ability to obtain funds from ITT
pursuant to the Stock Purchase Agreement.
IT Technology is in the development stage, and its efforts through December 31,
1999 have been principally devoted to the organizational activities. As a
result, IT Technology has experienced operating losses since its inception. To
finance its strategic plans and development, IT Technology is highly dependent
on ITT's ability to render the accelerated payment. Subsequent to December 31,
1999, in connection with the Stock Purchase Agreement, IT Technology 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 IT Technology or ITT will be
able to obtain additional financing to develop or sustain further investment or
operations of IT Technology.
NOTE B - UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial data as of and for the nine months ended September 30, 2000
included in the notes and in the accompanying financial statements have been
derived from our unaudited financial statements. In the opinion of management,
the unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations as of such dates and for such periods.
The results for the nine month period ended September 30, 2000 are not
necessarily indicative of the results to be expected for the entire year.
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-21
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
IT Technology's fiscal year ends on December 31.
4. Technology Costs
Technology costs are generally expensed as incurred, except for certain costs
relating to the development of internal-use software incurred during the
application stage that are capitalized and depreciated over the estimated
useful life of three years.
5. Equipment
Equipment is comprised primarily of computer equipment and is stated at cost.
Depreciation is provided for using the straight-line method of accounting over
the estimated useful lives ranging from 3 to 7 years.
NOTE D - CAPITALIZATION
IT Technology issued shares of common stock to the founders at a nominal
purchase price per share.
Through December 1999, IT Technology 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, IT Technology recorded a
non-interest bearing receivable of $1,250,000 which is payable in eight equal
installments of $156,250. The first payment was due 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.
Many of the required payments were accelerated and a total of $881,250 was paid
toward this receivable through September 30, 2000. In connection with the
second Amended Stock Purchase Agreement the note was eliminated, and ITT agreed
to pay an additional $360,000 through November 29, 2000.
On October 13, 2000, the Stock Purchase Agreement was further amended to allow
ITT to retain 50.1% of IT Technology's common stock in return for $2,741,250
already paid and the issue of 5,000,000 post-split shares of ITT common stock.
In addition, ITT has agreed to loan IT Technology $750,000 upon the ITT closing
of an initial public offering and raising a minimum of $2,000,000.
F-22
In January 2000, IT Technology modified its articles of incorporation to
increase the authorized shares of common stock to 100,000 shares at a par value
of $.01 per share. All references to number of shares have been restated to
reflect the change.
NOTE E - COMMITMENTS
IT Technology 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 IT Technology. 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 IT Technology, IGPC has agreed to supply IT
Technology with stamps at the lowest pricing structure available to other
dealers and that IGPC makes available for public sale.
The agreement with IGPC has a term of three years with an automatic renewal to
extend for an additional two years unless terminated at the end of the initial
term by either party. In addition, IGPC extended a line of credit not to exceed
$2,000,000 to IT Technology 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, IT Technology had $29,000
outstanding under this line of credit.
Should IT Technology not be able to renew its contract with IGPC on favorable
terms, or require a change in stamp providers, this could cause significant
service disruptions, which may have an adverse effect on IT Technology.
IT Technology 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, IT Technology entered into an agreement with an unrelated party in
connection with the scanning and cataloguing of stamp images. A total of
$114,000 was committed to this project. As of December 31, 1999, $22,800 has
been expended on this project.
NOTE F - LEASES
IT Technology 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:
Year ending December 31,
-----------------------
2000 $ 48,000
2001 44,000
------
$ 92,000
======
F-23
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission,("SEC"), a
registration statement on Form SB-2 under the Securities Act of 1933, as
amended, ("the Securities Act"), for the shares of our Common Stock being
offered by this Prospectus. This Prospectus does not contain all of the
information set forth in the registration statement and the exhibits. For
further information about the Company and the Common Stock being offered, see
the registration statement and the exhibits thereto. Statements contained in
this Prospectus regarding the contents of any contract or any other document to
which reference is made are not necessarily complete, and, in each instance
where a copy of a contract or other document has been filed as an exhibit to
the registration statement, reference is made to the copy so filed, each of
those statements being qualified in all respects by that reference. A copy of
the registration statement and the exhibits may be inspected without charge at
the SEC's offices at Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549,
and copies of all or any part of the registration statement may be obtained
from the Public Reference Room of the SEC, Washington, D.C. 20549 upon the
payment of the fees prescribed by the SEC. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 800-SEC-0330.
The SEC maintains a web site (http://www.sec.gov) that contains reports, proxy
and information statements and other information regarding registrants, such as
us, that file electronically with the SEC. As a result of this Offering, we
will become subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, and we will
file periodic reports, proxy statements and other information with the SEC. We
intend to furnish our stockholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each year containing unaudited interim financial information.
No dealer, salesman or any other person has been authorized to give any
information which is not contained in this Prospectus or to make any
representation in connection with this Offering other than those which are
contained in the Prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized by the
Company.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities which are offered hereby to any person in
any jurisdiction where such offer or solicitation would be unlawful. Neither
the delivery of this Prospectus nor any sale hereunder shall under any
circumstances create any implications that there has been no change in the
affairs of the Company or the facts which are herein set forth since the date
hereof.
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
PAGE
----
Prospectus Summary
Risk Factors
Use of Proceeds
Dividend Policy
Capitalization and Stock Ownership
Dilution
Management's Discussion and Analysis of
Financial Condition and Results of Operations
18
Business
Management
Principal Stockholders
Description of Capital Stock
Selling Shareholders
Registration Rights
Shares Eligible for Future Sale
Plan of Distribution
Legal Matters
Experts
Where You Can Find More Information
Index to Financial Statements
Dealer Prospectus Delivery Obligations:
UNTIL _________, 2001 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD SUBSCRIPTIONS.
F-25
I.T. TECHNOLOGY, INC
Common Stock
Up to 25,000,000 Shares
PROSPECTUS
January ___, 2001
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 IT Technology. 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.
Securities and Exchange Commission registration fee $ 6,600.00
National Association of Securities Dealers, Inc. fee $ 3,000.00
Nasdaq listing fee $ 11,000.00
Accounting fees and expenses $100,000.00
Legal fees and expenses $230,000.00
Director and officer insurance expenses $120,000.00
Printing and engraving expenses $100,000.00
Transfer agent and registrar fees and expenses $ 3,500.00
Blue Sky fees and expenses (including counsel fees) $ 10,000.00
Miscellaneous expenses $ 15,900.00
---------
Total $600,000.00
===========
The above expenses have already been paid by us, and are associated with the
offering in its prior form. We have estimated that the following offering
expenses will be spent in connection with this self-underwritten offering, and
will be deducted from the gross proceeds we receive from this offering, if any:
Securities and Exchange Commission
registration fee $ 0
Accounting fees and expenses $24,500.00
Legal fees and expenses $15,000.00
Printing and engraving expenses $ 5,000.00
Transfer agent and registrar fees and expenses $ 3,500.00
Blue Sky fees and expenses (including counsel fees) $ 0
Miscellaneous expenses $ 2,000.00
--------
Total $50,000.00
===========
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, IT Technology 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.
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.
IT Technology's Certificate of Incorporation provides that the directors will
not be liable to IT Technology 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.
IT Technology's Bylaws provide that IT Technology will indemnify its directors
and officers to the fullest extent permitted under Delaware law. Pursuant to
the Bylaws and Delaware law, IT Technology 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 IT Technology.
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 IT Technology. The Bylaws
authorize IT Technology 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 IT Technology 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 IT Technology 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.
IT Technology has purchased a directors' and officers' liability insurance
policy insuring directors and officers of IT Technology against any liability
asserted against such person and incurred by such person in any such capacity,
whether or not IT Technology would have the power to indemnify such person
against such liability under the Bylaws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
-------- ----------------------------------------------------------------
1. Revised Form of Underwriting Agreement(*)
2. None.
3.1 Certificate of Incorporation filed February 2, 1999.(*)
3.1a Amendment to Certificate of Incorporation of IT Technology
3.2 By-laws of IT Technology dated February 2, 1999.(*)
3.2(a) Amended and restated By Laws adopted November 6, 2000
4.1 Stock Certificate specimen of IT Technology.(*)
4.2 Form of Warrant Certificate (*)
4.3 Form of Subscription Document.
5. Opinion of Kenneth G. Eade
10.1(a) Stock Purchase Agreement between IT Technology and Stampville.Com
Inc. dated June 18, 1999.(*)
10.1(b) Amendment to Stock Purchase Agreement between IT Technology and
Stampville.Com Inc. dated December 8, 1999.(*)
10.1(c) Amendment No. 2 to Stock Purchase Agreement between IT Technology
and Stampville.Com Inc. dated October 13, 2000.
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 IT Technology 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 IT Technology dated
June 18, 1999.(*)
10.5(d) Amendment No. 1 to the Consulting Agreement between Mendel Mochkin
IT Technology 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 IT Technology
dated December 8, 1999.(*)
10.6(c) New Option Agreement between Robert Petty and I.T. Technology, Inc.
dated October 20, 2000.
10.7 Stock Option Agreement between Bickhams Capital, Inc. and
VideoDome.Com Networks, Inc. dated March 24, 2000.(*)
10.7(a) Amended and Restated Stock Option Agreement between Bickhams
Capital, Inc. and VideoDome.Com Networks, Inc.- October 31, 2000.
10.8 Registration Rights Agreement between IT Technology and Instanz
Nominees Pty. Ltd. dated October 26, 1999.(*)
10.9 Registration Rights Agreement between IT Technology and Kensington
Capital Corp. dated May 8, 2000.(*)
10.10 Loan Agreement between IT Technology and Ledger Technologies Pty.
Ltd. dated June 6, 2000.(*)
10.10(a) Loan Agreement between IT Technology and Ledger Technologies Pty.
Ltd. dated November 8, 2000.
10.11 Amendment No. 1 to Loan Agreement between Company and Ledger
Technologies Pty. Ltd. dated July 26, 2000.
10.12 Loan Agreement between IT Technology and Instanz Nominees Pty. Ltd.
dated July 27, 2000.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Grant Thornton LLP.
23.3 Consent of Kenneth G. Eade(included as part of Exhibit 5).
24. Power of attorney.(*)
(*) Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually, or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (230.424(b) of this Chapter)
if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate Offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and (iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
Offering of such securities at that time shall be deemed to be the initial bona
fide Offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
Offering.
(4) To file a "sticker amendment" to this Prospectus if up to five percent (5%)
of the shares subject to lock up agreements are released from the restriction
relating to such agreements prior to the expiration thereof, and to file a
post-effective amendment to this Prospectus if more than ten percent (10%) of
the shares subject to such agreements are released prior to the expiration
thereof.
Insofar as indemnification for liabilities arising from the Securities Act of
1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Act shall be deemed to be part of this Registration Statement
as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the Offering of such securities at that time shall be deemed to be
the initial bona fide Offering thereof.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Since February 2, 1999, we issued the following securities without registration
under the Securities Act of 1933, as amended.
1. In February 1999, we issued 5,000,000 pre-split shares of common stock to
Ledger Technologies Pty. Ltd., 5,000,000 pre-split shares shares of common
stock to Riccalo Pty. Ltd., and 2,000,000 pre-split shares of common stock to
Eurolink International Pty. Ltd., both sophisticated investors, in connection
with the formation of IT Technology. The consideration for such shares was $.01
per share and $.001 per share, respectively, and we received an aggregate of
$270,000 for this issuance. The issuance of such shares was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof. The purchaser is an affiliate of a director of IT Technology.
2. In May 1999, we issued an additional 2,500,000 pre-split shares of common
stock to Ledger Technologies Pty. Ltd., a sophisticated investor, for $.05 per
share, receiving a total of $125,000 as the consideration for such issuance.
The issuance of such shares was exempt from the registration requirements of
the Securities Act pursuant to Section 4(2)thereof. The purchaser is an
affiliate of a director of IT Technology.
3. In June and August 1999, we issued 500,000 pre-split shares of common stock
for $.05 per share and 250,000 pre-split shares of common stock for $.125 per
share to Atcor Aus. Pty. Ltd., a sophisticated investor, for an aggregate
amount of $56,250 as the consideration for such issuance. The issuance of such
shares was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof. The purchaser is an affiliate of a director
of IT Technology.
4. In June 1999, we issued 150,000 pre-split shares of common stock to Mendel
Mochkin, the brother of Levi Mochkin our Chief Executive Officer, as partial
consideration for entering into a Consulting Agreement with IT Technology,
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 up to an additional 350,000
pre-split 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 pre-split shares of common stock for
$.125 per share to Tilbia Nominees Pty. Ltd., a sophisticated investor, for an
aggregate amount of $200,000 as the consideration for such issuance. The
issuance of such shares was exempt from the registration requirements of the
Securities Act pursuant to Section 4(2). The purchaser is an affiliate of two
directors of IT Technology.
6. In October 1999, in connection with the private placement of common stock,
we issued 2,500,000 pre-split shares of common stock at $1.00 per share. We
raised $2,500,000 through the sale of all of the 2,500,000 pre-split shares of
common stock to Instanz Nominees Pty. Ltd., an accredited investor. The
issuance of such shares was exempt from the registration requirements of the
Securities Act pursuant to Rule 506 of Regulation D promulgated thereunder. The
purchaser is an affiliate of a director of IT Technology.
7. In December 1999, we granted certain Jonatahan Y. Malamud options to
purchase 1,600,000 pre-split shares of common stock at an exercise price of
$1.25 per share. The grant of such option to purchase shares was exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof.
8. In January 2000, we granted Robert Petty options to purchase up to a total
of 1,450,000 pre-split shares of common stock as consideration for entering
into a Consulting Agreement between Petty Consulting, Inc. and us. The options
vest upon the occurrence of various conditions and each have an exercise price
of either $1.00 or $2.00. The grant of such options to purchase shares of
common stock was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof. In October, 2000 we terminated Mr.
Petty's options, and granted him options to purchase a total of 5,000,000
post-split shares of common stock, over the next three years, at an exercise
price of $.10 per share. The grant of such options to purchase shares of common
stock was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2).
9. In October 2000, we issued 1,000,000 pre split shares to Jonathan Malamud
and terminated his options to purchase stock. The issuance of such shares was
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2). The purchaser is an affiliate of IT Technology.
10. In October 2000, we issued 1,800,000 pre split shares to Sunswipe
Australasia Pty Ltd. in exchange for gross proceeds of 450,000. The issuance
of such shares was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2). The purchaser is an affiliate of a director of IT
Technology.
11. In November 2000, we issued 23,283,356 post-split to Ledger Technologies,
Pty, Ltd., to retire $905,000 in debt owed to Ledger, plus interest. The
issuance of such shares was exempt from the registration requirements of the
Securities Act pursuant to Section 4(2). The purchaser is an affiliate of a
director of IT Technology.
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 Post-effective Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Melbourne Australia, on December__, 2000.
I.T. TECHNOLOGY, INC.
By: /s/ LEVI MOCHKIN
-------------------------------------
Levi Mochkin
Chairman of the Board,
Chief Executive Officer and Director
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons on behalf of IT
Technology in the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LEVI MOCHKIN Director December 11, 2000
----------------------------------
Henry Herzog
/s/ LEVI MOCHKIN C.E.O. and Director December 11, 2000
----------------------------------
Levi Mochkin
/s/ LEVI MOCHKIN C.F.O. and Director December 11, 2000
----------------------------------
Jonathan Herzog
/s/ LEVI MOCHKIN Director December 11, 2000
----------------------------------
Anthony Davis
[CAPTION]
Exhibit 3.1a
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION OF
I.T. TECHNOLOGY, INC.
A Delaware corporation
The undersigned hereby certifies as follows:
ONE: That they are the President and Secretary, respectively, of I.T.
TECHNOLOGY, INC., a Delaware corporation.
TWO: That, at a meeting of the Board of Directors held on October 20, 2000,
which was ratified by a subsequent shareholder's meeting on November 6, 2000,
the Corporation resolved to amend articles 4 and 9 of its Certificate of
Incorporation, as follows:
IT IS RESOLVED, that Article 4 of the Certificate of Incorporation is hereby
amended to read as follows:
"4. This corporation is authorized to issue two classes of shares: Common and
Preferred. The number of Common shares which the corporation is authorized to
issue is five hundred million (500,000,000), each with a par value of $.0002
per share, in order to reflect a 5 for 1 forward share split. The number of
Preferred shares which the corporation is authorized to issue is twenty five
million (25,000,000) each with $.001 per share par value, which preferred stock
may be issued in one or more series as may be determined from time to time by
the Board of Directors, each of which series shall be distinctly designated.
The Board of Directors is hereby authorized to fix or alter the voting rights,
designations, powers, preferences, and relative and other special rights, and
the qualifications, limitations and restrictions of any wholly unissued series
of preferred stock, and the number of shares of such series, and to increase or
decrease the number of shares of any such series subsequent to the issue of
shares of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of that series."
IT IS FURTHER RESOLVED, that Article 9 of the certificate of incorporation and
Section 2.9 of the By Laws of the corporation be amended to read as follows:
"Any action required or permitted to be taken by the stockholders of the
corporation shall be effected either at a duly called annual or special meeting
of stockholders of the corporation or by consent in writing by the holders of
outstanding stock pursuant to Section 228 of the DGCL or any other provision of
the DGCL. Except as otherwise required by law, stockholders may not call any
special meeting of stockholders and special meetings of stockholders may only
be called by order of the board of directors."
THREE: This amendment was approved by the required vote of shareholders in
accordance with the corporations law of the state of Delaware. The total
number of outstanding shares of each class entitled to vote for the amendment
is: Sixteen Million, Five Hundred Thousand (16,500,000) shares. The number of
shares of each class voting for the amendment equaled or exceeded the vote
required, that being over fifty (50%) percent. The amendment was approved by
a vote of Twelve Million and Fifty Thousand (12,050,000) shares, equaling
73.03% of all shares entitled to vote.
Dated: November 6, 2000
/s/ Henry Herzog
--------------------------
HENRY HERZOG, President
Dated: November 6, 2000
/s/ Jonathan Herzog
--------------------------
JONATHAN HERZOG, Secretary
We, the undersigned, hereby declare, under penalty of perjury, in accordance
with the laws of the State of California, that we are the President and
Secretary of the above-referenced corporation, that we executed the
above-referenced Certificate of Amendment to Articles of Incorporation,
that we have personal knowledge of the information contained therein, and that
the information contained therein is true and correct.
/s/ Henry Herzog /s/ Jonathan Herzog
----------------------- --------------------------
HENRY HERZOG, President JONATHAN HERZOG, Secretary
[CAPTION]
EXHIBIT 5.1 OPINION OF COUNSEL AND CONSENT
November 8, 2000
Board of Directors
I.T. Technology, Inc.
34-36 Punt Road
Windsor 3181
Melbourne, Victoria, Australia
Re: I.T. Technology, Inc. Common Stock on Form SB-2
Gentlemen:
The undersigned is counsel for I.T. Technology, Inc. I have been requested to
render an opinion on the tradeability of the 25,000,000 shares of IT proposed
to be sold pursuant the IT's Registration Statement on Form SB-2. In rendering
this opinion, I have reviewed IT's Registration Statement on Form SB-2, IT's
Form 8-A, company certificate of incorporation and by laws and other corporate
documents. All representations made to me in IT documents and by company
officers and directors are deemed to be accurate. It is my opinion that the
shares to be issued will be free trading shares. It is further my opinion
that:
1. I.T. Technology, Inc. is a corporation duly organized, validly existing and
in good standing and is qualified to do business in each jurisdiction in which
such qualification is required.
2. That the shares of common stock to be issued by IT have been reserved and,
when issued, are duly and properly approved by IT's Board of Directors.
3. That the shares of stock, when and as issued, will be fully paid and
non-assessable, and will be a valid and binding obligation of the corporation.
4. That the shares of common stock have not been but will be registered under
the Securities Act of 1933, as amended (the "Act"), and will be registered by
coordination with or exempt from the securities laws of the state jurisdictions
in which they will be sold.
I hereby consent to the use of this opinion in IT's Registration Statement on
Form SB-2. Please feel free to contact the undersigned should you have any
further questions regarding this matter.
Very truly yours,
/s/ Kenneth G. Eade
-------------------
KENNETH G. EADE
[CAPTION]
EXHIBIT 10.1(c)
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT (this "Amendment") is entered
into as of October 13, 2000, by and between I.T. Technology, Inc., a Delaware
corporation ("I.T.") and Stampville.com Inc., a New York corporation
("Stampville").
RECITALS
A. I.T. and Stampville have entered into a Stock Purchase Agreement (the
Original Agreement) dated as of June 18, 1999 relating to the acquisition of
stock of Stampville by I.T. and amended pursuant to an Amendment to Stock
Purchase Agreement (?Amendment No. 1) dated as of December 8, 1999 (the
Original Agreement and Amendment No. 1. are collectively referred to as the
Amended Agreement).
B. I.T. has, as of the date of this Agreement, paid $2,461,250 of the
consideration contemplated by the Amended Agreement.
C. I.T. and Stampville now desire to amend certain terms of the Amended
Agreement.
NOW, THEREFORE, in consideration of the promises and the terms, provisions,
covenants and conditions hereinafter set forth, and for other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
AGREEMENT
1. Definitions. Unless otherwise defined in this Agreement, all capitalized
terms used in this Agreement shall have the meanings set forth in the Amended
Agreement.
2. Timing of Consideration. Notwithstanding the provisions of the Amended
Agreement, I.T. agrees, in lieu of any and all obligations to provide funds or
make any investment in Stampville as contemplated by the Amended Agreement and
any other arrangements or understandings between I.T. and Stampville, to pay to
Stampville the following amounts:
2.1 $80,000, which has been paid prior to execution of this Amendment, receipt
of which is acknowledged;
2.2 $93,000 on or about October 13, 2000;
2.3 $93,000 on or about October 31, 2000; and
2.4 $94,000 on or about November 29, 2000.
3. Satisfaction of Other Investment Obligations. The parties recognize that
the payments provided for in Section 2 of this Amendment satisfy and terminates
all investment obligations of I.T. pursuant to the Amended Agreement or as
otherwise discussed by I.T. and Stampville, however formed or styled, whether
consisting of equity, debt or otherwise, and no contingency related to any
obligation of I.T. to invest in Stampville, lend money to Stampville or
otherwise provide funds or other support to Stampville shall remain
outstanding. Without limiting the foregoing, I.T.s 50.1% equity interest in
Stampville shall not be reduced , and I.T.s management rights shall not be
curtailed, by virtue of the reduction of total investment in Stampville, and
shall be fully and completely earned, vested, owned and held by I.T.
4. Public Offering of Stampville. Upon execution of this Amendment, I.T. shall
commence and use its commercially reasonble efforts to restructure its pending
offering of common stock, pursuant to Registration Statement on Form SB-2,
Registration Number 333-30364 declared effective by the United States
Securities and Exchange Commission (the SEC). on August 4, 2000 (the
"Registration Statement"). Upon the completion of such restructured offering,
I.T. shall use its best efforts to assist Stampville in structuring an offering
of Stampville securities pursuant to a registration statement to be filed with
the SEC, or other transaction, the result of which shall be that the shares of
Stampville (directly or through a successor, affiliate or otherwise) shall be
registered under the Securities Exchange Act of 1934, as amended, subject to
the approval of the board of directors of Stampville and compliance with all
applicable laws, rules and regulations.
5. Loan to Stampville. If I.T. is successful in raising not less than two
million dollars ($2,000,000) in a public offering of its common stock pursuant
to the Registration Statement, I.T. shall make available to Stampville a loan
of up to seven hundred fifty thousand dollars ($750,000), to be used primarily
for the purpose of defraying the costs associated with pursuing the public
offering of securities, of Stampville as contemplated in paragraph 4 above and
for working capital purposes. The loan to Stampville shall be unsecured and
bear interest at the "prime" rate of interest as reported from time to time in
The Wall Street Journal, Western Edition, and not to exceed the maximum rate
allowed by applicable law. The loan and all accrued and unpaid interest shall
become due upon the completion of a public offering or private sale of equity
or debt securities or other financing transaction in which the proceeds to
Stampville equal or exceed two million dollars ($2,000,000).
6. Issuance of I.T. Shares. As partial consideration for entering into this
Amendment, I.T. shall issue to Cheski Malamud or his designee one million
(1,000,000) shares of the common stock of I.T., to be issued as follows:
6.1 Two hundred thousand (200,000) shares upon the execution of this
Amendment;
6.2 Two hundred thousand (200,000) shares upon the six month anniversary of
the execution of this Amendment;
6.3 Three hundred thousand (300,000) shares on the twelve month anniversary of
the execution of this Amendment; and
6.4 Three hundred thousand (300,000) shares on the twenty-four month
anniversary of the execution of this Amendment.
The number of shares to be issued shall be adjusted equitably in the event of a
stock split, stock dividend or other similar event. The parties recognize that
all shares issued pursuant to this Section 6 shall be ?restricted? shares and
subject to limitations on transfer pursuant to federal and state securities
laws. The recipient of the shares, whether Malamud or his designee, shall
provide such representations and enter into such agreements relating to the
issuance and transfer of the shares as I.T. may reasonably request.
7. Elimination of Selected Provisions. Section 10 of Amendment No. 1
(Malamuds - Options in I.T.) is hereby terminated.
8. Survival of Provisions. Except as specifically provided in this Agreement,
all of the terms and conditions contained in the Amended Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
STAMPVILLE.COM INC. I.T. TECHNOLOGY, INC.
By: /s/ Jonathan Malamud By: /s/ Levi Mohkin
------------------------------ -------------------------------------
Jonathan Y. Malamud, President Levi Mochkin, Chief Executive Officer
[CAPTION]
EXHIBIT 10.6 (c)
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE ISSUER, OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE ISSUER, THAT THE PROPOSED DISPOSITION IS EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT.
OPTION
This OPTION (the "Option") is granted as of the 20th day of October, 2000
("Grant Date") by I.T. Technology, Inc., a Delaware corporation (the "Issuer"),
to Robert Petty ("Holder").
RECITAL
In consideration for Holder's agreement to serve as a consultant of the
Issuer, the Issuer has agreed to issue to Holder, Options, permitting the
Holder purchase of Five Million (5,000,000) post-split (5 for 1) shares of the
Common Stock of the Issuer (subject to adjustment pursuant to Section 15 below)
on the terms and conditions set forth below (collectively, the "Option
Shares").
AGREEMENT
NOW, THEREFORE, in consideration of these premises and the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Issuer and Holder agree as follows:
1. Grant of Option.
The Issuer hereby grants to Holder the right and option (the "Option"),
upon the terms and subject to the conditions set forth in this Option, to
purchase the Option Shares, at a per share exercise price equal to $0.10 per
share (the "Exercise Price").
2. Term of Option.
The Option shall terminate and expire at 5:00 p.m., New York time, upon
the first to occur of either (i) the second (2nd) anniversary of the Vesting
Date, (ii) the fifth (5th) anniversary of the Grant Date (the "Option
Expiration Date"), or (iii) upon termination of holder's employment or
consulting arrangement for the issuer (the "Option Expiration Date") .
3. Vesting of Option.
The following number of Options shall vest upon the occurrence of the
following events ("Vesting Date"), no options may vest after the termination of
Petty's employment or consulting arrangement with the issuer:
xi. Options to purchase One Million (1,000,000) Option Shares shall vest on
December 31 2000.
xii. Options to purchase Two Hundred and Fifty Thousand (250,000) Option Shares
shall vest on June 30, 2001.
xiii. Options to purchase Two Hundred and Fifty Thousand (250,000) Option
Shares shall vest on September 30, 2001.
xiv. Options to purchase Two Hundred and Fifty Thousand (250,000) Option Shares
shall vest on December 30, 2001.
xv. Options to purchase Seven Hundred and Fifty Thousand (750,000) Option
Shares shall vest on June 30, 2002.
xvi. Options to purchase Five Hundred Thousand (500,000) Option Shares shall
vest on September 30, 2002.
xvii. Options to purchase Five Hundred Thousand (500,000) Option Shares shall
vest on December 31, 2002.
xviii. Options to purchase Five Hundred Thousand (500,000) Option Shares shall
vest on March 31, 2003.
xix. Options to purchase Five Hundred Thousand (500,000) Option Shares shall
vest on June 30, 2003.
xx. Options to purchase Five Hundred Thousand (500,000) Option Shares shall
vest on December 30, 2003.
(j) Notwithstanding anything to the contrary contained above, all
unvested Options shall vest upon the consummation by the Issuer of a merger,
reorganization, sale of the Issuer's capital stock or other corporate
transaction where the shareholders of the Issuer immediately prior to such
transaction do not constitute a majority of the shareholders of the surviving
entity immediately following the transaction (the "Change of Control
Transaction"); provided, further however, that such Change of Control
Transaction occurs only after the effectiveness of an IPO by the Issuer and
where the market capitalization of the Issuer immediately prior to the
consummation of the Change of Control Transaction is at least $50,000,000.
(k) Notwithstanding anything contained herein to the contrary, all
unvested Options shall terminate immediately upon the termination of employment
of Holder as a consultant to Issuer (whether by expiration of term or
otherwise), and all vested options shall terminate thirty (30) days after the
termination of employment of Holder as a consultant to Issuer (whether by
expiration of term or otherwise).
(l) In addition to the foregoing, the Holder agrees that
notwithstanding anything to the contrary contained above, no Option may be
exercised unless and until any then-applicable requirements of all state and
federal securities laws shall have been fully complied with to the reasonable
satisfaction of the Issuer and its counsel; provided, however, that the Issuer
use its best efforts to comply with the requirements of all such state and
federal securities laws.
4. Exercise of Option.
There is no obligation to exercise the Option, but the Option may be
exercised in whole or in part at any time or from time to time on or prior to
the Option Expiration Date. A new Option shall be issued for the amount of
unexercised shares. The Option must be exercised by delivery to the Issuer of:
a) written notice of exercise in substantially the form of Exhibit "A"
attached to this Option; and
(b) payment of the Exercise Price of the Option Shares pursuant to
Section 6.
Upon receipt of the foregoing, the Issuer shall promptly issue in the name
of the Holder one or more stock certificates evidencing the Option Shares
issued pursuant to such exercise and deliver such certificate(s) to the Holder
in such denominations as the Holder shall request.
5. Sale of Option Shares.
(a) Sale Restriction. The Holder hereby agrees that, notwithstanding
anything in this Option to the contrary, the Holder shall be entitled to sell,
subject to any restrictions on sale pursuant to federal securities laws,
including restrictions imposed by virtue of Rule 144 promulgated under the
Securities Act of 1933, as amended ("Rule 144"), state securities laws or
otherwise, from Option Shares issued to him pursuant to the exercise of
Options, no more than twenty percent (20%) of the Option Shares issued to him
pursuant to the exercise of Options during any twelve (12) month period. In
addition to this, the Holder shall not be entitled to sell any shares from
Option Shares issued to him pursuant to the exercise of Options during a twelve
(12) month period commencing from 30 days after quotations are first available
for the Common Stock.of the Issuer's securities. With the exception of any
restrictions on sale imposed pursuant to federal securities laws, including
Rule 144, state securities laws or otherwise, the restrictions set forth in
this paragraph 5(a) shall terminate on the third anniversary of the date upon
which quotations are first available for the Issuer's common stock on the
Nasdaq Stock Market.
(b) Notice of Offer, Right of First Refusal. In addition to the
limitations set forth above, Holder agrees that upon receiving a bona fide
offer by a third party to purchase all or any of the Option Shares which the
Holder is willing to accept the Holder shall, not less than ten (10) business
days prior to consummating a sale pursuant to such offer, give notice thereof
to the Issuer. The notice shall specify:
(1) The number Option Shares proposed to be sold (the "Offered Shares");
(2) The identity of the proposed buyer;
(3) The consideration to be received for the Offered Shares; and
(4) The terms and conditions upon which the Holder intends to make the
sale.
This notice shall be accompanied by a true and complete copy of the proposed
buyer's written offer. The Issuer shall have ten (10) business days to notify
the Holder of its acceptance of any Offer by the Holder to sell the Offered
Shares to the Issuer. The Issuer shall have the right to purchase all or a
portion of the Offered Shares at the price per Share and on the terms set forth
in the Offer, which it may exercise only by giving written notice thereof to
the Holder (the "Issuer's Acceptance"), during the ten (10) business day period
following the receipt of the Holder's notice. The Issuer's Acceptance shall
specify the number of the Offered Shares that the Issuer desires to purchase.
The Holder shall not participate in any vote that may be required in connection
with the Issuer's decision as to whether to exercise its right to purchase any
or all of the Offered Shares.
(c) Closing for Right of First Refusal Purchase. If the Issuer exercises
its right to purchase the Offered Shares, the closing of such purchase shall
take place on or before the thirtieth (30th) day following the date that the
Issuer, gave notice of the exercise of its right to purchase such Shares. The
Issuer shall give written notice to the Holder of the closing date and the
location of the closing for the purchase by Issuer, at least five (5) days
prior to such date.
(d) Transfer of Offered Shares to Third Party. Notwithstanding any other
provision in this Section, if and only if the Issuer either (i) does not
exercise its rights to purchase all or a portion of the Offered Shares in
accordance with the terms and conditions set forth in this Section or (ii)
after exercising such rights, the Issuer fails to consummate such purchases
through no fault of the Holder, then Holder may carry out its proposed sale to
the proposed buyer in accordance with the terms set forth in the Offer.
6. Delivery of Shares; Payment of Exercise Price.
Payment of the Exercise Price shall be made in United States currency by
wire transfer to an account designated by the Issuer or by cash or by delivery
of a certified check, bank draft or postal or express money order payable to
the order of the Issuer, or (ii) .
7. Restrictions on Option Shares.
Unless the Issuer has on file with the Securities and Exchange Commission
(the "SEC") an effective registration statement covering the reoffer or resale
of the Option Shares issued to the Holder, each certificate for Option Shares
issued upon the exercise of the Option, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE ISSUER, OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE ISSUER, THAT THE PROPOSED DISPOSITION IS EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT.
8. Representations and Warranties of the Issuer.
The Issuer represents and Options that it has properly set aside and
reserved from its authorized but unissued shares of Common Stock, and will at
all times maintain as reserved, a number of shares equal to the Option Shares.
The Option Shares will, upon issuance, be duly authorized, validly issued,
fully paid and nonassessible and free from all preemptive rights of any
shareholders and free of all taxes, liens and charges with respect to the
issuance thereof. Except as expressly set forth in this Section 8, the Issuer
has made no representation, warranty, covenant or agreement regarding the
Option, the shares issuable in connection therewith or any other matter
relating thereto, including but not limited to whether or not the Issuer shall
file a registration statement with the SEC, if such a registration statement is
filed, whether the SEC will declare the registration Statement effective.
9. Reserve.
The Issuer shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
maintaining a reserve equal to the number of Option Shares, and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the issuance of Common Stock upon exercise of the Option,
the Issuer shall promptly seek such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
In the event of the consolidation or merger of the Issuer with another
corporation where the Issuer is not the surviving corporation, effective
provision shall be made in the Certificate or Articles of Incorporation,
documents of merger or consolidation, or otherwise, of the surviving
corporation so that such corporation will at all times reserve and keep
available a sufficient number of shares of Common Stock or other securities or
property to provide for the Option in accordance with the provisions of this
Section 9.
10. No Rights as Stockholder.
Holder shall have no rights as a stockholder of the Issuer with respect to
the Option Shares until the date the exercise notice is received by the Issuer
together with payment (the "Exercise Date"). No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior
to the Exercise Date.
11. Lost, Mutilated or Missing Option.
Upon receipt by the Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Option, and, in the case of
loss, theft or destruction, upon receipt of indemnification, or, in the case of
mutilation, upon surrender and cancellation of the mutilated Option, the Issuer
shall execute and deliver a new Option of like tenor and representing the right
to purchase the same aggregate number of Option Shares.
12. Taxes.
The Issuer shall pay all expenses, taxes and owner charges payable in
connection with the preparation, issuance and delivery of certificates for the
Option Shares and any new Options, except that if the certificates for the
Option Shares or the new Options are to be registered in a name or names other
than the name of the Option Holder, funds sufficient to pay all transfer taxes
payable as a result of such transfer shall be paid by the Option Holder at the
time of its delivery of the Notice of Exercise or promptly upon receipt of a
written request by the Issuer for payment.
13. No Impairment.
The Issuer will not, by amendment of its Certificate of Incorporation or
through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Issuer, but will at
all times in good faith assist in the carrying out of all the provisions of
this Option and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
Adjustment.
(a) If outstanding shares of the Common Stock of the Issuer shall be
subdivided into a greater number of shares, or a dividend in Common Stock or
other securities of the Issuer convertible into or exchangeable for Common
Stock (in which latter event the number of shares of Common Stock issuable upon
the conversion or exchange of such securities shall be deemed to have been
distributed), shall be paid or distributed in respect to the Common Stock of
the Issuer, the number of Option Shares for which this Option may be exercised
immediately prior to such subdivision or at the record date of such dividend
shall, simultaneously with the effectiveness of such subdivision or immediately
after the record date of such dividend or other distribution, be
proportionately increased, and conversely, if outstanding shares of the Common
Stock of the Issuer shall be combined into a smaller number of shares, the
number of Option Shares for which this Option may be exercised prior to such
combination shall, simultaneously with the effectiveness of such combination,
be proportionately decreased. Any adjustment to the Option Shares under this
Section 14(a) shall become effective at the close of business on the date the
subdivision or combination referred to herein becomes effective.
(b) In the event of any recapitalization, consolidation, merger or
reorganization ("Reorganization"), where the Issuer shall not be the surviving
entity the Holder of the Options shall at the sole discretion of the Issuer be
entitled to either (1) receive, and provision shall be made therefore in any
agreement relating to any such Reorganization, upon exercise of the Option the
kind and number of shares of Common Stock or other securities or property
(including cash) of the Issuer, which the Holder would have received in
connection with the Reorganization as the holder of the number of shares of
Common Stock into which the Option could have been exercised in full
immediately prior to such Reorganization; and in any such case appropriate
adjustment shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the Holders, to the end
that the provisions set forth herein (including the specified changes and other
adjustments to the number of Option Shares) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares, to such other
securities or property thereafter receivable upon issuance of the Option Shares
or (b) no less than thirty (30) days prior notice of such Reorganization,
during which time the Holder may elect to exercise all Options which have then
vested. All other Options shall expire upon the consummation of the
Reorganization . The provisions of this Section 14(b) shall similarly apply to
successive Reorganizations. For purposes of this Section 14, the term
"Reorganization" shall include the acquisition of the Issuer by another entity
by means of a merger, consolidation or other reorganization.
(c) In addition to the adjustments to the number of Option Shares or
other property receivable upon exercise of the Options as provided in Sections
14(a) and (b) above, the Exercise price per Option Share shall be appropriately
adjusted so that the aggregate exercise price shall remain constant.
15. Certificate of Adjustment.
Within thirty (30) days following any event requiring an adjustment or
readjustment of the number of shares of Common Stock or other securities
issuable upon exercise of the Option, the Issuer, at its expense, shall cause a
nationally recognized firm of independent public accountants selected by the
Issuer to compute such adjustment or readjustment in accordance with this
Option and to prepare a certificate showing such adjustment or readjustment,
and shall mail such certificate, by first-class mail, postage prepaid, to the
Holder at the address set forth in Section 18(b). The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based.
16. Modification.
The Board or a committee thereof may modify, extend or renew the Option or
accept the surrender of, and authorize the grant of a new option or Option in
substitution for, the Option (to the extent not previously exercised). No
modification of the Option shall be made without the written consent of Holder.
17. General Provisions.
(a) Further Assurances. Holder shall promptly take all actions and
execute all documents requested by the Issuer, which the Issuer deems to be
reasonably necessary to effectuate the terms and intent of this Option.
(b) Notices. All notices, requests, demands and other communications
under this Option shall be in writing and shall be given to the parties hereto
as follows:
If to the Issuer, to:
I.T. Technology, Inc.
34-36 Punt Road
Windsor, Vic 3181
Melbourne, Australia
If to Holder, to:
Robert Petty
20H 240 86th
East NY 10028 NY
or at such other address or addresses as may have been furnished by either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, two days after
such communication is deposited in the mail by first-class certified mail,
return receipt requested, postage prepaid, addressed as aforesaid, or (ii) if
given by any other means, when delivered at the address specified in this
subparagraph (b).
(c) Governing Law. THIS OPTION SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
IN, AND TO BE PERFORMED WITHIN, THAT STATE. JURISDICTION AND VENUE OVER ANY
LEGAL ACTION BROUGHT HEREUNDER SHALL RESIDE EXCLUSIVELY IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA. EACH OF THE PARTIES HERETO WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY SUCH LEGAL ACTIONS.
(d) Attorneys Fees. In the event that any action, suit or arbitration or
other proceeding is instituted upon any breach of this Option, the prevailing
party shall be paid by the other party thereto an amount equal to all of the
prevailing party's costs and expenses, including reasonable attorneys' fees
incurred in each and every such action, suit or proceeding (including any and
all appeals or petitions therefrom).
(e) Amendment; Waiver. This Option shall be binding upon and inure to the
benefit of the Holder and the Issuer and their respective successors, heirs and
personal representatives. No provision of this Option may be amended or waived
unless in writing signed by the Holder and the Issuer. Waiver of any one
provision of this Option shall not be deemed to be a waiver of any other
provision.
IN WITNESS WHEREOF, the Issuer has caused this Option to be executed as
of the date first above written.
I.T. TECHNOLOGY, INC.
By: Levi Mochkin
AGREED TO AND ACCEPTED THIS 21 DAY OF NOVEMBER, 2000.
By: Robert Petty
------------------
Robert Petty
EXHIBIT "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: I.T. Technology, Inc.
The undersigned hereby irrevocably elects to exercise the purchase right
represented by the Option granted to the undersigned on ___________, 2000 and
to purchase thereunder _______ shares of Common Stock of I.T. Technology, Inc.,
a Delaware corporation (the "Issuer"). The closing of the exercise of the
purchase right shall take place at _____ on ________________, _____ at the
principal executive office of the Issuer located at ______________________.
[Holder]
By:
-----------------------
Its:
-------------------
[CAPTION]
EXHIBIT 10.7(a)
AMENDED AND RESTATED
STOCK OPTION AGREEMENT
This AMENDED AND RESTATED STOCK OPTION AGREEMENT is entered into as of the 31st
day of October, 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 3500 West Olive Avenue, Suite 300, Burbank,
California 91505 ("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, on March 24, 2000, Bickhams exercised its Initial Option to
purchase 250,000 of the Series A Preferred Stock of VideoDome at an aggregate
exercise price of US$150,000;
WHEREAS, on or about July 27, 2000, Bickhams exercised its Second Option
to purchase 250,000 of the Series A Preferred Stock of VideoDome at an
aggregate exercise price of US$150,000;
WHEREAS, VideoDome requires up to an additional $25,000,000 of financing
to implement its business plan;
WHEREAS, Bickhams and VideoDome have agreed, subject to the terms of this
Agreement, that Bickhams shall acquire options to invest up to $25,000,000 in
VideoDome on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties have agreed as follows:
1. Definitions. Any capitalized terms not otherwise defined herein shall
have the meaning set forth in the original Stock Option Agreement, dated March
24, 2000, by and between Bickhams and VideoDome.
2. 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 Series A Preferred Stock ("Series A
Preferred Stock"), on the following term and conditions (collectively, the
"Options"):
a. Third Option. Bickhams shall receive an option to purchase the number of
shares of Series A Preferred Stock of VideoDome equal to 25% of the outstanding
capital stock of VideoDome of all classes and series, including all instruments
convertible into or exchangeable for any class or series of capital stock
(collectively, "Capital Stock") on a fully-diluted basis calculated on the date
of exercise of the Third Option (as defined below) minus the number of shares
of Capital Stock held by Bickhams on the date of exercise of the Third Option
at an exercise price of US$1,000,000 (the "Third Option"). The Third Option
shall be exercisable for a period commencing as of the date hereof and
terminating on September 15, 2001. Upon the exercise of the Third Option by
Bickhams, Bickhams shall pay to VideoDome the sum of US$1,000,000, wired to the
account of VideoDome listed in Section 13(d), payable in ten equal monthly
payments of US$100,000 beginning on November 15, 2000 and payable on the
fifteenth day of each month thereafter until paid in full (each a "Payment
Date"). Within 15 days after each Payment Date, VideoDome shall issue an
executed stock certificate to Bickhams in the name of Bickhams Capital, Inc.
representing 75,000 shares of Series A Preferred Stock, or such other number of
shares of Series A Preferred Stock as may be necessary to cause Bickhams, upon
exercise of the Third Option, to hold not lest than twenty-five percent (25%)
of the outstanding Capital Stock of VideoDome. VideDome and Bickhams agree and
recognize that the foregoing is an option only and does not constitute an
absolute obligation of Bickhams to exercise the Third Option, and that the only
recourse to VideoDome, should Bickhams not exercise the Third Option, in whole
or in part, shall be to cancel any unexercised portion of the Third Option if,
within fifteen (15) business days after receipt of written notice from
VideoDome, Bickhams fails to make any payment with respect to the Third Option.
All shares issued to Bickhams, whether pursuant to the Third Option or
otherwise, shall remain outstanding without regard to the cancellation of any
portion of the Third Option.
b. Fourth Option. Bickhams shall receive an option to purchase the number of
shares of Capital Stock of VideoDome equal to 50.1% of the outstanding Capital
Stock on a fully-diluted basis calculated on the date of exercise of the Fourth
Option (as defined below) minus the number of shares of Capital Stock held by
Bickhams on the date of exercise of the Fourth Option at an exercise price of
US$4,000,000 (the "Fourth Option"). The Fourth Option shall be exercisable
only upon the exercise of the Third Option and for the period commencing as of
November 2, 2000 and terminating on September 15, 2001. Upon the date of
exercise of the Fourth Option by Bickhams, Bickhams shall pay to VideoDome the
sum of US$2,000,000 in cash, wired to the account of VideoDome listed in
Section 13(d), and $2,000,000, payable, at the discretion of Bickhams in cash
or in shares of the common stock of I.T. Technology, Inc., a Delaware
corporation ("I.T.") and sole shareholder of Bickhams. The number of shares of
common stock of I.T. issued hereunder, if, any, shall be calculated based on
the average closing price of such stock during the prior 30 trading days prior
to the date of exercise of the Fourth Option discounted by 15% to Daniel and
Vardit Aharonoff (collectively, the "Aharonoffs"). VideDome and Bickhams agree
and recognize that the foregoing is an option only and does not constitute an
absolute obligation of Bickhams to exercise the Fourth Option, and that the
only recourse to VideoDome, should Bickhams not exercise the Fourth Option
shall be to cancel the Fourth Option if, within fifteen (15) business days
after receipt of written notice from VideoDome, Bickhams fails to make the
payment with respect to the Fourth Option.
c. Final Option. In addition to the Third Option and the Fourth Option,
Bickhams shall receive an option to purchase the number of shares of Capital
Stock equal to 25% of the outstanding Capital Stock on a fully-diluted basis
calculated on the date of exercise of the Final Option (as defined below) at an
exercise price of US$20,000,000 (the "Final Option Exercise Price"); provided
however, if VideoDome shall have become a publicly traded company with a market
capitalization of at least US$100 million prior to the exercise date of the
Final Option, then the Final Option Exercise Price shall increase by
US$2,000,000 for each US$10,000,000 of market capitalization of VideoDome in
excess of US$100 million (the "Final Option"). The Final Option shall be
exercisable only upon the exercise of the Fourth Option and for the period
commencing as of September 1, 2001 and terminating on August 31, 2002. Upon
the date of exercise of the Final Option by Bickhams, Bickhams shall pay to
VideoDome the sum of US$20 million in cash, subject to any adjustment described
in this Section 2(c), wired to the account of VideoDome listed in Section
13(d).
d. Preferred Stock. The Options shall be exercisable into shares of Series A
Preferred Stock. As a condition to the exercise of the Options by Bickhams,
VideoDome shall amend its Articles of Incorporation to authorize any additional
shares of Capital Stock necessary to effect the grant of the Options hereunder.
e. Fully-Diluted Basis. For the purposes of this Agreement on a
"fully-diluted basis" shall include all shares of Capital Stock which are
authorized or which have been issued and outstanding or which may be 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 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 except for
(x) the authorization of additional Capital Stock issuable in connection with
the Options; (y) the issuance of Common Stock not exceeding 25% of the
outstanding Common Stock, on a fully-diluted basis, under an stock option plan
in form and substance acceptable to Bickhams to be adopted by VideoDome
promptly following the execution of this Agreement (which plan shall provide,
inter alia, that the plan shall be administered by a committee of which at
least half the members shall be designated by Bickhams, and which shall not
grant any options without the consent of all of the members of such committee
unless (i) Bickhams fails to exercise the Fourth Option; or (ii) additional
shares of voting securities of VideoDome with an aggregate purchase price of
not less than five million dollars ($5,000,000) are issued, except as a result
of stock split, stock dividends, reverse stock splits and similar transactions,
upon the exercise of employee stock options or upon the issuance of 4.5 million
shares of Common Stock to the Founders pursuant to the Assignment and
Subscription Agreement); and (z) 4.5 million shares of Common Stock issuable to
Daniel Aharanoff and Vardit Aharanoff (each a "Founder") in exchange for their
assignment of certain intellectual property rights pursuant to an assignment
and assumption agreement in form and substance acceptable to Bickhams to be
entered into between VideoDome and the Founders (the "Assignment and
Subscription Agreement")promptly after execution of this Agreement; or
(ii) the Founders 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 owned or controlled by them, provided however,
that a Founder may transfer shares of capital stock by gift or sale, or upon
death or permanent incapacity, to his guardian, conservator, executor,
administrator, trustees or beneficiaries of his will, spouse, children,
stepchildren, grandchildren, parents, siblings or legal dependents, to a trust
of which the beneficiary or beneficiaries of the corpus and the income shall be
such a person or persons or the Founder provided that (x) such transferee
agrees to become a party to this Agreement pursuant to Section 13(p), and (y)
such transfer is exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act").
g. Gross Up of Shares. The parties recognize that it is the intent of the
parties that, upon exercise in full of the Third Option, that Bickhams own not
less than twenty-five percent (25%) of the fully-diluted Capital Stock of
VideoDome, and that upon exercise in full of the Fourth Option, that Bickhams
own not less than fifty and one-tenth percent (50.1%) of the fully diluted
Capital Stock of VideoDome. Consequently, if, at any time, VideoDome issues
any shares of Capital Stock, or enters into any agreement or issues any
security convertible or exercisable into any shares of Capital Stock, whether
such issuance requires or does not require approval by Bickhams, VideoDome
shall, concurrently therewith and as a condition thereto, issue to Bickhams,
without any further consideration, sufficient shares of Series A Preferred
Stock to cause Bickhams to own the appropriate number of shares of Capital
Stock.
h. 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 with respect to 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 at the corporate headquarters of
VideoDome. 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 at the corporate
headquarters of VideoDome. If Bickhams or I.T. requires audited financial
statements of VideoDome in connection with any securities filing or other
transaction, VideoDome shall bear the cost of preparing such audited financial
statements, together with all consents related thereto.
3. 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 Capital 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 the 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 that 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 nor aggregated with any Distribution Share
paid in any 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 hereof the "Pro-Rata Share" shall be equal to the
product of the total consideration distributed to the holders of Capital Stock
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 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 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
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 is sold; or (bb) VideoDome's
merger with or into 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.
h. for the purposes of this Agreement, the determination by the Board of
Directors 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 3(i) shall be in exchange for and in lieu of any rights
Arial may have against VideoDome to Capital 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.
4. 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.
5. Management and Board of Directors. In the event Bickhams exercises its
Third Option:
a. the VideoDome Board of Directors ("Board") shall consist of four seats to
be designated as follows: (A) two members shall be designated by the holders
of Common Stock of VideoDome, (B) two members shall be designated by Bickhams;
provided, that at such time as a third party invests at least US$5,000,000 in
VideoDome, Bickhams shall be entitled to designate only one member of the
Board. 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 8 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 holders of Common
Stock 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 with an aggregate purchase price of not less
than five million dollars ($5,000,000) are issued, except as a result of stock
split, stock dividends, reverse stock splits and similar transactions, upon the
exercise of employee stock options or upon the issuance of 4.5 million shares
of Common Stock to the Founders pursuant to the Assignment and Subscription
Agreement.
c. Promptly after execution of this Agreement, VideoDome shall enter into
three year employment agreements with each of the Aharonoffs, in form and
substance acceptable to Bickhams, which shall provide for aggregate monthly
compensation to the Aharonoffs not to exceed $25,000 and a covenant not to
compete and stock buy-back option.
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 (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.
e. VideoDome shall appoint Robert Petty as acting President of VideoDome
pursuant to the terms and conditions contained in an employment agreement, to
be dated October 9, 2000, by and between VideoDome and Robert Petty, in form
and substance acceptable to the parties, which shall provide for aggregate
monthly compensation to Robert Petty not to exceed $15,000.
6. Australian Joint Venture. 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, the terms and conditions of which shall be
negotiated upon the establishment of the Australian JV. 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.
7. 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.
8. 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.
9. Representations and Warranties of VideoDome.
a. The authorized Capital Stock consists of 10,750,000 shares of Capital
Stock. The authorized Common Stock consists of 5,750,000 shares of which
4,500,000 shares are issued and outstanding. The authorized Preferred Stock of
VideoDome consists of 5,000,000 shares of which 500,000 shares are issued and
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 commitment, plan, or arrangement to
issue, and no outstanding option, warrant, or other right calling for the
issuance of, any share of Capital Stock 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 except for the
shares of Capital Stock issued to Bickhams pursuant to the exercise of the
Initial Option and the Second Option.
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.
10. Representations and Warranties of Bickhams.
a. Bickhams is a corporation duly organized, validly existing, and in good
standing under the laws of Delaware. Bickhams 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.
b. Bickhams has all requisite power and authority to execute, deliver, and
perform this Agreement. All necessary corporate proceedings of Bickhams have
been duly taken to authorize the execution, delivery, and performance of this
Agreement by it.
c. This Agreement is made with Bickhams in reliance upon Bickhams'
representation to VideoDome, which by Bickhams' execution of this Agreement
Bickhams hereby confirms, that the Series A Preferred Stock to be issued to
Bickhams upon exercise of the Options, and the Common Stock issuable upon
conversion thereof (collectively, the "Securities") shall be acquired for
investment for Bickhams' own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that Bickhams has
no present intention of selling, granting any participation in or otherwise
distributing the same. By executing this Agreement, Bickhams further
represents that Bickhams does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
party or to any third party with respect to any of the Securities.
d. Bickhams believes that it has received all the information it considers
necessary or appropriate for deciding whether to accept the Options upon the
terms and conditions set forth in this Agreement. Bickhams further represents
that it has had an opportunity to ask questions and receive answers from
VideoDome regarding the terms and conditions of the Options and the business,
properties, prospects and financial condition of VideoDome.
e. Bickhams is an investor in securities of companies in the development
stage and acknowledges that it is able to fend for itself, can bear the
economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Options and underlying Series A Preferred Stock.
Bickhams also represents it has not been organized for the purpose of acquiring
the Options or Series A Preferred Stock. The Options and underlying Series A
Preferred Stock, and Common Stock reserved upon conversion thereof, have not
been registered under the Securities Act and, therefore cannot be resold unless
they are registered under the Securities Act or unless an exemption from
registration is available.
f. Bickhams understands that the Securities it is purchasing are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from VideoDome in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act
only in certain limited circumstances. In this connection, Bickhams represents
that it is familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act.
g. Upon exercise of the Options, it is understood that the certificates
evidencing the Series A Preferred Stock may bear one or all of the following
legends:
(i) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT."
(ii) Any legend required by the laws of the State of California, including any
legend required by the California Department of Corporations and Sections 417
and 418 of the California Corporations Code, or by any other state securities
laws.
11. Covenants of Bickhams. In the event Bickhams exercises its Third Option,
Bickhams shall:
a. temporarily provide to VideoDome office facilities in Melbourne, Australia
within reasonable efforts reasonably satisfactory to VideoDome; and
b. assist VideoDome in locating suitable personnel, reasonably satisfactory
to VideoDome, to act as an international sales director of VideoDome for the
territory of Australia and the South Pacific.
12. Injunctive Relief; Specific Performance. Anything to the contrary
contained herein, the parties hereto expressly acknowledge and agree that any
breach of Sections 2,4,5 or 6 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.
13. 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.
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.
3500 West Olive Avenue
Suite 300
Burbank, CA 91505
Attention: Daniel Aharonoff
Its Chief Executive Officer
Fax No.: (818) 986-4163
Wiring Instructions: Wells Fargo
Bank Routing #: 121000248
Account # 0488567868
15760 Ventura Blvd.
Encino, CA 91436
with a copy to: O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: Matt Fojut, Esq.
Fax No.: (213) 430-6407
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 13(d). Any notice given in accordance with
this Section 13(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 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 existence or terms
of this Agreement or the relationship of Bickhams, VideoDome and I.T., or any
arrangements among them, 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, 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 VideoDome 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.
p. Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any
Securities). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except expressly as provided in this Agreement.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated
Stock Option Agreement as of the day and year first written above.
BICKHAMS CAPITAL, INC.
/s/ Jonathan Herzog
---------------------------
By:
Its: Chief Financial Officer
VIDEODOME.COM NETWORKS, INC.
/s/ Daniel Aharonoff
----------------------------
By: Daniel Aharonoff
Its: Chief Executive Officer
SOLELY AS TO SECTION 3 ABOVE:
AGREED TO AND ACCEPTED THIS 5 DAY OF November, 2000.
/s/ Oren Arial
------------------
By: Oren Arial
[CAPTION]
EXHIBIT 10.10(a)
LOAN AGREEMENT
THIS DEED is made this 8th day of November 2000.
BETWEEN:
LEDGER TECHNOLOGIES PTY. LTD. (A.C.N. 085 887 921) of 10 Bickhams Court, East
St Kilda in the State of Victoria, Australia (hereinafter referred to as "the
Lender") of the first part;
AND
I.T. TECHNOLOGY, INC. of 34-36 Punt Road, Windsor, Victoria, Australia
(hereinafter referred to as "the Borrower") of the second part.
WHEREAS:
A. The Borrower wishes to borrow monies from the Lender.
B. The Lender is prepared to advance to the Borrower an amount in Australian
Dollars and repayable in Australian Dollars equivalent to the sum of ONE
HUNDRED THOUSAND AMERICAN DOLLARS ($US100,000.00) on such terms and conditions
as noted in this Agreement. This amount may be further increased by mutual
consent of both the Lender and the Borrower as evidenced by their signatures in
the Schedule of Loan Advances. All loan advances made pursuant to this
Agreement will be as specified in the attached Schedule of Loan Advances and
shall be repaid in accordance with the provisions of this Agreement.
IN CONSIDERATION of the terms and conditions set out hereunder the parties
heretofore agree as follows:-
1. The Lender agrees to lend to the Borrower the amount specified in Recital B
hereof (hereinafter referred to as "the said Loan").
2. The details of every advance of funds by the Lender to the Borrower pursuant
to this Agreement shall be recorded in the Schedule of Loan Advances in this
Agreement, which shall be signed by a Director of the Lender and a Director of
the Borrower. The details of every loan repayment pursuant to this Agreement
shall be recorded in the Schedule of Loan Repayments in this Agreement, which
shall be signed by a Director of the Lender and a Director of the Borrower.
3. The said Loan shall be repaid by the Borrower to the Lender when:
(a) In the opinion of the Lender, the Borrower has received adequate additional
financing to repay the said Loan and ;
(b) In the opinion of a majority of the Board of Directors of the Borrower,
there are reasonable grounds to believe that the Company will be able to pay
its debts as and when they become due and payable.
4. Interest calculated daily at a rate of 10% per annum on all loan funds from
time to time advanced pursuant to this Agreement shall be paid by the Borrower
to the Lender upon repayment of the said Loan.
5. This Agreement shall be governed by and construed in accordance with the
laws of the State of Victoria, Australia.
6. This Agreement shall be binding on and enure to the benefit of the assignees
and successors in title of the parties.
7. If any provision of this Agreement is held invalid, unenforceable or illegal
for any reason, this Agreement shall remain otherwise in full force and the
said provision shall be read down to such extent as may be necessary to ensure
that it does not infringe the laws of the said State and as may be reasonable
in all the circumstances so as to give it a valid operation of a partial
character and in the event that such provision cannot be so read down it shall
be deemed void and severable.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands and seals
the day and year hereinbefore written.
THE COMMON SEAL of the Lender }
was hereto affixed } [seal]
in the presence of authorised persons: }
Director /s/ Lisa Mochkin
-------------------------
Full Name Lisa Mochkin
THE COMMON SEAL of the Borrower }
was hereto affixed } [seal]
in the presence of authorised persons: }
Director /s/ Henry Herzog
-------------------------
Full Name Henry Herzog
<TABLE>
<S> <C> <C> <C> <C>
SCHEDULE OF LOAN ADVANCES
Advance Date Amount ($US) Amount ($AUD) Lender's Signature Borrower's Signature
------- ---- ----------- ------------ ------------------ --------------------
1. 9/11/00 100,000 192,111-03 /s/ L.Mochkin /s/ Henry Herzog
2.
3.
4.
5.
SCHEDULE OF LOAN REPAYMENTS
Repayment Date Amount ($US) Amount ($AUD) Lender's Signature Borrower's Signature
--------- ---- ----------- ------------ ------------------ --------------------
1.
2.
3.
4.
5.
</TABLE>
[CAPTION]
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 Post-effective
amendment No. 2 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
January 15, 2001
[CAPTION]
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 Post-effective amendment No. 2
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
January 15, 2001
[CAPTION]
SUBSCRIPTION AGREEMENT
I.T. Technology, Inc.
34-36 Punt Road
Windsor 3181
Melbourne, Victoria, Australia
Gentlemen:
The undersigned has read the matters set forth in your prospectus dated
____________________, 2001. The undersigned represents as set forth below and
subscribes to purchase ________Shares at $.10 per Share, for $_______________,
subject to your acceptance of this subscription. There is no minimum
contingency and proceeds may be utilized at the issuer's discretion. If any
checks are delivered to any NASD member, the member must promptly, by noon of
the next business day, transmit all checks received to the issuer or any person
entitled thereto. The undersigned, if an individual, is a resident of, or, if a
corporation, partnership or trust, has as its principal place of business in:
The State of New York_____
A State foreign to U.S.A._____
Dated:______________
_______________________________ _______________________________
NAME OF PURCHASER SIGNATURE
_______________________________
Title of Authorized Signatory if
Purchaser is a corporation,
partnership or other entity
_______________________________
Signature of Spouse or Co-owner
Purchaser's Address to which all
correspondence should be sent:
____________________________________________________
State where incorporated, P.O. Box or Street Address
where organized, or domiciled
____________________________________________________
CITY, STATE ZIP CODE
Tax ID Number_________________________
Telefax and Phone Numbers ________________________
_________________________
Social Security Number
